Management Accounting combines accounting, finance, and management with the leading edge techniques needed to drive successful businesses. It is the process of identification, measurement, calculation, analysis, preparation, interpretation, and communication of information used by management to plan, evaluate, and control within an entity and to ensure appropriate use of, and accountability for its resources.
Management Accounting is also about producing financial information that helps managers make decisions. For example, managers should understand the cost of the business better so that decisions on spending can be better made. Moreover, they have to find the cost of each product to help decide a fair price. Then, find out the profitability of products to decide what product to sell and which not to, is primordial. In addition, managers should compare actual spend with budgeted spend to help identify areas of over or under spending. Finally, financial analysis is important to help make investment decisions.
When it comes to decision-making, it can be defined as the process whereby the decision-maker identifies and choose alternatives based on values and preferences (Harris 2012). Management Accounting provides an organization with information upon which informed strategic decisions and operations can be assisted (Kidane 2012). Likewise, the need for sustainability information arises at all levels according to the United Nations Environment Programme (UNEP 2014). Therefore, the information that Management Accounting provides, may be applicable to make good and reliable decisions for a sustainable future.
Garrison, Noreen, and Brewer (2010; 33) state that Management Accounting is concerned with providing information to people who manage and govern its operations inside an organization. They also state that Management Accounting emphasizes decisions affecting the future, relevance, and timeliness. Consequently, the importance of Management Accounting may be in providing relevant information for planning, control, and performance management.
For instance, in Pearson Company, there are individuals – like the controller, vice president, and president/chief financial officer (CFO) – that are responsible for the flow of good accounting information that supports the planning, control, and evaluation of work. After all, management accounting is very important for the company in order to fetch good accounting reports and data, for making good decisions and have good planning about the activities to be implemented.