There are many types of business accounting that exist; however, not all of them are required by the companies. Some of these varieties of accounting are designed so that. The managers and managers of the company, in order to improve and perform better internal monitoring. Therefore, make effective decisions, decide to adopt this type of accounting.
This would be the case, for example, of management accounting. Below we will tell you all about the definition of management accounting.
What is management accounting?
Management accounting, which is closely related to cost accounting, is the set of information that is used to assess, analyze and control the economic resources used during the development of the company’s business activity.
Legally, it is not mandatory to present the information related to the management accounting of the company; However, it is the companies that are betting on their inclusion in the daily management of the company, since there are many advantages of management accounting.
It could be understood as a concept of management accounting as that economic information intended for internal users of the company and that is responsible, mainly, for the analysis of the costs of the company, helping to make management decisions and business control.
Objectives of management accounting
Among the main objectives of management accounting or cost accounting, are:
- Know in a detailed, detailed and real way the costs incurred by each of the departments, sections, and teams that make up the company.
- Management accounting helps decision-making since it is a way for the team to analyze the costs of each of the processes and see which points can be improved or where those costs could be reduced to make the said process much more efficient and profitable.
- Facilitate the control and planning of allocation of resources, both material, human, and economic. Because by monitoring and periodically monitoring the costs incurred by the company in a certain period of time, it helps detect errors, duplications, etc.
Many people believe that management accounting is not necessary if financial accounting is already carried out. However, while the latter must be presented and carried out in accordance with the General Accounting Plan, accounting or management accounting, no. However, they are both closely related, providing feedback between them and giving reliability to the information.
While financial accounting is general information about the company, management accounting is about information and disaggregated data, which are adapted to the demand and preferences of those who will read it. Equally, cost accounting or management is very forward-looking, helping to make effective decisions.
Benefits of management accounting
Among the multiple advantages of management accounting, we highlight the following:
- Reduction of expenses. Management accounting helps companies reduce operating costs. This is because managers periodically analyze the costs incurred in the development of the company’s activity. Detecting, understanding better their business and the money that each process, equipment or machine needs to function in an optimum
- Increase in financial income. Accountants, thanks to management accounting, can make future forecasts related to consumer demand, potential sales or effects. For example, of the CPI on consumption. It is a way to control and follow more or less real levels of supply and demand. Being able to adapt to the production of the company to them.