Objectives Of Management Accounting – Managerial Decisions

Objectives Of Management Accounting – The first and foremost objective of management accounting is to enable the management to maximise the profits at minimum cost. For this, the statement of accounts is presented in such a way that helps in taking correct policy decisions. Some of the other important objectives of management accounting are as follow:

Objectives Of Management Accounting

(1) Formulation of Plans and Policies

Management has to formulate various plans for different activities so as to achieve the pre-determined objectives. For these plans, management requires necessary information about the cost and benefit of different alternatives. Management accounting helps in providing these information to the management.

(2) Control over Performance of Concern

The objective of management account is to establish control over the performance of business concern. Budgetary control and standard cost are two important techniques of management accounting which are helpful in controlling the performance of the concern. Separate standards are fixed for each department and the actual results are compared to the standards. Thereafter, variances are calculated and efforts are made to remove them.

(3) Sound Decision Making ( Objectives Of Management Accounting )

Management has to make different decisions at different levels. Some of these decisions include the determination of dividend policy, expansion or diversification of production capacity, fixation of selling price, selection of product mix, etc. Management accounting provides various information collected from internal and external sources so as to arrive at right decision.

(4) Motivation to Employees

It is necessary to motivate the employees to achieve business goals,. Management accounting helps in the motivation of employees by setting the targets for them. Various rewards and incentives are given to employees who achieve their targets in a prescribed time period. This helps in motivating the employees.

(5) Maintaining Coordination

Various departments of organisation are coordinated with the help of management accounting. The budgets which are prepared by different departments can be contradictory. Management accountant acts as a coordinator and establishes coordination by removing contradictions.

(6) Internal Audit ( Objectives Of Management Accounting )

Management accounting includes the development of internal audit system for internal control. It is necessary to measure the performance of every department and the whole organisation. This helps the management in fixing the responsibility of different individuals.

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(7) Effective Organisational Function

Organisation implies the assigning of duties, authorities and responsibilities to different individuals in the concern. Management accounting helps in evaluating the performance of different individuals and their respective departments. This information is helpful in fixing the responsibility of the employees for various functions. This helps in maintaining an effective organisational bond.

(8) Tax Accounting ( Objectives Of Management Accounting )

Management accountant guides the reanisation about tax administration. It includes tax planning, determination of taxable income, filling of the return promptly and timely payment of tax to the concerned authorities. Thus, management accounting is used to attain a number of objectives.

(9) Effective Financial Analysis

The information which is provided by the financial accounting is not enough for decision making. It is also required to be analysed in a systematic and meaningful manner from which the results are detailed out. For this, data are presented in a comparative form and methods alyse them such as ratio analysis, funds flow statement, cash flow to an stat ement, comparative and common size statements etc. are used.

(10) Management Reporting

The main objective of management accounting is to enable the management in taking proper and prompt isions. For this purpose, it has to keep the management fully aware regarding the current position of the concern. This is done through regular financial and other reports.

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