Characteristics or Nature of Management Accounting


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The task of management accounting involves furnishing of accounting data to the management for basing its decisions on it. It also helps, in improving efficiency and achieving organizational goals. The following are the main characteristics of management accounting:

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  1. Providing Accounting Information: Management according is based on accounting information. The collection and classification of data is the primary function of accounting department. The information so collected is used by the management for taking policy decisions. Management accounting involves the presentation of information in away it suits managerial needs. The accounting data is used for reviewing various policy decisions. Management accounting is a service function and it provides necessary information to different levels of management.

 

  1. Cause and effect analysis: Financial accounting is limited to the preparation of profit and loss account and finding out the ultimate result, i.e., profit or loss management accounting goes a step further. The ‘cause and effect’ relationship is discussed in management accounting. If there is a loss, the reasons for the loss are probed. If there is a profit, the factors different expenditures, current assets, interest payables, share capital, etc. So the study of cause and effect relationship is possible in management accounting.

 

  1. Use of Special Techniques and concepts: management accounting uses special techniques and concepts to make accounting data more useful. The techniques usually used include financial planning and analysis, standard costing, budgetary control, marginal costing, project appraisal, control accounting, etc. The type of technique to be used will be determined according to the situation and necessity.

 

  1. Taking Important Decisions: Management accounting helps in taking various important decisions. It supplies necessary information to the management which may base its decisions on it. The historical data is studied to see its possible impact on future decisions. The implications of various alternative decisions are also taken into account while taking important decisions.

 

  1. Achieving of Objectives: In management accounting, the accounting information is used in such a way that it helps in achieving organizational objectives. Historical data is used for formulating plans and setting up objectives. The recording of actual performance and comparing it with targeted figures will give an idea to the management about the performance of various departments. In case there are deviations between the standards set and actual performance of various departments corrective measures can be take at one. All this is possible with the help of budgetary control and standard costing.

 

  1. Increase in Efficiency: The purpose of using accounting information is to increase efficiency of the concern. The efficiency can be achieved by setting up goals for each department. The performance appraisal will enable the management to pin point efficient and inefficient spots. An effort is made to take corrective measures so that efficiency is improved. The constant review of working will make the staff cost – conscious. Every one will try to control cost on one’s own part.

 

  1. Supplies Information and not decision: The management accountant supplies information to the management. The decisions are to be taken by the top management. The information is classified in the manner in which it is required by the management. management accountant is only to guide and not to supply decisions. ‘How is the data to be utilized’ will depend upon the caliber and efficiency of the management.

 

  1. Concerned with forecasting: The management accounting is concerned with the future. It helps the management in planning and forecasting. The historical information is used to plan future course of action.
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We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to contact@bms.co.in.

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