ng on the other side provide information that is of pivotal importance for management to make day to day decisions as well as to set their long term strategy.
When financial accounting provides standardized reports to external stakeholders, management accounting enables accountants to provide information for each and every level of management, from section supervisor to department heads.
“Management accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis in making informed business decisions that would allow them to be better equipped in their management and control functions (wikipedia, 2007)”.
The purpose of managerial accounting is to provide management with the information that holds key importance in strategic planning, directing and motivating employees and evaluating and controlling organizational performance. It provides basis for decision making for future activities. Reports are prepared for each and every segment of department so that the department heads and section managers may know exactly about their department’s performance and can reward or take controlling measures for their employees.
Managerial accounting provides data to enable management of making budgets which are a part of their planning process. Budgets help management know exactly of their current state of resources and their future use in various activities from day to day operations to expansion projects. Daily sales report generated by management accountants or daily production reports help management analyze the efficiency of various department.
Comparisons between the standard and the actual help management to know about the current and required status of their business activities and counter measures can be taken if found deviating from standards. Managerial accounting’s ability to provide basis for controlling measures lays ground for key performance measures for an organization.