Importance of Management Accounting

Untitled Forums Accounting Importance of Management Accounting

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    Importance of Management Accounting


    1) Aim. Management accounting with the data available determines the goals and vision of the organization for a short run or long run. And it also helps the company in finding out the route through which they can reach to that ultimate goal.

    2) Planning. Planning is one of the important things that a producer must do to ensure higher earning. A producer producing 1000 units when the demand is just 100 and a producer producing 1000 units when the demand is 900. Both the producer may employ the same resources but the earning of both the producer will be different. Thus it is very important for the manager to analyze the past on the basis of the data and prepare for the future.

    3) Better Price. A cost control device in management accounting helps the management in reducing the prices of the product which will beneficial for the consumers. When the quality of the product is pre-determined, the manufactured product’s quality will also be good.

    4) Measurement. Company’s result cannot be determined without measuring the performance of the company with the predetermined performance. Like in standard costing, standards are determined first and then the actual cost is compared. It helps out in finding deviation. If the actual cost is more than the budgeted cost, performance is found out to be less and vice versa.

    5) Increases efficiency of the business. Management accounting increases the efficiency of the business concern. The targets of different departments of the enterprise are determined in advance and the achievement of these goals is taken as a tool for measuring their effectiveness.

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