Management Accounting UGC NET Commerce Paper II

 Definition

The process of preparing management reports and accounts that provide accurate and timely financial and statistical information required by managers to make day-to-day and short-term decisions.
Unlike financial accounting, which produces annual reports mainly for external stakeholders, management accounting generates monthly or weekly reports for an organization's internal audiences such as department managers and the chief executive officer. These reports typically show the amount of available cash, sales revenue generated, amount of orders in hand, state of accounts payable and accounts receivable, outstanding debts, raw material and inventory, and may also include trend charts, variance analysis, and other statistics. Also called managerial accounting.

FUNCTIONS OF MANAGEMENT ACCOUNTING

Management accounting helps in the performance of each of these functions in the following ways;

(i) Provides data: Management accounting serves as a vital source ofdata for management planning. Theaccounts and documents are arepository of a vast quantity of data about the past progress of the
enterprise, which are a must for making forecasts for the future
.
 (ii) Modifies data: The accounting data required for managerial decisions is properly compiled and classified

 (iii) Analyses and interprets data: The accounting data is analyzed meaningfully for effective planning and decision-making. For thispurpose the data is presented in a comparative form. Ratios are calculated and likely trends are projected.

 (iv) Serves as a means of communicating: Management accounting provides a means of communicating management plans upward,downward and outward through the organization. Initially, it means identifying the feasibility and consistency of the various segments of the plan. At later stages it keeps all parties informed about the plansthat have been agreed upon and their roles in these plans

(v) Facilitates control: Management accounting helps in translating given objectives and strategy into specified goals for attainment by a specified time and secures effective accomplishment of these goals in
an efficient manner. All this is made possible through budgetarycontrol and standard costing which is an integral part of management accounting