The goals of management accounting are reduced to competent work with data relating to the cost of production or services, as well as the costs of the enterprise. Such information allows managers to make accurate and effective decisions within their responsibilities.
The essence of management accounting
Both tax and financial accounting are strictly regulated by law and existing standards. As for management accounting, the information needs of the management of a particular company are used as the main guidelines in the process of its maintenance.
For this reason, different approaches are used to effectively develop such a system. Methods of management accounting may also differ. Such a system is often implemented precisely by top management.
The essence of managerial accounting and its main goal is to provide the persons managing the company with the full amount of data that is necessary for the efficient operation of the enterprise. This is explained by the fact that managers often lack managerial information.
The directors of structural divisions and specialists who are responsible for the formation and implementation of the long-term goals of the company often also use such a data collection system. Moreover, the larger the enterprise becomes, the stronger management needs to develop subsystems.
Training
For effective work, you need to configure the control system, taking into account the characteristics of the company. Without special skills, the company's specialists will not be able to do this.
For this reason, it is advisable to send employees to management accounting courses. Such training events are aimed at senior, middle managers and company executives. Accountants, economists and specialists in planning departments can also study.
The course "management accounting" in most cases is focused on the study of basic rules, principles of the system, features of budgeting, pricing and cost management. The program should also contain information on how to properly analyze the cost of production or services.
The purpose of such training is to ensure that managers and specialists of the enterprise can gain practical skills in the formation and subsequent use of the system. For this reason, the course examines examples of managerial decisions in the framework of using data accounting.
Accounting Objects
A system that allows you to control and analyze the activities of the enterprise should be aimed at working with the right base. If you select the main objects of management accounting, then they can include:
- business results;
- internal pricing;
- expenses of companies, as well as their structural divisions;
- internal reporting;
- forecast financial transactions that will be necessary or inevitable in the future.
As a result, we can conclude that the subject of accounting is the production side of the company and its divisions. Moreover, regardless of the type of the latter.
Management Accounting Objectives
The implementation of the main task within the framework of such a management system includes working with different flows of information. Accordingly, the goals are divided into specific groups:
- Formation of integrated management reports. This includes information on the results of the financial, investment and production activities of the enterprise. This report also includes data received from key structural units for the current and past period.
- Materials analysis of the influence of external and internal factors on the activities of the company and its branches.
- Predicted and planned indicators. In this case, work is carried out with information regarding the upcoming period. According to the basic theory of decision making, managers, before formulating specific tasks, make up an operational strategy. Its main goal is to identify the best way to achieve the long-term goals of the company. At this stage of work, reports on the activities of the departments in the current period are used.
Key Management Accounting Tasks
If we talk about this system more specifically, we can distinguish the main areas of analysis and reporting, which are used on an ongoing basis.
We are talking about the following management tasks:
- Determination of the actual cost of production. Work is also underway with various types of services and work. In addition to information about the cost of the product, data is collected regarding planned and regulatory indicators.
- Accounting for the movement and availability of labor, financial and material resources. Information on these categories is sent to managers.
- Definition of results of activity within the framework of financial indicators. Such data coming from structural divisions are evaluated taking into account various positions: responsibility centers, incomplete production value, etc.
- Accounting for income, expenses and deviations on them. Estimates, standards and established norms of both the company itself and its structural divisions are taken as the main evaluation criterion. Also, when analyzing data, technological solutions and responsibility centers existing at the enterprise are taken into account.
- Monitoring and analysis of financial and economic activities. The data on the structure, its branches and other centers of responsibility are taken into account.
- Prediction and evaluation of the forecast itself. The essence of management accounting at this stage boils down to providing an opinion on what future events may affect the company's operations.
- Planning financial and economic activities. It is about drawing up a general plan of action - both for the company and for its divisions.
It is worth noting that the content of reports is subject to change. It all depends on their current target value.
Functions
There are a number of processes that allow you to quickly achieve management accounting goals. We are talking about the following functions of the system, making it one of the effective management tools:
- Communication. In this case, the information necessary for the full communication of various levels of leadership and structural units is collected. Its use can significantly improve the quality of data exchange.
- Informational. We are talking about the timely provision of necessary data for managers of all levels.
- Predictive. It helps to predict the future development of the company and timely adjust its activities, giving it the right direction. The main task in this case is the achievement of strategic goals. To do this, you need to identify inefficient development lines in time and change them.
