ManagementAccounting in Today’s Organizations
ManagementAccounting in Today’s Organizations
Bothfinancial and management accounting are essential tools in businessoperations, but they provide information to the management in adifferent manner. It is worth noting that although both aspectsprovide the financial status and processes of an organization, theiroperations, mandate, and target are different. Businesses integratethe accounting skills to help in the determination of theiroperational strategies. Accounting helps businesses to review theprograms and their performances. In this regard, accounting enablesbusinesses to check on their functions and operations. In bothmanagement and financial accounting, the investors are not activeparticipants in daily operations of the organization (Agrawal, 2010Martin n.d.). Nonetheless, the investors are concerned about theinvestment they put in the organizations. On the other hand, themanagers of the organizations need to be updated about the dailyoperations of the companies to enable them to develop betterdecision-making plans that will help the organization in achievingits desired objectives.
Differencebetween managerial accounting and financial accounting
Regardingthe operations of an organization, the management accounting isusually present within the organization. On the other hand, thefinancial accounting is presented to the external stakeholders of anorganization. What this means is that while management accountingoffers information relating to some aspects of the organization tothe management and employees, financial accounting providesinformation to external parties such as shareholders. The provisionof information to parties within an organization means that financialaccounting covers the whole organization while management account maycover a specific aspect of an organization and not necessarily theentire organization. In this sense, there is the aspect ofaccountability to the stakeholders of an organization. Hermanson,Edwards, and Invacevich (2011) contend that per the element ofnecessity, financial accounting is important to an investor inasmuchas the management accounting is important to the managers. This isbecause the managers use the management accounting to developstrategies that are essential for the future of the business.Financial accounting works on the principle of Generally AcceptedAccounting Principle or other standards as required in a country(Agrawal, 2010). On the other hand, management works on theprinciple of guessing and estimation. This is because managers lackenough time to analyze data when making the decision in anorganization. The operation of the financial accounting on the basisof GAAP means that the operation is a requirement of the law, whichdoes not apply to management accounting.
Financialinformation and purposes
Financialsare essential in an organization as various organizational expertsuse them to report to shareholders. In this regard, the expertisesuch as management uses the financial information to examine theorganizational performance. Financial information within theorganization helps the managers to improve the service delivery bytheir organizations (Martin, n.d.). Internally, the employees of anorganization are able to assess the profitability of the organizationthat they are working. Through assessment, employees manage to thinkof the future pay raise. The financial information in a companybenefits the owners of the organizations. In this regard, the ownerof the company is able to make a judgment of the possible decisionthey would like to make on their investment. The owner of the companydetermines the viability of their investment and makes a probablejudgment. Financial accounting mainly provides information thatrelates to financials and utilization of capital in an organizationwhile management accounting allows managers to make decision-makingprocesses
Changein managerial accounting today
Unlikefinancial accounting that deals with the presentation of thefinancial health of a firm in a specific time to externalshareholders, management accounting deals with the presentation ofinformation for decision-making processes. Thus, managementaccounting does exist based on past performances of a firm but basedon future and current trends. As such, management accounting utilizesforecasting and deals with fluctuations greatly, which means that itsaspects change significantly. The role of management has changed overtime due to the major developments taking place in the financial andmanagement accounting. In this regard, the roles of the managers inthe organization change to adapt to different needs of theorganization and the market. Managers prepare data for use within theorganization. The management accountancy is a new development inmanagement (Martin, n.d.). The management accountant is responsiblefor the recording of numbers used for reviewing an organizationbudget. Management accountants supervise the low-key employees in theorganization. Regarding the development of the management roles, theinitiation of management accountancy enabled the ease in tracking taxand preparation of income statements.
CertifiedManagement Accountant designation
Thecertified management accountant designation is a major certificationfor management for the accountants. The certified managementaccountant designation enables professionals to improve theirmanagement and accountant skills (Hermanson et al., 2011). With thehelp of pursuing certified management accountant designation, anaccountant is able to develop high standards of professional ethics.Employers believe that employees who pursue the certified managementaccountant designation are committed to their jobs. This is becausethey invest in time and resources to accomplish the certifiedManagement Accountant Designation Program. The employees with acertified management accountant designation attain annual educationalrequirement (Hermanson et al., 2011). In this sense, the employersare satisfied that the employees are updated with current financialand management accounting skills.
Agrawal,N. K. (2010). Principlesof management accounting.Global Media.
Martin,J. R. (n.d.) Management accounting: concepts, techniques, andcontroversial issues – Chapter1: Introductionto managerial accounting, cost accounting and cost management system.Retrieved 26 March 2016 from http://maaw.info/Chapter1.htm
Hermanson,R.H., Edwards, J.D., & Invacevich, S.D. (2011). Accountingprinciples: A business perspective.First Global. Retrieved 26 March 2006from http://textbookequity.com/oct/Textbooks/TBQ_PA_Accounting_managerial.pdf