MANAGEMENT ACCOUNTINGManagement Accounting is a new approach to accounting. The term Management Accountingis composed of two words Management and Accounting. It refers to Accounting for theManagement. Management Accounting is a modern tool to management. Management Accounting provides the techniques for interpretation of accounting data. Here, accounting should serve the needs ofmanagement. Management is concerned with decision-making. So, the role of managementaccounting is to facilitate the process of decision-making by the management.Managers in all types of organizations need information about business activities to plan,accurately, for the future and make decisions for achieving the goals of the enterprise.Uncertainty is the characteristic of the decision-making process. Uncertainty cannot beeliminated, altogether, but can be reduced.The function of Management Accounting is to reduce the uncertainty and help the management in the decision making process.

Management Accounting is concerned with accounting information, which is useful to themanagement.Robert N. AnthonyManagement Accounting is concerned with the efficient management of a business throughthe presentation to management of such information that will facilitate efficient planning andcontrol.Brown and HowardAny form of Accounting which enables a business to be conducted more efficiently can beregarded as Management AccountingThe Institute of Chartered Accountants of England and WalesManagement Accounting in the following manner:Management Accounting is an integral part of management concerned with identifying,presenting and interpreting information for:(1) formulating strategy(2) planning and controlling activities(3) decision taking(4) optimizing the use of resources(5) disclosure to shareholders and others, external to the entity(6) disclosure to employees(7) safeguarding assets.ROLE OF MANAGEMENT ACCOUNTING IN MANAGEMENT PROCESSAn enterprise would operate, successfully, if it directs all its resources and efforts to accomplishits specified objective in a planner manner, rather than reacting to events.Organisation has to be both efficient and effective. Organisation is effective when the plannedobjective is achieved. However, the firm is efficient only when the objective is achieved, withminimum cost and resources, both in physical and monetary terms. The role of ManagementAccounting is significant in making the firm both efficient and effective.Management Accounting has brought out clear shift in the objective of accounting. Frommere recording of transactions, the emphasis is on analyzing and interpreting to help themanagement to secure better results. In this way, Management Accounting eliminates intuition,which is not at all dependable, from the field of business management to the cause and effectapproach.It is well known the basic functions of management are:(1) Planning,(2) Organising,(3) Controlling and(4) Decision-makingManagement accounting plays a vital role in the managerial functions performed by themanagers.CHARACTERISTIC of management accounting1- Management accounting is concerned with future2- Management accounting is of selective nature3- Management accounting stresses on cause and effect relationship4- Management accounting does not flow set rules and formats like financial accounting5- Management accounting provides data, not decisions6- It is highly sensitive to management needs7- Management accounting is an integrated system.Scope of Management accounting1-General accountingCost accountingBudgeting and forecastingCost control proceduresCost and statisticsTax accountingMethods and procedures designReportingInternal auditingOffice serviceOBJECTIVES OF MANAGEMENT ACCOUNTING1- Helpful in planning and formulating policy2- Helpful in organizing3- Motivating of employees4- Object of coordination5- Reporting to management6- helpful in decision making7- helpful in controlling performance8- helpful in interpretation of financial information9- helpful in tax administration10- to help in fulfilling legal requirementsLIMITATIONS OF MANAGEMENT ACCOUNTING1. Accuracy is not Ensured2. A Tool in the Hands of Management3. Strength and Weakness4. Costly Affair5. Lack of Knowledge and Understanding6. Persistence on Intuitive Decision-making7. Psychological Resistance8. Evolutionary Stage

techniques of management

In previous educational contents, we've explainedfunctionsandadvantagesof management accounting. Both contents were published to tell the importance of this branch of accounting. We want to take this conversation a step further today, and discuss tools and techniques of management accounting that can be helpful to management for providing best information. Take a look at some of best tools and techniques of management accounting outlined below:

1 :Analysis of Financial Statements

Analysis of financial statements is the main tool of management accounting. In this tool, we collect four financial statement, one is profit and loss account, second is balance sheet, third is cash flow statement and fourth and last is fund flow statement. After this, we calculate more than 30 ratios and also analyze the financial statement by financial analysis, fund flow analysis and cash flow analysis. Main aims of analysis of financial statements are following :

1.Profitability- its ability to earn income and sustain growth in both short-term and long-term. A company's degree of profitability is usually based on theincome statement, whichreports on the company's results of operations;

2.Solvency- its ability to pay its obligation tocreditorsand other third parties in the long-term;

3.Liquidity- its ability to maintain positivecash flow,while satisfying immediate obligations;

Both 2 and 3 are based on the company'sbalance sheet,which indicates the financial condition of a business as of a given point in time.

4.Stability- the firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators.

2 :Budgetary Control

This is that tool of management accounting in which we make budgets for planning and control of fund. All budgets are made with past historical accounting data and future expectations. After this budgeted data is compared with actual recorded accounting data and performance is calculated on the basis of deviation between actual and expected performance.

3 :Decision Accounting

There are lots of decision which businessman has to take on the basis of tools of management accounting. One of management accounting tool is decision accounting. It is helpful to take main decision which we can explain following ways :

a) To Buy or to construct any fixed asset

b) Do's or Dont's to do any business activity

c) To choose best alternative

d) Calculation the price of product

4 :Throughput accounting

Throughput Accounting(TA) is a dynamic, integrated, principle-based, and comprehensive management accounting's tool that provides managers with decision support information for enterprise optimization. Actually this is the extension of decision accounting. Throughput accounting is relatively new in management accounting. It is an approach that identifies factors that limit an organization from reaching its goal, and then focuses on simple measures that drive behavior in key areas towards reaching organizational goals.

5 :MIS

We MIS tool, management accountant provides information needed to manage organizations effectively. If we have to understand MIS, we need to understand ERP, SCM, CRM, DSS and other computer techniques for providing information with effective ways.

6 : Financial Policy

Financial policy is that tool of management accounting which is needed to make good structure of capital mix We decide the proportion of share capital and loans in capital structure. Financial and operating leverages are also its sub-tools.

7-Working Capital Management

With this tool of management accounting, we manage short term assets and short term liabilities. All cash management,debtormanagement and inventory management will include in working capital management. We make also working capital cycle for knowing the firm's ability to convert its resources into cash. If there is low time for conversion of raw material into sales and then cash from debtor, it is good indication.