Introduction to managerial accounting Introduction Managerial accounting also known as management accounting is described by the Institute of Management Accountants as. the internal role of business- building between finance and accounting professionals who implement, manage, design internal systems. It ensures effective decisions, that control, support and plan value-creating operations for the organization. Generally, management accounting through controlling and planning operations aids the process of decision making. In this paper I will discuss managerial accounting.
Managerial accounting is a process of measuring, identifying, analyzing, communicating and interpreting information to internal managers of an organization. It creates precise reports that are focused on future, present and past, the management uses these reports in making educated decisions concerning the organization. Some of the reports produced are. Department reports, Sales forecasting, planning reports and Production reports. Financial accounting provides information to government agencies, suppliers, banks and shareholders who use it in making long term decisions for the organization, and they follow Generally Accepted Accounting Principles (GAAP). Reports created include. income statement, balance sheets, retained earnings summary and cash flow reports.
Managerial accounting lays emphasis on decisions that affect the future, therefore planning is an important element of the manager’s job since managerial accounting is future based. Financial accounting basically provides past financial transaction summaries which may be used in planning to some extent, since the future is not always a reflection of past happenings. Many changes are taking place in economic and technological conditions therefore, manager’s planning must be based on what will happen rather than what really happened (Accounting for Management, 2012).
Accounting information is used internally by employees and various managers who include. marketing managers and purchasing managers. Accurate accounting is important to individuals who make crucial business and financial decisions within the organization that affect the organization directly. Companies aiming at selling services and goods at prices that provide adequate returns to the owners should keep an adequate level of liquidity and profitability to continue operations. Accounting information is critical to organizations in conducting their daily activities such as. financing the company, investing in resources, managing employees, producing goods and marketing them.
Managerial accounting is crucial in global competition, the market place is global nowadays. A firm is likely to be competing with other firms in Korea, Germany or Japan, international competition has forced companies to strive for perfection in quality services (Accounting for Management, 2012). This has led many companies to be intertwined and has led managers to change their accounting systems in order to put up with the competition. Managerial accounting also focuses on the customer, in order to succeed in the current era customers must be focused by businesses. The value of services and products to customers is affected by product quality, price, user-friendliness, functionality, maintenance costs and warranty. Due to this high customer focus, various customer attributes are measured through managerial accounting.
The Certified Management Accounting (CMA) is used around the world by many professional bodies to designate their various professional certifications. It is a designation of Canada’s Society of Management Accountants, in that. it provides a good foundation in management, strategy and accounting using both non-financial and financial information to make decisions in government and industry.
In conclusion, managerial accounting is important to an organization’s management in making precise decisions. Managers are able to control the firm’s productivity and profitability through managerial accounting. Financial accounting is also vital to an organization’s external structure since shareholders are able to get reports of how the company is running financially.
Accounting For Management, (2012). Difference Between Financial and Managerial Accounting (Financial Accounting Vs Managerial Accounting: Retrieved on 26th November 2012, from: http://accounting4management.com/financial_accounting_vs_managerial_accounting.htm