Objectives of Management Accounting

 Objectives of Management Accounting

Posted by Muhammad Jakirul Haque Talukder on |

A. The base objectives of management accounting are to assist the management in carrying out its duties efficiently. The objectives of Management Accounting are: -
• The computation of plans and budgets covering all aspects of the business. Example: production, selling, distribution, research and finance.
• The systematic allocation of responsibilities for implementation of plans and budgets.
• The organization for providing opportunities and facilities for performing responsibilities.
• The analysis of all transactions, financial and physical, to enable effective comparison to be made between the forecasts and actual performance.
• The presentations of up to date information, at frequent intervals, to management in the form of operating statements.
• The statistical interpretation of such statements in a manner which will be of utmost assistance to management in planning future policy and operation.

B. The fundamental objectives of management accounting is to enable the management to maximize profits or minimize losses. The evolution of management accounting has given an approach to the function of accounting. The main objectives of management accounting are as follows:

1. Planning and policy formulation:
Planning involves forecasting on the basis of available information, setting goals; framing polices determining the alternative courses of action and deciding on the program of activities. Management accounting can help greatly in this direction. It facilitates the preparation of statements in the light of past results and gives estimation for the future.

2. Interpretation process:
Management accounting is to present financial information to the management. Financial information is technical in nature. Therefore, it must be presented in such away that it is easily understood. It presents accounting information with the help of statistical devices like charts, diagrams, graphs, etc.8

3. Assists in Decision-making process:
With the help of various modern techniques management accounting makes decision-making process more scientific. Data relating to cost, price, profit and savings for each of the available alternatives are collected and analyzed and provides a base for taking sound decisions.

4. Controlling:
Management accounting is a useful for managerial control. Management accounting tools like standard costing and budgetary control are helpful in controlling performance. Cost control is affected through the use of standard costing and departmental control is made possible through the use of budgets. Performance of each and every individual is controlled with the help of management accounting.

5. Reporting:
Management accounting keeps the management fully informed about the latest position of the concern through reporting. It helps management to take proper and quick decisions. The performance of various departments is regularly reported to the top management.

6. Facilitates Organizing:
“Return on Capital Employed” is one of the tools of management accounting. Since management accounting stresses more on Responsibility Centers with a view to control costs and responsibilities, it also facilitates decentralization to a greater extent. Thus, it is helpful in setting up effective and efficiently organization framework.

7. Facilitates Coordination of Operations:
Management accounting provides tools for overall control and coordination of business operations. Budgets are important means of coordination.