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  Role of Management Accountancy

Introduction to Role of Management Accountancy

The role of management accounting and financial accounting is fairly different from each other because they have dissimilar goals altogether. Management accounting analyzes measures and reports financial and non financial information that assists managers to take decisions to fulfil the objectives of an organization.

Managers employ management accounting information to communicate, choose and implement strategy. They also employ management accounting information to coordinate product production, design, and marketing decisions. Management accounting point out on internal reporting.

The following points emphasize the role played through Management Accounting in the business organization.

I. Implementing Strategy:

Managers implement strategies through translating them into actions. Creating value for customers is a significant part of implementation and planning of strategies. Strategic implementation and planning will involve decisions regarding the design of products, research and development, services or processes, production, distribution and customer services, marketing.

Each of this area is significant for satisfying customers and maintains them satisfied. Management accounting will assist to track the costs of every of the activity mentioned above. The final target is to decrease costs in each category and to enhance efficiency. Cost information also assists managers create cost benefit analysis. For instance, managers can observe that is it cheaper to buy products from outside vendors or to complete manufacturing in-house? Is it valuable to invest more resources in design and manufacturing if it decrease costs in marketing and customer service?

II. Supply Chain Analysis:

Companies can also execute strategy, cut costs and create value through enhancing their supply chain. The term 'Supply Chain' explains the services and information, flow of goods from the original sources of materials and services to the delivery of products to customers in spite of of whether those activities take place in similar organization or in other organization. Customers expect enhanced performance from companies by the supply chain. They suppose that the companies should carry out all these activities in an effective manner so as to decrease costs and also preserve quality of the products and the products be available simply for them. This is no uncertainty a daunting task and the management accounting plays an important role in make sure value for money for the customers. Tools such as standard costing and target costing can be employed efficiently for cost control and cost reduction and so to make sure reasonable prices for customers. A system of budgets and budgetary control will make sure continuous planning and monitoring several functions and so give for introspection. Continuous enhancement in these activities will assist in creating value for customers.

III. Decision Making:

The decision making is one of the significant functions of management. Management Accounting assists in this crucial area through giving relevant information to the management. Techniques such as marginal costing assist to generate information that will be helpful for taking decisions. Decisions involve make or buy decisions, working of additional shift, adding or dropping a product line, continue or shut down operations, capital expenditure decisions and so on. Decisions relies on information are supposed to be more rational and objective than subjective.

IV. Performance Measurement:

Management accounting assists hugely for the measurement of performance of the organization. The major aspect of performance measurement is comparison among the targets and actual. There are various tools and techniques such as budgets and budgetary control, standard costing and marginal costing that are employed in measuring the actual performance against the target performance. This will make easy introspection and corrective action can be taken for further enhancing the performance.

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