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1.2 NATURE OR FEATURES OF MANAGEMENT ACCOUNTING

Management Accounting is basically the most effective tool to the

management for the purpose of its planning, controlling and decision-making. Various distinguished nature or features of ManagementAccounting are discussed as follows:

i. Management Accounting deals with the collection of accounting andother data, and it analyses, interprets and communicates all relevantinformation to the management which are effectively required forplanning, controlling and decision-making for the organization. Hence,in a nutshell, one of the most important nature of ManagementAccounting is to analyse and interpret accounting and other data to

make them understandable and usable to the management.ii. It interprets the analysed data as obtained from the operational and

non-operational activities of the enterprise and makes necessarycomments and conclusions on them.

iii. It provides necessary information to the management to judge theeffectiveness of its managerial functions.

iv. It provides necessary information to the management to perform itsmanagerial functions of decision-making, planning and controlling.

v. It provides necessary information to the management to reviewwhether the performance of the enterprise has been achieved towardsits goals and objectives.

vi. It acts as a yardstick for measuring the level of performance of theoperational and non-operational activities of the enterprise.

vii. It serves as a yardstick for measuring the effectiveness of managerialperformance of the different activities of the enterprise.

viii. It is a forward-looking tool to the management. It analyses andinterprets historical data for projecting the future trends of the differentactivities of the enterprise.

ix. It prepares necessary plans to implement various financial decisions of

the management. It also develops a system of feedback reporting andmonitoring performance against the plan of the management.

1.5 ROLE OR FUNCTIONS OF MANAGEMENT ACCOUNTING

The function of Management Accounting is to assist the management toperform its functions of planning, organizing, directing, controlling anddecision-making. The major functions of Management Accounting are as

follows:

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i. Collection of data: Management Accounting does not maintain recordsof financial and cost data but it collects the basic financial data mainlyfrom the records as maintained by financial and Cost Accounting for thepurpose of preparing plans and actions of the management.

ii.

Supply of modified data: It modifies the collected raw data byclassifying and compiling them for making them suitable for the purposeof their analysis and interpretation. It extracts the necessary andeffective information from those basic data for the purpose of theiranalysis and interpretation.

iii. Analysis and interpretation of data: It analyses and interprets thosemodified data and extracts the necessary and effective information formaking them understandable and useable to the management in theprocess of its planning, controlling and decision-making. After analysingand interpreting all those data, it presents the results with necessarycomments to the management.

iv. Planning and forecasting: It formulates some definite plans forimplementing policies of the management. It helps the management forformulating different short- and long-term policies by providingnecessary and relevant information in relation thereto. In the process offormulating policies and for their proper execution, it makes theforecasting of some probable future happenings.

v. Communication: It provides a means of communicating plans andactions of the management over all areas of activities of the

organization. It provides necessary and relevant information to all levelsof management.vi. Ensuring control: It ensures a control over the performance of different

sections of an enterprise. It uses various techniques like BudgetaryControl, Standard Costing and Responsibility Accounting, and to identifythe weaker areas of performance of activity and suggests appropriateremedial measures to overcome the prevailing problems.

vii. Helping in decision-making: It helps the management in the process ofits effective decision-making by providing necessary and relevantinformation in the relation thereto.

viii. Performance evaluation: It evaluates the performance of activities ofdifferent divisions as well as the business as a whole of an enterprise byusing its various tools and techniques.

ix. Preparation of reports: It prepares reports of performances of differentactivities of the enterprise and provides to the management on regularintervals. These managerial reports are prepared as per therequirement of the management.