Description
Many different kinds of organizations affect our daily lives. Manufacturers, retailers, service industry firms, agribusiness companies, nonprofit organizations, and government agencies provide us with a vast array of goods and services. All of these organizations have two things in common. First, every organization has a set of goals or objectives. An airline, such as Quantas or Southwest Airlines, might specify profitability and customer service as its goals. The New York Police Department’s goals would include public safety and security coupled with cost minimization. Second, in pursuing an organization’s goals, managers need information. The information needs of management range across financial, production, marketing, legal, and environmental issues. Generally, the larger the organization is, the greater is management’s need for information.
Managerial accounting is the process of identifying, measuring, analyzing, interpreting, and communicating information in pursuit of an organization’s goals. Managerial accounting is an integral part of the management process, and managerial accountants are important strategic partners in an organization’s management team.
In this chapter, we will explore the role of managerial accounting within the o_verall management process. In the remaining chapters, we will expand our study by exploring the many concepts and tools used in managerial accounting.
Managerial Accounting: A Business Partnership with Management
The role of managerial accounting is very different now than it was years ago. In the past, managerial accountants operated in a strictly staff capacity, usually physically separated from the managers for whom they provided reports and information. Nowadays, managerial accountants serve as internal business consultants, working sideby-side in cross-functional teams with managers from all areas of the organization. Rather than isolate managerial accountants in a separate accounting department, companies now tend to locate/them in the operating departments where they are working with other managers _!o make decisions and resolve operational problems. Managerial accountants take on leadership-roles on their teams and are sought out for the valuable information they provide. The role of the accountant in leading-edge companies “has been transformed frop:1-number cruncher and financial historian to being business partner and trusted advisor.”2
An organization’s management team, on which managerial accountants play an integral role, seeks to create value for the organization by managing resources, activities, and people to achieve the organization’s goals effectively.