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Characteristics of Management Accounting

Management accounting refers to preparing accounting information to help management formulate plans, policies, and decisions. It processes and presents accounting and economic data to evaluate management performance, formulate strategies, and aid in budgeting and forecasting. Management accounting is a decision-making system that provides both qualitative and quantitative future-oriented information in flexible formats to aid discretionary activities like financial planning, statement analysis, and control techniques. It presents relevant data through reports to support management decision making.

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111 views

Characteristics of Management Accounting

Management accounting refers to preparing accounting information to help management formulate plans, policies, and decisions. It processes and presents accounting and economic data to evaluate management performance, formulate strategies, and aid in budgeting and forecasting. Management accounting is a decision-making system that provides both qualitative and quantitative future-oriented information in flexible formats to aid discretionary activities like financial planning, statement analysis, and control techniques. It presents relevant data through reports to support management decision making.

Uploaded by

joko purnomo
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Management Accounting

Definition: Management Accounting refers to the application of professional


knowledge, techniques and concept in preparing the accounting information in
such a manner, which helps the management of the organization in the
formulating plans and policies, controlling the operations of the organization,
decision making, optimising the use of resources, disclosure to management and
safeguarding assets.
In finer terms, management accounting can be understood as the processing and
presentation of accounting and economic data, so that it would help in the
evaluating performance of the management, formulating strategies, making
comparisons, budgeting, forecasting, etc.

Characteristics of Management Accounting


 Decision-making system: The financial data provided by the management
accounting, is helpful to the management in framing policies and assisting the
day to day operations.
 Future-oriented: Management accounting is future-oriented as it helps in
planning and deciding the future course of action.
 Qualitative and Quantitative Information: In management accounting,
qualitative information relating to the performance of the managers and other
staff is also considered, along with the other financial data.
 No set format: There is no set format for the disclosure of the information.
Management accounting usually presents information in the form which is
easily understandable to the managers and other users.
 Discretionary activity: Management accounting is not compulsorily required
by the statute. Indeed, management accounting is done as per the requirement
of the organization and hence, it can be done weekly, monthly, quarterly, half-
yearly, etc.

Management Accounting Techniques


The following tools and techniques are used in management accounting for
better decision making:
1. Financial Planning: Financial Planning refers to the activity of deciding
beforehand, what is to be done to reach the desired financial objectives, i.e. it is
the process of managing the finances of the organization to get the maximum
return. It includes cash flow planning, investment planning, tax planning, etc.
2. Financial Statement Analysis: It refers to the process of analysing the financial
data of the organization for rational decision making. This includes comparative
statement analysis, ratio analysis, cash flow analysis, trend analysis, etc.
3. Statistical and Graphical Techniques: Various statistical and graphical techniques
are used by the management to make better economic decisions. These
techniques include statistical quality control, linear programming, investment chart
and so forth.
4. Control Techniques: Standard costing and budgetary control are the techniques
used by the management to keep a check on the utilization of resources.
5. Reporting: The management accountant processes the data and presents it in
reports to provide the relevant information required by the managers.
Therefore, the data available with the help of management accounting must be
relevant and precise, presented in an understandable format, consistent and
comparable, and it is available at regular time intervals.
For this purpose, the selection of information to be presented, an organization of
information and the way in which it should be presented must be carefully chosen
by the management accountant.

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