Nature and Scope of Management Accounting

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Management accounting is a young discipline. As a result, management accounting concepts and tools are still evolving in new ways and found to provide information that assists management.

In the words of Batty J., “Management accountancy is the term used to describe the accounting methods, systems and techniques which, coupled with special knowledge and ability, assist management in its task of maximizing profits or minimizing losses”.

Management accounting is a hybrid discipline comprised of diversified fields in management and economics. As the main purpose of management accounting is to assist the strategic manager, it incorporates the theories, tools, and techniques of any discipline as per the needs.

On this ground, the scope of management accounting touches all the disciplines of business administration. For example, the following list highlights the scope of management accounting:

Tools Applicable in Management AccountingOrigin of the Tool
1. Cost Determination
2. Regression, probability, hypothesis tests, etc.
3. Linear programming
4. Marginal costing, price-demand relation
5. Analysis of customers, competitors, etc.
6. Accounting information system
7. SWOT analysis
8. Financial performance analysis
9. Present value-based decisions
10. Tax effect
1. Cost accounting
2. Statistics
3. Operations management
4. Economics
5. Marketing
6. MIS
7. Strategic Management
8. Financial accounting
9. Financial Management
10. Tax planning

The list implies that management accounting is composed of key techniques from cost accounting, statistics, operation management, economics, marketing, MIS, business environment and policy, and so on.

Therefore, management accounting can aptly be called a hybrid subject. Remember, a hybrid product is the most handsome and fruitful one. Most of management accounting begins with cost analysis.

So, it is too difficult to draw a true topic distinction between cost accounting and management accounting. Where cost accounting information ends management accounting analysis begins.

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