Question

Explain how managerial accounting helps managers in key areas of planning, controlling, and decision making. Give examples with details of each area and state why these are relevant and important to a company's success or failure

Answer 1

1. Planning and policy formulation:

Planning involves forecasting on the basis of available information, setting goals; framing polices determining the alternative courses of action and deciding on the programme of activities. Management accounting can help greatly in this direction. It facilitates the preparation of statements in the light of past results and gives estimation for the future.

2.. Controlling:

Management accounting is a useful for managerial control. Management accounting tools like standard costing and budgetary control are helpful in controlling performance. Cost control is effected through the use of standard costing and departmental control is made possible through the use of budgets. Performance of each and every individual is controlled with the help of management accounting.

3.Assists in Decision-making process:

With the help of various modern techniques management accounting makes decision-making process more scientific. Data relating to cost, price, profit and savings for each of the available alternatives are collected and analyzed and provides a base for taking sound decisions.

Importance of managerial accounting - :

1. Increase in Efficiency:The targets of different departments are fixed in advance on the basis of forecasting and planning and later on actual performance is compared with them. This process helps in measuring and increasing the efficiency of the enterprise.

2. Proper Planning:On the basis of information provided by management accountant, the work-load of each and every individual is fixed in advance and the activities of the concern are planned in a systematic manner

3. Measurement of Performance:through the techniques of standard costing and budgetary control

4. Effective Management Control:

5. Improved Services to Customers:The installation of various types of control through management accounting leads to reduction in cost and price and maintenance of standard level of quality of goods produced and services rendered