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Definition, Function, and Scope of Management Accounting

Management accounting or management accounting is one type of accounting that is very important for a company or business. The data generated by accounting will be used as the basis for corporate management planning. This process produces quantitative information in the form of financial reports as well as qualitative reports in the form of non-financial reports.

Definition of Management Accounting

The Chartered Institute of Management Accountants (CIMA) defines accounting as the process of identifying, measuring, accumulating, analyzing, compiling, interpreting, and communicating information. The data presented will then be used by management to plan, evaluate, and control within an entity.

Management Accounting Function

The following is the function of management accounting for a company:

  • Tools for Analyzing Decision Making

Accounting is used as an analytical tool that can provide quantitative and qualitative data. The data presented will then be used as a basis for making decisions.

  • Information Systems for External Parties

Management accounting is not only designed for internal parties. This field of accounting is also used for the benefit of external parties, such as shareholders, governments, financial institutions, and other parties who have interests in the company.

The resulting report can be used as a form of company responsibility towards stakeholders in the company. The stakeholders can find out the condition of the company based on the management accounting report.

  • Relevant Sources of Financial Data and Information

Management accounting provides information related to company finances and various relevant data sources. These data are then used as the basis for planning activities or operations within a company.

  • Sources of Information for the Accountability of Each Division

Each division must make reports related to management management. Management accounting can be used as a source of information in making reports for each division. This report can later be used as a basis for planning their work program according to company needs.

  • Measuring Company Performance

Management accounting presents historical data that can be used as a tool to evaluate work at the division level and also the interests of the company as a whole. The evaluation process is very important to do to be able to assess the extent to which the company's performance is in achieving the predetermined targets. Thus, the company can control which parts need to be increased, reduced, or maybe eliminated.

  • Coordination of Various Company Activities

Management accounting also functions for coordination between divisions. The information generated by this management enables the divisions to obtain external information needed to carry out their respective programs. Thus, collisions of interests between divisions can be avoided.

Who Needs Management Accounting

  • Finance Manager

Financial managers need this accounting to collect information related to working capital, cost expenses, returns on investment, returns on capital, and various other types of finance.

  • Production manager

Production managers also need accounting management to obtain detailed information related to production costs, unit product costs, direct labor costs, and overhead costs that directly affect the production process.

  • Marketing Manager

Marketing managers need data from management accounting to determine the selling price of products, determine the sales system on credit or cash, sales commission expenses, and information on discount rates for certain products that are made to increase the number of sales of these products.

Thus a discussion of the meaning, function, and scope of management accounting. Soltius Indonesia is here to provide solutions in the application and development of accounting software products that can optimize the functions of management accounting in your company.

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