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What do you mean by management accounting?

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What do you mean by management accounting?
Management accounting is concerned with the provisions and use of accounting information to
managers within organizations, to provide them with the basis to make informed business decisions that
will allow them to be better equipped in their management and control functions.
According to the Chartered Institute of Management Accountants (CIMA), Management Accounting
is "the process of identification, measurement, accumulation, analysis, preparation, interpretation and
communication of information used by management to plan, evaluate and control within an entity and
to assure appropriate use of and accountability for its resources. Management accounting also
comprises the preparation of financial reports for non management groups such as shareholders,
creditors, regulatory agencies and tax authorities"
The American Institute of Certified Public Accountants (AICPA) states that management
accounting as practice extends to the following three areas:
Strategic Managementadvancing the role of the management accountant as a strategic
partner in the organization.
Performance Managementdeveloping the practice of business decision-making and
managing the performance of the organization.
Risk Managementcontributing to frameworks and practices for identifying, measuring,
managing and reporting risks to the achievement of the objectives of the organization.
The Institute of Certified Management Accountants (ICMA), state "A management accountant
applies his or her professional knowledge and skill in the preparation and presentation of financial and
other decision oriented information in such a way as to assist management in the formulation of policies
and in the planning and control of the operation of the undertaking. Management Accountants
therefore are seen as the "value-creators" amongst the accountants. They are much more interested in
forward looking and taking decisions that will affect the future of the organization, than in the historical
recording and compliance (scorekeeping) aspects of the profession. Management accounting knowledge
and experience can therefore be obtained from varied fields and functions within an organization, such
as information management, treasury, efficiency auditing, marketing, valuation, pricing, logistics, etc."

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Differentiate between financial accounting & management
accounting?
Management Accounting Compared with Financial accounting
the following table summarizes the main differences between management accounting and financial
accounting.
Management accounting
Financial accounting
A management accounting system produces
information that is used within an organization, by
managers and employees
A financial accounting system produces
information that is used by parties external to the
organization, such as shareholders, bank and
creditors.
Management accounting helps management to
record, plan and control activities and aids the
decision making process.
Financial accounting provides a record of the
performance of an organization over a defined
period and the state of affairs at the end of that
period.
There are no legal requirements for an organization
to use management accounting.
Limited companies must, by law prepare financial
accounts.
Management accounting can focus on specific
areas of an organization’s activities. Information
may aid a decision making rather than be an end
product of a decision.
Financial accounting concentrates on the
organization as a whole, aggregating revenues
and costs from different operation. Financial
accounts are an end themselves.
Management accounting information may be
monetary or alternatively non monetary.
Most financial accounting information is of a
monetary nature.
Management accounting provides both an
historical record of the immediate past and a
future planning tool
Financial accounting presents an essentially
historical picture of past operation.
No time span for producing financial statements
Financial statements are required to be
produced for the period of 12 months.
No strict rules govern the way in which
management accounting operates. The
management accounts and information are
prepared in a format that is of use to managers
Financial accounting must operate within a
framework determined by law
and IASs. In principle the financial accounts of
different organizations can be easily compared.
Management accounting has no specified format.
There are no specific statements which should be
produced.
Financial accounts are supposed to be produced
in accordance with a specified format by IAS or
law.

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What do you mean by management accounting? Management accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions. According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is "the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non management groups such as shareholders, creditors, regulatory agencies and tax authorities" The American Institute of Certified Public Accountants (AICPA) states that management accounting as practice extends to the following three areas: Strategic Management—advancing the role of the management accountant as a strategic partner in the organization. Performance Management—developing the practice of business decision-making and managing the performance of the organization. Risk Management—contributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the organization. The Institute of Certified Management Accountants (ICMA), state "A manageme ...
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