Management Accounting - Functions, Characteristics, Objectives, Advantage and Disadvantage

Management Accounting - Unit 1

2. Planning Acting
Feedback
Controlling

3. Meaning:
Management Accounting is a system of accounting concerned with the
internal reporting or information to the management for planning and
controlling operations, decision making on special matters and formulating
long range plans.
Management accounting involves
➢collecting,
➢classifying,
➢analyzing,
➢interpreting
➢and presenting all accounting information which are useful to the
management.

4. Definition:
The Institute of Cost and Works Accountants of India:
Defines management accounting as “A system of collection and
presentation of relevant economic information relating to an enterprise for
planning, controlling and decision making.

5. •This concept was not known to the business
world until 1950.
•The term was first formally described in a report
entitled ‘Management Accounting’ in 1950.
•The report was published by the Anglo American
Council of Productivity Management
Accounting Team after its visit to US in first
quarter of 1950

6. Characteristics of Management Accounting
The following are the main characteristics of management accounting:
❖Providing Accounting Information
❖Taking Corrective Actions
❖Use of Special Techniques and Concepts
❖Taking Important Decisions
❖No Fixed Norms Followed
❖Increase in Efficiency
❖Supplies Information and Not Decision
❖Concerned with Forecasting
❖Internal Use
❖Flexibility in Presentation of Information

7. Objectives/Functions of Management Accounting
➢ Planning and Forecasting
➢ Modification of Data
➢ Financial Analysing and Interpretation
➢ Facilitate Managerial Control
➢ Communication
➢ Use of Qualitative Information
➢ Co-ordinating
➢ Helpful in Taking Strategic Decisions
➢ Supplying Information to Various Levels of Management
➢ Helpful in Organization
➢ Helpful in Tax Administration

8. Advantages of Management Accounting
It helps in decision-making such as pricing, accepting additional offer,
selecting a suitable product mix, and so on.
It increases the efficiency of the business functions by fixing targets.
The business activities can be planned with the help of budgeting and
forecasting.
Various tools have provided the validity and reliability of the business concern.
It is useful to control or eliminate wastage, production defectives etc.
It helps in communicating up-to-date information to various parties related
with the business concern.
It aims to control the cost of production, which will increase the profit.
It analyse the socio and economic forces and government policies, which will
help to assess the impact of the business concern.
It helps to increase the efficiency of the business.

9. Limitations
It is concerned with financial and cost accounting. If these records
are not reliable, it will affect the effectiveness of management
accounting.
Decisions taken by management accountant may or may not be
executed by the management.
It is very costly. Only big concerns can adopt this.