Accounting for Management Control

p ACCOUNTING FOR MANAGEMENT CONTROL

2007

INTRODUCTION

Accounting for Management Control is a managerial activity concerned with planning and controlling of the corporations financial resources to generate returns on its invested funds . The raising and using of capital for generating funds and paying returns to the suppliers of capital is the finance function of a company . Thus the funds raised by the company will be invested in the best investment opportunities , with an expectation of future benefits . As every business activity either directly or indirectly involves the acquisition and use

of funds , there is an inseparable relationship between the finance and other functions like production , marketing etc . The raising of funds and using of money may not necessarily limit the general running of the business . A firm in a tight financial position will give more priority to financial considerations to devise its marketing and production strategies in tune with its financial constraints . On the contrary , management of a business company , with plentiful supply of funds , will be more flexible in formulating its production and marketing policies . In fact , the financial policies will be devised to fit the production and marketing decisions under such a situation . It may be difficult to separate the finance function from the other functions of the business , the finance function can be broadly discussed as

i . Managerial functions

ii . Routine functions

The managerial functions require greater planning , control and execution of financial activities . Whereas , the routine functions need a greater managerial talent to carry them out . The routine functions are mainly incidental to the effective handling of the managerial functions . Some of the important routine functions are

i . Supervision of cash receipts and payments and safeguarding of cash

ii Custody and safeguarding of securities , insurance policies and other valuable s

iii . Taking care of the methodological procedures of new outside financing

iv . Preparation of the reports and keeping of the records

These routine functions are carried out by the people at the supervisory levels

SCOPE OF ACCOUNTING FOR MANAGEMENT CONTROL

The scope and functions of accounting of management control are divided into two broad categories

a . Traditional approach

b . Modern approach

Traditional Approach

The traditional approach to the scope of management accounting refers to its subject matter in the initial stages study . According to this approach , the scope of management accounting is confined to the raising of funds . Hence , the scope of finance was treated by the traditional approach in the narrow sense of procurement of funds by corporate enterprise to meet their financial needs . Since the main emphasis of finance function at that period was on the procurement of funds , the subject was called corporation finance till the rnid-1950 's and covered discussion on the financial instruments , institutions and practices through which funds are obtained . As the problem of raising funds is more intensely felt at certain episodic events such as merger liquidation , consolidation , and reorganization and so on . These are the broad features of the subject matter of corporation finance which has no concern with...