The distinguishing feature of management accounting of accounting for
planning and control is its emphasis on the first and second purposes.
Accounting and Planning – Accounting is the handmaiden of planning. Without it planning cannot be effective, since values must be established throughout before decisions as to courses of action are taken. Management is concerned with decisions about the future while accounting accumulates past data about operations of the business. But in most cases the past experience provides a guide to future actions. Accounting records what decision has been taken in the past and with what results, and it sets down acceptable criteria for evaluating such results and helps management in deciding the future course of action on the basis of past experience.
The emphasis has shifted from purely historical accounting to the submission of purposeful up-to-date information as a means of controlling current operations, and predictions of the future as a guide to planning. Budgeting and planning in general is taken as highly significant management functions.
The accountant helps to bring together the budget estimates and co-ordinates them into a comprehensive plan for future. When we have accounting as a tool for planning we may have two types of planning: Period planning and Project planning. Period planning involves preparation of budgets or estimates as a means of projection of the future activity of the enterprise in terms of expenses, revenues, assets, liabilities for a stipulated period.
While Project planning is the analysis that is made in order to reach a decision on a specific project or proposal and involves a consideration of how future expenses and revenues will be affected over the whole life of the project. In the field of both the Period and Project planning accounting has an important role to play.
Accounting and Control – Control function of the management involves the determination of the degree to which the actual operation of business conforms to its plans and policies Accounting helps management in the control process in the following ways:
(a) As a means of communication of enterprise’s objectives, goals, plans, policies and targets through various types of accounting reports.
(b) As a means of motivation through the devices of budgetary control and standard costing which motivates the employees of an organization to work on certain mission; and
(c) As a means of checking up the performances of the employees as well as of various departments or sections. Thus accounting helps the appraisal process by which the management evaluates how well the employees are doing their job.
During the course of operation, measurements can be made and related to the budget plan to see if operations are being carried out as intended. From the managerial point of view, the accounting process helps to ascertain the effectiveness of the management and provides the management with a means for self-evaluation. Accounting not only directly contributes towards only these two process of management, i.e., planning and control but it also helps in other management process, viz., co-ordination, direction, motivation, organization, etc.
Accounting and Planning – Accounting is the handmaiden of planning. Without it planning cannot be effective, since values must be established throughout before decisions as to courses of action are taken. Management is concerned with decisions about the future while accounting accumulates past data about operations of the business. But in most cases the past experience provides a guide to future actions. Accounting records what decision has been taken in the past and with what results, and it sets down acceptable criteria for evaluating such results and helps management in deciding the future course of action on the basis of past experience.
The emphasis has shifted from purely historical accounting to the submission of purposeful up-to-date information as a means of controlling current operations, and predictions of the future as a guide to planning. Budgeting and planning in general is taken as highly significant management functions.
The accountant helps to bring together the budget estimates and co-ordinates them into a comprehensive plan for future. When we have accounting as a tool for planning we may have two types of planning: Period planning and Project planning. Period planning involves preparation of budgets or estimates as a means of projection of the future activity of the enterprise in terms of expenses, revenues, assets, liabilities for a stipulated period.
While Project planning is the analysis that is made in order to reach a decision on a specific project or proposal and involves a consideration of how future expenses and revenues will be affected over the whole life of the project. In the field of both the Period and Project planning accounting has an important role to play.
Accounting and Control – Control function of the management involves the determination of the degree to which the actual operation of business conforms to its plans and policies Accounting helps management in the control process in the following ways:
(a) As a means of communication of enterprise’s objectives, goals, plans, policies and targets through various types of accounting reports.
(b) As a means of motivation through the devices of budgetary control and standard costing which motivates the employees of an organization to work on certain mission; and
(c) As a means of checking up the performances of the employees as well as of various departments or sections. Thus accounting helps the appraisal process by which the management evaluates how well the employees are doing their job.
During the course of operation, measurements can be made and related to the budget plan to see if operations are being carried out as intended. From the managerial point of view, the accounting process helps to ascertain the effectiveness of the management and provides the management with a means for self-evaluation. Accounting not only directly contributes towards only these two process of management, i.e., planning and control but it also helps in other management process, viz., co-ordination, direction, motivation, organization, etc.
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