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FINANCIAL MANAGEMENT
CHECK POINT 59: MANAGEMENT ACCOUNTING

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1. management accounting information
2. comparison of financial and management accounting
3. responsibility accounting objectives
4. responsibility accounting centers
5. cost center
6. revenue center
7. profit center
8. investment center
9. criteria for management accounting reports
10. comparison between actual and budgeted values
11. frequency of management accounting reports
12. two types of variances
13. variance analysis
14. management accounting in a service company
15. small business example
management report for abc service company
16. small business example
evaluation of results in a service company
17. management accounting in a merchandising company
18. small business example
management report for abc merchandising company
19. small business example
evaluation of results in a merchandising company
20. management accounting in a manufacturing company
21. small business example
management report for abc manufacturing company - page 1
22. small business example
management report for abc manufacturing company - page 2
23. small business example
evaluation of results in a manufacturing company
24. importance of management accounting reports
25. for serious business owners only
26. the latest information online
 

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FINANCIAL MANAGEMENT
CHECK POINT 59: MANAGEMENT ACCOUNTING

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1. management accounting information
2. comparison of financial and management accounting
3. responsibility accounting objectives
4. responsibility accounting centers
5. cost center
6. revenue center
7. profit center
8. investment center
9. criteria for management accounting reports
10. comparison between actual and budgeted values
11. frequency of management accounting reports
12. two types of variances
13. variance analysis
14. management accounting in a service company
15. small business example
management report for ABC service company
16. small business example
evaluation of results in a service company
17. management accounting in a merchandising company
18. small business example
management report for ABC merchandising company
19. small business example
evaluation of results in a merchandising company
20. management accounting in a manufacturing company
21. small business example
management report for ABC manufacturing company - page 1
22. small business example
management report for ABC manufacturing company - page 2
23. small business example
evaluation of results in a manufacturing company
24. importance of management accounting reports
25. for serious business owners only
26. the latest information online
 

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WELCOME TO CHECK POINT 59

TUTORIAL 1 General Management TUTORIAL 2 Human
Resources Management
TUTORIAL 3 Financial Management TUTORIAL 4 Operations Management TUTORIAL 5 Marketing
And Sales Management
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96
2 7 12 17 22 27 32 37 42 47 52 57 62 67 72 77 82 87 92 97
3 8 13 18 23 28 33 38 43 48 53 58 63 68 73 78 83 88 93 98
4 9 14 19 24 29 34 39 44 49 54 59 64 69 74 79 84 89 94 99
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
 

HOW CAN YOU BENEFIT FROM CHECK POINT 59?

 
The main purpose of this check point is to provide you and your management team with detailed information about Management Accounting and how to apply this information to maximize your company's performance.
 
In this check point you will learn:
 
• About the purpose of management accounting information.
• About the difference between financial and management accounting.
• About responsibility accounting objectives.
• About the cost, revenue, profit, and investment centers.
• About the criteria for management accounting reports.
• About variance analysis and two types of variances.
• About management accounting in a service company.
• About management accounting in a merchandising company.
• About management accounting in a manufacturing company.
• About the importance of management accounting reports... and much more.
 

LEAN MANAGEMENT GUIDELINES FOR CHECK POINT 59

 
You and your management team should become familiar with the basic Lean Management principles, guidelines, and tools provided in this program and apply them appropriately to the content of this check point.
 
You and your team should adhere to basic lean management guidelines on a continuous basis:
 
Treat your customers as the most important part of your business.
Provide your customers with the best possible value of products and services.
Meet your customers' requirements with a positive energy on a timely basis.
Provide your customers with consistent and reliable after-sales service.
Treat your customers, employees, suppliers, and business associates with genuine respect.
Identify your company's operational weaknesses, non-value-added activities, and waste.
Implement the process of continuous improvements on organization-wide basis.
Eliminate or minimize your company's non-value-added activities and waste.
Streamline your company's operational processes and maximize overall flow efficiency.
Reduce your company's operational costs in all areas of business activities.
Maximize the quality at the source of all operational processes and activities.
Ensure regular evaluation of your employees' performance and required level of knowledge.
Implement fair compensation of your employees based on their overall performance.
Motivate your partners and employees to adhere to high ethical standards of behavior.
Maximize safety for your customers, employees, suppliers, and business associates.
Provide opportunities for a continuous professional growth of partners and employees.
Pay attention to "how" positive results are achieved and constantly try to improve them.
Cultivate long-term relationships with your customers, suppliers, employees, and business associates.

