Management, accounting, information, decision-making
Accounting has been clear as the progression of identifying, measuring, recording and communicating financial information of an entity, so that this information can be utilized in making decisions. The primary objective of accounting can, therefore, be seen as that of helping users of accounting information make wise economic decisions, about an entity. However, this definition mainly refers to financial Accounting, which is clearly different from Management Accounting (Lambert, 2006).
Management Accounting is a stem of accounting that intend at providing managers of an entity, with useful information, to help them make decisions on the management and control of the entity (Lambert, 2006).
Briefly, financial accounting differs from management accounting in the following ways: Firstly, Management Accounting, unlike Financial Accounting, is more internally focused. This means that it provides information for users within the entity namely, the Management. Financial Accounting information, is mostly used by persons external to the entity. These include Investors, Government Agencies, Suppliers, Customers, Donors, Employees, competitors and so forth (Arnold & Turley, 1996).
[...] This means that it provides information for users within the entity namely, the Management. Financial Accounting information, is mostly used by persons external to the entity. These include Investors, Government Agencies, Suppliers, Customers, Donors, Employees, competitors and so forth (Arnold & Turley, 1996). Secondly, Management Accounting provides information that is future focussed, in the sense that it attempts to make forecasts and predictions. Thirdly, Financial Accounting information is prepared under guidelines, such as generally accepted accounting principles (GAAPs), while Management accounting information, is prepared on a need based approach. [...]
[...] As noted earlier, Management Accounting aims at providing information for decision making to individuals within an organization. User of such information includes Departmental Managers, Plant managers, Stores managers, supervisors, Chief financial officer, Board of directors, the chief Executive Officer, and virtually all the employees. However, the use of this information differs from individuals and departments. Perhaps, the critical need for accounting information is that it shows actual expenditures and performance in terms of money, for different departments and activities (Arnold & Turley, 1996). [...]
[...] Therefore, the information has to be well researched with a few items for discussion. Similarly, information for decision making at the individual level should be such that it is well summarised and covers a narrow scope, to enable the individual decision maker, make a decision easily and in good time. For instance, line managers would want information that involves their departments, and sometimes information that compares performance of their departments to other departments. This information should, therefore, be prepared with this in mind. [...]
[...] This aims at assessing the effectiveness of management in achieving the organisations goals and objectives. Decision making Models This is similar to setting an objective statement, of what decision you want to make. For example, one would define the situation as want to cut production cost by 20,000 pounds in the next quarter. Secondly, you must consider alternatives that can meet the objective, based on your skills and experience. The next stage involves gathering information that supports these alternatives, and comparing it using different benchmarks, such as cost. [...]
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