Management accounting is an orderly system for collecting, registering, summarizing, and presenting information on the economic activities of an organization and its internal structural units, which is necessary for making management decisions.
The organization and use of the management accounting system allows you to analyze the financial and economic situation of the company, plan the allocation of resources, reduce costs, and improve financial performance.
What is the difference between an accounting and a management report? The goals of accounting and management accounting are fundamentally different from each other. The first uses the recording of the facts of economic activity to control the company. Whereas the purpose of the second is operational analysis and planning of activities.
Each company creates and develops its own forms of management reporting.
Management reporting is maintained to help company executives make decisions. Management reporting is a set of reports that enable the management of a company to manage the business. The reporting structure allows you to analyze the work of individual business areas for any time interval.
Recommendations for the formation of management reporting
• Credibility: the information must be true;
• Informativeness: the amount of information should be sufficient for running a business
• Benefit: information in management accounting should be really useful;
• Accessibility: data must be understandable for analysis.
• Timeliness: an important point in management accounting. All information must be provided on time;
• Consistency. Accounting must be kept constantly, without time gaps.
Based on this, the information obtained in the course of management accounting allows us to identify the weaknesses of the business and give a hint in which direction to move on.
Competently built management accounting is an important lever of company management, which collects and summarizes information for the manager as of the current date, helps to distribute financial flows, identify strengths and weaknesses in activities, based on the actual financial condition and available resources.