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.