Functions (or objectives) of Management Accounting


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Main functions of Management Accounting are as follows:

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  1. Planning – Information and date provided by management accounting helps management to forecast and prepare short-term and long term plans for the future activities of the business and formulate corporate strategy. For this purpose management accounting techniques like budgeting, standard costing, marginal costing.

 

  1. Coordinating: Management accounting techniques of planning also help in coordinating various business activities. For example, while preparing budgets for various departments like production, sales, purchases, etc., there should be full coordination so that there is no contradiction. By proper financial reporting, management accounting helps in achieving coordination in various business activities and accomplishing the set goals.
  2. Controlling: Controlling is a very important function of management and management accounting helps in controlling performance by control techniques such as standard costing, budgetary control, control rations, internal audit, etc.

 

  1. Communication: Management accounting system prepares reports for presentation to various levels of management which show the performance of various sections of the business. Such communication in the form of reports to various levels of management helps to exercise effective control on various business activates and successfully running the business.

 

  1. Financial analysis and interpretation: In order to make accounting data easily understandable, the management accounting offers various techniques of analyzing, interpreting and presenting this data in non-accounting language so that every one in organization understands it. Ratio analysis, cash flow and funds flow statements trend analysis, etc., are some of the management accounting techniques which may be used for financial analysis and interpretation.

 

  1. Qualitative information: Apart from monetary and quantitative data, management accounting provides qualitative information which helps in taking better decisions. Quality of goods, customers and employees, legal judgments, opinion polls, logic, et, are some of the expels of qualitative information supplied and used by the management accounting system for better management.

 

  1. Tax policies: Management accounting system is responsible for tax policies and procedures and supervises and coordinates the reports prepared by various authorities.

 

  1. Decision – making: Correct decision making is crucial to the success of a business. Management accounting has certain special techniques which help management in short team and long term decisions. For example, techniques like marginal costing, differential costing, discounted cash flow, etc., help in decisions such as pricing of products, make or buy, discontinuance of a product line, capital expenditure, etc.
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