Management Accounting

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Subject: Management Accounting

What Do You Mean by Management Accounting?
Management accounting has been defined as the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of financial information which is used by the management to plan, evaluate and control within an organization. It ensures the appropriate use of and accountability for an organization’s resources. The management accounting also comprises the responsibility for the preparation of financial reports for nonmanagement groups such as regulatory agencies and tax authorities. Management accounting is the accounting for the planning, control and decision making activities of an organization. Management accounting vs financial accounting: Financial accounting is concerned mainly with the historical aspects of external reporting; that is providing financial information to outside parties such as investors, creditors and governments. In order to protect those outside parties from being misled, financial accounting is governed by what are called as generally accepted accounting principles. Management accounting on the other hand is concerned primarily with providing information to internal managers who are charged with planning and controlling the operations of the firm and making a variety of management decisions. On account of the internal use, management accounting is not subject to generally accepted accounting principles. We can summarize the difference between management accounting and financial accounting as detailed below: 1. 2. Financial accounting is subject to generally accepted accounting principles; whereas management accounting is not subject to generally accepted accounting principles; Financial accounting generates accurate and timely data whereas the management accounting emphasizes relevance and flexibility of data;

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Subject: Management Accounting
3. 4. 5. 6. Financial accounting emphasizes the past; whereas management accounting has more emphasis on the future; Financial accounting looks at the business as a whole whereas management accounting focuses on parts as well as on the whole of a business; Financing accounting stands by itself, whereas management accounting draws heavily from other disciplines such as finance, economics and operations; Financial accounting is an end in itself, whereas management accounting is a means to an end. Cost accounting vs management accounting: The difference between cost accounting and management accounting is a subtle one. Cost accounting is a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services to the aggregate and in detail. It includes methods for recognizing, classifying, allocating, aggregating and reporting such costs and comparing them with standard costs. From this definition of cost accounting and the NAA’s definition of management accounting, the following information is found to be clear: “the major function of cost accounting is cost accumulation for inventory valuation and income determination. Management accounting; however, emphasizes the use of the cost data for planning, control and decision making purposes. In fact, the management accounting typically does not deal with the details of how costs are accumulated and how unit costs are computed for inventory valuation and income determination. Although unit cost data are used for pricing and other managerial decisions, the method of computation itself is not a major topic of management accounting but rather of cost accounting.

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Management Accounting Homework Help from Classof1.com
*The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
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