10 Tools & Techniques of Management AccountingAug 6,18
Management accounting aims at helping the managers of an organization in identifying and evaluating the results of their decisions. It is also known as cost accounting or managerial accounting. It involves preparation of financial reports and statistical information that can aid in taking long-term as well as short-term management decisions within the organization. The management accounting reports contain all the necessary details about a company’s cash flow, the revenue that is generated, inventory details, payable accounts, debts and other related statistics. In today’s article, we bring you the top 10 tools and techniques of Management Accounting
List of Some Useful Tools of Management Accounting
1. Historical Cost Accounting
As the name suggests historical cost accounting involves gathering the historical data about the costs involved in each job. Or assignment help experts who provide MBA assignment help can also provide you with the details and case studies about historical cost accounting. The historical data collected in this technique is then compared to the present standard costs. The results obtained are used by the managers in decision-making, cost controlling and future planning.
2. Funds Flow Statements
In the funds’ flow accounting technique the managers analyze the financial status of the company. They keep a check on where the funds are coming from and how are they be utilized in the company. The fund flow and cash flow analysis thus help them in cost controlling and future planning on how to utilize the cash better.
3. The Marginal Costing Technique
The marginal costing technique includes monitoring the changes in costs and sales due to a change in the volume of production. The managers use break-even analysis and differential costing tools of management accounting in this technique. The reports thus generated are used in decision making and maximizing the profits.
4. Cost Accounting
There can be situations when differences arise between the estimated cost of a product and its actual costs. The main function of cost accounting technique is to present the cost data according to various departments, products, branches, and processes of the organization. The data is then compared with the estimated cost. This then enables the managers to find out the reasons for these cost differences.
5. Financial Planning
In the financial planning technique, the managers plan to advance the primary financial objectives of the organization. Not only this, but it also involves determining the procedures that will be used to achieve that objective. The managers determine how much capital will be required, how will the company generate the funds and how the income will be distributed. This technique is useful as it identifies the complete financial status of the company. Financial planning is a separate topic with wide possibilities. With our assignment writing services in the USA, our assignment providers assist students in creating explanatory assignments on financial planning and management accounting.
6. Replacement Accounting
This technique is also known as revaluation accounting. At the time of rising costs, several issues may arise in front of the managers. This method aims at solving them adequately by re-evaluating the assets. The main function of this technique is to help the managers in maintaining and preserving the capital of the organization. It also determines how the change in cost will affect the financial statements of the company.
Miscommunication or lack of direct communication between the employees and the manager can be a significant limitation to Management Accounting. It is crucial that the managers receive the right information at the right time. This will allow them to carry out the functions of decision-making planning and controlling in an effective way. Free-flow of communication is a must for better functioning of an organization.
8. Decision-Making Techniques
Businesses are complex. It requires assessing various factors, variables, and circumstances before making any financial decisions for the organization. There can be several alternatives in front of management. Decision-making techniques help them in choosing the best one of those. Various tools of management accounting such as differential costing, capital budgeting, and marginal costing are used to select the favorable alternative in order to maximize the profit in the business.
9. Graphical Techniques
In this technique, the managers use statistics and graphics to represent information in a meaningful manner. There are several tools such as linear programming, sale charts, master charts, and quality control charts that are used to present the estimations and comparisons. This not only helps the managers in decision-making but also helps in identifying the management problems in a better way.
10. Financial Statement Analysis
The aim of this technique is to clarify and represent only financial data that can be beneficial for management. It includes various activities such as trend analysis, cash flow analysis, and ratio analysis. These reports help the managers in forecasting the earnings, cash flow, debt maturities and if the organization will be able to sustain any losses if they occur.
So these were top 10 tools and techniques that are used by Management Accountants. Despite many profitable benefits, this technique suffers from certain limitation as well as it is completely based on records that may or may not be accurate. The decision-making process in this technique is most of the times intuitive and can subject to biases and manipulation. If you find management accounting topic difficult our experts are available round the clock to take your queries. Feel free to contact us any time and get the best quality assignment in management accounting.