MANAGEMENT ACCOUNTANTS
From Applegate Accountants, Cheshire

We all use information every day to manage our lives whether we are management accountants or not. We consult train timetables to help us get to work, or review the local fuel prices before filling up our car. As we travel on the train we check our watches to see if the train is running on time, and as we drive we monitor our speed and compare it with the speed limit. We learn to use the information that is useful to us and ignore the information that is not very helpful.

Management Accountants have a wealth of information available to help them to control their organisations. They can obtain information of how much their products or services cost, how much their competitors are charging, and what the current rate of inflation is. They need the right information to help them to do their jobs.

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The best kind of information is that which satisfies the following criteria.

Relevant to the User. If you were hoping to catch a train today, a copy of last year’s timetable may not be very relevant, but if you were a statistician undertaking an analysis of train performance over a number of years it would be a vital piece of information.

Understandable. In the same way that the format of a train timetable will help us to understand its content, the way that accounting information is presented to managers is of vital importance.

Timely. If information is to be acted on it must arrive at the right time. Imagine a car speedometer that only informed the driver of the car’s speed via a printout once the journey was completed. Such a system would not help the driver avoid prosecution for speeding, because the information would arrive too late for action to be taken. In the same way receiving accounting information too late to take appropriate action can occur in some organisations and cause major problems.

Consistent. If meaningful comparisons are to be made, the information must be generated using consistent techniques. Government departments are sometimes accused of distorting information by modifying the way that it is compiled from one period to the next. For example comparing the total number of unemployed people is difficult if some groups that previously included in the figure are no longer counted. An organisation’s profits for different periods would also be difficult to compare if the bad debt provision was suddenly changed from 0.1% of debtors to 10%.

Sufficiently accurate for its purposes. Sometimes a reasonably accurate piece of information is all that is required, whereas in other circumstances it would be insufficient. A manager may only need to know that a supplier is owed about £30,000, but the accounts department will need to know the exact figure if payment is to be made. Accuracy may have a cost attached, in terms of the staff time to produce the information and other costs resulting from the delay created. A balance must be found between the speed and accuracy of information.

Management accounting is the general term used for the production of accounting information for those inside an organisation. Because it is an internal system there are no external rules about how or when the information should be produced. Management accounting exists to help managers plan, monitor, control, and make decisions about the organisation. Its emphasis is on providing information that can help with the future of the organisation. The guiding principal for management accounting information is that it should be useful to its readers. If the information fails that simple test, then it has been a pointless waste of time producing it.

Management accounting is the branch of accounting that deals with providing internal information within a company. Providing costing information is an important area of management accounting.
Management Accounts are based around the organisations costing system which can be derived from Absorption costing, Marginal costing or activity based costing. Each system used different terminology and different ways of calculating the cost of an organisation’s output or activities. The different ways that stock can be valued in management accounts effects the amount of profit that is recorded in each period when stock levels change.

MANAGEMENT ACCOUNTANTS From Applegate Accountants, Cheshire

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MANAGEMENT ACCOUNTANTS
From Applegate Accountants, Cheshire