Last Updated on March 12, 2024 by admin
Planning and control instruments must be management oriented in order to be relevant for decision-making. The purpose of Management Accounting is to support management. Information provided by the system should be presented in a planning and control-compliant manner up to the balance sheet, so that managers can plan and control their areas of responsibility and coordinate them mutually.
The Focus of Management Accounting
The focus is always on the self-reliant management of a given area. Customers, sales, products, cost centers and projects are in the center. For a cost center the following questions arise:
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- Which and how many activity units should we provide and what should be their performance-related costs (planning of proportional costs)?
- Which structures must be available to be ready to generate the requested output and how much should these cost (planning of fixed costs)?
- What was the actual activity level in a given period of time and how much should this perfomance have cost (flexible budget of the actual performance)?
- Which costs directly attributable to our area have actually been incurred (actual cost recording)?
- What differences between the flexible budget and actual costs have arisen for which we are responsible (variance analysis)?
- What further development do we expect by the end of the year or project, taking into account what has been achieved and the corrective measures already planned (forecast)?
Overall, Accounting for Management is a support for decision-making in planning, implementation, control, correction and expectation (i.e., the management cycle). This requires the inclusion of services, revenues and inventories, represented in quantities and values. A consistently designed management-oriented activity, cost, revenue and profit accounting system that can represent plan, target, actual and forecast is a prerequisite. The underlying data comes from the dispositional systems (ERP) and from the accounting system.
Controllers are responsible for the design, implementation and operation of this overall system.
Valuation requirements from laws and accounting standards are of secondary importance for the design of Management Accounting, because internal and market-related planning and control are the main focus.
Accounting for Management can only do justice to its purpose if it shows the person responsible in each case the variables in plan, target, actual and forecast that can be directly influenced by him and his employees.