Q.What do you mean by management accounting? State its main features.

The very name — accounting for management — points to what management accounting is: accounting done to serve the people who run the business.

It takes the data produced by financial and cost accounting, adds outside information where needed, and reshapes it into reports and analyses designed specifically to help managers do their job.

Meaning. Management accounting is accounting for management. It is the branch of accounting that collects, processes and presents accounting and other economic information in a form that helps management to plan for the future, take decisions and control the business. It takes the data produced by financial accounting and cost accounting — and adds outside information where needed — and reshapes it into reports, statements and analyses designed specifically to assist the people who run the enterprise. A widely accepted description is that it is the presentation of accounting information in such a way as to assist management in the creation of policy and in the day-to-day running of the business.

Main features of management accounting

1. Management-oriented. It exists solely to serve the internal needs of management, not the needs of outsiders.
2. Supplies information, not decisions. It provides the facts and the analysis; the decision itself is taken by management.
3. Draws on many sources. It uses financial accounting, cost accounting, statistics, economics and other data — financial and non-financial alike.
4. Future-oriented. It is concerned chiefly with planning and forecasting the future, not merely recording the past.
5. No fixed format. Its reports are prepared in whatever form best suits the purpose; there is no statutory format and no legal compulsion.
6. Selective. It presents only the information relevant to the matter in hand, not every transaction of the business.
7. Concerned with cause and effect / analysis. It does not merely present figures but analyses and interprets them to bring out their meaning for management.

Students often define management accounting exactly like financial accounting or cost accounting. The distinguishing points must come through — that it serves internal management, is forward-looking, and has no fixed format — and the answer should list the features, not merely give a one-line definition.