Advantages of Management Accounting Presented by Dr. B. N. Shinde
Management accounting provides several benefits to companies, such as increasing efficiency, boosting profitability, simplifying decision-making, enabling financial control, and ensuring cost transparency. Dr. B. N. Shinde, an Assistant Professor at Deogiri College, Aurangabad, highlights how management accounting enhances operational performance and supports strategic decision-making for business success.
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Advantages of Management Accounting Presented by Dr. B. N. Shinde Assistant Professor Department of Commerce Deogiri College, Aurangabad
Advantages of Management Accounting 1. Increases Efficiency of the company: Companies opt for Management accounting as it increases the efficiency of the company in performing operations. It contributes performance by evaluating and comparing. Management accounting makes it easier to achieve various results. This indirectly performance. As a result, they receive rewards in the form of promotions. Thus, management accounting indirectly increases the efficiency of the company at a whole. in striving for better to strive for better
Advantages of Management Accounting 2. Increases the bar of Profitability: Management budgetary control and capital budgeting. The use of this method makes it easier for the company to cut short the extra expenditure for performing vital operations. This indirectly increases the bars of profits for the company, as the company is able to reduce its pricing on the products. accounting includes
Advantages of Management Accounting 3. Simplifies the decision making : Managerial decisions management require a simplified report of the financial statement of the company. For this action, the management accountant creates a detailed technical report with simpler interpretations. Here, he represents the key facts of the financial statements. This enables the managing officers to take up appropriate decisions for the betterment of the company. and other activities of
Advantages of Management Accounting 4. Enables controls over the fluctuation of business monetary fund: One of the essential factors in business is the monetary fund. Management control over the fluctuation of this monetary fund. Management accounting studies the flow of the funds in detail. Moreover, it helps in maintaining the emergency fund in case of any urgency. Further, it also helps in eliminating any source within the company that misuses the fund. After all, emergency preparation should always be kept aside before setting up any business. accounting enables
Advantages of Management Accounting 5. Cost transparency: In the corporate world, the majority of the costs come from the Information Technology (IT). The work of management accounting in the firm is to work with the IT department closely. This action ensures within budget actions and provides cost transparency to the company.
Advantages of Management Accounting 6. Flexibility and freedom: A management accounting system is of a flexible nature. These reports do not require to be made yearly, monthly, or weekly. Therefore, the accountant gets enough time to prepare a perfect report.
Advantages of Management Accounting 7.Assist in goal completion (Objectives): The objective of the report presented by the management accountant is to assist in achieving a long-term goal. It becomes possible to achieve the goal due to the detailed information of the management accountant, which highlights the strong and weak points of the company. In addition, this information helps to identify the weakness and takes measures to overcome them.
Advantages of Management Accounting 8. Future prediction from the past result: Every new system that evolves for the corporate world has a single motive. It is to attain success in the competitive market. With similar intent, the management accounting system also strives for betterment in performance. Thus, with the help of given data of the past (of the company), it provides a chance to prepare for better future results.
Advantages of Management Accounting 9.Advanced technique and features: The reasons because of which the management system seems reliable are the special tools and techniques. To form an accurate and valid report special techniques like budget controlling, marginal costing, responsibility accounting, etc are used. The use of the technique may differ according to the issue at hand. However, this technique makes it easier to make decisions in favor of the company.
Advantages of Management Accounting 10. Marginal costing: Marginal costing is possible with the aid of a management accountant. It fixes the selling price of the products created in the organization. Further, it also suggests several ways to use scarce materials and recommends actions based on a fixed cost, contribution, and other extras. Although management accounting does not promise perfect decisions, they do increase the chances of taking effective decisions. resources. It also
LIMITATIONS OF MANAGEMENT ACCOUNTING 1. Limitations of Accounting Records: Management accounting derives its information from financial accounting, cost accounting and other records. It is rearrangement or modification of data. The correctness or otherwise of the management accounting depends upon the correctness of these basic records. The limitations of these records are also the limitations of management accounting. concerned with the
LIMITATIONS OF MANAGEMENT ACCOUNTING 2. It is only a Tool: Management accounting is not an alternate or substitute for management. It is a mere tool for management. Ultimate decisions are being taken by management management accounting. and not by
LIMITATIONS OF MANAGEMENT ACCOUNTING 3. Heavy Cost of Installation: The installation of management accounting system needs a very elaborate organization. This results in heavy investment which can be afforded only by big concerns. 4. Personal Bias: The interpretation of depends upon the capacity of interpreter as one has to make a personal judgment. Personal prejudices and bias affect the objectivity of decisions. financial information
LIMITATIONS OF MANAGEMENT ACCOUNTING 5. Psychological Resistance: The installation of management accounting involves basic change in organization set up. New rules and regulations are also required to be framed which affect a number of personnel and hence there is a possibility of resistance form some or the other. 6. Evolutionary stage: Management accounting is only in a developmental stage. Its concepts and conventions are not as exact and established as that of other branches of accounting. Therefore, its results depend to a very great extent upon the intelligent interpretation of the data of managerial use.
LIMITATIONS OF MANAGEMENT ACCOUNTING 7. Provides only Data: Management accounting provides data and not decisions. It only informs, not prescribes. This limitation should also be kept in mind while using the techniques of management accounting. 8. Broad-based Scope: The scope of management accounting is wide and this creates many difficulties in the implementations process. Management requires information from both accounting as well as non-accounting sources. It leads to inexactness and subjectivity in the conclusion obtained through it.
