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Management Accounting Scope

>> December 14, 2010

Management Accounting Scope can be divided in following three parts

1. Analysis of Financial Statements Scope
2. Interpretation Scope
3. Decision Making Scope

Now we explain all above parts with more detail.

1. Analysis of Financial Statements/Accounting Data Scope

This part of management accounting scope answers our following questions

Q:- Which tools are being used for analyzing of accounting data?
Q:- Which specific accounting data is used for analyzing financial position, income position and solvency position?
Q:- What are main types of financial statement analysis?
Q:- What are the limitations of financial statement analysis?

2. Interpretation Scope

After analysis through ratio analysis, fund flow analysis, cash flow analysis or any other tool of management accounting, our next management accounting scope is interpretation scope. Analyzed data is also no tongue if you have no idea how to explain it? So, this is big scope for every wise man. Same analyzed financial statement's meaning may be different if interpretation is given by different account managers. For example, If we open the financial statement of twelve five years plan and we find that govt of India paid 1,10,000 Crores rupees for ending of poverty and you can find different detail of it. But if new account manager links it with no. of poor people, then we can see still 85% persons are poor. So, meaning of spending of Rs. 1,10,000 crores will become opposite. So, interpretation is important part of management accounting scope.

3. Decision Making Scope

"Who and how is the accounting information used for decision making?", is the part of scope of management accounting.

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