1. MANAGEMENT ACCOUNTING INFORMATION

MANAGEMENT ACCOUNTING INFORMATION

Business owners and financial managers must be able to develop, understand, and implement accurate and timely accounting information for planning, decision-making, pricing, and controlling activities within every business organization.

This information, known as Management Accounting Information, must be prepared in the financial department on a regular basis. In order to provide an effective method of handling such an important task, the company must develop, implement, and maintain a comprehensive Management Accounting System.

The American Accounting Association defines Management Accounting as:

"The process of identification, measurement, accumulation, analysis, preparation, and communication of financial information used by management to plan, evaluate, and control within the organization and to assure appropriate use and accountability for its resources." (18)

Managers sometimes confuse Management Accounting information with Financial Accounting. Some of the basic differences between Financial And Management Accounting Reports have been described earlier. Additional differences between financial and management accounting are summarized below.

 

ADDITIONAL INFORMATION ONLINE

Introduction To Managerial Accounting By Etramway.
Tips How To Learn Management Accounting By Rikars Eagles.
Management Accounting By Roderick Barday And James Mackey.
Introduction To Management Accounting By Jenny Cummins, Sawara.
Introduction to Managerial Accounting By Diane Tanner, UNFtannertown.

2. COMPARISON OF FINANCIAL AND MANAGEMENT ACCOUNTING

COMPARISON OF FINANCIAL AND MANAGEMENT ACCOUNTING

Areas 
Of Comparison

Financial 
Accounting

Management 
Accounting

Primary Users Of Information.

Individuals and organizations outside the business entity.

Business owners and managers within the organization.

Types Of   Accounting Systems.

Double-entry accounting system.

Any useful management system may be used. The double entry-accounting system does not apply to management accounting.

Restrictive Guidelines

Must comply with the Generally Accepted Accounting Principles (GAAP).

There are no formal guidelines or restrictions for management accounting systems. The only criteria is the usefulness of the system.

Units Of Measurement

Historical Dollar.

Historical or future Dollar, or any other useful physical measurement such as man-hour or machine-hour.

Focal Point Of The Analysis

The entire business organization.

The entire business organization and various departments within the organization.

Frequency Of Reporting

Periodically on a regular basis.

As often as required. May or may not be on a regular basis.

Degree Of  Objectivity

Includes financial information related to the past performance business organization. This information requires strict objectivity.

Includes financial information related to the past, current and future performance of the business organization. This information is subjective in nature and it is usually based on estimated values.

Types Of Statements

Financial statements, including, balance sheet, income statement and statement of cash flows.

Monthly, quarterly, semi-annual, and annual management accounting reports, cash flow projections, budgets and cost accounting reports.

 

ADDITIONAL INFORMATION ONLINE

Financial And Managerial Accounting By Jose Cintron.
Financial Accounting Vs. Managerial Accounting By Roger Gee.
Financial Accounting Vs. Managerial Accounting By LauraCash2486.
Financial And Managerial Accounting Information By Larry Walther, SFI.
Managerial Accounting Vs. Managerial Accounting By Education Unlocked.

3. RESPONSIBILITY ACCOUNTING OBJECTIVES

RESPONSIBILITY ACCOUNTING

Management accounting provides the basis for the information system known as Responsibility Accounting. The prime objectives of the responsibility accounting information system are outlined below.

RESPONSIBILITY ACCOUNTING OBJECTIVES

1.

To classify financial information in accordance with a specific area of responsibility within a company.

2.

To report the performance of individual expense, or cost center, revenue center, profit center, and investment center.

4. RESPONSIBILITY ACCOUNTING CENTERS

RESPONSIBILITY ACCOUNTING CENTERS

Not all managers have the same degree of Financial Responsibility within the organization.  Some, for example, control various aspects of the company's expenditures, while others control revenues, profits, and investment performance. For this reason, financial responsibility within the organization falls into four major categories, or Responsibility Accounting Centers illustrated below.

FOUR RESPONSIBILITY ACCOUNTING CENTERS

     
Cost
Center
  Revenue 
Center
  Profit
Center
  Investment 
Center
 

ADDITIONAL INFORMATION ONLINE

What Is A Profit Center? By Ron Budman.
Responsibility Accounting By D.V. Ramana.
Responsibility Centers By Mohamed Kafafy.
Responsibility Centers By John Daniel McLellan.
Responsibility Accounting By John Daniel McLellan.