- Control and analytical. This function is necessary for the implementation of full control over the achievement of planned budgets, indicators, strategic and tactical goals of the enterprise. This element of management accounting is used to obtain information regarding the effectiveness of decisions made by individual performers and units as a whole. Their influence on the performance of the entire company is also taken into account. This part of the research and analysis includes identifying the reasons for the deviation of actual costs from the available estimates.
In addition to the described basic processes, in the framework of the activities of various companies, other additional functions can be used:
- Organization. This function is needed to highlight costs, revenues and responsibility centers. It also allows for interaction and coordination between different levels of management, departments and even individual performers.
- Motivation. It is necessary for the formation of indicators of the contribution of individual employees to the overall result of the entire company.
- Planning. This includes budgeting and budgeting at several levels: strategic, tactical and operational.
Requirements
Management accounting goals inevitably include working with data. And the information that is analyzed and transmitted to managers must meet certain requirements:
- Completeness. Management should always have access to the amount of information that will allow you to effectively manage the company and departments. The most complete systems include the use of double entry and accounts. They allow you to control in the framework of current activities costs, results, investments, inventories, as well as the degree of effectiveness of enterprise management.
- Credibility. It implies a level of information at which accurate and reliable conclusions can be made based on the data obtained.
- Integrity. The essence of this requirement is to ensure systematic accounting, even if the accounts, double entries and primary documentation are not used. By systemicity it is necessary to understand the use of the same principles of reflection of credentials and the comparability of information with indicators of financial statements.
- Regularity. Information should be provided on an ongoing basis.
- Timeliness. The data obtained in the framework of management accounting should be available to the manager at the time when you need to make a decision.
- Relevance. Within the framework of the system, data generated taking into account the conditions in which the managers make a decision will be suitable.
- Clearness. Information must be submitted in a form in which it can be analyzed quickly, without missing important details. We are talking about data formats such as tables, time series, graphs, etc.
Decision theory includes working with reliable data that was provided on time. Otherwise, it will be difficult to make an accurate, quick and effective correction of the goals and activities of the company.
If the management accounting framework is correctly compiled and the system is correctly formed (taking into account all the features of the company), then managers will be able to identify risks and weaknesses in the business. Also, managers can easily determine unprofitable, ineffective services, goods and places of their sale.
Budgeting
Company management is associated not only with analysis and planning, but also with the process of delegation of authority.
Budgeting (planning and budgeting) is used in the process of transferring authority to the level of systemic motivation and responsibility centers. This method allows you to quickly obtain accurate data and ensure the efficient operation of the company. For this reason, management accounting and budgeting are closely related.
It is important to understand that there is no one or more templates of such systems that would suit different companies. For each business, it is necessary to separately develop management and budgeting methods.
Thus, you always need to make a choice in favor of an individual approach.
As for the types of budget, we can distinguish 4 key areas:
- The main ones. Income, expenses, balance sheet and cash flow.
- Additional. Plans for individual programs and projects, profit distribution.
- Auxiliary. Credit plan, taxes and capital investments.
- Operating
If we talk about examples of managerial decisions, then in real companies budgeting is usually used to build a cost management system.
This approach makes it possible to evaluate the contribution of each business unit to the process of achieving strategic goals and to predict the company's costs. Budgeting also allows you to identify hidden reserves of the enterprise, monitor the implementation of plans and evaluate their effectiveness.
Accounting methods
To begin with, it is worth noting that the legislation, including tax, does not contain strict requirements relating to this issue. In other words, a company can choose those management accounting methods that it will need in order to achieve its strategic goals.
The main thing is that they do not go towards the bureaucracy and thereby do not interfere with the production process.
The most common methods include:
- Cost calculation. Different types of calculation can be used: design, regulatory, conversion, process. Which one will be chosen depends largely on the characteristics of production and its scale.
- Direct costing. It is about determining the cost of production in the amount of direct costs.
- Cost accounting. The costs incurred are recorded without separation by deviation and rate. Information on the balances of work in progress, as well as inventory, is used to determine the cost.
Summary
Management accounting is always focused on determining the cost of production / services and company costs. Moreover, each enterprise independently determines how information will be processed in the framework of a particular production. If accounting is used correctly, then managers will be able to determine the breakeven point and correctly draw up a budget.