Financial economics, management accounting


 accounting administration

Management accounting (in English: Accounting Administration) is the accounting that is concerned with following up on the company's financial reports, and related to decision-making, planning and control of operational processes. [1] Management accounting is defined as the activity used in preparing financial statements about the institution in order to contribute to providing the necessary support For administrative decisions. [2] Another definition of management accounting is that it is the financial report related to the factors affecting decision-making, management planning and operations control. As management accounting is concerned with focusing on control and planning in order to achieve the special goals of the company. [3]


The emergence of management accounting

The concept of management accounting appeared for the first time in the year 1950 AD during the formation of a team called Management Accounting through the Anglo-American Council, and the task of the team was to visit a group of industrial establishments located in the United States; In order to formulate a report on the nature of work in it, and then the report was published under the title (Management Accounting), and it contained a definition of the concept of this type of accounting by explaining accounting information in a manner that helps management to prepare special policies in the daily operations of enterprises. [4]


According to the International Federation of Accountants (IFAC), the emergence and development of management accounting depends on the following basic stages: [4]


The stage of financial control and cost determination before the year 1950 AD: which is the stage in which the characteristics of managerial accounting did not appear. Rather, the interest of companies was linked to cost determination, which later led to the emergence of cost accounting, which is one of the most important foundations of management accounting. I was interested in using scientific methods in management, which contributed to the introduction of the idea of ​​management accounting.

The stage of administrative control and planning (1950 AD - 1965 AD): This is the stage in which the term managerial accounting appeared and became one of the administrative tools. The task of the management accountant was based on providing information with the aim of implementing administrative planning, providing assistance to management in making decisions and preparing the appropriate plan to achieve goals using many methods, such as financial monitoring and decision analysis.

The stage of helping to reduce waste of resources (1965 AD - 1985 AD): It is the stage associated with the interest of managerial accounting in the follow-up of investment and special decisions in financing; It was concerned with following up on external relations, which contributed to the development of the methods used in management accounting within most of the company's functions, starting with control and planning, and then formulating investment decisions, ending with preparing budgets. Management accounting also relied on the use of quantitative analysis; By using modern technology to reduce costs and improve quality.

The stage of effective use of resources (1985 AD - 1995 AD): which was concerned with searching for advanced scientific methods in order to determine costs and build value that depends on the effective use of available resources and modern technology in order to face developments in the economy.

The stage of the technological revolution (after 1995 AD): It is the stage in which technology spread in all economic fields, such as trade and industry, and this resulted in the emergence of large investments imposed on management accounting that adopt a management philosophy consistent with these developments, which led to the emergence of modern tools, such as Targeted costs and management based on activities.

Objectives of management accounting

Management accounting seeks to achieve a set of goals, namely: [5]


Providing appropriate assistance to managers in establishments by providing them with the appropriate tools to apply the accounting and financial assessment, which contributes to the follow-up of administrative performance in a detailed and total manner at one time.

Implementing a deep foundation in data analysis, according to the application of appropriate methodologies based on the combination of management science and accounting tools.

Contribute to building a future outlook towards profit performance and financial achievement in the institution. In order to issue appropriate recommendations to achieve harmony between the systems of the administrative process and the special requirements in the future plan.

Study the potential risks that affect the vitality and continuity of work, and then develop the necessary models to overcome any potential financial or administrative damages; Either now or in the future.

Participating in developing financial budgets: Because administrative accounting budgets cover all financial activities in the institution, and are characterized by being realistic. Which can be implemented depending on the capabilities of the institution, and these budgets allow the possibility of adjusting them in line with the changes in the conditions affecting the state of the institution.

Foundations of management accounting

Management accounting is based on a set of principles: [6]


Accounting foundations: They are the foundations that are represented by a set of accounting systems, and management accounting uses them to prove economic activities through records and documents, and then classify them with the aim of identifying specific facts related to the main and sub-activities of the economic unit in order to work to implement control over them.

Administrative foundations: They are the foundations that managerial accounting can not achieve success without its presence, and these foundations are divided into the following:

The statistical foundations: They are the foundations that depend on the combination of statistics and management accounting. Because this accounting has become the main assistant to statistics, and any business unit that depends on the existence of necessary quantitative data helps in applying administrative processes.

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