Management Accounting is identification, measurement, collection, systematization, analysis, decomposition, interpretation and transfer of information required for business management. This is the system, which provides business owners and managers with the information they need for decision-making and good management. Properly established management accounting provides an opportunity to get the information needed for setting of priorities in the enterprise activity and planning of the further work, provides a basis for assessment of prospects, emerging opportunities and delivers mechanisms for control over the implementation of adopted decisions.
Management accounting is more than an internal accounting. Users of the management accounting are managers at all levels of the company’s business management. Management accounting uses not only the actual data on completed transactions, but also evaluation data (analytics), data on possible developments in the future (plans and budgets). Management accounting provides information for users not only in monetary form and not only quantitative, but also qualitative (what kind of activities or department is the most profitable and, the most important thing, why).
Management accounting information is usually a trade secret of the enterprise, which is not subject to publication. The company’s managers independently establish composition, terms and frequency of internal management reporting. The accounting system is not regulated by legislation.
Management accounting is different for every enterprise. All enterprises are different, each enterprise has its own objectives, strategies, priorities, interests, values, culture and traditions, which are different from the same set of attributes in other enterprises. All enterprises deliver to the tax authorities financial reports of standard form, but each enterprise carries out its business in its own way. Each enterprise has its own structure of business processes, its own organizational structure, its own peculiarities in business administration and management, its own system of distribution and transfer of powers and responsibilities. Finally, each enterprise has its own specific problems. And so, as noted above, any standards, common for all, cannot be applied to management accounting.
The implementation process of management accounting system requires compliance with the following main conditions: clear statement of goals and objectives of the project, availability of experts in the field of management accounting, active participation of the senior company’s management (realization of the “from up to down” project), availability of resources allocated for this task.
The active participation of senior management of the enterprise is a key factor in the success of the project, given that management accounting is created in order to meet information needs of managers-decision makers, and in the first place - for the top management of the enterprise. Hence, for the correct organization of management accounting the expert should know information about what the company’s managers want to receive and based on that, to build a system of accounting. In such manner, at the stage of target setting involvement of senior management is essential for understanding by the expert of not only structure and goals pursued by the company, but also information needs of managers.