“Accounting Management is an important management information system” Discuss this statement in light of the users of the accounting information.
Meaning – Accounting Management is concerned with the identification, Measurement, Accumulation, Analysis, Preparation, Interpretation and Communication of information in such a way that assists management in fulfilling organisational objectives.
Accounting Management provides the right information to the right people at the right time. Thus any form of accounting which enables the management to be conducted more efficiently can be regarded as accounting Management.
In other words:The main function of Management Accounting is analysis and evaluation of business past transactions for the proposed future. It is the process of presentation of Accounting information in such a way that assists the management in creation of policy and day to day operations of business.
Managers have not sufficient time to examine the details of the operating information. So they use such operating information for their management responsibility. Thus, accounting information prepared to aid management is called Management Accounting information.
Thus, the Accounting management information system has to go through three functions.
- Planning
- Implementation
- Control
- Planning:- Planning is performed at all levels by the management in all organisations. So it is the process of deciding what actions should be taken in the future. So budgeting can be performed also through the accounting information. Thus, it involves making decisions.
- Implementation:- Planning is just not sufficient for accomplished tasks. So for desired results proper implementation of planning is required in the business. Thus, such a process will be helpful in the management to be run more efficiently.
- Control:- Without proper control on the applied process, no desired results will be achieved. So control must be established on all operations for the purpose of best output. In the control process Accounting information is applied as communication, motivation, attention getting and appraisal.
So all decisions concerned with Accounting enables the management to run more efficiently. Accounting management alerts the management at all levels. As regarding taxation, cost, inflation and Economic order quantity. All decisions will be taken rationally by the management which is derived from the Accounting information. As per desired output Accounting information is used. Accounting management information system
USERS OF ACCOUNTING MANAGEMENT
There are many persons and agencies which are involved in an organisation. These people also used the financial data. For Example – Stockholders required financial information in order to measure Management Performance. Creditors consider the financial strengths of a business before lending funds to such a business. Accounting management information system
Here are Two Types of Users
- Internal User
- External Users
1.Internal User– Top Level, Middle Level and lower Management in the organisation are the potential users of accounting information.
- Top Management– Top Management is concerned with the Accounting information for planning and policy making.
- Middle Level Management – This Management is concerned with Controlling. They do something for remedial tasks in the organisation.
- Lower:- Level Management also uses accounting information for the purpose of operational affairs of business.
2. External Users :- External users may have direct and indirect interest in the accounting information. So Accounting management information systemis used by following
- Investors:- All investors are required to have accounting information. Which will enable them to take their decision regarding the investment. Future investors can also think about the decision of investment whether they should invest or not.
- Creditors:- Creditors are those people who give money to the business. Both long term and short term creditors are interested in solvency and liquidity of business.
- Employees:- Employees are also interested in knowing the profit of business. So they used Accounting information, from which they can ask more salaries and bonuses for their service.
- Customers:– Customers are also interested in knowing the profitability of business. Which leads to the quality of the products. Which quality is expected by the customers.
- Government:- Government is also interested in knowing the exact profit of business. Because the government would like to know the liability tax of the organisation. Which depends on the profit of the business.
- Researchers:- Accounting information is also used by the Researchers for their further research to dig out cause and effects after the success of business.
Conclusion:- Accounting Management is considered as the Management information system. Which supplies the essential information for the management to take essential decisions. Thus its user can also be considered in the statement of accounting information.
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Important question of Management Accounting and Control System
Distinction between fixed budget and flexible budget.