MANAGERIAL ACCOUNTING

Managerial Accounting

Managerial Accounting

Introduction

Managerial accounting as defined by the (CIMA) is the process of “identification, preparation, analysis, measurement, accumulation, correct interpretation and communication of information and knowledge used by management to plan, control and evaluate within an entity and appropriate use of and accountability for its valuable resources. Managerial accounting includes the preparation of financial reports for non-management use as well such as financial reporting for creditors, shareholders, tax authorities and regulatory agencies. The significance of Managerial accounting in any organization is of vital importance as it define the financial position of the company and on the basis of this information the company make its strategic decisions. The wrong interpretation or representation of Managerial accounting in financial reporting can lead the organization towards deterioration.

Literature review

Managerial accounting

Managerial accounting, which is also, commonly known as management accounting deals with the provision and use of accounting information of the company or entity by the managers within the organization. (Michael, 2006, Pp. 6-22). This accounting information provides the manager with the relevant information and basis for make better decisions for business and enables better management of their control functions. The application of Managerial accounting information is as following.

Primarily it is designed to be used by the internal stake holders of the company such as managers within the company or organization.

The information it contains is of paramount importance and confidential as well and intended to be sued only by the management of the company, instead of public reporting use.

It emphasize on the future decision making, instead of historical.

Normally, it is created by the use of the management information and accounting systems.

Role of managerial accounting within an organization

These days, management, accountant has a dual role in an organization in terms of dual reporting relationships. In Australia also, one can observe the growing trend of management accountant. As a provider, of decision based operational information, and strategic partner, it is their responsibility to manage business teams and at the same time, they are required to report responsibilities and relationships to the corporations finance division. (Charles, 2003, Pp. 75- 119)The activities provided by the management accountants are inclusive of planning and forecasting, performance variance analysis; monitoring and reviewing costs associated with the business are the ones that have double accountability to both finance and the business team.

Different changes in managerial accounting practices

In late 1980's, educators and accounting practitioners were greatly criticized due to the lack of innovations and changes in the old accounting practices in the last 60 years, despite radical changes and alterations in the business field and environment. (Jay Rich, 2009, Pp. 115-130)The traditional accounting institutes feared that the significance of managerial accounting may overshadow in the business organizations, therefore, they subsequently devoted their considerable and adequate resources to develop more innovative and sound skills for managerial accounting practices. When compared to the traditional accounting practices a basic distinction and improvement in the innovative accounting practices can be easily illustrated with the use of cost control techniques.

The other common name of activity based accounting is cause and ...