FUNCTIONS OF MANAGEMENT ACCOUNTING

Management accountant supplies useful information to different functional authorities provide necessary accounting information and advice for price determination and pricing decisions and helps to make strategic decisions such as seasonal or temporary suspension of production, make or buy decisions, replacement decisions, and expansion or closure of particular division or department, etc. Its other major functions are:

Planning: One of the important functions of management accounting is to provide necessary information and data for making short-term and long-term forecasts and planning the operations of the business. For doing this, the management accountant uses techniques of statistics, like probability, trend study of correlation and regression; budgeting and standard costing: capital budgeting: marginal costing, and cash funds flow statements, etc. These are important tools in the hands of management accountants for the planning of the business.

Organising: The management accountant helps the management in organizing the human and non-human resources of the business by analyzing different functions and assigning specific responsibilities. He tries to organize the accounting and finance functions of the business on modern lines.

Coordinating: The management accountant increases the efficiency of the organization and maximizes its profits by providing different tools of coordination such as budgeting, financial reporting, financial analysis, interpretation, etc. It helps the management by reconciling the cost and financial accounts, preparing budgets and setting the standard costs, and by analyzing variances in costs to facilitate management by exception.

Controlling: The management accountant helps in controlling the performance of the organization by using standard costing, budgetary control, accounting ratios, cash and funds flow statements, cost reduction programs, and evaluating the capital expenditure proposals and return on investment.

Communicating: The management accountant prepares various reports to communicate the results to the superior, to motivate the employees, to exercise effective control of their activities, and to enable the management to take sound decisions. He also communicates with the outside world about the progress of the business through published accounts and returns.

Financial analysis and interpretation: The management accountant analyses the data and presents it before the management in a non-technical manner along with his comments and suggestions so that the owners and the top personnel in the management may understand it and take decisions without any difficulty.

Protection of business assets: The management accountant will be responsible for the protection of business assets. He is to see that sufficient funds are available for repairs, maintenance, and replacement of fixed assets so that the production capacity of the enterprise may not be badly affected. He is also to see that business assets are properly insured.

Maintaining tax policies: The management accountant is responsible for tax policies and procedures. He will make available the reports required by various authorities. He will make proper provisions for taxation and he is to ensure that quarterly payments of taxes paid in advance as required by the Income Tax Act are made in time to avoid penal interest payment on delayed payment of tax.