Management Accounting - Research Paper Example

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This research aims to evaluate and present the process of management accounting that combines data from both the internal environment and the external environment in order to generate reports as required by the different department heads. Thus the sources of data are both external and internal…
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Management Accounting
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"Management Accounting"

Download file to see previous pages The intention of this study is management accounting as the process of generating reports that enable managers to assess how the company is performing in relation to competitors. By contrast, financial accounting provides reports for external stakeholders such as the shareholders. Financial accounting reports are also prepared according to the generally accepted accounting principles. However such rules are not applicable to management accounting. Thus a management accountant can apply his own discretion in preparing the required report. Management accounting is defined on the basis of several assumptions. The first assumption is related to the goal of management accounting. The goal of management accounting is to assist the management in maximizing the net profit of the company. The second assumption is that the management is able to control the success of the company to some extent so that its performance is not completely dependent upon market forces. The role of management is to apply planning and control to impact upon organizational performance. Management accounting is defined based upon the assumption that it is meant to provide a set of decision making tools that the management will apply to enhance organizational performance. As mentioned before, the role of management is to apply planning and control. Planning and control can be applied in marketing, production or finance. Therefore the definition of management accounting must include decision making in marketing, production and finance. ...
As mentioned before, the role of management is to apply planning and control. Planning and control can be applied in marketing, production or finance (Lillis & Mundy, 2005). Therefore the definition of management accounting must include decision making in marketing, production and finance. Management accounting derives its definition also from the assumptions that the management makes about the accounting department. The management expects the accounting department to provide data that will assist in marketing, production and financial decision making. Finally, management accounting must be defined based upon the assumption that accounting information must be customized to the decision making tool involved. Sometimes this involves defining the nature of the accounting information according to fixed and variable costs (Emsley, 2005). Management accounting as a process must incorporate all these assumptions. The sources of management accounting data can be both external and internal. The role of management is to apply planning and control techniques in influencing the organizational performance. To meet this objective, the management must access data from both the internal environment and the external environment. Management accounting data from the internal environment enables the management to assess the organizational performance. The data from the external environment, such as the data on competitors and demand, enable the management to compare organizational performance with market performance. Thus these sources of data enable the management to understand whether the company is performing above or below the market average. As mentioned before, one of the assumptions ...Download file to see next pagesRead More
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