Management Accounting: Its Principles and Importance

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Recommended: Role of management accounting within a business

In a competitive business environment, all organizations take on the full responsibility or accounting and management. So, what is management accounting? Management accounting is accounting however in a sense that it includes the production of all useful information in an organization. This may be comprised of information where such may be financial or nonfinancial, accurate or broadly correct, actual or estimated, detailed or highly aggregated, presented in various forms either written or spoken which also includes graphs and tables, and is primarily related to profits and/or losses, volumes, trends and etc. (Coombs, Hobbs and Jenkins, 2005,p.2)
According to the Chartered Institute of Management Accountants [CIMA], management accounting is the combination of accounting, finance and management that holds the forefront to a successful business (CIMA). This definition from CIMA is generally accepted as the definition for management accounting since some of its known definitions and descriptions were too broad and imprecise. Terence Lucey (2003) could generally define management accounting as an integral part of management, which involves identification, presentation and interpretation of information, which will be used in the following:
• Strategy formulation
• Activity planning and control
• Decision taking
• Optimizing the use of resources
• Disclosure to shareholders and others external to the entity
• Disclosure to employees
• And safeguarding assets
Management accounting is a critical profession that drives a business performance of an organization (Institute of Management Accountants, Inc. [IMA]). In the course of this discussion, we will tackle about the principles, purposes and the importance of management accounting so...

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...te of Management Accountants. Management Accounting. The Association of Accountants and Finance Professionals in Business. Available through [accessed December 29, 2013]
Johnson, R. Managerial Accountant’s Role in Business Planning. Small Business by Demand Media. Available through [accessed December 30, 2013]
Knese, W. F. 2013. Management Accounting is Important. Perspectives.
Lucey, T. 2003. Management Accounting. 5th ed. Great Britain: Biddles Ltd., Guilford and King’s Lynn
Managerial Accounting Concepts and Principles. APTARA. Available through
Prasad, M. and Sinha, K. 1990. Principles of Management Accounting. First Edition Delhi: Jainendra Prakash Jain at Shri Jainendra Press

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