Q.Choose the correct alternative: Management accounting is primarily concerned with providing information to —

The key is in the very name of the subject — accounting for management — which tells us whom it serves.

Management accounting is defined as the branch of accounting that presents accounting and other information in a form that helps management to plan, take decisions and control the business. Its defining feature is that it is management-oriented — it exists only to serve the internal needs of management.

Let us examine each option.

• (a) Shareholders and investors — these are external parties served chiefly by financial accounting, which reports the overall profit and financial position to them. Incorrect.
• (b) The internal management of the business — correct. Management accounting is prepared for the managers who run the business, to help them plan, decide and control.
• (c) The income-tax department — this is an external authority served by financial accounting and tax records, not by management accounting. Incorrect.
• (d) Creditors and lenders — again external parties, who rely on the published financial statements. Incorrect. …

Students may pick (a) or (d) by confusing management accounting with financial accounting. The test is always who the information is for — management accounting is …