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Management Accounting Essay

851 words - 4 pages

THE NATURE OF MANAGEMENT ACCOUNTING [SUMMARY]

What is Management Accounting?

Management Accounting is the process within an organization that provides information used by an organization’s managers in planning, implementing and controlling the organization’s activities.

Management Accounting as One Type of Information

Information is a fact, datum, observation, perception or nay other thing that adds to knowledge.

An organization’s day-to day activities requires a considerable amount of operating information. This information provides the raw materials for the summarized information that is reported in the financial accounting and management accounting processes.

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Operating information is used both in preparing the financial statements and in management accounting.

Both are used in decision making

Financial accounting information assists investors in evaluating companies’ prospects so that decisions can be made about supplying debt or equity funds to these companies

Management accounting information is used in a wide array of decisions made by managers : product pricing, investments, buying goods etc

SOURCES DESCIPLINES

Economics – deals with principles governing decisions on the use of scarce resources

Social psychology – deals with principles governing human behavior in organizations

Management accounting is the internal business function responsible for collecting and reporting financial information for internal business use. Management accounting information often relates to the cost of materials and labor used to produce goods or services sold to consumers. This information is necessary for companies to determine the effectiveness and efficiency of business operations and how well they earn profits based on the assets used to produce consumer products. Management accounting information is usually specific to each company and the managers meeting to review the information for decision-making purposes.

Facts

• Management accounting is an important source for important financial information related to business operations. Accountants report this information to executive management to report on the financial strength of the company.
Benefits
• Strong management accounting systems can increase a company's profitability and find areas to lower costs. Because management accounting starts at the beginning of the financial information process, it is easier to determine areas for improving...

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