what is the Scope of Management Accounting?

The Scope of Management accounting is very wide and broad based. It Includes all information, which is provided to the management for financial analysis and interpretation of the business operation. The following field of activities are includes included in the scopes of this subject:

1. Financial Accounting: Financial accounting though provides historical information but is very planning and financial forecasting. It is an essential perquisite of any discussion of management accounting. Financial statements contain enough  information that is used by management for decision making. Management accounting contains only tools and techniques and its get the data for interpretation and analysis mainly firm financial accounting. Thus, without efficient financial accounting system, management accounting cannot be operative.


2. Cost accounting: cost accounting provides various techniques for determining cost of manufacturing products of cost of providing service. It uses financial data for finding out cost of various job, Product or processes. Business executives depend heavily on accounting information in general and on cost information in particular because any activity of an organisation can be described by its cost. They make use of various cost data in managing organisation effectively. Cost accounting is Considered as a backbone of management accounting as its provides the analytical tools such as Budgetary Control, , Standard Costing, Marginal Costing, Inventory costing, Operating Costing Etc., which are used by management to discharge its responsibilities effectively.


3. Financial Management: Financial management is concerned with the planning and controlling of the financial resources of the firm. It deals with the raising funds and their effective utilization. Its main aim is to use the fund in such a way that the earning of the firm is maximized. today finance has become the life blood of any business concerned.  although, financial management has emerged as a separate subject, management accounting includes and extends to the operation of financial management etc..


4. Financial Statement Analysis:  The Various parties concerned with the financial statements may need information, which can be obtained by financial statement analysis and developing certain trends and ratios. A person can gain meaningful insights and conclusions about the firm with the help of analysis and Interpretation of the information contained in financial statements. Different techniques have been developed which can be used for the proper interpretation and analysis of financial statement.


5. Interpretation of data: The Work of Interpretation of financial data is done by the management accountant. He Interprets various financial statements to the management. This statements may be studied in comparison to statements of earlier periods or in comparison with the statements of similar other concerns. The significance of these reports is explained to the management in a simple language. If the statement are not properly interpreted then wrong conclusions may be drawn. So, Interpretation is Important as compiling of financial statements.


6. Management Reporting: Clear Informative, Timely reports are essential management tools in reaching decisions that make the best use of firm's resources. Thus, one of the basic responsibility of management accounting is to keep the management well informed about the operations of the business. the reports are presented in the form of graphs, diagrams, index numbers or other statistical techniques so as to make them easily understandable. The management accountant send interim reports may be monthly, quarterly, half yearly, these report are cover profits or order in hand, etc these reports are helpful in giving a constant review of the working of the business.


7. Quantitative Techniques: Modern managers believe that the financial and economic data available for managerial decisions can be more useful when analyzed with more sophisticated analysis and evaluation techniques. This Techniques such a time series, regression analysis and sampling techniques are commonly used for this purpose, Further, managers also use techniques such a linear programming, game theory, Queuing theory etc in their decision making Process.


8. Inflation Accounting: Inflation accounting attempts to identify certain characteristics of accounting that tend the reporting of financial results during the period of rapidly changing prices. It devices and implements appropriate methods to analysis and interpret the Inflation on the Financial Information.