What Are The Merits And Limitations Of Management Accounting?


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Here are some limitations of using Management accounting
1) Mgt Acccounting is based on data of Financial and Cost Accounting. Historical data is used to make future decisions. The correctness and effectiveness of managerial decisions will depend upon the quality of data on which these decisions are based. If financial data is not reliable then Mgt Accounting will not provide correct analysis.  For example: Ratio analysis using historical financial numbers.
2) the application of Mgt Accounting will be useful to person connected with Decision making process as they have proper understanding of Mgt Accounting and related subjects such as Statistics, Economics, Prinples of Mgt, Engineering etc.
3) In Mgt Accouting decision making based on facts and figures, there is a tendency to make decisions intuitively. Mgt may avoid lengthy courses of deciding things and may take an easy course of arriving at decision, using intuitive. Interitive decisions limits the usefulness of Mgt Accounting.
4) The tools and techniques of Mgt Accounting provide only information and not decision. Decisions and their implementations are done, by Mgt. So it has supplementary service function and has no final say in taking decisions and their implementations.
5) The interpretation of financial information depends upon the personal judgement of the interpreter. Personal prejudices and bias affect the objectively of decisions.

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