Objectives or Functions of Management Accounting
Table of Contents
- 1 Objectives or functions of Management Accounting
- 1.1 1. Presentation of Data
- 1.2 2. Modifies Data
- 1.3 3. Forecasting
- 1.4 4. Analysis and Interpretation of Data
- 1.5 5. Help in Organizing
- 1.6 6. Means of Communication
- 1.7 7. Planning
- 1.8 8. Facilitates Control
- 1.9 9. Decision-making
- 1.10 10. Using of Qualitative Information
- 1.11 11. Coordination
- 1.12 12. Special Cost and Economic Studies
- 1.13 13. Motivating Employees
Objectives or functions of Management Accounting
The main objective of management accounting is to help the management to take quality decision for controlling the business activities effectively. The other objectives and the following functions of management accounting are performed to achieve all the objectives.
1. Presentation of Data
Both profit and loss account and balance sheet are not useful for taking a decision in accounting. Hence, the contents of profit and loss account and balance sheet are modified and rearranged in such a manner that helps the management for taking decision through various techniques.
2. Modifies Data
The financial accounting information is modified according to the management expectations. For example, total purchase figures are modified month wise, product wise, supplier wise and territory wise.
The management can forecast the achievement of objectives for short term and long term. The accountant provides necessary information and data for forecasting.
4. Analysis and Interpretation of Data
The financial accounting data is rearranged for proper analysis. Comparative and common size statements are prepared for the meaningful interpretation of data. Ratios are calculated and likely trends are projected.
5. Help in Organizing
Organizing refers to allocation of company resources to various departments and assignment of duties to employees at various levels of management. The modified data and analysis and interpretation help the management to organize.
6. Means of Communication
The analysis and interpretation of modified data is conveyed to the employees of an organization as a whole. More meaningful information is supplied to all levels of management executives. In this way, rearranged and modified data are used as means of communication under management accounting system.
The fund flow statement, cash flow statement, budgeting, standard costing, capital budgeting and marginal costing are used for planning purpose. These are important tools of management accounting.
8. Facilitates Control
Management accounting translates the objectives into achievements within a specified time. This is possible through budgetary control and standard costing which are an integral part of management accounting. In this way, management accounting facilitates control.
Modified data, analyzed and interpreted information are highly useful to management for taking quality decision and policy formulation in a management accounting system.
10. Using of Qualitative Information
Qualitative information means data cannot be measured in terms of rupees, units, kgs, tons, metres and the like. Employees efficiency, policy of management, employer and employee relationship etc are the examples for qualitative information. These types of information are also used in the management accounting system.
The preparation of budgets on functional basis is the fixation of targets for each department separately. The objectives of organization is achieved through attainment of targets of all the departments. The preparation of periodical performance report of all the departments under management accounting system brings coordination among all the departments.
12. Special Cost and Economic Studies
The special cost and economic studies are considered in the management accounting system in order to increase the profits of the concern.
13. Motivating Employees
The preparation of budgets and adoption of standard costing technique automatically motivates the employees indirectly. If the budgets are achieved and if there is any favorable variances under standard costing technique, a suitable monetary and non-monetary motivating schemes are prepared and implemented.