Strategic Sight Academy of Business Knowledge

Please be cautious that applying the periodic cost management approach gives a totally incorrect picture of revenues.
To be continued... .

Classification of cost by function:

Production costs:

Production costs are the costs which are incurred when raw materials are converted into finished goods and part-finished goods(work in progress).

Cost and Managerial Accounting
Types of Cost and Cost behavior

Roles of Management Accounting:

vii) Planning and Controlling: Under Management Accounting the information are collected from various sources, analyzed and decisions are made for future to run the business effectively. To decide about the future course of action for the attainment of predetermined goals or objectives is known as planning. The decision are implement and actual performance is measured which is compared with the estimated performance. The differences/deviations are calculated and corrective measures are taken for the accomplishment of the objectives. Hence it can be said that Management Accounting helps not only in planning but also in controlling the business activities of an organization.

vi) Tools/Techniques: After collecting the data from various sources, the management accountant uses various statistical tools/techniques to study the same and to select the information to be handed over to the managers for taking decisions.

v) Means Not the End: Under the concept of Management Accounting, the information are collected and supplied only by the Management Accountant to the management for taking timely and good decisions, therefore it is clear from the above that decisions are not provided to the management but only the required/important information. Hence Management Accounting is a means and not and end or substitute of the management.

iv) Selective: A lot of quantitative and qualitative information are collected under the process of Management Accounting but after the appropriate study of the same only a selective/important information are passed on to the concerned manager so that he/she may take appropriate decision in the interest of the organization. Therefore it can be said that all information collected are not used for taking decisions by the management.

iii) Rationale behind Decisions: When the decisions are taken by the management on the basis of information, the same is needed to be explained as to why and how these decisions are taken by giving suitable arguments and cause and effect relationship of the future outcomes.

ii) Talent Based: The concept of Management Accounting is totally based on the talent or abilities of management and no defined set rules/procedures are there to assist the managers. After analyzing the available information, the managers have to take decisions which are totally based on their personal experience, education, knowledge and wisdom.

Characteristics of Management Accounting
On the basis of the meaning and definitions, the following are the main characteristics of Management Accounting:
1- Characteristics of Management Accounting
On the basis of the meaning and definitions, the following are the main characteristics of Management Accounting:
i) Future-Oriented
ii) Talent Based
iii) Rationale behind Decisions
iv) Selective
v) Means Not the End
vi) Tools/Techniques
vii) Planning and Controlling

i) Future Oriented: Under Management Accounting various information from different sources are collected and passed on to the management to take decisions. The management decides the future courses of actions based on the information and try to attain the same by adopting various suitable controlling techniques such as marginal costing, standard costing and budgetary control system, etc.

Characteristics of Management Accounting
i) Future Oriented
ii) Talent Based
iii) Rationale behind Decisions
iv) Selective
v) Means Not the End
vi) Tools/Techniques
vii) Planning and Controlling