Explain the Objectives of management accounting?
1. Planning and policy formulation: the object of management accounting is to supply necessary data to the management for formulating plans. Planning is essentially related to taking decisions for future. It also includes forecasting setting goals and deciding alternative course of action. Management accountant prepares statements of past results and gives estimations for the future. The figures supplied and opinion given by the management accountant help management in planning and policy helpful in controlling performance.
2. Helpful in organizing: organization is related to the establishment of relationship among different individuals in the concern. It also includes the delegation of authority and fixing of responsibility. Management accounting is connected with the establishment of cost centres preparation of cost control accounts and fixing of responsibility for different functions.
3. Helpful in interpreting financial information: the main object of management accounting is to present financial information to the management in such a way that it is easily understood.
4. Motivating employees: management accounting helps the management in selecting best alternatives of doing the things. Targets are laid down for the employees. They feel motivated in achieving their targets and more incentives may be given for improving their performance.
5. Helpful in making decisions: the management has to take certain important decisions. A decisions may have to taken be about the expansion or diversification of production. There may be a question of replacement of labour with machine or introduction of latest technological device.
6. Reporting to management: one of the initial objectives of management accounting is to keep the management fully informed about the latest position of the concern. This helps management in taking proper and timely decisions.
7. Helpful in co-ordination: management accounting gives tools which are helpful in coordinating the activities of dissimilar sections or departments. Co-ordination is done through functional budgeting.
8. Helpful in tax administration: the complexities of tax system are increasing every day. Management accounting helps in accessing various tax abilities and depositing correct amount of taxes with the concerned authorities. Various tax returns are to be filled under different tax laws. Tax administration is carried on with the advice and guidance of the management accountant.
9. Helpful in controlling performance: management accounting devices like standard costing and budgetary control are. The complexities of tax system are increasing every day. Management accounting helps in accessing various tax liabilities and depositing correct amount of taxes with the concerned authorities.