Management accountant supplies informa tion to the management so that l atter may be able to discharge all its functions, i.e., planning, organisation, staffing, direction and control sincerely and faithfull y. For doing this, the management accountant uses the following tools and techniques:
i. Financial Planning. Financial Planning is the act of deciding in advance about the financial activities necessary for the concern to achieve its primary objectives. It includes determining both long term and short term financial objectives of the enterprise, formul ating financial policies and developing the financial procedure to achieve the objectives. The role of financial policies cannot be emphasized to achieve the max imum return o n the capital employed . Financial policies may relate to the determination of the amount of capital required, sources of funds, govern the determination and distribution of income, act, as a guide in the use of debt and equity capital and dete rmination of the optimum level of investment in various assets.
ii. Analysis of financial statements. The analysis is an attempt to determine the significance and meaning of the financial statement data so that a forecast may be made of the prospects for future earnings. ab ility to pay interest and debt maturities and profitability of a sound dividend policy. The techniques of such analysis are comparative financial statements, trend analysis, funds flow statement and ratio analysis. This analysis results in t he presentation of information which will help the business executives, investors and creditors.
iii. Historical cost accounting. The historical cost accounting provides past data to the management retating to the cost of each job, process and department so th at comparison may be made with the standard cost. Such comparison may be helpful to the management for cost control and for future planning.
iv. Standard costing. standard costing is the establishment of standard cost under most efficient operating conditions , comparison of actual with the standard, calculation and analysis of variance, in order to know the reasons and to pinpoint the responsibility and to take remedial action so that adverse things may not happen again. This aspect is necessary to have cost control.
v. Budgetary control. The management accountant uses the tool of budgetary control for planning and control of the various activities of the business. Budgetary control is an important technique of directing business operations in a desired directi on, i.e., achieve a satisfactory return on investment.
vi. Marginal costing. The management accountant uses the technique of marginal costing , differential costing and break even analysis for cost control, decision-making and profit maximization .
vii. Funds flow statement. The management accountant uses the technique of funds flow statement in order to analyse the changes in the financial position of a business enterprise between two dates. It tells wherefrom the funds are coming in the business an d how these are being used in the business. It helps a lot in financial analysis and control, future guidance and comparative studies.