5. COST CENTER

WHAT IS A COST CENTER?

Every manager, who has authority to spend certain amounts of money on the company's behalf to meet its operational objectives, is responsible for a Cost Center or Expense Center. 

Thus, for example, the operations executive is in charge of the operations department's cost center. This means that the operations executive is responsible for maintaining expenditures in his or her department within the limits prescribed by the annual operations budget.

6. REVENUE CENTER

WHAT IS A REVENUE CENTER?

Sometimes a manager maintains the responsibility for selling sufficient volume of products or services to meet revenue projections imposed by the company's annual sales budget.  This manager is responsible for a Revenue Center within the organization. 

A sales executive, for example, is responsible for overall performance of the sales department in terms of meeting annual sales objectives. Moreover, each sales person carries personal responsibility for meeting individual sales quotas in assigned geographic areas.

7. PROFIT CENTER

 WHAT IS A PROFIT CENTER?

Every executive manager, in addition to routine functions, must be responsible for a specific Profit Center within a profit-oriented organization. Obviously, such a center does not exist in a non-profit organization. The number of profit centers depends upon the size of the organization and range of products or services offered to customers. 

Thus, for example, small companies normally have only One Profit Center, which is the company itself. Therefore, the overall responsibility for the profit center in a small company is carried by the chief executive officer, or the owner of the business.

Medium-sized and larger organizations, on the other hand, usually have Separate Profit Centers for various product and service lines or for various divisions, depending upon their specific organizational structure. The responsibility for each profit center in these companies is carried by individual product, service, or divisional managers.

8. INVESTMENT CENTER

 WHAT IS AN INVESTMENT CENTER?

The ultimate responsibility of executive managers in an organization is to secure an acceptable level of Return On Investment (ROI) for shareholders and outside investors. For this reason, executive managers are responsible for a specific Investment Center within a profit-oriented organization.

In financial terms, a return on investment is the ratio between net earnings and average investment value within a particular center. 

The number of investment centers also depends upon the size of the organization. For example, in small companies the investment center is the company itself. The overall responsibility for the investment center in a small company, therefore, is carried by the chief executive officer, or the business owner. 

Medium-sized and larger organizations usually have several investment centers in accordance with their specific organizational structures.

9. CRITERIA FOR MANAGEMENT ACCOUNTING REPORTS

CRITERIA FOR MANAGEMENT ACCOUNTING REPORTS

The main feature of Management Accounting Reports is their usefulness for day-to-day management control. Hence, the format of these reports may vary from one company to another, depending upon the size, type, and particular requirements of the organization.

Most management accounting reports must be prepared on a regular basis to facilitate comprehensive evaluation of the company's performance. 

Effective operational guidelines for a Company's Performance Evaluation include several important principles, as outlined below.

OPERATIONAL GUIDELINES FOR EVALUATING 
A COMPANY'S OPERATIONAL PERFORMANCE

1.

Provision of accurate and suitable measures of performance through a budgeting procedure.

2.

Identification of individual managerial responsibilities based on relevant budget projections.

3.

Comparison of actual performance results with the corresponding budget projections.

4.

Preparation of performance reports, which include the variance between the planned and actual results.

5.

Analysis of performance results and identification of possible causes for variances and areas of concern.

10. COMPARISON BETWEEN ACTUAL AND BUDGETED VALUES

 COMPARISON BETWEEN ACTUAL AND BUDGETED VALUES

An isolated assessment of actual operating results usually does not provide management with the opportunity to judge the performance of the company objectively. For this reason, actual levels of Revenues, Expenses, and Income must be compared with the corresponding budget projections. Such projections constitute an integral part of the budgeting process and should be formulated prior to the commencement of a particular fiscal period.

This process of comparing actual and budgeted values of revenues, expenses and income represents an essential element of the management control function discussed in detail in Tutorial 1. This process is based on the Feedback Control, and it is designed to help management to evaluate the actual results in light of what was planned in the beginning of a particular fiscal period, and to determine Variances.

11. FREQUENCY OF MANAGEMENT ACCOUNTING REPORTS

 FREQUENCY OF MANAGEMENT ACCOUNTING REPORTS

Management Accounting Reports concerning the company's operating results should be prepared at least once a month. This will enable management to compare Budgeted Values and Actual Values on a monthly basis and year-to-date basis.

