Management Accounting & Knowledge Management –
According to Atrill and McLaney (2012, pp. 33) the major differences that characterize financial accounting and management accounting are often related to the groups of people each area intends to address information.
Further explaining, the authors suggest that management accounting will focus on providing information for those within the company. On the other hand, financial accounting will address information to those who don’t make part of the board of directors, but are interested in the company’s activities. Management accounting reports tend to be very detailed and of high confidentiality while financial accounting reports are meant to be public and offer a general overview of the company’s financial health. Another important point that differs between management accounting and financial accounting is the degree of objectivity. While management accounting might produce reports of financial and non-financial nature, financial accounting will focus on producing objective reports, always passive of verification due to accounting regulations.
Regarding the usefulness of management and financial accounting during the decision making process, one might analyze management accounting as a field that collects data, converts it into information that will be transformed into knowledge and then the knowledge created will be used during the decision making process. Atrill and McLaney (2012, pp. 32) corroborate this thought when they mentioned that management accounting will produce financial and non-financial information such as physical volumes of inventories, sales orders received or new products launched; it is due to this non-financial information yet extremely relevant to managers that planning, evaluation and control can be exerted in a company. One can also say that management accounting is more dynamic while finance accounting is a picture of the past. Following this line of thought based on cause and consequence, I strongly believe that finance accounting is a reflect or a consequence of management accounting and both are linked.
The efficiency and effectiveness of data systems will play an important role on the creation and maintenance of information. Not only information technology is of fundamental importance but also the overall knowledge creation and management will influence in management accounting reports. Mubarak (2013, pp. 7) emphasizes the importance of managers and middle management being able to differentiate knowledge, information and data. In addition, the author clarifies that the way knowledge is acquired, stored, processed, distributed and used will reflect on management accounting reports and the abilities of a company when accomplishing its objectives. I strongly believe that the only way a company could in this day and age cope with managers who have little knowledge of accounting is offering training and promoting continued education. There is no possible way to remain competitive without timely data analysis and decision making.
Atrill, P. & McLaney, E. (2012) Management Accounting for Decision Makers.7th ed.Harlow, England: Pearson Education Ltd.
Mubarak, A. (2013) “Knowledge Management and Management Accounting Decisions – Experimental Study” Journal of Organizational Knowledge Management. [online] Available:
http://www.ibimapublishing.com/journals/JOKM/2013/607397/607397.pdf (Accessed: 9 November 2013)