Management accounting - Essay Example

However, with the right tools information and skills, a company is guaranteed to stay afloat in a world where businesses keep dropping out of the corporate world. How companies manage their finances and workforce dictates whether the company is bound to open its doors come the next financial year. One of the major concerns in management is the management of accounts which is usually handled a company’s accountants in conjunction with the management of the company. Management accounting specifically deals with generating information pertaining to a given company and basically relates on how to minimize costs while improving sales and boosting profits within the available company’s resources.

In short this is information that helps the management to make crucial decisions. Financial accounting on the other hand deals with generating information based on information relayed by external users and mainly deals with control of cash inflow and outflow in the company. So why is management accounting so important? Among the most important reasons why management accounting is important to company include; 1) Planning-this basically deals with making decisions pertaining to the company’s products where and when to make them, who to sell them to, how much labor it will use and so on and so forth (Caplan, 5). 2) Operational Control-management helps the top officials in identifying and minimizing production error from the time a product is initiated for production to the time it is released to the market for sale. 3) Performance and Evaluation-this involves evaluating the efficiency and effectiveness of different products and different managers within the company.

When dealing with management of accounts two concepts become clear: Variable (Direct) costs and fixed production overhead costs