As a result of such a comparison the Variance between the Planned Results and Actual Results can be identified and the overall Trends of the company's performance on a month-to-month and a year-to-date basis can be established.

These variances and trends, in turn, will provide strong indication to management, whether the actual performance in a particular area of the company’s activities was successful or not. More about the interpretation of variances and trends in management accounting is discussed next.

Management accounting reports can be completed manually or by using a specific accounting software program.

POPULAR ACCOUNTING SOFTWARE PROGRAMS
There are several excellent Accounting Software Programs available to small business owners at present. Some of the most popular accounting software packages are presented below:

Sage One

QuickBooks Intuit

FreshBooks

Harvest Software Systems

NetSuite

Various accounting software programs may include additional functions, depending on each specific package. This is discussed in detail in Integrated Financial Management in Tutorial 3.

12. TWO TYPES OF VARIANCES

VARIANCE

The Variance between the planned results and actual results must be identified and classified into two types as illustrated below.

 THE TWO TYPES OF VARIANCES

 
Favorable Variance   Unfavorable Variance

This is a variance between planned results and actual results that provides a positive contribution to the company's actual net income.


 

This is a variance between planned results and actual results that provides a negative contribution to the company's actual net income.

 

ADDITIONAL INFORMATION ONLINE

Budget Vs. Actual & Rolling Forecasts By PlanGuru.
Actual Vs. Budget Analysis - Part 1 By AkparawaNET.
Actual Vs. Budget Analysis - Part 2 By AkparawaNET.
Flexible Budgets And Variance Analysis By Savita Sahay, RutgersWeb.
Budgeting And Variance Analysis By Divya Anantharaman, RutgersWeb.

13. VARIANCE ANALYSIS

The detailed description of Favorable And Unfavorable Variances is summarized below.

VARIANCE ANALYSIS

Account
Description

Variance

Favorable (F)

Unfavorable (U)

  • • Service Fees Earned
  • • Gross Sales/Net     Sales
  • • Gross Margin From     Sales
  • • Income From     Operations
  • • Net Miscellaneous     Revenue
  • • Income Before     Taxes
  • • Net Income
  • • Inventory (Ending)

The actual value exceeds the corresponding budgeted value.

The actual value is below the corresponding budgeted value.

  • • Any Expense
  • • Inventory     (Beginning)

The actual value is below the corresponding budgeted value.

The actual value exceeds the corresponding budgeted value.

PRIORITIES IN VARIANCE ANALYSIS

Business owners and financial managers must keep in mind that sometimes Monthly Variations may be unfavorable, which may indicate specific immediate problems that need to be fixed as soon as possible. However, the most important attention should be paid to the Year-To-Date Variations, which indicate the company’s performance from the beginning of the year. If these variations are unfavorable and substantial, this should be a definite cause for alarm and immediate corrective action by management.

Business owners and financial managers must always remember that being in business is not a “sprint” but a “marathon”, and only those who are able to withstand the challenges in a long run will succeed and remain in business. For this reason management accounting reports should be interpreted correctly and this should provide a solid foundation for prioritizing management activities within the organization.

14. MANAGEMENT ACCOUNTING IN A SERVICE COMPANY

 MANAGEMENT ACCOUNTING IN A SERVICE COMPANY

Consider the Budgeted Income Statement For ABC Service Company, presented earlier. Assume that the company is half way through its budgeted period, i.e. six month from the beginning of the year 2014 fiscal period.

The ABC Service Company's Management Accounting Report for the first six month of the year 2014 is presented below.

15. SMALL BUSINESS EXAMPLE
MANAGEMENT REPORT FOR ABC SERVICE COMPANY

16. SMALL BUSINESS EXAMPLE
EVALUATION OF RESULTS IN A SERVICE COMPANY

 EVALUATION OF RESULTS IN A SERVICE COMPANY

From the examination of the Monthly Results, it appears that, although the company exceeded its Monthly Revenue plan by $2,000, it is still behind on a year-to-year basis by $2,000. Examination of the company's expenditures reveals mixed results and indicates that some variances are favorable on a monthly basis and unfavorable on a year-to-date basis, or vice versa. 

