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CONTENTS: 1.Introduction 2.Importance 3.Objectives 4.Findings 5.Nature 6.


Introduction: - Management accounting is the term used to describe

accounting methods, systems and techniques which coupled with special knowledge and ability, assist management in its task of maximizing profits or minimizing losses. Management Accounting is the study of managerial aspects of accounting. Financial management is concerned with estimation of capital requirements and with managerial decisions relating to the determination of the various types of sources and their relative proportion, whereby the total capital is to be obtained. It is concerned with the planning, organizing, directing and controlling financial activities of any enterprise. Importance of financial management cannot be over-looked as it helpful in promoting new enterprises, smooth running and expansions of existing enterprises. Money is a universal lubricant which makes an enterprise run smoothly.

Importance: -

The importance of Effective Management Accounting is-

1. Increase in Efficiency 2. Proper Planning 3. Measurements of Performance 4. Maximizing Profitability 5. Improve Service to Customers 6. Effective Management Control. 7. Providing Accounting Information 8. Cause and Effect Analysis 9. Use of Special Techniques and Concepts 10.Taking Important decisions
11. Concerned with Forecasting.

Objectives: - The primary objective of management accounting is to enable

management to maximize profit or minimize losses. This is done through the presentation of statements in a way that management is able to take correct policy decisions. The following are the objectives for Better Effective Management are-

1. Planning and Policy Formulation 2. Helpful in controlling Performance 3. Helpful in Organizing 4. Helpful in Interpreting Financial Information 5. Motivating Employees 6. Helpful in Making Decisions 7. Reporting to Management 8. Helpful in Co-ordination 9. Helpful in Tax Administration.

Findings: - Tools & Techniques Used for Effective Management are

1. Financial Policy and Accounting: - Every concern has to take a decision about the sources of raising funds. The funds can be raise either through issue of share capital or through the raising of loans. Again a decision is to be taken about the type of capital, i.e., equity share capital or preference share capital. Preference share capital can be sub divided into a number of types. The second division concerns the raising of loans. Whether the loans should be long term or short term again a matter of policy. The proportion between share capital and loans should also be decided. All these decisions are very important and management accounting provides techniques of financial planning.

2. Analysis of Financial Statements: - The analysis of financial statements is meant to classify and present the data in such a way that it becomes useful for the management. The meaning and significance of the data is explained in a nontechnical language. The techniques of financial analysis include comparative financial statement, ratios, funds flow statements, trend analysis, etc. 3. Historical Cost Accounting: - The system of recording actual data on or after the date when it has been incurred is known as Historical Cost Accounting. The actual cost is compared to the standard cost and it gives an idea about the performance of the concern. Through costing is important but by itself its utility is limited. 4. Budgetary Control: - It is a system which uses budgets as a tool for planning and control. The budgets of all functional departments are prepared in advance. The budgets are based on Historical data and future possibilities. The actual performance is recorded and compared with the predetermined targets. Management is able to assess the performance of each and every person in the organization. 5. Standard Costing: - Standard costing is an important technique for cost of control purposes. In standard costing system costs are determined in advance. The determination of standard cost is based on a systematic analysis of prevalent

conditions. The actual cost are recorded and compared with standard costs. The variances, if any, are analyzed and their reasons are ascertained. Standard costing helps to enhance the efficiency of the concern and also enables management by exception 6. Marginal Costing: - This is method of costing which is concerned with changes in costs resulting from changes in the volume production. Under this system cost of product is divided into marginal (variable) and fixed cost. The latter part of cost (fixed) is taken as fixed and is recorded over a level of production and every additional production unit involves only variable cost. Marginal costing is helpful for measurement of profitability of different lines of production, different departments and division of an enterprise. 7. Decision Accounting: - An important work of management is to take decisions. Decision taking involves a choice from various alternatives. There may be decisions about capital expenditure, whether to make or buy, what price to be charged, expansion or diversification. 8. Revaluation Accounting: - This is also known as Replacement Accounting. The preservation of capital in the business is the main object of management. The profits are calculated in such a way that capital is preserved in real terms During periods of rising prices, the value of capital is greatly affected According to Batty, Revaluation accounting s used to denote the methods employed for overcoming the problems connected with fixed asset replacement in a period of rising prices. 9. Control Accounting: - Control Accounting is not a separate accounting system. Different systems have their control devices and these are used in control accounting. Standard costing and budgetary control can be exercised through variance analysis reports. In control accounting we can use internal check, internal audit, statutory audit and organization and methods for control purpose. 10. Management information Systems: - With the development of electronic devices for recording and classifying data, reporting to management has considerably improved.

Nature: - Following are the nature of Effective Management1. Technique of Selective Nature: - Management accounting is a technique of selective nature. It takes into consideration only the data from the income statement and position statement which is relevant and useful to the management. 2. Provide Data and not the Decisions: - The management accountant is not taking any decision but provides data which is helpful to the management in decision making. 3. Concerned with future: - Management accounting unlike the financial deals with the forecast with the future. It helps in planning the future because decisions are always taken for the future. 4. Analysis of different Variables: - Management accounting helps in analyzing the reason as to why the profit or loss is more or less as compared to the past period. 5. No Set Formats for Information: - Management accounting will not provide information in a prescribed form like that of financial accounting. It provides the information to the management in the form which may be more useful to the management in taking various decisions on the various aspects of the business.

Conclusion: -The most important condition for success of Management

Accountant is that management should regard for management accounting services. The suggestions of the Management Accountant should not be brushed aside but should be properly studied and practical shape, if possible. Over the many years many accounting concepts and conventions such as, business entity concept, money measurement concepts, consistency convention etc. have been developed. They are the foundation stones upon which any accounting system is to be built. The Management Accountant should not ignore these concepts and conventions if he wants to be successful in his duties.