Learning Materials For Accounting, Management , Finance And Economics.

Sunday, November 1, 2009

Merits Of Management Accounting

Management accounting is very useful for every business organizations. The main advantages or merits of management accounting are interpretation of data and information, performance comparison, planning, forecasting, controlling, coordinating, better organizing etc. Advantages of management accounting can be described with the help of following points.

1. Analyzing And Interpretation Of Data

Management accounting analyze and interpret systematically the information collected from within and outside the business and communicate the result to the management. This will help in implementing managerial policy decision effectively.

2. Comparing The Performance

Management accounting helps in comparing actual performance with the budgeted standard and reporting management by deviations of corrections.

3. Proper Planning, Forecasting And Budgeting

All the business activities are planned well ahead base on the accounting information applying budgeting and forecasting techniques. As such, all the activities are expected to be interwoven and well integrated to achieve the set goal. The said budgeting and forecasting techniques are efficiently applied with the help of management accounting.

4. Effective Controlling

Management accounting techniques help the business control its activities efficiently. It helps in utilizing its capital in an optimal way.

5. Cope With The Changing Environment

The management accounting often takes cognizance of the changes in the economic environment caused by government policies and other economic forces. This helps the business combat and accommodate it to such changes. Even the management accounting helps the business to get rid of the seasonal and cyclical fluctuations.

6. Better Coordination

Better coordination is also another notable advantage of management accounting. It facilitates coordination between different departments and helps in attaining the objectives of the business as a whole.

7. Better Organizing

Management accounting plays a significant role in organizing the business on a sound footing. It assist the management with the help of internal control and internal audit in fixing targets, responsibilities, appraisal of performance, problem and solutions of these cost and profit centers and executing overall control of business activities.

8. Taking Corrective Measures

Management accounting often compares the actual performance with the standard and analyze the reasons for any deviation there have and offers suggestions to take corrective measures.