Question

Discuss the importance of understanding managerial accounting in all career fields and roles.

Answer 1

Managerial Accounting is a branch of accounting related to the presentation of accounting information to the management in a manner to assist them in discharging their managerial functions like planning, decision making and control. The management of a concern needs information about its past and present operations for deciding future trends and course of actions. Management accounting supplies those information. It designs to provide correct information to the management. It contains techniques to solve problems, take right decisions, plan effectively and to exercise control. It provides information which may be financial in nature (like monetary information) and also non-financial (like product performance, quality, customer satisfaction etc.) It provides the basis for managerial decisions and organisational success. Naturally it acts as a decision-support system.

The Institute of Cost and Works Accountants of India (ICWAI) opines that “Management Accounting is a system of collection and presentation of relevant economic information relating to an enterprise for planning, controlling and decision-making. ” M. S. Wilson has hinted at the decision-supporting quality of Management Accounting by saying that “Management Accounting encompasses techniques and processes that are intended to provide financial and non-financial information to people within an organisation to take better decisions and enhance. Organisational electiveness through proper control. ”

Under Management Accounting, uses some techniques most of which are used by the Cost Accountant also. These are budgetary control, standard costing, marginal costing, breakeven analysis, cost volume and profit analysis etc. So, management accounting may be considered as the elucidation of the management aspects of Cost Accounting. Both the principles of financial accounting and cost accounting are used in Managerial Accounting.

It helps in taking important business decision relating to:

Cost control

Capital Budgeting

Dividend policy

Production capacity

And many more.

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