Top 10 Functions of Management Accounting

The following points highlight the top ten functions of management accounting. The functions are: 1. Forecasting and Planning 2. Organising 3. Coordinating 4. Controlling Performance 5. Financial Analysis and Interpretation 6. Communication 7. Special Studies 8. Protection of Business Assets 9. Tax Policies.

Management Accounting: Functions # 1. Forecasting and Planning:

One of the important functions of management accounting is to provide necessary information and data for making short-term and long-term forecasts and planning the operations of the business.

For doing this, the management accountant uses techniques of statistics, like probability, trend study of correlation and regression; budgeting and standard costing; capital budgeting; marginal costing and cash funds flow statements etc. These are important tools in the hands of management accountant for the planning of the business.

Management Accounting: Functions # 2. Organising:

The management accountant helps the management in organising the human and non-human resources of the business by analysing different functions and assigning specific responsibilities. He tries to organise the accounting and finance function of the business on the modern lines.

Management Accounting: Functions # 3. Coordinating:

The management accountant increases the efficiency of organisation and maximise its profits by providing different tools of coordination as budgeting, financial reporting, financial analysis and interpretation etc. It helps the management by reconciling the cost and financial accounts, by preparing budgets and setting the standard costs and in analysing variances in costs to facilitate management by exception.

Management Accounting: Functions # 4. Controlling Performance:

The management accountant helps in controlling the performance of the organisation by using standard costing, budgetary control, accounting ratios, cash and funds flow statements, cost reduction programmes and evaluating the capital expenditure proposals and return on investment.

Management Accounting: Functions # 5. Financial Analysis and Interpretation:

The management accountant analyses the data and presents it before the management in non-technical manner along with his comments and suggestions so that the owners and the top personnel’s in the management may understand it and take decisions without any difficulty.

Management Accounting: Functions # 6. Communication:

The management accountant prepares various reports to communicate the results to the superior, to motivate the employees, to exercise effective control on their activities and to enable the management to take sound decisions. He also communicates with the outside world about the progress of the business through published accounts and returns.

Management Accounting: Functions # 7. Special Studies:

The management accountant tries to maximise the profits of the concern by conducting various cost and economic studies on regular basis. He tries to determine the needs of long-term and short-term capital, recommend appropriate capitalisation for the enterprise, evaluation of alternative capital expenditure proposals and their impact on the return and profits of the concern.

Management Accounting: Functions # 8. Protection of Business Assets:

The management accountant will be responsible for the protection of business assets. He is to see that sufficient funds are available for repairs, maintenance and replacement of fixed assets so that production capacity of the enterprise may not be badly affected. He is also to see that business assets are properly insured.

Management Accounting: Functions # 9. Tax Policies:

The management accountant is responsible for tax policies and procedures. He will make available the reports required by various authorities. He will make proper provision for taxation and he is to ensure that quarterly payments of taxes paid in advance as required by the Income Tax Act are made in time to avoid penal interest payment on delayed payment of tax.

Management Accounting: Functions # 9. Miscellaneous Functions:

Besides the above functions, the management accountant supplies useful information to different functional authorities, provides necessary accounting information and advice for price determination and pricing decisions and helps to make strategic decisions as seasonal or temporary suspension of production, make or buy decisions, replacement decisions and expansion or closure of particular division or department, etc.

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