QS Study

Advantages of Management Accounting

Management accounting is the sourcing, analysis, communication and applies of decision-relevant financial and non-financial information to produce and protect value for organizations. Following advantages from the management accounting system may enjoy by a business:

  • Management accounting analyzes and interprets methodically the information collected from within and outside the business and communicates the result to the management. This will assist in implementing managerial strategy decision efficiently.
  • It measures the real performance in assessment with the budgets and helps the management in such a method that the latter can maximize the rate of return on capital employed.
  • All the business activities are planned well ahead base on the accounting information applying budgeting and forecasting techniques. As such, all the activities are expected to be interwoven and well integrated to achieve the set goal.
  • It also helps to improve the relation between the management and labour.
  • This techniques help the business control its activities efficiently. It helps in utilizing its capital in an optimal way.
  • The management accounting often takes cognizance of the changes in the economic environment caused by government policies and other economic forces. This helps the business combat and accommodate it to such changes.
  • It takes all the data and then present it in such a way that a proper analysis about the feasibility and profitability of any business decision can be made.
  • It facilitates coordination between different departments and helps in attaining the objectives of the business as a whole.
  • It plays a significant role in organizing the business on a sound footing. It assist the management with the help of internal control and internal audit in fixing targets, responsibilities, appraisal of performance, problem and solutions of these cost and profit centers and executing overall control of business activities.
  • It is proactive-analyses the governmental policies and socio-economic scenario which helps to assess the external environmental impacts on the organization