8 Importance of Management Accounting


Importance of Management accounting can be well-understood as given below:-

Importance of Management Accounting

Helps in Making Plans

Management accounting assists organization in making better plans for future activities. It supplies all financial and non-financial data to management on a regular basis. Managers through the availability of all these information are able to perform better analysis and forecasting which enables them in framing proper plans.

Assist in Decision Making

Efficient decision making is a major role played by management accounting. It collects and analyses all financial information available within organization and present them in simplified charts, tables or graphs. Management gets better understanding regarding organization affairs and is able to take correct decisions at right time.

Importance of Management Accounting
Importance of Management Accounting

Measures the Performance

Management accounting monitors and measures the overall performance of organization. It uses various tools like variance analysis which measures the company performance with pre-established standards for finding out the deviations. Managers by identifying all variations in performance of company are able to take corrective measures accordingly for removing them.

Increases the Efficiency

This accounting branch aims at raising the overall efficiency of business organizations. Management accounting sets target for each division in advance and checks whether they fulfill all targets. It ensures that all resources are fully utilized which helps in improving the efficiency.

Better Service to Customers

Management accounting focuses on better service to customers by providing them quality goods at fair prices. It helps in controlling the prices of products by employing cost control devices. In addition to that, it sets various quality standards to be met by organization for producing their goods. 

Raises the Profitability

It has an efficient role in enhancing the profitability of organizations. It makes companies cost conscious and assist in avoiding all extra expenditures. Management accounting uses techniques such as budgetary control and capital budgeting for reducing the expenses which helps in earning better profits. 

Provides Reliability

Management accounting adds reliability to management decisions by providing them genuine information. It uses proper scientific tools and techniques for analysis purposes which helps managers in the proper management of business operations.

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