The term management accounting is made with two words that are “Management” and “Accounting”. The study of managerial elements of accounting is termed management accounting. For successfully making any decision by the management it works as a kind of tool for them. organizing accounting in such a way that will help the management to develop policies and keep tracking the implementation of such policies is the main goal of management accounting. For students who are pursuing management and want to build their careers as good managers, having a good knowledge of management accounting is very important for them. In their course of study, they will be provided with lots of Managerial Accounting assignments that will help the students to build their practical skills and build their knowledge about the subject.
Understanding Management Accounting
Presentation of accounting data is a particular way that will help the management in their day-to-day operation and developing policy can be referred to as management accounting. Management accounting is focused on the revenue and expenses of the company and also on the utilization of assets. The person who is working in the management accounting of the organization is responsible for noting any unexpected risk or any reduction in the expenses or revenue and giving it to the management. The actual aim of this analysis is to improve the financial performance of the company and be able to take action accordingly. The person behind the concept of management accounting was James H. Bliss.
Nature of Management Accounting
In the area of accounting management accounting is the latest branch, but even though it is counted as one part of Science and another as part of Art. Management Accounting is considered the Science of ‘Quantifying and summarizing’ and the Art of ‘Interpreting’ accounting data.
With the help of collection, processing, and objective analysis of data quantified in figures Management Accounts obtain its conclusion. Thus, it can be said that management accounting is dependent upon the “Objectivization and Quantification of progress and problems”. So, it can be regarded from this point of view Management accounting is a science.
Other than tools, the process of Management Accounting also includes in it, human judgment, whims, and prejudices as evidence for the interpretation of data, their deduction, and conclude their analysis. With precision, the deduction cannot be regarded as scientific. When personal judgment is included in the Management accountant that influences the deduction and interpretation significantly. So, it can be said that from this point of view Management accounting may be considered an Art.
So, it may be concluded by saying that, like every other social science, the subject of Management accounting included in it some parts of Arts and some parts of Science.
The Characteristics of Management Accounting
The main aim or objective of Management Accounting is to make analysis, record, and present financial data to the Management in a way that will be proved to be helpful and useful for them to run and plan the operation of their business systematically and effectively. Below we have discussed the main characteristics of Management Accounting, this will be helpful for the students of management so that they can run and plan their future business operations successfully.
Providing financial operation
The main goal of Management Accounting is to provide its management with all the financial information. The manner of providing the information is such that will be easy for the different levels of management to review their policies and making of decisions.
Analyzing cause and effect
The importance of Financial Accounting is to make a presentation of the P&L account and Balance Sheet. The cause and effect of the facts are analyzed by the management accounting and also of the figures. Through this process, the causes of loss are investigated for any loss. For the profits, the variables that affect the loss are also analyzed. The comparison of the amount of profit is made with the expenditure, sales, capital employed, etc. so that appropriate conclusions can be drawn that are related to the effect of that item on profit.
Using special techniques and concepts
Special techniques are also operated by Management Accounting such as standard costing, budgetary control, marginal costing, fund flow, cash flow, ratio analysis, etc. to make the data related to accounting more useful and helpful for the management. All and each of such techniques and concepts are proven to be very useful tools for a specific purpose, that is for making analysis and interpretation of data, establishing control over operations, etc.
Important decisions can be taken by the management if relevant information is provided by the Management Accounting and it is the main objective of the Management Accounting. Based on the historical information the impacts of the future can be predicted, decisions are made and alternatives are developed to take the most beneficial course of action.
No fixed convention
Various established principles and rules are there in financial accounting so that financial accounts can be prepared. There are no such fixed rules in management accounting. Management accounting has applied various tools or techniques which are the same but the application of those techniques is not the same and varies depending upon the situation to situation and concern to concern.
Organizations or enterprises can realize their objectives with the help of management accounting. The objectives can be laid down based on historical information and predicting the future changes of the enterprise. If there is any difference noticed actual from the predetermined results then corrective action is taken and then predictive objectives can be achieved.
Improvement of efficiency
Information is provided by accounting so that efficiency can be increased that is the main purpose of accounting. By fixing the goals and target of the enterprise for some specific period the efficiency of the division and department can be improved.
The main duty of management accounting is to take correct decisions for future implementation. The decision includes forecasting and prediction of the future. Forecasting is very important as it helps enterprises to plan and lay down their objectives.
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What are the 5 characteristics of accounting information?
The following are the 5 qualitative characteristics of accounting information:
What is the 5 type of accounting?
Here are the 5 types of accounting:
- Financial accounting.
- Managerial accounting.
- Cost accounting.
- Tax accounting.
What are the 5 functions of Management Accounting?
The following are the 5 functions of Management Accounting:
- Forecasting and planning.
- Tax policies.