Question

Define Management Accounting. Explain its usefulness to modern business and state limitations of it.

Answer 1

Management accounting

The process of preparing management reports and accounts that provide accurate and timely financial and statistical information required by managers to make day-to-day and short-term decisions.

Usefulness

1. Accomplishment of goals:

It is the management which determines the goals of the organization and of various departments and functional groups. The goals are communicated to the employees to seek their cooperation.

2. Effective Utilization of Resources:

Management ensures optimum utilisation of resources. Through planning and organisation, management eliminates all types of wastages and achieves efficiency in all business operations.

3. National Growth and Prosperity:

Efficient management of resources is equally important at the national level. According to Peter Drueker, “Management is the crucial factor in economic and social development.” The development of a country virtually depends on the quality of management of its resources.

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