Thus, for example, the company exceeded its monthly budget by $400 on Advertising, by $300 on Traveling, by $100 on Utilities, and by $100 on Interest Expense during June 2014. All other expenses were well within the limit imposed by the company's monthly budget. As a result, the company produced Net Income of $6,100, in excess of $2,100 of the Budgeted Income.

Although examination of monthly results is essential in evaluating the company's most recent performance, prime attention should be paid to the year-to-date results. These results help management to evaluate overall company performance from the beginning of a particular fiscal period, thereby providing a highly effective and valuable tool of control. 

Hence, particular care should be exercised in identifying favorable and unfavorable year-to-date variances pertaining to the company's revenues, expenditures, and income.

In the case of ABC Service Company, it overspent $100 on Audit and Secretarial Fees, $500 on Communication, $700 on Office Supplies and Expenses, $600 on Salaries and Wages, and subsequently, $300 on Total Operating Expenses. However, since other expenses compare favorably with corresponding budget estimates, the company almost achieved its year-to-date Net Income projection of $24,000.

In addition to the dollar-to-dollar comparison between budgets and actual results, examination of monthly management reports should also include comparison of planned percentages and actual percentages of revenues, expenditures, and income against corresponding year-to-date net sales. 

This enables management to interpret the significance of each year-to-date variance in terms of actual net sales achieved so far. This is particularly important if there is a substantial variation between budgeted and actual net sales.

The "bottom-line" parameter of the Monthly Management Report is the value of the year-to-date Net Income. The company's Net Income for the first six month of the year 2014 is $23,900, which is only $100 below the budget. This represents a fairly favorable reflection of the company's overall performance, while the monthly Net Income is $6,100 or $2,100 above the budget. 

Note:

The company's performance must be measured against corresponding budget projections not just on a monthly basis, but also on the year-to-date basis!.

17. MANAGEMENT ACCOUNTING IN A MERCHANDISING COMPANY

 MANAGEMENT ACCOUNTING IN A MERCHANDISING COMPANY

Management Accounting In A Merchandising Company and evaluation of management reports is carried out in a similar manner. 

Consider the Budgeted Income Statement For ABC Merchandising Company presented earlier. Assume that the company is half way through its budgeted period, i.e. six month from the beginning of the year 2014 fiscal period.

The ABC Merchandising Company's Management Accounting Report for summarizing the first six months of performance in the year 2014 is presented below.

18. SMALL BUSINESS EXAMPLE
MANAGEMENT REPORT FOR ABC MERCHANDISING COMPANY

19. SMALL BUSINESS EXAMPLE
EVALUATION OF RESULTS IN A MERCHANDISING COMPANY

 EVALUATION OF RESULTS IN A MERCHANDISING COMPANY

The evaluation of the ABC Merchandising Company's Management Report enables management to identify the company's monthly and year-to-date performance and compares budgeted values and actual values of revenues, expenditures, and income. 

For example, the company generated Net Sales in June 2014 in excess of $1,900 in comparison with the budget. However, on the year-to-date basis, the company's Actual Net Sales are still behind the budget by $9,200. This means that the company's sales department should improve its performance.

The Cost of Goods Sold by the company during June 2014 reflects an over-expenditure of $5,000 in comparison with the corresponding budget projection. However, on the year-to-date basis, the company is still doing very well by spending $8,000 below the corresponding budget projection. Both variances are heavily influenced by the availability of inventory at the start and at the end of a particular period as well as the value of net purchases during the same period.

An unfavorable year-to-date Net Sales variance of $9,200 is dramatically "softened" by a favorable year-to-date Cost of Goods Sold variance of $8,000. This, in turn, helps to reduce the unfavorable variance of Gross Margin from Sales from $3,100 for June 2014 to $1,200 for the year-to-date period. Moreover, management succeeded in keeping the company's Operating Expenses below the budget allowances, thereby contributing to favorable Total Operating Expenses variances of $500 during June 2014 and at $1,600 for the year-to-date period.

The "bottom-line" parameter of the Monthly Management Report is the value of the year-to-date Net Income. The company's Net Income for the first six month of the year 2014 is $107,700. This represents a very favorable reflection of the company's overall performance, even if its’ monthly Net Income is $2,400 below the budget. 

Note:

The company's performance must be measured against corresponding budget projections not just on a monthly basis, but also on the year-to-date basis!

20. MANAGEMENT ACCOUNTING IN A MANUFACTURING COMPANY

 MANAGEMENT ACCOUNTING IN A MANUFACTURING COMPANY

Management Accounting In A Manufacturing Company and evaluation of management reports is carried out in a similar manner. 

