Functions of management accounting

 

Functions of management accounting

Managerial accounting performs the following functions in general

  • Profitability

Management accounting determines the profit from a particular product,  project or line of business.

  • Break even analysis

It determines the number of units at which the organization will attain a no profit no loss situation.  

  • Forecasting

It determines the bottlenecks in the organization and their impact on the organization.

  • New product analysis

It prepares analysis for the new product in terms of standard costs,  actual cost and reasons for deviations.

  • Stock valuation

Determine the direct and indirect costs of stock in hand and presenting it to management

  • Variance analysis

Performing trend analysis for various costs incurred and understanding the causes for the variances.

  • Capital budgeting analysis

Understanding the need for acquiring fixed assets and the costs involved and allocation of finances to the best available option.

  • Aids in Financial accounting

Management accounting presents financial information at regular intervals and hence it aids in the preparation of financial statements at year-end.   Just as automation has touched every aspect of business so also ERP systems enable reporting under management accounting.

The various functions of management accounting like capital budgeting, variance analysis, profitability are performed by ERP systems and reports are generated. The management accountant has to ensure correctness of the information inputted and reports generated.

Management accounting provides the management with better control of the business. Although not regulated by any law it provides the management an assurance. It provides the management the confidence to face auditors and regulators. It aids in better management.

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