Management accounting is a field of accounting that analysis and provides cost information to the internal management for the purpose of planning, organizing, directing, controlling, and decision making. 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.
Role of management accounting: There are many roles of management accounting. These are as follows –
Planning and forecasting: This is thinking in advance about what to do, how to do it, when to do it and who is to do it. Thus, planning is a concern with future activity and formulates budgets to meet the objectives of the organization.
Organizing: This is the important role of management accounting. Organizing as the identification and classification of required activities and the grouping of activities necessary to attain objectives.
Coordinating: Coordination is the separate function of the management accounting. It seems more accurate, however, to regard it as the essence of managership, for achieving harmony among individual efforts toward the accomplishment of group goals.
Controlling: Controlling is that part of the management activity whereby managers compare actual performance against the planned performance, find out the deviations, and take remedial steps to remove the deviations.
Motivation: A general term applying to the entire class of drives, desires, needs, wishes, and similar forces of management accounting.
The policy of formulation: Activities that are not required as part of one’s formal role in the management accounting, but that influence, or attempt to influence, the distribution of advantages and disadvantages within the management accounting.
Reporting: Reporting is the correcting information of managerial function that submitted to the organization for collect accounting statement.
Decision making: Since management has to make a choice of one course of action out of the several alternative courses of action available, it involves decision-making.
Management Information system: Management information system is an organized combination of people hardware, software, communication network, and data resources that collect transforms and disseminates information in an organization.
Communication: Communication is the major role of management accounting. Any organization or managers cannot develop a managerial skill without communication.