What is management accounting?

Accounting is considered to have four elements. Are the external relations (income statement, balance sheet and cash), tax reporting (information needed for submission of tax returns), internal control systems and procedures, and finally management accounting. This can also be called operational reporting. It provides the information needed by business managers in their day to day decision making, planning and control. This is sometimes also referred to as internal reporting. Deals with external reporting financial reports to shareholders, investors, owners and regulatory agencies. Managers need information on a day to day. This could take two forms. One would be the day to day data generated as the volume of products sold, average unit price at which products are sold, the number of pieces produced, the material cost per unit, labor costs per unit of labor, wages paid , hours of downtime, maintenance hours, advertising costs, labor productivity in hours / pieces, inventory levels, orders in hand and such similar information, scrap rate, the main causes of scrap. This is not to find a place in external communication that deals with issues at the macro level. However, this data is crucial in managing a business.

In addition to providing data, internal reporting, also tries to help operational managers in efficiently using the data being provided to them. We see the scrap rate. At a basic level, more operator has a number of waste, it may be a percentage of defective parts in good parts, could be the number of pieces produced defective in one day, could be broken down for reasons of scrap. When these data are analyzed over specific periods of time, important trends emerge. The scrap rate may be increasing or reduction. When correlated with other events, a causal pattern may emerge. Most companies have some kind of preventive maintenance program. Check if the wreck is raised when the preventive maintenance programs are completed as planned. Price fixing of the reasons could be analyzed, could result in capital expenditure. This would result in cost-benefit analysis comparing control, etc. The data are the basis on which to run the different analyzes and correlations.

This also helps to understand different causal conditions. Events and possible outcomes. Advertising campaign could be an example. Before launching a campaign, trends and past results would be checked to determine the level of success.

All these activities are part of internal reporting. It helps managers better understand their activities and help them to use information effectively....