MANAGERIAL ACCOUNTING IN ORGANIZATIONS

Managerial Accounting in Organizations

Managerial Accounting in Organizations

Management accounting or managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions.

In contrast to financial accountancy information, management accounting information is:

designed and intended for use by managers within the organization, whereas financial accounting information is designed for use by shareholders and creditors.

usually confidential and used by management, instead of publicly reported;

forward-looking, instead of historical;

computed by reference to the needs of managers, often using management information systems, instead of by reference to financial accounting standards.

This is because of the different emphasis: management accounting information is used within an organization, typically for decision-making.

According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is "the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies and tax authorities" (CIMA Official Terminology).

The American Institute of Certified Public Accountants(AICPA) states that management accounting as practice extends to the following three areas:

Strategic Management—Advancing the role of the management accountant as a strategic partner in the organization.

Performance Management—Developing the practice of business decision-making and managing the performance of the organization.

Risk Management—Contributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the organization.

The Institute of Certified Management Accountants(ICMA), states "A management accountant applies his or her professional knowledge and skill in the preparation and presentation of financial and other decision oriented information in such a way ...