Account week 2 Discussion 2

Accounting
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What is the most important role of management accounting? How is that different than financial accounting?

Nov 26th, 2014

Most important role of management accounting:

                                                                             Management accounting is not only concerned with the overall financial and operational efficiency of an organisation but goes much deeper into the divisional and departmental activities so a to assist in 

(a) pin-pointing places of weaknesses and inefficiencies with a view to improve performance in the utilisation of resources and

(b)formulating plans,policies and strategies for advancing the interests of shareholders and other interested in the well-being of a business entity.

Management accounting is designed not merely to provide monetary data but also takes along with it quantitative input and output relationship,in matters of individual resources employed in an organisation. The two key words often used in this connection are "control" and "analysis". Both these words connote "appraisal of past" and "feed forward" or planning; and the accounting provides necessary techniques.


Different than financial accounting:

                                                      The objectives of the two accounting approaches are different.The objective of financial accounting is to provide data bearing on the stewardship of a business for the information of shareholders, prospective investors and tax authorities.The preparation and presentation of these accounts should necessarily conform to generally agreed upon principles. Since these accounts have a different objective, they are of limited use to management.The principles in accordance with which these accounts are drawn up do not necessarily regulate management accounting.

Management accounting is not only concerned with the overall financial position but is also with the performance efficiency of the parts making the whole business management. For example , management would be interested to know quantitative input and output ,scrap, underutilized capacity, deficit production and causes thereof, productivity increase resulting from introduction of wages incentive schemes or provision of better production facilities, methods, working conditions. Similarly , management would be interested in knowing actual total costs of a product , future cost of the product, out of pocket costs of the product and so on. Financial accounting does not meet these managerial needs of data for control, decision making and policy formulation.

Nov 26th, 2014

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Nov 26th, 2014
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Nov 26th, 2014
Dec 11th, 2016
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