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Mangement Accounting Essay

1595 words - 7 pages

Introduction
Managerial accounting is concerned with providing information to managers- that is, to those who are inside an organization and who direct and control its operations. Managerial accounting can be contrasted with financial accounting, which is concerned with providing information to stockholders, creditors and others who are outside an organization (Garrison and Noreen, 1999).

Managerial accounting information includes:
* Information on the costs of an organization’s products and services.
For Example, managers can use product costs to guide the setting of selling prices. In addition, these product costs are used for inventory valuation and income determination (Horngren ...view middle of the document...

g. the number of production runs per month) that drive costs. Activity-based costing gives the management of an organization a clear picture of the cost drivers and the opportunities to reduce costs (Kaplan and Norton, 2001, pp. 378). For more information on activity based costing, see the Activity Based Costing page.

Traditionally, management accountants’ principal performance report was variance analysis, which is a systematic approach to the comparison of the actual and budgeted costs and revenues during a production period. While some form of variance analysis is still used by most manufacturing firms, it nowadays tends to be used in conjunction with other performance reports such as the balanced scorecard. A balanced scorecard is a set of financial measures, operational measures on customer satisfaction, internal processes and the organization's innovation and improvement activities (Kaplan and Norton, 1992). Kaplan and Norton also argue that the balanced scorecard can be used as a strategic management system which identifies the value drivers of an organization's strategy and a management system to align the organization to the strategy (Kaplan and Norton, 2001, pp. 378).

Functions of Management Accounting
Management accounting is one of important part of accounting. To use accounting for decision making encourages its development. Management accounting’s main function is to collect accounting information which is useful for different managerial functions like planning, organization, coordination and control. Following are the other important functions of management accounting.

1. Planning and Forecasting Function:

Planning includes activities such as product planning, production planning and strategy development etc. management accounting involves the all the planning activities as mentioned above and forecasts as per the requirement.

2. Modification of data function:

Second good function of management accounting is to modify of raw accounting data. After this, businessman bids fair to effective use these modify data in business’s management. Management accounting can be used to classify every accounting item in different views. There are many accounting software which can be helpful to show sale or purchase or any other accounting items according to production level, area, season, country, age or quality of debtors or creditors.

3. Interpretation Function:

It is also function of management accounting to do complete interpretation of financial analysis. It cuts down work burden of manager because management accountant supports him by providing fact and interpretation of financial data after its analysis.

4. Management Control Function:

Management control can be possible only with management accounting function. Management accounting uses responsibility accounting tool in which different cost, revenue and investment centers are made. Proper budget is maintained in each centre. Analysis of actual recorded...

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