Management accounting and cost accounting form part of accounting that enables the smooth and efficient control of the business. Management accounting involves measuring, analysis and reporting on the nonfinancial and financial information that allows the business management to make good decisions that meet the organizational goals. While cost accounting involves measuring, analysis and making reports on the nonfinancial and financial information that relates to the price of utilizing or acquiring resources in a particular organization. For instance, determining the cost of a commodity is considered as an accounting role that helps to achieve management accounting decision-making and financial accounting inventory valuation (Horngren et al. 2010). Depending on the information provided by the two types of accounting several analyses are made that include, Cost accounting intends to minimize on the extra cost and to eliminate unnecessary expense while management accounting is involved in policy planning and formulation of strategies. This study aims at determining whether strategic cash accounting is involved in modern management accounting.
Does Modern Accounting Include Strategic Cash Accounting?
Modern accounting tends to include cash accounting in various ways that include, first, currently most of the accounting professionals, view cost accounting information as part of the information gathered from management accounting that is used in creating management decision. For example, determining which product will be promoted and pricing of the products in the market. Management accounting encompasses all the areas of an organization such as marketing, sale, auditing and costing to generate management information that is important for the management's decision making.
Secondly, both the strategic cost accounting and management accounting systems play a vital role in an organization since the internal management mainly uses them. The two systems tend to back each other for example when cost accounting uses the qualitative approach when recording the information that is money related, management accounting, on the other hand, creates emphasis on both the qualitative and quantitative information (Drury, 2013). Therefore, the involvement of both accounting system helps in generating conclusive data or information for the organization's development and control.
Thirdly, Management accounting also uses cost accounting since both systems are involved in process or responsibility of keeping the records that relate to the past, present and the future cost of operation of any organization (Drury, 2013). Both accounting systems change the obtained data to generate information that is useful to the organization's stakeholders for purposes of assessing the growth or progress of the organization.
Fourth, Management accounting tends to depend on the cost accounting system for the preparation of reports on the cost of business operation. The reports help in advising the organization managers on the various ways of enhancing the business processes and practices depending on cost capabilities and efficiency. For example, through pricing of products in the market.
The management accounting and cost accounting are essential in ensuring efficient and smooth operation of the businesses since they both play various key roles when used together that include; first, the data gathered by the two accounting systems help the business managers in decision-making. Secondly, both accounting systems work together to produce conclusive data. For example, the cost accounting uses a qualitative approach for instance when recording data that is money related, While the management accounting focuses on both qualitative and quantitative methods. Thirdly, both of the systems are involved in keeping records that are essential in estimating the cost of operation of a business. However, Cost accounting tends to minimize expenditure by avoiding unnecessary expenses and regulating various costs, while management accounting is involved in policy planning and strategy formulation.
DRURY, C. M. (2013). Management and cost accounting. Springer.
Horngren, C. T., Foster, G., Datar, S. M., Rajan, M., Ittner, C., & Baldwin, A. A. (2010). Cost accounting: A managerial emphasis. Issues in Accounting Education, 25(4), 789-790.
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