Functions of management accounting:
1. Planning of Accounting Function
An accounting system is maintained in an organization which should cover standards of costs, sales forecast, production planning, profit planning, allocation of resources, capital budgeting and short term and long term financial planning. Moreover, he has to prepare the necessary procedures to implement the plan effectively.
The management accountant has to measure the actual performance and compare with standard. Based on this comparison, he has to find the differences and interpret the results of operation and submit the same to all levels of management. This is done through appropriate accounting reports for controlling.
The top management requests the management accountant to prepare the report for the root causes for an unfavorable event or operations. In this report, the accountant can pin point real reasons and the persons who are responsible.
He consults all levels of management for framing a policy or an action programme. Such type of consultation brings co-ordination between the accounts department and top management.
The accounting information is modified and presented before the management with interpretation. The interpretation is made in different phases. If so, real reasons for the operating results can be understood by the management.
He has to evaluate the effectiveness of policies, organization structure and procedures adopted for attaining the objectives. For which, he has to consult the same with functional managers and top executives.
Decision-making is a process of choosing among competing alternatives. Decision-making is inherent in each of three management functions described above, namely, planning, organising and controlling. A manager cannot plan without making decisions and has to choose among competing objectives and methods to carry out the chosen objectives. Similarly in organising, managers need to decide on an organization structure and on specific actions to be taken on day-to-day operations. In control function managers have to decide whether variances are worth investigating.