To provide an understanding of the nature of management accounting and its role in the process of managing and controlling the enterprise.
▪ Management accounting
▪ Management control
▪ Decision making
By the end of this section you should be able to understand:
▪ The purpose of management accounting
▪ The concepts and processes of control.
The Role of Management Accounting
Most enterprises face a process of constant change in their environment. Change is also a continuous process within the enterprise. To survive the enterprise must be able to face up to and manage these changes. The ability to manage change is a critical success factor for all enterprises.
Management accounting is concerned with the process of change management by:
▪ The analysis of past decisions.
▪ The provision of information which explains current trends.
▪ The provision of information for decision making.
▪ The provision of information for planning and control.
Traditionally management accounting provided cost information to management for the control and decision making process. The concern of the management accountant today is much wider and includes the provision of both financial information and non-financial information.
Management accounting is concerned with the process of management. By considering the process of management it is possible to establish a framework for management accounting.
A framework for Management Accounting
Management is a social process entailing responsibility for the effective and economic planning and regulation of the enterprise in fulfillment of a given purpose or objective. (T Lucey, Management Information Systems)
Consider now how the following terms from the definition relate to the management accounting system:
Social process – management