Features or Characteristics of Management Accounting
The followings are the features or characteristics of Management Accounting.
1. Selective Nature
Management accounting selects only few information out of much information provided by the financial accounting system. The reason is that all the financial accounting information are not necessary to management.
2. More Emphasis on Future
There is no meaning of collection of historical data. The management accounting attempts to highlight upon what should have been. In this aspect, the use of standard costing, cost variances and budgetary control emphasizes to highlight upon the futuristic nature of management accounting.
3. Provides only information but no decision
The financial accounting information is presented in the different basis and in different manner which helps the management for proper planning and take quality decisions. It is up to the intelligence of management executives to take valid decision out of available information.
4. The Problem of Choice
An attempt is made to solve the managerial problems. For which, a comparative analysis of various available alternatives are taken into account and only that alternative is normally selected which seems to be more attractive and profitable. For example, Capital Budgeting techniques.
5. Study Causes and Effects Relationship
Under financial accounting system, profit and loss account is prepared to know the quantum of profit earned or loss suffered. It does not disclose the reasons for such quantum of profit earned or loss suffered. But, under management accounting system, it study the cause and effects relationship prevailing between the variables which affect business activity and profitability through analysis.
6. Importance to Elements of Costs
The total cost is divided into fixed, variable and semi-valuable under management accounting system. Moreover, it highlights the nature and characteristics of each such costs with reference to varying production levels.
7. Not bounded by the Rules of Financial Accounting
Management accounting never follows the rules of financial accounting. But, it is concerned with the information which are highly useful to the management for decision making and control purposes.
8. Recognition of Non-monetary Variables
Non-monetary variables such as efficiency of employees, labour turnover, policy of management, organization culture, market conditions and consumers or customer behavior are taken into account before taking a decision by the management. Under these circumstances, the management consider the monetary information for supporting their decisions.
9. It modifies, analyses and interprets data
The financial accounting information are modified, analyzed and interpreted with new dimensions. In this way, data help the management to take the line of action towards control of destiny of an undertaking.
10. No Specific Rules and Conventions
Financial Accounting System has rules and conventions to record the business transactions in the books of accounts. But, there is no such rules and conventions to the management accounting. Moreover, the tools and techniques applied by the management are varying from one period to another and one concern to another.
The conclusions derived from the application of a technique depend on the intelligence and experience of the management executives.
11. Achievement of Objectives
Management accounting fixes the standard for various business activities on the basis of the historical information provided by the financial accounting. Actual performance is recorded to compare the actual with standard. If there is any deviations, corrective action can be taken by the management to achieve the objectives.
12. Improving Efficiency
The management can fix the target for each department or division through budgetary control system. The actual performance is compared with that of targets. The deviations are find out and classified into two categories i.e.
- Positive deviations and
- Negative deviations.
If positive deviations, the concerned department is appreciated. If negative deviations, causes are find out to give ideas for improving the efficiency of the relevant department. In this way, the efficiency of employees is improved in the organization as a whole.