It doesnâ€™t matter if an organization is measured by its nonprofit contributions to humanity or its ability to turn a profit, financial information is the lifeblood of any organization and the quality of its interpretation and flow to the firmâ€™s decision makers falls on the Management Accountant. However the role that the management accountant plays in the organizations success is largely unknown, unnoticed and is often misunderstood.
To briefly change this mystery around management accounting, this paper will first explore in summary the diverse role and importance that management accounting plays in the organization followed by a comparison of financial accounting with management ...view middle of the document...
Management accountants play a useful if not vital role in enabling mangers and key decision makers to reach sensible decisions in their crucially important choices, making the flow of financial information or financial accounting the primary means of communication between an organization and its stakeholders. For this reason, most organizations use financial accounting as a broad indicator or measure of the organizations overall performance or financial health.
With financial accounting as one of the main languages within an organization, this information is used as a signal that performance is on track or on the other hand that something is wrong but unfortunately it is not an indicator of what is wrong and to locate the problem, decision makers must go beyond their financial statements and dig deep.
Here in lies the valuable and critical role that management accounting playsâ€”just as an anesthesiologist monitors and manages the medical care of patients before, during and after surgery so does the management accountant. They monitor and manage financial data and deliver valuable information and knowledge for decision makers that provide insight into what is happening within the organization just as an anesthesiologist provides valuable information to the surgeon on the patientâ€™s situation.
Most of the information that is supplied by management accountants is financial or expressed in some form of monetary terms; however, this is not always the case. Management accountants must be diverse and synthesize data into qualitative information relating to such factors as â€œphysical units of researchâ€¦customer goodwill, workforce moraleâ€ (Atrill & McLaney, 1994, pg. 7) or employee capabilities, service levels and product performance.
What Is The Relationship Between Financial Accountants and Management Accountants?
Comparing financial accounting with management accounting is similar to comparing a hamburger with a veggie burger. The concept of a hamburgerâ€”what it looks like, what it tastes like and how its made is generally well understood by most everyone, even when it comes in various varieties such as a turkey, chicken or a beef.
A veggie burger on the other hand is a bit mysterious. It looks somewhat like a hamburger. It shares many of the same condiments and is usually served between two buns, just like a hamburger. However, a veggie burger is nothing like a hamburger. Itâ€™s an enigma of ingredients that have absolutely no resemblance to any vegetable--and most people have a hard time understanding what is actually inside a veggie burger.
Financial accounting is much like a hamburger, when you order a hamburger, most people have a good idea of what they are dealing with and what they will get in returnâ€”a piece of meat toped of some rather standard condiments that together are placed in-between two buns. Although there can be many variations of what makes up a hamburger, the basic concept of a hamburger doesnâ€™t...