Page 165 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting Pooja, Lovely Professional University

Notes Unit 9: Introduction to Management Accounting

CONTENTS

Objectives
Introduction
9.1 Meaning of Management Accounting
9.2 Nature and Scope of Management Accounting
9.3 Limitations of Management Accounting

9.4 Relationship of Financial, Cost and Management Accounting
9.5 Summary
9.6 Keywords
9.7 Review Questions

9.8 Further Readings
Objectives

After studying this unit, you will be able to:
Explain the meaning of management accounting
Describe the nature and scope of management accounting

State the limitations of management accounting

Discuss the relationship of financial, cost and management accounting
Introduction

Management accounting as a new branch of accounting is of recent origin. Financial accounting

recorded business transactions on double-entry basis and helped ascertainment of profit or loss
for the given period and valuation of stock of assets and liabilities on a given date. Financial
accounting enabled the concern with the liabilities and safeguard the assets entrusted and therefore
was also known as custodial or stewardship accounting. Basically meant for consumption of
owners, creditors, statutory authorities, the reporting was for a concern as a whole.
Management accounting is the accounting system for making decisions of the business enterprise.
Management accounting furnishes the necessary information to assist the business enterprise to
make rational decisions through the development of policies and procedures in order to meet the
day to day commitments of the enterprise.

9.1 Meaning of Management Accounting

The term ‘Management Accounting’ refers to accounting for the management. Management
accounting provides necessary information to assist the management in the creation of policy
and in the day-to-day operations. It enables the management to discharge all its functions, i.e.,

planning, organization, staffing, direction and control efficiently with the help of accounting
information.

160 LOVELY PROFESSIONAL UNIVERSITY