Objectives of Management Accounting

Management accounting is not maintained to satisfy any law; it exists purely to help management run the business better. All its objectives therefore flow from the needs of management. The main objectives are the following.

1. To help in planning and forecasting. The first objective is to provide the information — cost data, budgets, forecasts, trends — that management needs to plan the future course of the business and to set targets.
2. To help in decision-making. Management accounting supplies analysed data for specific decisions such as whether to make a component or buy it, whether to accept a special order, whether to continue or drop a product, and how to price a product. It presents the relevant figures so that management can choose the best alternative.
3. To help in controlling performance. By comparing actual results against budgets and standards and highlighting the differences, management accounting enables management to control operations and to correct deviations promptly.
4. To help in coordinating operations. Through budgets and reports that link the different departments together, it helps management coordinate the activities of the whole organisation towards common goals.
5. To communicate information. It communicates the right information, in the right form, to the right level of management at the right time, so that each manager can act on it.
6. To interpret financial information. Raw accounting figures mean little to a busy manager; management accounting interprets and analyses them — through ratios, comparisons and charts — so that their meaning is clear.
7. To motivate employees. By setting targets and measuring performance against them, management accounting can motivate managers and staff to work towards the goals of the organisation. …