The predominant objective of control accounting is to offer managers useful and timely statistics to help them make powerful selections. It goes beyond the conventional economic reporting of external monetary statements and offers facts for internal use. In this blog, you will come to know the accounting management meaning and the objective of management accounting. Also, we discuss the definition of management accounting. For more information, you have to follow the whole article.
Meaning of Management Accounting
Management accounting presents the financial data in such a way as to assist management in planning and controlling the activities of the firm. Management accounting is also known as accounting for management or accounting management.
Define Management Accounting
According to R.N. Anthony,” Management accounting is concerned with accounting information useful to management.”
According to the Anglo-American Council of Productivity,” It is the presentation of accounting information. It helps to assist management in the creation of policy and the day-to-day operations of an undertaking.” The next section discusses the objective of management accounting.
Effective Functions/ Objective of Management Accounting
The following are the functions and objectives of management accounting:
1. Collection of Data
The basic objective of management accounting is data collection. The records are gathered from inside in addition to external sources. Internal sources include profit and loss accounts, balance sheets, sales reports, etc. External sources include trade journals, business magazines, etc.
2. Modification of Data
Sales data is classified according to product, area, type of customers, etc. Data is changed consistent with the motive for which the records is required. However, the main objective of management accounting is the modification of data.
3. Analysis and Interpretation of Economic Statements
The basic function of management accounting is to analyze the position of liquidity, profitability, and solvency of the enterprise. The techniques used for analysis are common-size statements and comparative financial statements. Therefore, the analysis and interpretation of financial statements is the objective of management accounting.
4. Use of Qualitative Information
It also collects and uses qualitative information. For example, while preparing a production budget, it may use the figures from past production and qualitative information such as productivity reports.
5. To help in Planning
Planning is one of the basic functions of management accounting. It provides the necessary information to the management for formulating plans. The data is supplied, and the management gives opinions in formulating plans.
6. It helps in Organizing
Organisation is the division of duties, authorities, and responsibilities among various persons working in the enterprise. Thus, it is the functions of management accounting to help in setting up an effective organizational framework.
7. To help in Coordination
Management accounting provides tools that help in coordinating the activities of different sections or departments. The functions of management accounting are to reconcile the activities of different departments through budgeting and financial reports.
8. It helps in Motivation
The role of management accounting is to make employees feel motivated to achieve their targets in a prescribed period. Their actual performance is measured, and rewards and incentives are given to efficient employees. It is the functions of management accounting to check performance and match it with standards.
9. Easy Communication
The main aim of management accounting is to communicate up-to-date information. The functions of management accounting are to communicate information to everyone easily.
Conclusion
Management accounting is focused on presenting applicable and reliable data to help managers make informed decisions, allocate assets efficiently, improve performance, and achieve the organization’s goals and targets. Therefore, these are the functions and objectives of management accounting.