Q.Explain the functions of management accounting.

The functions of management accounting describe what it actually does for management — the work it performs in the business.

The functions of management accounting can be set out as follows.

1. Collection and recording of data. It gathers accounting and other economic data — from the financial accounts, the cost accounts and external sources — that management will need.
2. Modification and analysis of data. It reclassifies, groups and modifies the raw data so that it becomes relevant for a particular purpose — for example, separating fixed from variable cost, or grouping figures department-wise.
3. Planning and forecasting. It helps management set objectives and prepare plans and forecasts for the future, chiefly through budgets and projected statements.
4. Facilitating decision-making. It presents the relevant data for a decision — the alternatives and their likely costs and benefits — so that management can choose wisely. This is one of its most important functions.
5. Controlling performance. Through budgetary control and standard costing, it compares actual with planned performance, reports the variances, and enables management to control operations.
6. Coordinating operations. Through budgets and reports that tie the departments together, it helps coordinate the whole organisation towards common goals.
7. Communicating and reporting. It communicates the results of its analysis to the different levels of management through timely, understandable reports, and reports to outside parties where required. …

Students sometimes confuse the functions of management accounting with its objectives. Though the two overlap, the functions describe the actual work done (collecting, analysing, reporting), while the objecti …