Accounting management is a way where we can learn everything about the expenses and profits & Loss of business during the financial year. It is a process of analyzing the business cost and prepare the internal report of a business. It is also known as cost and managerial accounting.
Definitions by different authors
Management Accounting is concerned with accounting information that is useful to management.R.N. Anthony
Management Accounting is the term used to describe accounting methods, systems, and techniques which coupled with special knowledge and ability, assists in its task of maximizing profits or minimizing losses.Batty
Use of Accounting Management in business:-
Well, It is used only for the internal purposes of a business. It is not under the regulation of any law and the main purpose of accounting management is that it helps internal management to take any decision about the organization.
It will help you to handles such things:-
- Company’s available cash
- Generation of sales revenues
- Company’s accounts payable & receivable
- Financial accounting statements
- Calculation of financial ratios and performance
- Helping in improving cash flow and finance recommendation
- Decision Making:- As we know that in accounting management we get modified data of a business that helps us to make the decision about the business.
- Planning:- We have an overview of the profit and the losses of a business. It helps us to make future planning for our business.
- Identify business problems:- It provides us the report of profits and losses by looking at this report we come to know about where our business is going in loss or which department is going in loss. So we can say that it also helps us to identify the business problems.
- Provide up to date data:- The most important objective is to provide up to date data to the organization.
There are many Scopes in Accounting Management and the field is also wide. It includes reports about the business which is provided to the management.
Here are some field of activities are included in the scope of Accounting Management:-
- Financial Accounting:- Financial Accounting provides the past financial position of a business or an organization. It provides information to interested parties who are interested to invest in the organization. It provides only monetary information.
- Cost Accounting:- In a business cost accounting plays a very useful role. It provides many techniques of costing like marginal costing, standard costing, opportunity cost analysis, etc. which helps us to improve our business position.
- Tax:- It is another part of Accounting Management and it is a structure of accounting method focused on taxes.
- Reporting:- The management accountant is required to prepare and submit reports of profit and losses and expenses of a business to the management.
Management Accounting is very useful for organizations because it provides information about the business which helps us to plan, making decisions, identify business problems, etc.
Here are some limitations of management accounting:-
- It depends on data which is provided by Financial Accounting. These are prepared on the basis of certain accounting concepts.
- We can say that the use of Management Accounting required too much knowledge of related subjects like accounting principles, statistics, economics, etc.
- It is so much costly because the installation needs to much cost and numerous rules and regulations which only big concerns can afford.
- It’s is only a tool that provides data and information to the management. It cannot make any decision.
Tools to use in Management accounting:-
- Skills to read and analyze financial statements.
- Management Information System (MIS)
- Key Performance Indicator (KPIs)
- Financial Modeling.
If you want to become a succeed Management Accountant then you have to learn given topics deeply:-
- Job Order Costing
- Process Costing
- Absorption Costing vs. Variable Costing
- Understanding Cost Behaviour and cost volume profit analysis
- Operational Budgeting
- Standard Costing and Variance Analysis
- Activity-based costing
- Pricing of individual products and services
- Analyzing the profitability of product lines, customers, etc.
- Capital Budgeting
- Ratio Analysis
Well, in the end, all I have say that accounting is the key to your business growth and accounting management help you to manage all the transaction for your business and keep you moving towards your business goal.