Here is a term paper on ‘Management Accounting’ for class 11 and 12. Find paragraphs, long and short term papers on ‘Management Accounting’ especially written for school and college students.
Term Paper on Management Accounting
Term Paper Contents:
- Term Paper on the Meaning and Definitions of Management Accounting
- Term Paper on the Objectives of Management Accounting
- Term Paper on the Scope of Management Accounting
- Term Paper on the Functions of Management Accounting
- Term Paper on the Advantages of Management Accounting
- Term Paper on the Limitations of Management Accounting
Term Paper # 1. Meaning and Definitions of Management Accounting:
The term management accounting refers to accounting for the management. Management accounting provides necessary information to assist the management in the creation of policy and in the day-to-day operations. It enables the management to discharge all its functions i.e. planning, organization, staffing, direction and control efficiently with the help of accounting information.
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Management accounting is concerned with all situations including monetary and non-monetary economic events from the point of view of management. Management accounting concentrates on future operations, profitability etc., Management accounting can be applied for the making the cost accounting more purposeful and management oriented accordingly the management accounting directs its attention to various departments of the business and report about the profitability performance of each of the departments in the business.
“Management accounting is concerned with accounting information that is useful to management”. – R.N. Anthony.
“Management accounting is the presentation of accounting information is such a way as to assist management in the creation of policy and in the day-to-day operations of an undertaking”. – Anglo American Council of Productivity.
Term Paper # 2. Objectives of Management Accounting:
The objectives of management accounting are:
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(1) To assist the management in promoting efficiency. Efficiency includes best possible services to the customers, investors and employees.
(2) To prepare budget covering all functions of a business (i.e. production, sales, research and finance).
(3) To analysis monetary and non-monetary transactions.
(4) To compare the actual performance with plan for identifying deviations and their causes.
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(5) To interpret financial statements to enable the management to formulate future policies.
(6) To submit to the management at frequent intervals operating statements and short-term financial statements.
(7) To arrange for the systematic allocation of responsibilities.
(8) To provide a suitable organization for discharging the responsibilities.
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In short, the objective of management accounting is to help the management in making decisions and implementing them efficiently.
Term Paper # 3. Scope of Management Accounting:
Management accounting has various facets. The field of management accounting is very wide. The main purpose of management accounting is to provide information to the management to perform its functions of planning directing and controlling.
Management accounting includes various areas of specialization to render effective service to the management:
i. Financial Accounting:
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Financial Accounting deals with financial aspects by preparation of Profit and Loss Account and Balance Sheet. Management accounting rearranges and uses the financial statements. Therefore management accounting does not exclusively maintain factual data for itself. It is closely related and connected with financial accounting, thus, management accounting is dependent on financial accounting which limits its scope.
ii. Cost Accounting:
Cost accounting is an essential part of management accounting. Cost accounting, through its various techniques, reveals efficiency of various divisions, departments and products. It also provides information regarding cost of products process and jobs through different methods of costing. Management accounting makes use of all this data by focusing it towards managerial decisions.
iii. Budgeting and Forecasting:
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Budgeting is setting targets by estimating expenditure and revenue for a given period. Forecasting is prediction of what will happen as a result of a given set of circumstances. Targets are fixed for various departments and responsibility is pinpointed for achieving the targets. Actual results are compared with preset targets and performance is evaluated.
iv. Inventory Control:
This includes, planning, coordinating and control of inventory from the time of acquisition to the stage of disposal. This is done through various techniques of inventory control like stock levels, ABC and VED analysis physical stock verification, etc.
v. Statistical Analysis:
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In order to make the information more useful statistical tools are applied. These tools include charts, graphs, diagrams index numbers, etc. For the purpose of forecasting, other tools such as time series regression analysis and sampling techniques are used.
vi. Analysis of Data:
Financial statements are analysed and compared with past statements, compared with those of other firms and with standards set. The analysis and interpretation, results in drawing reports and presentation to the management.
vii. Internal Audit:
Internal audit helps the management in fixing individual responsibility for internal control.
viii. Tax Accounting:
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Tax liability is ascertained from income statements. Tax planning in done by following the various tax incentives offered by the Central and State Governments. Knowledge of tax provisions helps the management in meeting the tax liabilities and complying with other legislations like Sales tax, Companies Act and MRTP Act.
ix. Methods and Procedures:
In includes keeping of efficient system for data processing and effective reporting of required data in time.
Term Paper # 4. Functions of Management Accounting:
Main objective of management accounting is to help the management in performing its functions efficiently. The major functions of management are planning, organizing, directing and controlling.
Management accounting helps the management in performing these following functions effectively:
(i) Presentation of Data:
Traditional Profit and Loss Account and the Balance Sheet are not analytical for decision making. Management accounting modifies and rearranges data as per the requirements for decision making through various techniques.
(ii) Aid to Planning and Forecasting:
Management accounting is helpful to the management in the process of planning through the techniques of budgetary control and standard costing. Forecasting is extensively used in preparing budgets and setting standards.
(iii) Decision Making:
Management accounting provides comparative data for analysis and interpretation for effective decision making and policy formulation.
(iv) Communication of Management Policies:
Management accounting, convey the policies of the management downward to the personnel effectively for proper implementation.
(v) Effective Control:
Standard costing and budgetary control are integral part of management accounting. These techniques lay down targets, compare actual with standards and budgets to evaluate the performance and control the deviations.
(vi) Incorporation of Non-Financial Information:
Management accounting considers financial and non- financial information for developing alternative courses of action which leads to effective and accurate decisions.
(vii) Co-Ordination:
The targets of different departments are communicated to them and their performance is reported to the management from time to time. This continual reporting helps the management in coordinating various activities to improve the overall performance.
Term Paper # 5. Advantages of Management Accounting:
Management accounting has several advantages. These advantages usually coincide with the ability for companies to improve operations and overall profitability. Business owners can also create a competitive advantage by developing cost allocation processes in their management accounting function.
Advantages of management accounting are as follows:
(i) Helps in Decision Making:
Management accounting helps in decision making such as pricing, make or buy, acceptance of additional orders, selection of suitable product mix etc. These important decisions are taken with the help of marginal costing technique.
(ii) Helps in Planning:
Planning includes profit planning, preparation of budgets, programmes of capital investment and financing. Management accounting assists in planning through budgetary control, capital budgeting and cost-volume-profit analysis.
(iii) Helps in Organizing:
Management accounting uses various tools and techniques like budgeting, responsibility accounting and standard costing. A sound organizational structure is developed to facilitate the use of these techniques.
(iv) Facilitates Communication:
Management is provided with up-to-date information through periodical reports. These reports assist the management in the evaluation of performance and control.
(v) Helps in Co-Ordination:
The functional budgets (purchase budget, sales budget, and overhead budget etc.) are integrated into one known as master budget. This facilitates clear definition of department goals and coordination of their activities.
(vi) Evaluation and Control of Performance:
Management accounting is a convenient tool for evaluation of performance. With the help of ratios and variance analysis, the efficiency of departments can be measured. Management accounting assists the management in the location of weak spots and in taking corrective actions.
(vii) Interpretation of Financial Information:
Management accounting presents information in a simple and purposeful manner. This facilitates quick decision making.
(viii) Economic Appraisal:
Management accounting includes appraisal of social and economic forces and government policies. This appraisal helps the management in assessing their impact on the business.
Term Paper # 6. Limitations of Management Accounting:
Despite of the fact that the management accounting is very useful for the business concern, management accounting suffers from some limitations.
They are:
(i) Based on Accounting Information:
Management accounting derives information from past financial accounting and cost accounting records. If the past records are not reliable, it will affect the effectiveness of management accounting.
(ii) Wide Scope:
Management accounting has a very wide scope incorporating many disciplines. This results in inaccuracy and other practical difficulties.
(iii) Costly:
The installation of management accounting system requires a large organization. Hence, it is very costly and only big concerns can afford to adopt it.
(iv) Evolutionary Stage:
Management accounting is still in its initial stages. Tools and techniques are not fully developed. This creates doubts about the utility of management accounting.
(v) Opposition to Change:
Introduction of management accounting system requires a number of changes in the organization structure, rules and regulations. This rearrangement is not generally liked by the people involved.
(vi) Intuitive Decisions:
Management accounting helps in scientific decision making. Yet, because of simplicity and personal factors the management has a tendency to arrive at decisions by intuition.
(vii) Not an Alternative to Management:
Management accounting will not replace the management and administration. It is a tool of the management. Decisions are of the management and not of the management accountant.