Management Accounting

Accounting department is an essential unit of any enterprise, company or organization which is responsible for control of funds and documentary accounting of incomes and expenditures. Many organizations prefer having duplicate accounting. Accounting is one of the types of business accounting carried out by an accounting department.

Key accounting items:

1. Payments
2. Profit, loss, financial result
3. Monetary and business transactions and processes
4. Sources of monetary funds and assets
5. Types and flow of assets

Some companies employ managerial accounting as an additional accounting system. Managerial accounting implies accumulation of data and examination of a company’s internal affairs. Management accounting can help analyze a company’s economical and financial state at any time and outline future trends.

Accounting and management accounting

1. Management accounting is applied to enhance the efficiency of control. Accounting is intended for reporting (to a tax authority).
2. Management accounting outcomes are available for the company officials only, while accounting department must provide data to the public authorities and partners.
3. For management accounting, any reasonable accounting techniques may be applied, while accounting must follow certain guidelines and regulations.
4. Managerial accounting allows approximation of figures. Accounting, on the contrary, requires precise calculations.
5. Managerial accounting may be introduced as needed, while accounting is a requisite for each and every company.
6. Managerial accounting employs one accounting system, while accounting implies duplicate accounting.
7. The key object for managerial accounting is the company and its departments, while accounting is focused on the company as a whole.

Managerial accounting: implementation

Before the managerial accounting system is implemented, the responsible person/department should be determined. Normally it would be the chief financial officer or finance department. After thorough analysis of the flow of funds within the company and operation of subdivisions, many companies would change their organizational structure to make it more balanced. Based on the gathered information, a database would be formed for further periodic computations.

To enhance the management efficiency, the information should be updated as often as possible. Some companies use monthly updates, while others need it weekly. Data are provided in any format convenient for the director and in line with the internal standards. Large companies employ an automated system of management accounting. In any case, the cost of data accumulation should not exceed its efficiency.

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