Management Accounting Needs For Economic Information
An organization is a group of people working together for some common objectives. All organizations have two things in common. First, every organization has a set of goals or objectives. The achievement of objectives requires proper management, commitment, and competitiveness. Second, in pursuing an organization’s goals, managers need information. The information needs of management range across financial, production, marketing, legal, and environmental issues.
Also, Read the Changing Role of Management Accounting in an Organization.
Further, a business organization works in a highly competitive environment because business is carried out with the purpose of making profits, that is, to make money. Making money or profits is not a matter of chance; neither does the money fall from the sky. For a business to be profitable and successful it needs the following basic information;
Marketing Information
This type of information provides the knowledge of customers’ expectations and demands, the quality and price of the product they expect, and the services to be rendered along with the products. This is the age of consumer delight, which means a positive consumer surplus from the product. Therefore, marketing information is the first and foremost need for business
success.
Management Information
Management information includes the overall aspects of the organization covering administrative, human resource, marketing, production, financial and competitors, and government regulations. Management is getting things done by others. Management is the process of planning, decision-making, and control. All of these management functions encompass a large number of complex and interrelated day-to-day actions mostly intellectual in character. Management carries out the overall responsibility of the entity.
Economic Information
Businesses make profits through the buying and selling of products and services. An organization needs an initial investment to acquire various assets. These assets are financed through owners’ equity and borrowed capital. A product involves costs to manufacture it. It is to be priced reasonably. If prices are set below the costs, then the firm will not survive for long. If it is over-priced customers will not buy it, because many alternatives are there. Therefore, a business firm needs cost control and cost management systems. All these are money matters. Accounting provides this economic information. So, accounting can aptly be defined as a process of collecting, recording, classifying, analyzing, and reporting of financial data.
As an organization has to be operated in an economic society, the need for economic information is a crucial one. Whether it is a buying decision or selling, the relevant information is equally important.
Accounting serves the purpose of providing economic information to the concerned stakeholders. So, accounting is synonymous with financial matters. The need for economic information is the root cause behind the emergence of Management accounting. It serves basically two functions decision facilitating function and decision influencing function. Information is usually supplied to a decision-maker to assist him/her in choosing an alternative. In a no-option case, information is not so important. It is important because it helps the decision-maker to choose the best among the various courses of action. Economic information is needed generally for the following stakeholders;
- Outsiders include investors, employees, creditors, government, consumers, etc.
- Strategic management team for planning, decision-making, and control.
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