quantitative information and common sense, foresight, knowledge and experience.Management accounting includes financial accounting information and raw material fromseveral other disciplines such as costing, statistics, mathematics, political science, sociology, psychology, management economics, law etc. With all these data he can ensure optimumutilization of all the resources including employees by maintaining sound morale of theemployees, maximization of output and minimization of inputs, analyze the managerialquestions in terms of costs, revenues, profits and growth. It is thus a highly personalizedservice with the help of which management can explore and exploit business opportunitiesand take sound and correct decisions. It is not a precise science as it uses its own conventionsrather than standardized principles. Therefore the inferences drawn from the facts provided,depends on the skill, judgment and common sense of different management accountants.Thus it is said that management accounting serves as a management information systemwhich enables the effective management of an enterprise.
Scope of management accounting:
Management accounting is a wide and diverse subject. As stated earlier it includes various branches of knowledge such as psychology, sociology, economics, laws, political science,mathematics, statistics, finanacial accounting, cost accounting etc. It is thus very difficult todefine its scope, as it is a dynamic and ever growing discipline of knowledge. The importanttechniques and systems used by management accounting are briefly stated below.a.Historical cost accounting: Maintenance of books of cost accounting enables toknow the actual costs incurred by the firm. b.Standard costing: The standard costs laid down by experts are compared with thenatural costs in order to know the deviationsc.Marginal costing: The costs are divided into fixed and variable costs which help ismaking vital decisions.d.Decision accounting: Decisions are made after studying the impact of decisions interms of costs, resource, profits, growth etc.e.Budgetary control: It is a system of controlling the cost with the help of budgets.f.Control accounting: It includes the techniques such as standard costing, budgetarycontrol, control reports, internal check, internal audit and reports.g.Revaluation accounting: It is based on current costs to ensure that the investmentis intact and profits from investment are kept in mind.h.Financial planning & policies: It consists of raising the long term and short termfinance and invest it on optimum basis and enhance the profitability of the firm.i.Capital expenditure: The large amounts of future capital expenditure and future profits are analysed to take important decisions. j.Break even analysis: This is an important technique which is used to analyse the behavior of costs viz., fixed and marginal costs, indicating the level of activity atwhich the total costs would equal the total revenue and also the margin of safety.k.Inter-period comparison: It is a technique of comparing the present performancewith the past performance.l.Techniques of forecasting: Some techniques like decision tree, probability andsensitivity analysis are used by management accountants for forecasting whichforms a base for planning.m.Operations research: It consists of statistical and mathematical techniques that areincreasingly used in decision making process.n.Statistics: The statistical techniques used by management accountant arecorrelation, regression, probability, time series, standard deviation, linear programming, control charts etc.