Management accounting is a process during which identification, measurement, and the provision of all the necessary information that reveals the essence of the economic and financial activities of a company takes place. Knowledge of the indicators of operational processes of the enterprise contained in the relevant statements is a necessary link involved in planning, administrative procedures and evaluating the activities of the company. Management accounting is also a prerequisite for solving the problem of rational use of all resources and the completeness of their accounting.
The administrative functions of the organization include several stages. After setting goals , planning is carried out. Then follows the execution of the task and control over its solution. Next, an analysis of the work performed is carried out and a managerial impact is formed. As a result of passing this cycle, an idea is formed about the situation that has developed in the company.
The effectiveness of the manager making strategic and operational decisions is directly dependent on the completeness and quality of the information provided to him. That is, management accounting is a whole system, the purpose of which is to support the conduct of business based on the analysis of indicators of economic and financial activity.
The reporting provided to the head serves to create an objective picture of the availability of resources and their effective use. This information is necessary for the company to achieve its goals. In this regard, the proper organization of management accounting is the most important task. She stands in front of any enterprise. The first step in the preparation of the necessary reporting is the reflection of basic operations. They are entered in certain registers. This is called operational or primary accounting.
To make administrative decisions, the leader must see the company not only as a single unit. It is important to objectively assess the effectiveness of each unit, as well as the degree of rational use of available resources. You must also find out the needs of customers and offers of suppliers. Any situation should be provided from various angles and have a sufficient degree of detail or generalization.
The top level of the management accounting system includes generalized indicators of financial activity. These registers serve to formulate the main tasks and indicate general guidelines for successful business activities.
The following levels of information provide an opportunity to determine the causes and analysis of indicators that are generalized. These registers are used to provide more detailed information on the magnitude of interest using detailed data. Based on them, it is possible to analyze the causes of existing deviations from the normative indicator. Information at these levels is provided at the operational request of management or at a pre-established schedule.
Management accounting is a clear system, the construction of which is based on one basic principle. It includes the statement of tasks for reporting, which should support the timely adoption of administrative decisions and be focused on the achievement of future goals.
Management accounting is designed to:
- measure the results of the current work of the organization;
- ensure clarity and clarity of strategic objectives;
- focus on critical indicators and key points;
- give a clear picture of the improvement or deterioration of all indicators of the enterprise;
- be the basis for the motivation of the team.