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Functions of Management Accounting

Functions of Management Accounting

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Published by ClassOf1.com
Management accounting is assigned the functions of classifying presenting and interpreting data in such a way that it helps management in controlling and running the enterprise in an efficient and economical manner.
Management accounting is assigned the functions of classifying presenting and interpreting data in such a way that it helps management in controlling and running the enterprise in an efficient and economical manner.

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Published by: ClassOf1.com on Feb 21, 2013
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 Accounting
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Sub: Accounting Topic: Management Accounting
*
The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not forsubmitting the same in lieu of their academic submissions for grades.
Functions of Management Accounting
Management accounting is assigned the functions of classifying presenting and interpreting data insuch a way that it helps management in controlling and running the enterprise in an efficient andeconomical manner. Some of the functions of management accounting are as mentioned below:1)
Planning and forecasting:
One of the important functions of the management accounting is tohelp the management in planning for short term and long term periods and also in making forecastsfor the future. Management accountants use various techniques such as budgeting, standard costing,marginal costing, funds flow statements, probability and trend ratios etc. for fixing the targets. Thesetechniques are useful in planning various activities. As such, the management accounting tools areuseful in planning and forecasting;2)
Modification of data:
Management accounting helps in modifying the accounting data. Theinformation is modified in such a way that it becomes useful for the management and if sales data isrequired, it can be classified according to the product, area, season wise type of customers and timetaken for getting the payments etc.3)
Financial analysis and interpretation:
Management accountant undertakes the job of presentingthe financial data in a simplified way. Financial data is generally collected and presented in atechnical way. Top managerial executives may lack technical knowledge. Management accountantanalyses and interprets financial data in a simple way and presents it in a non technical language. Hegives facts and figures about various policies and devaluates them in monetary terms. He gives hisopinion about the various alternative courses of action so that it becomes easy for the managementto take a decision;4)
Facilitates managerial control:
Management accounting is very useful in controlling performance.
 
 
Sub: Accounting Topic: Management Accounting
*
The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not forsubmitting the same in lieu of their academic submissions for grades.
All accounting efforts are directed towards control of the enterprise. Performance evaluation ispossible through standard costing and budgetary control which are an integral part of managementaccounting;5)
Communication:
Management accounting establishes communication within the organization andwith the outside world. The management accountant prepares reports for the benefit of differentlevels of management and employees. The activities of the concern are communicated to outsiderssuch as bankers, investors, creditors, government agencies etc. The filing of various tax returns is alsoentrusted to the accountant;6)
Use of qualitative information:
The field of management accounting is not restricted to the use of monetary data only. It collects and uses qualitative information also. While preparing a productionbudget, management accountant may not only use past production figures; however, he may rely onthe assessment of persons dealing with production, productivity reports, consumer surveys andmany other business documents. The use of qualitative information is as helpful as monetaryinformation. Management can assess various aspects of a plan before finalizing it.7)
Coordination:
The coordination among different departments is essential for smooth running of the concern. Management accountant acts as a coordinator among different financial departmentsthrough budgeting and financial reports;8)
Helpful in taking strategic decisions:
Management accounting helps in taking strategic decisionsand it supplies analytical information regarding various alternatives and the choice of management ismade easy. These decisions may be regarding seasonal or temporary stoppage of production,replacement decisions, expansion or diversification of works and a correct decision is taken.

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