Thivya.

215012301336

MANAGEMENT ACCOUNTING

Management accounting provides necessary information to assist the management in the creation
of policy and in the day-to-day operations. It enables the management to discharge all its functions,
i.e., planning, organization, staffing, direction and control efficiently with the help of accounting
information.

Accounting information is of great importance to the management of a business since they are
saddled with the responsibilities of making decisions on behalf of the business organization.

The information which regards to the financial position of the business, such as; profit and loss,
cost and earnings, liabilities and assets, etc is provided by Accounting to the management. This
is why the importance of accounting in business cannot be overemphasized.

Management depends on statistical data and information that accounting provides in order to
make the right decision.

The main motive of Accounting is to systematically record financial transactions in the books of
accounts and to ascertain the profit-loss and financial position of a business.

Some of the functions of accounting include: ascertainment of profit and loss and financial
position, interpretation and analysis of accounts and statements, development of accounting
system, a collection of statistical and economic data, formulation of financial principles and
financial planning and controlling results as per plan, etc.

Accounting in modem age is directly related to financial management. As a result of expansion

in scopes of business, management now depends on various accounting data and information in
taking decisions.

Accounting prevents the misuse of assets, increases production and profit, controls costs and
helps increase the efficiency of the overall management. The roles being played by management
is very important in the development of a business organization and cannot be overlooked.

The functions of management are planning, organizing, collecting business elements, motivating,
coordinating, controlling and budgeting, etc. An efficient accounting system is needed for
management functions to be successful.

There is no end to accounting system because it shows the financial position of a business
entity by identifying the economic events and recording, analyzing and presenting them.
Relevant costs analysis
How a company spends its money directly impacts the bottom line. To improve profit
margins, a company will have to perform a cost analysis to analyze expenses and better plan
future expenses. Since expenses are likely to be spread out, expense analysis involves
comparing different suppliers, products, services and other factors to determine the one that
would be most advantageous and profitable.

Audience Targeting
Product or service design is successful when it fulfills the needs of the end user or
customer. A company that knows its target audience well will be able to align both its
products as well as its advertising campaigns to better suit them. Many organizations do not
take advantage of the valuable information that they have about their existing customers. A
company that analyzes their customer data will be able to understand their demographics.

Make or buy evaluations

Manufacturing industries have a large amount of data that they can analyze to optimize
every stage of production. Product production is the core focus of the company. While some
companies perform every stage of production consecutively, other industries may use
components sourced from outside. Sometimes it may be more time or cost effective to
manufacture the required components internally rather than to source them from a vendor. If
there are plenty of vendors who are able to supply the required input components of the
required quality, on time and at competitive prices, buying from suppliers may be the better
option.

Define budgets
Budgets that are decided at random are often wasted, misallocated or insufficient. They may
even be excessive and lock in money that could be better used elsewhere in the company.
The most intelligent way of defining the budget for a period is to study the historical expense
data. Insufficient budget allocation may potentially stall a project or marketing campaign
mid way. This may cause the entire expenditure to be wasted or stall the optimal operations
of the company. Budget planning and allocation is vital to the success of every action of the
company. It would be foolhardy to embark on any project, product development,
manufacture or marketing unless there are enough funds allocated to complete the process.

Controlling
Management can have better control over all the different functions and departments of a
company when they have the right data. Rather than word of mouth, it is essential to also
assess the details of each department through the facts and figures. Management
accounting is essential to transform the data from departments into easy to understand
reports that keep management informed. So, if a department is underperforming,
management will be able to assess which aspects of that department are lagging behind.
Detailed analysis helps target the problem and address it.
Planning
Management of a company is about managing the current operations of a company and
also making future plans and steering the company towards its goals. Planning that is based
on data has a better chance of success. By studying the historical and current patterns in the
industry and company, management accounting helps forecast future trends. Today’s highly
competitive markets require that a business should use every opportunity to get one step
ahead of the rest. Management accounting helps companies extract and use the
information that is readily available in their records to make better decisions. Management
accounting generates reports that give you the larger picture and also drill down to finer
details. It can be used to spot trends and keep tweaking and adjusting plans in response.

Meaningful report generation

Management accounting analyses large amounts of data to extract vital information.
Creating these reports can be a time consuming effort without the proper tools. An
intelligent enterprise management software such as Tally helps a management accountant
create reports quickly and accurately. This also ensures that every report that is generated
uses the real time data. Computerized management accounting with accounting
software also helps the accountant easily access and compare historical data and trends.
Accurate and insightful reports drive the success of the company. Use of the complete
accounting software solution, Tally, empowers management to make confident data-driven
informed decisions.