Management accounting is a field of accounting that analysis and provides cost information to the internal management for the purpose of planning, organizing, directing, controlling, and decision making. It measures the real performance in assessment with the budgets and helps the management in such a method that the latter can maximize the rate of return on capital employed.
The scope of Management accounting: The scope of management accounting is very wide. The main aim is to help management in its functions of planning, directing, and controlling. The following are some of the areas of specialization of management accounting.
Financial accounting is the general accounting which relates to the recording of business transactions in the books of prime entry, posting them into respective ledger accounts, balancing them and preparing a trial balance. Hence management accounting cannot obtain full control and coordination of operations without a good design financial accounting system.
Cost accounting is a branch of accounting. It is the process and technique of ascertaining costs. Planning, decision-making, and control are the basic managerial functions.
The management should determine different levels of stock – Minimum Stock Level, Maximum Stock Level, Re-order Stock Level, for inventory control. The study of inventory control will be helpful in making managerial decisions.
Interpretation of data
Analysis and interpretation of financial statements are important parts of management accounting. After analyzing the interpretation is made and the reports drown from these analyses are presented to the management in a simple language.
Income statements are prepared and tax liabilities are calculated. The management is informed about tax burden from central government, State Government, and local authorities.
Budgeting and forecasting
Management accounting has to make a choice of one course of action out of the several alternative courses of action available, it involves budgeting and forecasting.
The statistical method used in the management accounting, because it is helpful and show the profit or loss of the organization by the statistic method.
Management information system (MIS)
Management information system is an organized combination of people hardware, software, communication network, and data resources that collect transforms and assimilates information in an organization.
Control process and method
Management accounting must be controlled process system of every organization because management accounting is a success or improving by the control process and method.
Reporting to management
Reporting is the correcting information of managerial function that submitted to the organization for collect accounting.