Management Accounting

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Management Accounting

Management accounting


Management 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 the management to plan, control and evaluate within an entity and to assure appropriate use of and accountability for its valuable resources. Management 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 management 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 management accounting in financial reporting can lead the organization towards deterioration.


Management accounting which is also commonly known as managerial 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 to make better decisions for business and enable better management of their control functions. The application of management accounting information is as follows

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

The information it contains is of critical 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's created by the use of the management information and accounting systems.

Role of management accounting within an organization

These days a management accountant has dual role in an organization in terms of dual reporting relationships. As a provider of decision based operational information and strategic partner, it's 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. For instance the examples of tasks in which accountability is more important to the business management team against the corporate finance division are the development of new product costing and system, business driver metrics, client profitability analysis, sales management score carding, and operations research.

Specifically the businesses and companies who derive most of their profits with the use of information economy such as publishing companies, banks and telecommunication companies, It expenditure of these companies are a significant source of excessive and uncontrollable spending. (Emilia, 2007, Pp. 88-113)Most of the times it is the greatest cost after property related costs and total compensation costs for the companies. A function of managerial accounting works closely with the IT department in order to provide transparency of IT costs.

Different changes in management accounting practices

In late 1980's, educators and accounting practitioners ...
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