Functions of Management Accounting

Management Accounting Functions

In management accounting or managerial accounting, managers use the provisions of accounting information to inform themselves better before they decide matters within their organizations, which allows them to manage better and perform control

    1. Planning of Accounting Function: An accounting system is maintained in an organization that should cover standards of costs, sales forecast, production planning, profit planning, allocation of resources, capital budgeting, and short-term and long-term financial planning. Moreover, he has to prepare the necessary procedures to implement the plan effectively.
    2. Controlling: The management accountant has to measure the actual performance and compare it with the standard. Based on this comparison, he has to find the differences and interpret the results of the operation and submit the same to all levels of management. This is done through appropriate accounting reports for controlling.
    3. Reporting: The top management requests the management accountant to prepare the report for the root causes of an unfavorable event or operations. In this report, the accountant can pinpoint real reasons and the persons who are responsible.
    4. Coordinating: He consults all levels of management for framing a policy or an action program. Such type of consultation brings co-ordination between the accounts department and top management.
    5. Interpreting: The accounting information is modified and presented before the management with interpretation. The interpretation is made in different phases. If so, real reasons for the operating results can be understood by the management.
    6. Evaluation: He has to evaluate the effectiveness of policies, organization structure, and procedures adopted for attaining the objectives. For which, he has to consult the same with functional managers and top executives.
    7. Decision-making: Decision-making is a process of choosing among competing alternatives. Decision-making is inherent in each of the three management functions described above, namely, planning, organizing, and controlling. A manager cannot plan without making decisions and has to choose among competing objectives and methods to carry out the chosen objectives. Similarly, in organizing, managers need to decide on an organizational structure and on specific actions to be taken on day-to-day operations. In control, function managers have to decide whether variances are worth investigating.
    8. 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 provision 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.