Q.1
Define ‘Management Accounting’? State its main characteristics and objectives.
Ans. Any form of accounting which enables a business
to be conducted more efficiently can be regarded as management accounting?
Accounting to T.G. Rose “Management accounting is
the adaptation and analysis of accounting information, and its diagnosis and
explanation in such a way as to assist management
Characteristics of Management Accounting:-
1.
Management accounting enables future forecasting.
2.
It is selective in nature.
3.
Supplies Data, Not Decisions.
4.
Integrated system.
5.
It is a service functions which provides information to the management for
formulating policies.
6.
Established financial accounting rules are not followed in Management
Accounting.
7.
Management Accounting emphasizes, specially, on cause and effect relationship.
8.
Emphasis is placed on nature of Cost Elements.
9.
Management accounting is a developing subject.
10.
Potentiality of development as a profession.
Objectives
of management Accounting
The main objective of
management accounting is to provide information for successfully carrying out
the managerial duties. The objectives of management accounting are as under:-
1.
To assist in Planning
2.
Helps is organizing.
3.
To assist in Interpreting Financial Information.
4.
To assist in Controlling Performance.
5.
To assist in Co-ordination.
6.
Help in Motivating Employees.
7.
Helps in analysis and interpreting the financial information.
8.
To assist in decision making.
9.
Helpful in reporting.
10.
Helpful in fixing responsibility.
11.
To Assure Accountability
Q.2
Describe in brief the functions of management accounting?
Ans.
Management Accounting helps the management is two ways:-
I.
Providing necessary accounting information to management
II.
Helps in various activities and tasks performed by the management.
I.
Providing necessary accounting information to management:-
(a)
Measuring:- For helping the management in measuring the work efficiency in
different areas it is done on the past and present incidents with context to
the future. In standard costing and budgetary any control, standard and actual
performance is compared to find out efficiency.
(b)
Recording:- In management accounting both the quantitative and qualitative
types of data are included and this accounting is done on the basis of
assumptions and even those items which cannot be expressed financially are
included in management accounting.
(c)
Analysis:- The work of management accounting is to collect and analyze the fact
related to the managerial problems and then present them in clear and simple
way.
(d)
Reporting:- For the use of management various reports are prepared. Generally
two types of reports are prepared:-
a.
Regular Reports
b.
Special Reports.
II
- Helping in Managerial works and Activities:-
The
main functions of management are planning, Organizing, staffing, directing and
controlling. Management accounting provides information to the various levels
of managers to fulfill the above mentioned responsibilities properly and
effectively. It is helpful in various management functions as under:-
(a)
Planning:- Through management accounting forecasts regarding the sales,
purchases, production etc. can be obtained, which helps in making justifiable
plans. The tools of management accounting like standard costing, cost – volume
– profit, analysis etc. are of great managerial costing, help in planning.
(b)
Organizing:- In management accounting whole organization is divided into
various departments, on the basis of work or production, and then detailed
information are prepared to simplify the thing. The budgetary control and
establishing cost centre techniques of management accounting helps which result
in efficient management.
(c)
Staffing:- Merit rating and job evaluation are two important functions to be
performed for staffing. Generally only those employs are useful for the
organization, whose value of work done by them is more then the value paid to
them.
Thus
by doing cost-benefit analysis management accounting is useful in staffing
functions.
(d)
Directing:- For proper directing, the essentials are co-ordination, leadership,
communications and motivation. In all these tasks management accounting is of
great help. By analyzing the financial and non financial motivational factors,
management accounting can be an asset to find out the best motivational factor.
Q.3
Explain the scope of management accounting and discus how it serves the
management needs?
Ans.
Scope of management accounting :- Management accounting has a vast area which
includes financial accounting and extends to the functions of a system of cost
accountancy, budgetary control and statistical methods. The scope of management
accounting includes:-
1.
The management accounting is likely to evaluate the variation by reasons and
the accountability and to put forward suitable corrective measures.
2.
Analyzing and interpreting accounting and other figures to craft it logically
and usable to management.
3.
Configuration, installation and operation of accounting cost accounting and
information systems, as a result it has to utilize these systems to get
together the altering needs the of the management functions.
4.
Provide system and techniques to estimate the recital of the right managements
in the beam of the objectives of the firm.
5.
The management accounting presents the history the figures in such a way as to
reproduce the trends of events to the management.
6.
Providing mean of communicating management plans to the various levels of the
organization and assists the management in directing their activities
7.
It is support management in decision making by:-
a.
Providing significant accounting data,
b.
Analyzing the outcome of alternative proposals on the profits and the situation
of the enterprise.
Serve
Management Needs:- Management accounting’s main function is to assist the
management. It presents comprehensive accounting information to the management
to the facilitate them to keep useful control over stores and stock, to
increase efficiency of the organization and check wastage and losses. The
various advantages resulting by the management from a high – quality system of
accounting are as follows:-
1.
Management accounting helps in organizational efficiency.
2.
Management accounting check and remover wastages.
3.
Management accounting formulates comparisons.
4.
Helps in price fixing.
5.
Management accounting helps in maximizing profitability.
6.
Management accounting protects against Seasonal fluctuations and trade Cycle.
7.
Management accounting helps in growth of National Economy.
8.
Management accounting helps in performance appraisal of business.
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