Management Accounting – Meaning, Functions & Role

by Julia Lopez Student

Management accounting is one of the most important subjects for the students who are enrolled in the business management courses of different universities and colleges. It is actually a compulsory subject in different graduate and post graduate courses.

But has anyone wondered why it is so?

We’ll tell you all about the subject. You just have to read it to the end for getting the gist of the subject!

What is Management Accounting?

Management accounting is actually the process of identifying, analyzing, interpreting and representing the financial information that has been obtained from the financial and cost accounting reports of the organization. The mangers of the company with the help of management accounting reports are able to provide timely and accurate statistical and financial information that assist them in routine decision making. It is also an important tool for performance measurement of the business organization.

The management accounting is different from financial accounting as the financial reports are prepared on annual basis for the external stakeholders of the business while the management accounting reports can be prepared on weekly and monthly basis for internal audience like the CEO and the departmental managers.

Let us see what essential functions are performed by management accounting!

Management accounting basically performs 4 major functions which are as follows:

Planning: The manager with the help of management accounting can undertake future planning activity for their organization. This is mainly because budgets prepared under this are based on the accounting information that are provided by the financial reports and appropriates decisions are made for future profitability on the basis of the current position of the company.

Organizing: The management accounting with the help of management reports effectively organizes, regulates and make adjustments in the existing operations and activities for achieving the desired objectives of the organization.

Controlling: The performance reports and the variance reports, prepared under management accounting control the organizational performance. This is done with the help of variance analysis that highlights the difference continue reading........