In sharp contrast to financial accounting, managerial accounting information is intended to serve the
specific needs of management. Business managers are charged with business planning, controlling,
and decision making. As such, they may desire specialized reports, budgets, product costing data, and
other details that are generally not reported on an external basis. Further, management may dictate
the parameters under which such information is to be accumulated and presented. For instance,
GAAP may require that certain research costs be deducted immediately in computing a business’s
externally reported income; on the other hand, management may see these costs as a long-term
investment and stipulate that internal decision making be based upon income numbers that exclude
such costs. This is their prerogative. Hopefully, such internal reporting is being done logically and
rationally, but it need not follow any particular set of guidelines.
Both financial accounting and
managerial accounting depend upon
a strong information system to
reliably capture and summarize
business transaction data.
Information technology has radically
reshaped this mundane part of the
practice of accounting during the
past 30 years. The era of the “green
eye-shaded” accountant has been
relegated to the annals of history.
Now, accounting is more of a
dynamic, decision-making discipline,
rather than a bookkeeping task.
specific needs of management. Business managers are charged with business planning, controlling,
and decision making. As such, they may desire specialized reports, budgets, product costing data, and
other details that are generally not reported on an external basis. Further, management may dictate
the parameters under which such information is to be accumulated and presented. For instance,
GAAP may require that certain research costs be deducted immediately in computing a business’s
externally reported income; on the other hand, management may see these costs as a long-term
investment and stipulate that internal decision making be based upon income numbers that exclude
such costs. This is their prerogative. Hopefully, such internal reporting is being done logically and
rationally, but it need not follow any particular set of guidelines.
Both financial accounting and
managerial accounting depend upon
a strong information system to
reliably capture and summarize
business transaction data.
Information technology has radically
reshaped this mundane part of the
practice of accounting during the
past 30 years. The era of the “green
eye-shaded” accountant has been
relegated to the annals of history.
Now, accounting is more of a
dynamic, decision-making discipline,
rather than a bookkeeping task.
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