Explain the importance of accounting information for internal parties | primarily management | in terms of the objectives and the | characteristics of that Information.

Management Accounting Information

Internal decision makers employed by the enterprise, often referred to management, create and use internal accounting information not only for exclusive use inside the organization but also to share with external decision makers. 

For example, in order to meet a production schedule, a producer may design an accounting information system for suppliers detailing its production plans. The producer shares this information with its supplier companies so that they can help the producer meet its objectives. Thus, although the creator and distributor of the accounting information is an internal decision maker, the recipient of the information is, in this case, an external decision maker. Other types of accounting information, however, are not made available to external decision makers. Long-range plans, research and development results, capital budget details, and competitive strategies typically are closely guarded corporate secrets.

USERS OF INTERNAL ACCOUNTING INFORMATION

Every employee of the enterprise uses internal accounting information. From basic labor categories to the chief executive officer (CEO), all employees are paid, and their paychecks are

generated by the accounting information system. However, the amount of use and, in particular, the involvement in the design of accounting information systems vary considerably,

Examples of internal users of accounting information systems are as follows:

Business unit managers

Board of directors

Plant managers

Chief executive officer (CEO)

Store managers

Chief financial officer (CFO)

Vice presidents 

Line supervisors

Employees have different specific goals and objectives that are designed to help the enterprise achieve its overall strategies and mission. Looking at the typical, simple organization chart in Exhibit 1-5, you can see that the information created and used by various employees

will differ widely. All enterprises follow rules about the design of their accounting information systems to ensure the integrity of accounting information and to protect the enterprise's assets. There are no rules, however, about the type of internal reports or the kind of accounting information that can be generated. A Snapshot look inside a firm will demonstrate the diversity of accounting information generated and used in the decision-making processes of employees. Many enterprises use a database warehousing approach for the creation of accounting information systems, This approach, coupled with user-friendly software, allows management and other designated employees access to information to create a variety of accounting reports, including required external financial reports. For example, detailed cost information

about a production process is used by the production line supervisor to help control production costs. A process design engineer, when considering the best configuration of equipment and employees, uses the same information to reduce costs or to increase efficiency. Finally, production-related cost information appears in the external financial statements used by

investors and creditors.

OBJECTIVES OF MANAGEMENT ACCOUNTING INFORMATION:

Each enterprise has implicit and explicit goals and objectives. Many enterprises have a mission statement that describes their goals. These goals can vary widely among enterprises ranging from nonprofit organizations, where goals are aimed at serving specified constituents, to for-profit organizations, where goals are directed toward maximizing the owners' objectives.

For example, the American Cancer Society, a nonprofit organization, has the following mission:

The American Cancer Society is the nationwide community-based voluntary health organization dedicated to eliminating cancer as a major health problem by preventing

cancer, saving lives, and diminishing suffering from cancer, through research, education, advocacy, and service. Procter & Gamble, a for-profit, global producer of consumer products, has the following purpose:

We will provide branded products and services of superior quality and value that improve the lives of the world's consumers, now and for generations to come. As a result, consumers will reward us with leadership sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper.