In
our earlier article we discussed Management Accounting, Objectives of Management Accounting and Importance of Management Accounting. Today in this
article let us discuss about the Scope and Nature of Management Accounting.
Management Accounting refers to the accounting systems and
techniques which help management to make decisions and fulfill its goals.
Scope of Management Accounting
The
scope of Management Accounting includes following,
§ Financial Accounting
§ Cost Accounting
§ Budgeting and Forecasting and
§ Auditing
Now let us discuss each point of Scope of Management Accounting in
detail below.
§ Financial Accounting:
Management Accounting is deals with financial accounting. It
analyzes and interprets the data provided by financial accounting based on the
requirements of management.
§ Cost Accounting:
Management Accounting also deals with cost accounting. It uses cost
control and cost techniques to understand the cost of production and operations
of business.
§ Budgeting and Forecasting:
Management Accounting helps to prepare the budgets by helping to
make decisions and prediction by providing various data required by management
by using various techniques and systems.
§ Auditing
Management Accounting needs dividing a system of internal control
by stabilizing internal audit coverage for all operating unit. Law “Most of the
managerial decisions have to be taken in the light of regulations or provisions
of various laws such as the Company Act, MTRP and so on.
Nature of Management Accounting
The nature of Management Accounting
is as follows,
§ Evolving
§ A Science as well as Art
§ Macro Approach
§ Highly Sensitive to Management Needs
§ Does not follow set Rules and Format
Now let us discuss each point of Scope of Management Accounting in
detail below.
§ Evolving:
Management Accounting has came into existence in very recent times
as a result of this currently management accounting is continuously evolving
and growing.
§ A Science as well as Art:
Management Accounting is Science because it collects data from
financial accounting, cost accounting and other sources and then processes (analyzes).
While Management Accounting is art because and interprets the data to prepare a
customized reports as required by management.
§ Macro Approach:
Management Accounting is considered to be macro in approach because
management accounting takes into account and interprets the operational data in
a wide environment where the business actually operates.
§ Highly Sensitive to Management Needs
Management Accounting collects analyzes and interprets the data and
prepares the customized reports based on the management needs or requirements
and also it only purpose is to provide data seek by management. Thus Management
Accounting is highly sensitive to management needs or requirements.
§ Does not follow set Rules and Format
Management Accounting does not have any set of rules and formats it
is purely guarded or prepared based on the management needs and requirements.
Conclusion
Thus,
Management Accounting has broad scope and it is science and art in nature.
Management Accounting is dependent on financial accounting, cost accounting and
others sources of data. Management Accounting sole purpose is to assist the
management so making decisions and formulate future policies and plans in the
light of relevant data and insights provided by management accounting.
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