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Objectives, Role and Scope of Management Accounting: Week 1

Management accounting provides economic and financial information for internal users like managers to assist with planning, organizing, directing, controlling and decision making. It aims to help determine goals, reduce costs, increase efficiency and maximize profitability. Management accountants perform functions like scorekeeping, attention directing, and problem solving. They help with forecasting, make-or-buy decisions, cash flow analysis, performance variances, and rate of return analysis. Management accounting covers areas like financial accounting, cost accounting, forecasting, budgets, taxes, controls, and reporting. It provides both financial and non-financial information for internal use compared to the externally focused financial accounting.

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640 views12 pages

Objectives, Role and Scope of Management Accounting: Week 1

Management accounting provides economic and financial information for internal users like managers to assist with planning, organizing, directing, controlling and decision making. It aims to help determine goals, reduce costs, increase efficiency and maximize profitability. Management accountants perform functions like scorekeeping, attention directing, and problem solving. They help with forecasting, make-or-buy decisions, cash flow analysis, performance variances, and rate of return analysis. Management accounting covers areas like financial accounting, cost accounting, forecasting, budgets, taxes, controls, and reporting. It provides both financial and non-financial information for internal use compared to the externally focused financial accounting.

Uploaded by

Aki Stephy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Objectives, Role

and Scope of
Management
Accounting

Week 1
Learning Objectives

Objectives, Role and Scope of Management


Accounting
LO1 Define management accounting
LO2 Enumerate and explain the objectives of management accounting
LO3 Explain the functions of management accountant
LO4 Define the scope of management accounting
LO5 Discuss the differences between financial and management accounting
information.
Management Accounting
Also called Managerial Accounting or Internal Accounting

A field of accounting that provides economic and financial


information for internal users, particularly the managers or
decision-makers in an organization
Objectives of Management Accounting

The main objective of managerial accounting is to assist the management of a company


in efficiently performing its functions: planning, organizing, directing, and controlling.
– Analysis and Interpretation of Financial Statements
– Planning and policy-making
– Decision-Making
– Controlling
– Coordinating
– Communicating
– Helps in evaluating the efficiency and effectiveness of policies
Benefits of Management Accounting
 Management Accounting supports the organization to achieve these
objectives:
■ Determining the goals
■ Reduce Costs
■ Increase Efficiency
■ Maximizing the Profitability
■ Increase Financial Returns
Functions of Management Accounting

Management accountants perform three functions, in general


Scorekeeping
– accumulate data and report reliable results to all levels of management
Attention-directing
– make visible opportunities and problems on which managers need to focus
Problem-solving
– conduct comparative analysis to identify the best alternatives in relation to the
organization’s goals
Functions of Management Accounting

Other functions of management accounting include:


1.  HELPING FORECAST THE FUTURE
2.  HELPING IN MAKE-OR-BUY DECISIONS
3.  FORECASTING CASH FLOWS
4.  HELPING UNDERSTAND PERFORMANCE VARIANCES
5.  ANALYZING THE RATE OF RETURN
Role of Management Accounting
Managerial accounting covers all fields of accounting
designed at informing management of business operation
parameters, which include reports of budgeting, trend
analysis, sales forecasting, product costing, constraint
analysis and many more on daily, weekly or monthly basis.
Scope of Management Accounting
Financial Accounting: Financial Accounting provides historical information useful
for future planning and financial forecasting
Cost Accounting: It provides various techniques of costing which are used in the
process of planning and decision-making.
Forecasting and budgeting: Management Accounting exercises the tool of
forecasting and budgeting in the process of planning, controlling and decision-
making
Tax accounting and tax planning: the analysis of implication of tax provisions on
future projects comes under management accounting.
Scope of Management Accounting
Internal Control & Audit: Management Accounting highly depends on internal control system existing in
the organization to identify the weaker sections of the organization.
Cost Control Procedures: include inventory control, cost control, budgetary control, variance analysis
etc.
Financial Analysis and Interpretation: Various financial analysis techniques such as Ratio Analysis, Fund
Flow Analysis, Trend analysis are used to analyze and interpret financial data.
Reporting to Management: The Management Accountant is required to submit reports to the
management as per their requirements.
Office Services: Management Accountant is expected to maintain and control office routines and
procedures like filing, copying, communicating, data processing etc.
Statistical Tools: Various statistical tools like graphs, charts, diagrams are used in the process of
planning, controlling and decision-making.
Comparing Management Accounting
with Financial Accounting
Management Accounting Financial Accounting
Targeted users Internally focused Externally focused
Restrictions on inputs and No mandatory rules Must follow externally
processes imposed rules
Type of information Financial and nonfinancial Objective financial
information; subjective information
information possible
Time orientation Emphasis on the future Historical orientation
Degree of aggregation Internal evaluation and Information about the firm
decisions based on very as a whole
detailed information
Breadth Broad, multidisciplinary More self-contained
Thank you!

Zephaniah 3:17
The Lord your God is in your midst,
a mighty one who will save;
he will rejoice over you with gladness;
he will quiet you by his love;
he will exult over you with loud singing.

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