Scope Of Management Accounting

The scope or field of management accounting is very wide and broad based and it includes a variety of aspects of business operations. The main aim of management accounting is to help management in its functions of planning, directing, controlling and areas of specialization included within the admit of management accounting. The scope of management accounting can be studied as follows:

1. Financial Accounting

Financial accounting forms the basis for analysis and interpretation for furnishing meaningful data to the management. The control aspect is based on financial data and performance evaluation, on recorded facts and figures. So, management accounting is closely related to financial accounting in many respects.

2. Cost Accounting

Cost accounting is the process and techniques of ascertaining cost. Planning, decision making and control are the basic managerial functions. The cost accounting system provides the necessary tool for carrying out such functions efficiently. The tools includes standard costing, inventory management, variable costing etc.

3. Budgeting And Forecasting

Budgeting means expressing the plans, policies and goals of the firm for a definite period in future. Forecasting on the other hand, is a prediction of what will happen as a result of a given set of circumstances. Forecasting is a judgement whereas the budgeting is an organizational object. These are useful for management accounting in planning.

4. Inventory Control

Inventory is necessary to control from the time it is acquire till its final disposal as it involves large sum. For controlling inventory, management should determine different level of stock. The inventory control technique will be helpful for taking managerial decisions.

5. Statistical Method

Statistical tools not only make the information more impressive, comprehensive and intelligible but also are highly useful for planning and forecasting.

6. Interpretation Of Data

Analysis and interpretation of financial statements are important part of management accounting. After analyzing the financial statements, the interpretation is made and the reports drawn from this analysis are presented to the management. Interpreting the accounting data to the authorities in the management is the principal task of management accounting.

7. Reporting To Management

The interpreted information must be communicated to those who are interested in it. The report may cover Profit and Loss Account, Cash Flow and Funds Flow statements etc.

8. Internal Audit And Tax Accounting

Management accounting studies all the tax matters to assist the management in investment decisions vis-a-vis tax planning as a resource to enjoy tax relief.

Internal audit system is necessary to judge the performance of every department. Management is able to know deviations in performance through internal audit. It also helps management in fixing responsibility of different individuals.

9. Methods Of Procedures

This includes maintenance of proper data processing and other office management services. It may have to deal with filing, copying, duplicating, communicating and management information system and also may have to report about the utility of different office machines.

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Functions Of Management Accounting

Key functions of management accounting

1. Forecasting and planning.
2. Co-ordinating.
3. Organising.
4. Controlling.
5. Financial Analysis and interpretation.
6. communications.
7. Motivating.
8.Decision making.

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Role Of Management Accounting

The main objectives or roles of management accounting are as follows.

1. Assistance in planning and formulation of future policies.
2. Management accounting helps in controlling performance.
3. Management accounting helps in interpretation of financial information.
4. Management accounting helps in coordinating operations.
5. Management accounting helps in organising.
6. Management accounting helps in evaluating the efficiency and effectiveness of policies.
7. Management accounting helps in motivating employees.
8. Management accounting helps in the solution of business problems.

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Concept And Meaning Of Management Accounting

Management accounting is the presentation of accounting information in such a way as to assist management in the creation of policy and the day to day operation of an undertaking.Management accounting relates to the use of accounting data collected by financial and cost accounting for the purpose of policy formulation, planning , control and decision-making by the top management. Management accounting uses all techniques of financial and cost accounting to help management to make decision in a scientific manner.

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Differences Between Financial Accounting And Cost Accounting

The main differences between financial accounting and cost accounting are given as under.

1.Financial accounting provides information about the business in general way.Financial accounting tells about the profit and loss and financial position of the business.Cost accounting provides information to the management for proper planning,control and decision making.

2. Financial accounting classifies,records and analyses the transactions in subjective manner or according to the nature of expenses.Cost accounting records the expenditure in an objective manner or according to the purposes for which the cost are incurred.

3.Financial accounts are the accounts of the whole business.Cost accounting is only a part of financial accounts.

4. Financial accounts are relate to commercial transactions of the business.Cost accounts are related to transactions connected with the manufacture of goods and services.

5.Financial accounts disclose the net profit or loss of the business as a whole.Cost accounts disclose profit or loss of each product, job or service.

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Concept And Meaning Of Cost Accounting

Cost accounting has been developed due to limitations of financial accounting. Financial accounting is concerned with record keeping directed towards the preparation of Profit and Loss Account and Balance Sheet. It provides information regarding the profit and loss which is helpful for the management to control the major functions of business like finance , administration , production and distribution.But details regarding operating efficiency to these divisions are lacking in financial accounting.

Cost accountancy is the application of costing and cost accounting principles , methods and techniques to the science , art and practice of cost control and the ascertainment of profitability.

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Concept And Meaning Of Financial Accounting

Financial accounting is a branch of accounting which is concerned with the preparation of financial statements for decision makers. Financial accounting is used to prepare accounting information for internal and external users. Therefore financial accounting may be defined as the process of summarizing financial data and publishing annual reports for the benefit of the people inside and outside the organization.

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