Principles of Management Accounting

Principles of Management Accounting

Management Accounting employs three principles devices, viz.,-

1. Forward Looking Principle – basis on the past and all other available data, forecasting the future and recommending wherever appropriate, the course of action for the future.
2. Target Setting Principle – fixation of an optimum target which is variously known as standard, budget etc., and through continuous review ensuring that the target is achieved or exceeded.
3. The Principle of Exception – instead of concentrating on voluminous masses of data, Management Accounting concentrates on deviations from targets (which are usually known as variances) and continuous and prompt analysis of the causes of these deviations on which to base management action.