Such information provides the policy makers with the necessary guidelines for framing the strategies for the company. Financial and accounting department is the most important department as they are the watch dogs of the financial conditions of a company. The formulation of strategy also includes under its fold aspects like financial goal and a financial performance analysis. The financial performance of a company is disclosed by its finance departments. The contemporary business environment of an organisation influences the management accounting system. Choosing a proper management accounting system is therefore imperative for every organisation.
Unlike the traditional financial accounting system, management accounting system is a more contemporary method of managing accounts and it discloses the relevant information to the stakeholders of the company. The financial accounting system is meant to provide information to the external parties of an organisation like shareholder, creditors, employees, customers and government, though these sections of people do not take part in the decision making process. The managerial accounting is useful for the internal group of people like the management team, CEO and policy makers as these people ‘plan and control’ a company (Clarke, p.10). The information derived from the management accounting system is more valid, accurate, subjective and judgemental than financial accounting system. Management, in its essence is endowed to look after four primary aspects which include strategic management, planning decision making, management control and financial reporting. The management accounting information plays a very important role in regards to all these functions. Its roles pertaining to management functions are discussed below.
Strategic management: Before drafting a competitive strategy, a company has to take into account its financial position. If a company wants to position itself in field of cost