Meaning

Any form of accounting which enables a business to be conducted more efficiently can be regarded as management accounting. Management accounting is concerned with accounting information which is useful to management.

Scope

Financial accounting Cost accounting Financial statement analysis Budgeting Inflation accounting Management reporting Tax accounting

Functions

Planning & forecasting Analysis & interpretation Coordinating Communication Special studies Tax administration

Tools & Techniques

Financial planning Analysis of financial statement Cost accounting Standard costing Marginal costing Budgetary control Funds flow analysis Management reporting

Advantages

Increases efficiency in activities of business. Ensure effective regulation of business activities. Ensures effective control by comparing actual results with standards. Provides means to motivate the employees of the organisation. Maintains good public relations by providing quality service to the customers of the business.

Limitations

The validity of the decision largely depends on the reliability of the historical data which can affect the effectiveness of the decisions. To find an individual in the management with the comprehensive knowledge about various subjects is almost impossible. Installation of management accounting needs a heavy investment.

The principle of objectivity is not followed in its real spirit in management accounting. There is tendency among business executives to use short cut approaches to a managerial problem rather than lengthy process as required under scientific analysis of management accounting. Its techniques lack sharpness and fluidity which, otherwise, is required of an efficient system. The analysis and interpretation differ from firm