Question

It is generally agreed that, “the importance of cost and management accounting can be considered under the following subheadings: to management, to workers, to investors, to government and to public.” Required: outline its importance with respect to the above mentioned subheadings.

Answer 1

The importance of Management accounting to various stakeholders can be discussed as below:

To Management:

Management accounting aims at providing information, both financial and other, to aid management in controlling activities of the organization and to take well balanced decisions.

It uses accounting and financial management principles to analyse and present the data in an objective manner. Wherever necessary, statistical and quantitative techniques would also be used to analyse complex situations.

Thus management accounting helps management to perform their function effectively.

It may also be noted that management accounting information is available only to the management and not to other stake holders.

Other Stakeholders:

Though the management accounting information is not available to other stakeholders for their decision making, nevertheless they are also benefitted from the use of management accounting by the management.

The importance of management accounting to the other stakeholders is detailed below:

To Workers:

As the operations become efficient and decisions are taken objectively, the firm prospers and grows in the right direction. As the firm grows, the workers get better remuneration, bonus, growth prospects etc.

To Investors:

As the firm prospers and grows, the investors are guaranteed not only their capital and return, but also capital appreciation.

To Government:

Increase in income, increases the revenues to government in the form if taxes.

To The Public:

Management accounting aids in seeing that the scarce capital made available to firms are used in the most economical manner. As firms perform well and grow, more and more employment opportunities are generated, which increase the well-being of the public.