MANAGEMENT ACCOUNTING

Management Accounting

Management Accounting

Introduction

Business and management are present in nearly every sphere of our existence because we live in a society full of organizations. The prevalence of these organizations, and the number and importance of the functions for which they are responsible, mean that it is essential that they are run efficiently and effectively.

Managers and business school lecturers study management practice in order to find the best way of performing organizational tasks, and hence to improve the running of business. American Independence and, more importantly, the French Revolution gave birth to the ideas of equality and freedom for all. The Industrial Revolution provided the means to put into practice these ideas and hence organizations were born and the concept of modern management emerged.

Managerial accounting is concerned with providing information to managers-that is, people inside an organization who direct and control its operation. In contrast, financial accounting is concerned with providing information to stockholders, creditors, and others who are outside an organization.

Managerial accounting provides the essential data with which the organizations are actually run. Managerial accounting is also termed as management accounting or cost accounting. Financial accounting provides the scorecard by which a company's overall past performance is judged by outsiders. Managerial accountants prepare a variety of reports. (Bailey, Brown & Cocco, 1998)

Some reports provide timely, frequent updates on key indicators such as orders received, order backlog, capacity utilization, and sales. Other analytical reports are prepared as needed to investigate specific problems such as a decline in the profitability of a product line. And yet other reports analyze a developing business situation or opportunity.

Discussion

Accounting emerged out of the human being's need to have knowledge of his fortune/ possessions, of his economic activity and of the obtained results. Seen from the perspective of the relationship between the user of the accounting information, ...