TECHNIQUES OF MANAGEMENT ACCOUNTING

Management accounting, like accounting, as an accounting service to management through its various functions, has to employ several tools, techniques, and methods.

These techniques can satisfy managerial needs. These are placed here in brief to have some idea about them.

Budgetary control: There are a number of devices that helps in controlling. The most widely used device for management control is "Budget". Budgetary control is a system that resorts to budget as a means of planning and controlling and coordinating different types of activities, like the production and distribution of goods and services as designed.

Marginal costing: Marginal costing is helpful for the measurement of the profitability of different lines of production. This technique helps in identifying the nature of costs like marginal costs (variable) and fixed costs. This is a method of costing that is concerned with changes in costs resulting from changes in the volume of production.

Decision accounting: One of the most important functions of top management is to make decisions. Decision-making involves a choice from several alternatives. The decision is taken after studying the alternative data in terms of costs, prices, and profits furnished by management accounting and exercising the best choice after considering other non-financial factors.

Standard costing: Standard costing is an important tool of cost control which is one of the main objectives of management accounting. Standard costing techniques compare the standard costs of materials, labor, and expenses incidental to production which is predetermined, with the actual costs that have occurred in the course of carrying out production. It is the most effective technique available for controlling performance and costs.

Revaluation accounting: This is an important tool for management accounting. Revaluation or Replacement accounting revere to the maintenance of capital in real terms. This term is used to denote the methods employed for overcoming the problems connected with fixed asset replacement in a period of rising prices. It is a fact that a problem arises in connection with the replacement of fixed assets in terms of rising prices. It ensures the maintenance of the capital of the firm.

Control accounting: It is not a separate accounting system. It consists of techniques of standard costing, budgetary control, control reports and statement, internal check, internal audit, and reports. It is in this field that management has the scope to display ingenuity in the analysis, interpretation, and presentation of information at all levels of management.

Management information system: It has already been stated that the management accounting of an enterprise is to provide management and other operations as a basis of protection and constructive to management. The management accountant provides all these data and information relevant to the enterprise for the purpose. With the development of electronic devices for recording and classifying data, reporting to management has considerably improved. Feedback of information can be used as a control technique.

Statistical techniques: There is a large number of statistical and graphical techniques that are used in management accounting. Some common examples are the master chart, chart of sales and earnings, investment chart, etc.

Ratio accounting: Ratio accounting signifies the technique and methodology of analysis and interpretation of financial statements using accounting ratios derived from such statements. Ratio accounting included trend analysis, comparative financial statements, ratio analysis, fund flow statements, etc.