Management accounting or managerial

accounting is concerned with the provisions and

use of accounting information to managers within
organizations, to provide them with the basis to
make informed business decisions that will allow
them to be better equipped in their management and
control functions.
In contrast to financial accountancy information,
management accounting information is:
 designed and intended for use by managers
within the organization, instead of being intended
for use by shareholders, creditors, and public
regulators;
 usually confidential and used by management,

instead of publicly reported;

 forward-looking, instead of historical;

 computed by reference to the needs of

managers, often using management information

systems, instead of by reference to general
financial accounting standards.

Definition
According to the Chartered Institute of Management
Accountants (CIMA), Management Accounting is
"the process of identification, measurement,
accumulation, analysis, preparation, interpretation
and communication of information used by
management to plan, evaluate and control within an
entity and to assure appropriate use of and
accountability for its resources. Management
accounting also comprises the preparation of
financial reports for non-management groups such
as shareholders, creditors, regulatory agencies and
tax authorities" (CIMA Official Terminology).
The Institute of Management Accountants(IMA)
[1]recently updated its definition as follows:
"management accounting is a profession that
involves partnering in management decision making,
devising planning and performance management
systems,and providing expertise in financial
reporting and control to assist management in the
formulation and implementation of an organization’s
strategy."

Scope of ma

Scope of management accounting is very vast and includes various aspects of the business
activities. Management accounting has its scope in the following fields or systems

1. Financial accounting :- It is the foremost and indispensable part of accounting. In

this system, business transactions of financial character are recorded in the proper
subsidiary book. Posting of these transactions is done in ledger and from this the
final accounts are prepared. Final accounts include profit and loss account and
balance sheet. Profit and loss account represents the profit/loss earned during the
accounting period and the balance sheet represents the financialposition of a
company as on a particular date. Financial accounting is the foundation from
 management accounting as it provides the necessary information for prepration of
details and reports to be presented to the management.

2. Cost Accounting :- Cost accounting is one of the important branches of

accounting. It ascertains the cost of producing a particular commodity and rendering
of services cost of selling and distribution. It facilitates effective planning regarding
commodities, proper decision-making and cost control. Some of the important tools
of cost accounting are marginal costing, standard costing and budgetary control.

3. Revaluation accounting :- Revaluation accounting ensures that capital is

represented at its real value in the accounts and the profit has been calculated
keeping this fact in mind. In other words, it assures that the assets are revalued
according to the need and its effect has been brought into the accounts.
Management accounting helps to ascertain the revalued figures of the assets.

4. Control accounting :- Controlling means to measure the variation, if any, between

actual and the standard results and taking corrective measures to remove that
variation.

Here are some limitations of using Management accounting

1) Mgt Acccounting is based on data of Financial and Cost Accounting. Historical data is
used to make future decisions. The correctness and effectiveness of managerial
decisions will depend upon the quality of data on which these decisions are based. If
financial data is not reliable then Mgt Accounting will not provide correct analysis. For
example: Ratio analysis using historical financial numbers.
2) the application of Mgt Accounting will be useful to person connected with Decision
making process as they have proper understanding of Mgt Accounting and related
subjects such as Statistics, Economics, Prinples of Mgt, Engineering etc.
3) In Mgt Accouting decision making based on facts and figures, there is a tendency to
make decisions intuitively. Mgt may avoid lengthy courses of deciding things and may
take an easy course of arriving at decision, using intuitive. Interitive decisions limits the
usefulness of Mgt Accounting.
4) The tools and techniques of Mgt Accounting provide only information and not decision.
Decisions and their implementations are done, by Mgt. So it has supplementary service
function and has no final say in taking decisions and their implementations.
5) The interpretation of financial information depends upon the personal judgement of the
interpreter. Personal prejudices and bias affect the objectively of decisions