According to The Environment Agency in the United Kingdom (2006), Environmental Accounting can be defined as:
“The collection, analysis and assessment of environmental and financial performance data obtained from business management information systems, environmental management and financial accounting systems. The taking of corrective management action to reduce environmental impacts and costs plus, where appropriate, the external reporting of the environmental and financial benefits in verified corporate environmental reports or published annual reports and accounts.”
According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is:
"The process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its Resource (economics) resources. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies and tax authorities"
Companies are facing increasing concerns from various groups over their environmental impacts, and different stakeholders are asking for different types of information. Company management needs information on cost, revenues and profits. Environmental protection agencies, environmental organisations and community want information on environmental impacts, while tax authorities, shareholders and investors are concerned with environmental assets and liabilities. It was found that management accounting systems alone would not be up to the task of providing management with enough information to make proper decisions. As such, there was a need to implement the principles of environmental accounting into management accounting, so as to further increase the information available to stakeholders in the organisation and for management to facilitate making proper managerial decisions. And so, as a subset of environmental accounting, environmental management accounting (EMA) was created.
The purpose of this paper is to explain the major effect of environmental accounting on companies and management accounting systems, which in our view is the creation of environmental management accounting. It will highlight the uses and benefits of environmental management accounting in management systems. This paper will firstly discuss accounting, giving a brief history, and also outlining the uses of accounting in businesses today. It will then discuss management accounting, before taking a very in-depth discussion on environmental accounting and finally environmental management accounting. 2.0 What Is Accounting?
Accounting is practiced at different levels and in different institutional contexts, with national accounting, government accounting and business accounting being the main forms today. According to Carter and Davies et al. (2000), government accounting applies to government agencies at different levels; business accounting applies to business enterprises and many non-profit institutions, with relatively minor differences between the various legal forms of organization and between industries.
Accounting uses various bases of measurement, mainly the cash basis, the accrual basis (or historical cost) and variations of these (Carter & Davies et al., 2000).
2.1 Brief History of Accounting
According to John R. Alexander, accounting is a little different than most other modern professions. Accounting has a history that is usually discussed in terms of one seminal event – the invention and dissemination of the double entry bookkeeping processes. According to Paul Garner and Atsuo Tsuji (1995), the first printed document of bookkeeping in the world is the “Summa de Arithmetica, Geometria, Proportioni et Proportionalita” written by Luca Pacioli. The book was published in Venice in 1494,...
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