Introduction And Meaning Of Management Accounting
Management accounting is a branch or part of accounting that is used by the top level management to make both financial and non-financial decisions for planning, organizing, controlling and directing purposes. It analyzes and interprets the data and information received from cost and financial accounting and helps the management to achieve organizational goals and objectives.
Functions Of Management Accounting
Some of the major roles and functions of management accounting can be highlighted as follows:
1. Setting Goals And Objectives
Management accounting is future oriented process. It analyzes past financial and non-financial data to set future goals and targets. Historical data obtained from other branches of accounting such as cost and financial accounting are used to formulate future plans and policies.
2. Proper Control System
It helps the management to establish proper control system in the organization. Good controlling system in the workplace ensures maximum utilization of resources, minimization of wastage and better employee performance. So, it helps to increased productivity and profitability.
3. Better Communication
Management accounting facilitates proper communication system in the organization. It establishes communication between different levels of management which minimizes misunderstanding and conflict in the organization.
4. Sound Decision Making
It provides accurate and up-to-date financial and non-financial data and information to the managers that helps the to authority to make wise decisions such as make or buy decision, drop or continue decision, special order decision etc.
5. Evaluation Of Performance
Another key function of management accounting is to evaluate the efficiency and performance of the operations. It makes the comparison between actual and budgeted performance or output and finds out the variations. It helps the management to take corrective measures to improve the performance.
Also Read:
Functions Of Financial Accounting
Advantages Of Management Accounting
6. Employee Motivation
It helps to increase employee motivation and job satisfaction by providing different facilities like reward, promotion, transfers etc. It boosts employee performance decreases labor turnover.
7. Profit Maximization
Better controlling, sound decision making, wastage minimization, proper use of resources and employee motivation increase the productivity and reduces the cost of production. So, it helps to maximize the profit of the company.