What is Management Accounting?

Any business runs on few basic principles. It has to generate finance to run the business, has to cut costs and expenses and has to generate profit from the business. All these principles if followed properly results in growth and development of business. These principles are based on how the accounting in a business is done. In an efficient business activity, accounting is divided into different categories. Management Accounting is one of those categories. It is done for the management to take better decisions for the improvement of the business. So, it is also called internal accounting. It differs from financial accounting which has to show reports to the stakeholders and the government. This blog helps in accounting assignment writing. Also there are some of the best Australian writers which provide management accounting assignment help online.

The Key Activities in Management Accounting

Every management needs financial status of their business so that they can prepare themselves for future. Management accounting provides them with the required information. This information is used to set goals and objectives for future business development and growth. There are some key activities performed in Management Accounting:

  • Budgeting activity: Every business has expenses to take care of. If these expenses go beyond certain limits they may result in loss of profit or revenue. So the management has to set a limit to these expenses. This activity of setting expense limit by the top management is known as budgeting.
  • Financial Reporting activity: This activity refers to the preparation of financial reports which are concerned with the inflow and outflow of cash. There are four types of financial reports prepared by the management accountant. These are: a) Report of retained equity b) Report of cash flow c) Report of Profit and Loss d) Report of Balance Sheet. The budgeting reports are then compared with these reports and the final picture of business becomes clear.
  • Variance Analyzing activity: It refers to the identification of cost and expenses which affect the profitability of the company. If the expenses exceed the budget, serious steps have to be taken to control it. But the opposite means profit. This variance analysis clarifies the decision to be taken by the business managers.
  • Monitoring activity of Internal controls: These controls are the guidelines which the management follow to reduce the overages and losses in the company. The operational activities may result in losses such as technological failures, fire or theft. So complete monitoring of these internal controls is needed that sees whether these controls are implemented properly or not. Every employee of the company should follow the company’s policy to avoid any unnecessary expenditure.

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