Consider the Production Budget and the Budgeted Income Statement For ABC Manufacturing Company, presented earlier. Assume that the company is half way through its budgeted period, i.e. six month from the beginning of the year 2014 fiscal period.

The ABC Manufacturing Company's Management Accounting Report summarizing the first six months of performance in the year 2014 is presented below.

21. SMALL BUSINESS EXAMPLE
MANAGEMENT REPORT FOR ABC MANUFACTURING COMPANY - PAGE 1

22. SMALL BUSINESS EXAMPLE
MANAGEMENT REPORT FOR ABC MANUFACTURING COMPANY - PAGE 2

23. SMALL BUSINESS EXAMPLE
 EVALUATION OF RESULTS IN A MANUFACTURING COMPANY

 EVALUATION OF RESULTS IN A MANUFACTURING COMPANY

The evaluation of the ABC Manufacturing Company's Management Report (Pages 1 and 2) enables management to identify the company's monthly and year-to-date performance and compares budgeted values and actual values of revenues, expenditures, and income. 

The first page highlights budgeted and actual expenses incurred by the production department.

It appears that the company exceeded its monthly budget by $1,000 on Direct Material Purchases, by $200 on Direct Sub-Contracting Service Costs, by $100 on Indirect Materials Purchases, and by $500 on Production Equipment Maintenance. This, in turn, contributed to an unfavorable Total Manufacturing Cost variance of $1,100 for June 2014.

An unfavorable Work-in-Process Inventory variable caused further excess of the actual Cost of Goods Manufactured in comparison with the budgeted value during June 2014. Despite generally unfavorable monthly results, the production department appears to perform reasonably well on a year-to-date basis. This is reflected in favorable variances of Cost of Direct Materials Used ($4,000), Direct Labor Costs ($1,000), Direct Sub-Contracting Service Costs ($200), Total Plant Overhead Costs ($200), Total Manufacturing Costs ($5,400), and Cost of Goods Manufactured ($4,400).

The next step in evaluating the performance of a manufacturing company entails examination of monthly and year-to-date variances pertaining to Sales, Cost of Goods Sold, Gross Margin From Sales, Operating Expenses, Income from Operations, Interest and Tax Expenses, and Net Income.

It appears that the company did not meet its sales target during June 2014. However, it is well ahead on a Year-to-Date basis by $3,000. The Cost of Goods Sold and Gross Profit Margin variances also appear to be unfavorable for the monthly period. However, on the year-to-date basis both variances reflect a healthy excess over the budget ($5,400 and $8,400 respectively).

Examination of the monthly management report further indicates that the company's operating expenses are controlled reasonably well despite an insignificantly unfavorable Total Operating Expenses variable of $400 for the six month period. 

On the other hand, the report notes an excessive Interest Expense on a year-to-date basis ($1,500) and insufficient Net Miscellaneous Revenue ($800). On the whole, however, this report reflects favorable performance because the company generated a Net Income of $154,700 during the first six month of 2014. This represents a $4,700 excess against the budget, despite an unfavorable variance of $1,400 during June 2014.

Note:

The company's performance must be measured against corresponding budget projections not just on a monthly basis, but also on the year-to-date basis!

24. IMPORTANCE OF MANAGEMENT ACCOUNTING REPORTS

 IMPORTANCE OF MANAGEMENT ACCOUNTING REPORTS

Management Accounting Reports are as important to business owners and financial managers as a compass is to the captain who is navigating his ship in uncharted waters. While the compass is helpful in determining the “true North”, management accounting reports can provide management with valuable information about the extent to which their company may have deviated from its “financial North”, i.e. its’ budgeted objectives in various areas of the company’s activities.

Subsequently, management accounting reports enable management to continuously monitor Monthly Variations and Year-To-Date Variations in various areas of their company’s activities. This, in turn, provides management with essential insight into the company's operating activities on a monthly and year-to-date basis, allows timely identification of problematic areas, and enables taking appropriate corrective action to ensure successful long-term organizational performance.

Management accounting reports also play an important role in the process of Participative Budgeting, allowing for more active involvement of lower-level managers in the routine control of the organization.

25. FOR SERIOUS BUSINESS OWNERS ONLY

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Reprinted with permission.

26. THE LATEST INFORMATION ONLINE

 

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