Management Accounting - Assignment PDF

From: Syed Munim Ajaz
To: Sir Mohsin
Unit: 5
Unit Name: Management Accounting
Submission Date:

INTRODUCTION OF MANAGEMENT ACCOUNTING
It’s a comprehensive term which integrates financial and non-financial statements through
which management team can obtain useful information in order to take a better and effective
decision. A well-organized accounting management system plays a crucial role in offering
information about the account status to the management team.
Management accounting is having a wide scope and it contains all kinds of accounting
information.
LO1
COMPARISON BETWEEN MANAGEMENT ACCOUNTING
AND COST ACCOUNTING
A.Management Accounting
The term Management Accounting otherwise known as Managerial Accounting, encapsulates
the business practice of preparing management documents, reports and accounts that provide
precise fiscal as well as numerical data, in a timely manner, which is required by managers for
decision making on daily or short –term basis.
B.Cost Accounting
Another term closely linked with management accounting is known as Cost Accounting. This is a
critical function and it provides information that is used both for management accounting as
well as financial accounting.

THE GLOBAL MANAGEMENT ACCOUNTING PRINCIPLES
Management accounting is the sourcing, analysis, communication and use of decision-relevant
financial and non-financial information to generate and preserve value of organizations.
Management accounting requires a thorough understanding of the business (including the
business model) and its operating environment so that organizational risks and opportunities
are known. By managing and responding appropriately to risks, organizations can exploit
opportunities and generate value for stakeholders over time.
Management accounting lies at the heart of an organization, at the crossroads between finance
and management. It provides structured solutions to unstructured problems by translating the
complex into the simple and by making the simple compelling.
Bringing together both financial and non-financial considerations, it is the discipline that should
be used to run the organization, to control and improve performances.
The business model is the means by which the organization generates value. Because
management accounting requires a thorough understanding of the business model, as well as
the organizations market and macro-economic environment, it contributes to sustainable
success.
Management accounting helps organizations make better decisions by extracting value from
information. Rooting decisions in evidence, or basing them on informed judgment rather than
conjecture, makes sustainable success more achievable. All the Global Management Accounting
Principles flow from this ambition.
They describe the fundamental values, qualities, norms and features to which management
accounting professionals should aspire. Four overarching Principles to be considered
continuously rather than sequentially are key to achieving this:
Communication provides insight that is influential
1. Strategy development and execution is a conversation
2. Communication is tailored
3. Communication facilitates better decisions
Information is relevant
1. Information is the best available
2. Information is reliable and accessible

3. Information is contextual
Impact on value analyzed
1. Simulations provide insight into options
2. Actions are prioritized by their impact on outcomes
Stewardship builds trust
1. Accountability and credibility
2. Sustainability
3. Integrity and ethics
An effective management accounting function is made up of skilled of competent people, who
apply the principles to maintain and improve and organizations performance management
system through the areas of practice they undertake. Three of the principles apply to the
discipline of management accounting, Stewardship builds trust, applies to the individual
behaviors of management accounting professionals.