May 25, 2023

Management Accounting Concept, Need, Importance and Scope

Management Accounting Concept, Need, Importance and Scope

Management Accounting Concept, Need, Importance and Scope

Management accounting is a branch of accounting that focuses on providing financial information and analysis to assist management in making decisions and achieving organizational goals. It involves the collection, analysis, and interpretation of financial and non-financial data to provide insight and support strategic decisions within an organization. Here are the main concepts, needs, importance and scope of accounting management:


1. Cost Accounting: Involves the measurement, analysis, and control of costs to increase efficiency and profit. Cost accounting techniques help to determine the cost of products, services, and processes.

2. Budgeting and Forecasting: This concept involves the preparation of budgets and financial forecasts to plan and allocate resources effectively. It helps in setting targets, monitoring performance, and controlling costs.

3. Performance Measurement: Management accounting uses a variety of tools and techniques to measure and evaluate the performance of different departments, projects, or individuals within an organization. Key performance indicators (KPIs) are often used to evaluate performance against predetermined objectives.

4. Decision Support: Management accountants provide financial analysis and information to support the decision-making process. Cost, income, and other economic factors are analyzed to evaluate the methods of conducting activities and to evaluate their potential impact on the establishment of policies.


1. Planning and Control: Management of accounting aids in setting realistic goals, developing plans, implementing and implementing plans. It provides research on the economic implications of various options and helps to monitor progress and take corrective actions.

2. Cost Management: By dividing and controlling costs, management accounting aids in improving operational efficiency, reducing waste, and maximizing profitability. It helps in identifying cost saving opportunities and optimizing resource allocation.

3. Performance Evaluation: A management system provides information on financial and non-financial performance measures, allowing managers to evaluate the effectiveness and efficiency of different activities, initiatives, or processes. It helps in identifying areas for improvement and increasing rewards.

4. Decision Making: Effective decision making requires accurate financial information and analysis. A management system provides the necessary data and insights to make informed decisions about investment, pricing, mix, production, resource allocation, and other strategic issues.


1. Strategic Planning: The management system supports strategic planning by providing financial analysis and insights into market trends, competitive movements, and potential risks. It helps to formulate long-term goals and devise strategies to achieve them.

2. Performance Monitoring: Based on research and evaluation of key performance indicators, management accounting enables managers to monitor the organization's progress toward its goals. It helps in identifying deviations, analyzing variations, and taking corrective actions to meet performance targets.

3. Resource Allocation: Effective resource allocation depends on optimizing efficiency and achieving organizational goals. A management system provides information on the costs, benefits and risks associated with different options, facilitating informed decisions about the allocation of resources.


The scope of account management spans a variety of areas, including but not limited to:

1. Cost Analysis and Cost Control

2. Budgeting and Financial Forecasting

3. Financial and Non-Financial Performance Measures

4. Pricing and Product Profitability Analysis

5. Capital development assessment

6. Risk assessment and management

7. Strategic Planning and Decision Support

8. Internal Opinion and Communication

9. Performance Evaluation and Incentive Systems

10. Corporate Governance and Compliance

The management account plays an important role in providing managers with the information, analysis, and tools necessary to make effective decisions, control policies and operations, and achieve organizational goals.