SCOPE OF MANAGEMENT ACCOUNTING

The scope of management accounting is very wide and broad-based. It Includes all information, which is provided to the management for financial analysis and interpretation of the business operation. The following fields of activities are includes included in the scope of this subject:

Financial accounting: Financial accounting though provides historical information but is very planning and financial forecasting. It is an essential prerequisite of any discussion of management accounting. Financial statements contain enough information that is used by management for decision-making. Management accounting contains only tools and techniques and it gets the data for interpretation and analysis mainly firm financial accounting. Thus, without an efficient financial accounting system, management accounting cannot be operative.

Cost accounting: Cost accounting provides various techniques for determining the cost of manufacturing products and of cost of providing services. It uses financial data for finding out the cost of various jobs, Products, or processes. Business executives depend heavily on accounting information in general and on cost information in particular because any activity of an organization can be described by its cost. They make use of various cost data in managing organizations effectively. Cost accounting is Considered the backbone of management accounting as it provides analytical tools such as Budgetary Control,, Standard Costing, Marginal Costing, Inventory costing, Operating Costing Etc., which are used by management to discharge its responsibilities effectively.

Financial management: Financial management is concerned with the planning and controlling of the financial resources of the firm. It deals with raising funds and their effective utilization. Its main aim is to use the fund in such a way that the earnings of the firm are maximized. Today finance has become the lifeblood of any business concerned. Although financial management has emerged as a separate subject, management accounting includes and extends to the operation of financial management, etc.

Financial statement analysis: The Various parties concerned with the financial statements may need information, which can be obtained by financial statement analysis and developing certain trends and ratios. A person can gain meaningful insights and conclusions about the firm with the help of analysis and Interpretation of the information contained in financial statements. Different techniques have been developed which can be used for the proper interpretation and analysis of financial statements.

Interpretation of data: The Work of Interpretation of financial data is done by the management accountant. He interprets various financial statements for the management. This statement may be studied in comparison to statements of earlier periods or in comparison with statements of similar other concerns. The significance of these reports is explained to the management in simple language. If the statements are not properly interpreted then wrong conclusions may be drawn. So. Interpretation is Important in compiling financial statements.

Management reporting: Clear Informative, Timely reports are essential management tools in reaching decisions that make the best use of firm's resources. Thus, one of the basic responsibilities of management accounting is to keep the management well informed about the operations of the business. The reports are presented in the form of graphs, diagrams, index numbers, or other statistical techniques so as to make them easily understandable. The management accountant sends interim reports may be monthly, quarterly, or half-yearly, these reports cover profits or orders in hand, etc. these reports are helpful in giving a constant review of the working of the business.

Quantitative techniques: Modern managers believe that the financial and economic data available for managerial decisions can be more useful when analyzed with more sophisticated analysis and evaluation techniques. These techniques such as time series, regression analysis, and sampling techniques are commonly used for this purpose, further, managers also use techniques such as linear programming, game theory, queuing theory, etc. in their decision-making Process.