How Managerial Accounting Adds Value to Organization

3207 Words Mar 20th, 2006 13 Pages
HOW MANAGERIAL ACCOUNTING ADDS VALUE TO ORGANIZATION

1. INTRODUCTION

Management accounting provides accounting and related information to support the management of an organization in its internal decision-making. It includes product costing, relevant costing, cost-volume-profit analysis, capital budgeting, and operational, tactical, and strategic planning. A major activity included in the management accounting is the measurement of costs of processes that create value.

Management accounting is performed inside organizations. It is the internal business-building role of accounting and finance professionals, who design, implement, and manage internal systems that support effective decision support, planning, and control over the
…show more content…
The differences are as follows: -

Management Accounting Financial Accounting
Users Is largely used by the people within the organization (internal users). E.g. the managers who make plan as well as financial decisions. The users of financial accounting consist of people within the organization as well as people external to the organization. E.g. investors, customers and suppliers
Reporting regulation framework Not regulated by any framework, since only the management intends it. Regulated by law and the preparation of report must conform to requirements of accounting standards other regulatory authorities.
Nature of report Based on combination of historical data, estimates and projection of future events. Information supplied is based on historical transaction data.
Reporting scope Information included normally focused on certain section of the organization such as product lines, jobs, departments or divisions. Report focus on all transactions occurred within the organization as a whole.
Report frequency Report is prepared as it is required. It depends on the management need. Report is usually prepared annually in accordance to the organization's accounting period.

5. MANAGERIAL ACCOUNTING TOOLS/TECHNIQUES Today, the management accounting embraces a variety of sophisticated Systems, tools, and techniques, such as activity-based costing, enterprise value analysis, value-chain analysis, and the balanced scorecard.