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Finance & Accounting
Pages 4 (1004 words)
Management accounting is not a specific system of accounts, but could be any form of accounting which enables a business to be conducted more effectively and efficiently. …
Accounting may be defined as “the art of recording, classifying, and summarizing ... transactions and events and interpreting the results thereof” (Introduction to managerial accounting, n. d, p.2). Two types of accounting are usually taking place in organizations; financial accounting and management accounting. Financial accounting and managerial accounting are entirely different things even though some people perceive both as same thing. Financial accounting is a reporting method to stakeholders outside the organization whereas management accounting is a reporting method intended for the stakeholders inside the organization. In other words, management accounting helps managers inside the organization to take sound decisions. Management accounting is a multifaceted entity and therefore it undergoes various processes like data collection, analysis, interpretations, implementations of decisions etc. Management accounting can be considered as an extension to cost accounting since it uses many of the data used for cost accounting. “From a management accounting point of view the primary purpose of management is to make decisions that may be classified as marketing, production, and financial” (Management Accounting and Decision-Making, n.d, p.24). Unlike cost accounting, management accounting is usually done through unregulated channels since it is intended for the internal use alone. Various sources of data such as accounting system, production and sales department, business process etc can affect management accounting.
Sources of data for management accounting and how these data are used to make management decisions
Accounts department, Production department, sales department and the business process are the major data sources for management accounting. ...
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