Management Accounting Objectives, Nature and Scope

Management accountants (also called managerial accountants) look at the events that happen in and around a business while considering the needs of rquired information to take important decisions. Management Accounting a tool to assist management in achieving better planning and control over the organization. It is relevant for all kinds of an organization including a not-for-profit organization, public or private prganizations. 

Some distinctive features of Management Accounting:

1.       Not a specific system of accounting.

2.       It means the study of the managerial aspect of accounting.

Objectives of Management Accounting:

It enable the management to maximize profits or minimize losses. 

1.       Planning and policy formulation: Planning involves forecasting on the basis of available information, setting goals; framing policies determining the alternative courses of action and deciding on the program of activities. Management Accounting anlyzes the past accounting information and finds the most crucial points which help managers to formulation of future planning and policy of a business organization

Interpretation process: Management Accounts makes the technical financial information easy and understandable with the help of statistical and mathematical devices like charts, diagrams, graphs, ratios etc.

Assists in the Decision-making process: Data relating to expenditures, prices, profit, and retained earnings etc. are collected and analyzed and provides a base for making sound decisions.

Controlling: It is useful for managerial control, tools like standard costing and budgetary control are helpful in controlling performance. 

Reporting: Management Accounts keeps the management fully informed about the current position of concern through updated reporting. 

Facilitates Organizing and Coordination: MA believes in decentralization to the greater extent, ince managerial accounting stresses more on Responsibility Centers with a view to controlling costs and responsibilities. Budgets are an important means of coordination.

Nature and Scope of Management Accounting:

Provides accounting information: It is a service function and it provides necessary information to different levels of management through various ways as marginal costing, ratios, dupont analysis etc.

Cause and effect analysis: Managerial Accounting discusses the cause and effect relationship. The reasons for the loss are probed and the factors directly influencing the profitability are also studied. Profits are compared to sales, different expenditures, current assets, interest payables, share capital, etc.

Taking important decisions: Apart from that MA uses various techniques such as standard costing, budgetary control, marginal costing, project appraisal, control accounting, etc. for the purpose of information processing. It supplies the necessary information to the management which may be useful for its decisions. The historical data is studied to see its possible impact on future decisions. The implications of various decisions are also taking into account.

Achieving objectives: It is uses accounting information in such a way that it helps in formatting plans and setting up objectives. Comparing actual performance with targeted figures will give an idea to the management about the performance of various departments. When there are deviations, corrective measures can take at once with the help of budgetary control and standard costing.

No fixed norms:  No specific rules are followed in Managerial Accounting as that of financial accounting. Though the tools might be same but their purpose always differ in MA. The deriving of conclusions also depends upon the intelligence of the management accountant. The presentation will be in the way which suits the concern most.
Increase in efficiency:  The purpose of using accounting information is to increase the efficiency of the concern. The performance appraisal will enable the management to pinpoint efficient and inefficient spots. An effort makes to take corrective measures so that efficiency improves. The constant review will make the staff cost-conscious.

Supplies information and not the decision: Management accountant is only to guide and not to supply decisions. The data is to use by the management for taking various decisions. “How is the data to utilize” will depend upon the caliber and efficiency of the management.

Concerned with forecasting: The management accounts concerned with the future. It helps the management in planning and forecasting. The historical information is used to plan the future course of action. The information is supplied to the object to guide management in making future decisions.