Management Accounting Advantages

Management Accounting Advantages:

  1. Proper Planning: The management can prepare the plan and execute the same for the effective operation of a business. In this context, various functional budgets are prepared and accounting information is rearranged department wise, product wise, section wise and the like for proper planning.
  2. Effective management Controlling: The actual performance of every business activity is measured and compared with the standard fixed or planned one. If the deviations are found that are controllable, the management can decide the course of action to exercise control. Both standard costing and budgetary control system highly help the management in this aspect.
  3. Measurement of performance: The system of budgetary control and standard costing enables the measurement of performance. In standard costing, standards are determined in advance and then the actual cost is compared with the standard cost. It helps the management to know the deviation.
  4. Maximum profitability: There is a moral among the employees. Standards are fixed and measure the actual performance to find the deviations. If the causes for deviations are reasonable and controllable, proper action may be taken by the management. In this way, profit is maximized.
  5. Good Industrial relations: Unacceptable standards or sub-standards which are often responsible for unhealthy and bad relations between management and labor can be removed by the use of management accounting, industrial relations can thus improve. It creates a good climate for further investments in the business concern.
  6. Service to customers: The cost control devices employed in management accounting enable the reduction of prices. All employees in the concern are made cost-conscious. Since the quality of goods is determined in advance the quality of products becomes good and hence the customers are provided quality goods at a reasonable price.
  7. Helps in communication: Two-way communication is followed in an organization if the management accounting system is followed. Modified accounting information and performance reports are sent to top management for decision making. In another way, the assignment of work and responsibilities over employees are communicated to lower-level executives.

Management accounting-advantages