ROLE & FUNCTION OF COST AND MANAGEMENT ACCOUNTING

ROLE & FUNCTIONS OF COST AND MANAGEMENT ACCOUNTING
The role of a cost and management accounting system is to:

• Provide relevant information to management for decision making,

• Assist management for planning, measurement, evaluation and controlling of business activities,

• Help in allocation of cost to products and inventories for both external and internal users.

Though the term cost accounting and management accounting is used by various authors synonymously but in actual, cost accounting is concerned with accumulation and allocation of costs to different cost objects. Whereas, management accounting concerned with provision of information to internal users for decision making.

The functions of cost and management accounting includes:
(i) Collection and accumulation of cost for each element of cost.

(ii) Assigning costs to cost objects to ascertain cost.

(iii) Cost and management accounting department (whatever nomenclature may be used to denote the department) sets budget and standards for a particular period or activity beforehand and these are compared with the assigned and ascertained cost.
Any deviation with the set standards are analysed and reported. All these mechanism is done to control costs.

(iv) The main function of cost and management accounting is provision of relevant information to the management for decision making. An Information system environment is set up which is popularly known as management information system (MIS). The MIS provides relevant and timely information related to both internal and external to the organisation to enable management at all levels to take decisions. Decisions include cost optimisation, price fixation, implementation of any plan related with product, process, marketing etc.

(v) The performance of a responsibility centre is measured and evaluated against the set standards. The function of cost and management accounting is to gather data like time taken, wastages, process idleness etc., analyse the data, prepare reports and take necessary actions.