CHARACTERISTICS OF MANAGEMENT ACCOUNTING INFORMATION
The accounting information created and used by management is intended primarily for planning and control decisions. Because the goal of creating and using management accounting information differs from the reasons for producing externally reported financial information,
its characteristics are different.
Both the processes used to create financial accounting reports and the structure of those reports significantly impact management strategy.
For example, because external financial reporting standards require companies to include pension-related obligations on their financial statements, management monitors those obligations closely. These pension-related obligations impact labor negotiations and labor-related corporate strategies.
Another example: is that the processes necessary to create required external financial reports have historically determined the type of accounting information available inside of companies
for internal decision making. Most plants within companies are organized as profit centers where plant-related financial statements mirror those necessary tor external reporting purposes. As you read the chapters of this book, we will remind you about how financial reporting has an impact on and is impacted by management strategies. The following paragraphs identify internal accounting information characteristics.
Importance of Timeliness:
In order to plan for and control ongoing business processes, accounting information needs to be timely. The competitive environment faced by many enterprises demands immediate access to information Enterprises are responding to this demand by create computerized databases that link to external fore casts of industry associations, to their suppliers and buyers, and to their constituents. Time lines for the develop orpiment and launch of new products and services are becoming shorter and shorter, making quick access to information a priority. In addition to needing timely information for planning purposes, enterprises are constantly
monitoring and controlling ongoing activities. If a process or activity goes out of control, the enterprise can incur significant costs. For example, recalls of products can be very expensive
for a company. If the company can monitor processes and prevent low-quality or defective products from reaching its customers, it can experience significant savings.
identity of Decision Maker Information:
that is produced to monitor and control processes needs to be provided to those who have decision-making authority to correct problems. Reporting scrap and rework information to line workers without providing them the responsibility for fixing the process is counter productive. However, a self-directed work team that has been assigned decision-making responsibility over equipment and work-related activities can have a significant impact on rework and scrap if team members control the process causing the problems.
Oriented toward the Future:
Although some accounting information, like financial accounting information, is historical in nature, the purpose in creating and generating it is
to affect the future. The objective is to motivate management to make future decisions that are in the best interest of the enterprise, consistent with its goals, objectives, and mission.
Measures of Efficiency and Effectiveness:
Accounting information measures the efficiency and effectiveness of resource usage. By comparing the enterprise's resource
inputs and outputs with measures of competitors effectiveness and efficiency, an assessment can be made of how effective management is in achieving the organization's mission. The accounting system uses money as a common unit to achieve these types of comparisons.
Management Accounting Information-A Means As with financial:
accounting information, management accounting information is a means to an end, not an end in and of itself. The ultimate objective is to design and use an accounting system that helps management achieve the goals and objectives of the enterprise.
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