Differences Between Management Accounting and Financial Accounting

1624 Words Dec 27th, 2010 7 Pages
MIDDLESEX UNIVERSITY

2008/2009

MODULE NUMBER ACC1130

MODULE TITLE Introduction to Managerial Finance

Coursework 1

STUDENT NAME …………………………..

STUDENT NO: …………………………...

SEMINAR TUTOR …………………………...

Introduction

Accounting is concerned with providing both financial and non-financial information that will help decision makers to make good decisions. An understanding of accounting therefore requires an understanding of the decision making process and an awareness of the users of accounting information. The major purposes of accounting are to formulate overall strategies and long-run plans. Resource allocation decisions such as product, pricing and customer emphasis. Cost planning and control of
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[7]

Functions of Management Accounting

Management accountants contribute to the company’s decisions about strategy, planning, and control, by scorekeeping, attention directing and problem solving.[8]

Scorekeeping:
It refers to the accumulation of data and the reporting of reliable results to all levels of management. Examples of scorekeeping are the recording of actual revenues and purchases relative to budgeted amounts.[9]

Attention Directing:
Helping managers focus on opportunities and problems. Attention directing means getting managers to focus on all opportunities that would add value to the company and not to focus only on cost reduction opportunities. An example is highlighting rapidly growing markets where the company may be under funding its investment. [10]

Problem Solving:
It refers to the comparative analysis undertaken to identify the best alternatives in relation to the organisation’s goals. An example is comparing the financial advantages of leasing a fleet of motorcycles rather than owning those motorcycles.[11]

Different decisions place different emphasis on these three roles. For strategic decisions and planning decisions, the problem solving role is most prominent.
For control decisions (which include both actions to implement planning decisions and decisions about performance evaluation), the scorekeeping and attention keeping and attention directing roles are most prominent because they provide feedback to
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