accounting administration

Management accounting (in English: Accounting Administration) is the accounting that is concerned with following up on the company's financial reports, which are related to decision-making, planning and control of operational processes. Management accounting is defined as the activity used in preparing the financial statements of the organization in order to contribute to providing the necessary support for administrative decisions. Another definition of management accounting is that it is the financial report related to factors affecting decision-making, administrative planning, and operations control; As managerial accounting is concerned with focusing on control and planning in order to achieve the special objectives of the company.

The emergence of managerial accounting

The concept of management accounting appeared for the first time in the year 1950 AD during the formation of a team in the name of management accounting through the Anglo-American Council, and the mission of the team was to visit a group of industrial facilities located in the United States; In order to formulate a report on the nature of the 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 the management to prepare special policies in the daily operations of the establishments.

According to the International Federation of Accountants known by the English symbol (IFAC), the emergence and development of management accounting depends on the following basic stages:

The stage of financial control and cost determination before 1950 ADThis is the stage in which the characteristics of managerial accounting did not appear, but the interest of companies was related to determining the cost, which later led to the emergence of cost accounting, which is one of the most important foundations of managerial accounting. Contributed to the introduction of the idea of management accounting.
The stage of monitoring and administrative planning (1950 AD - 1965 AD)It is the stage in which the term management accounting appeared and became one of the administrative tools. The task of the managerial accountant relied on providing information with the aim of applying administrative planning, providing assistance to management in making decisions and preparing an 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 management accounting in the follow-up of investment and special decisions in financing; As it was interested in 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 from control and planning, and then formulating investment decisions, up to the preparation of budgets. Management accounting also relied on the use of quantitative analysis; Through the use of modern technology to reduce costs and improve quality.
The phase of effective use of resources (1985-1995 AD)It is the stage that focused on searching for advanced scientific methods in order to determine costs and build value based on the effective use of available resources and modern technology in order to meet 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 that were imposed on managerial accounting to adopt a management philosophy consistent with these developments, which led to the emergence of modern tools, such as target costs and activity-based management.

Management accounting goals

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

Providing appropriate assistance to managers in the establishments By providing them with the appropriate tools for applying the accounting and financial evaluation, which contributes to the follow-up of administrative performance in a detailed and overall manner at the same time.
Implement a deep foundation in data analysisAccording to the application of appropriate methodologies based on the combination of management and accounting tools.
Contribute to building a future outlook towards profitable performance and private financial achievement in the enterprise; In order to issue appropriate recommendations to achieve harmony between the administrative process systems and the special requirements in the future plan.
Study potential risks that affect the vitality and continuity of workand then developing the necessary forms to avoid any potential financial or administrative damages; Either now or in the future.
Participate in setting financial budgetsBecause management accounting budgets cover all financial activities in the organization, and they are realistic; Which of them can be implemented depending on the capabilities of the institution, and these budgets allow the possibility of adjusting them in line with changes in circumstances affecting the state of the institution.

Fundamentals of management accounting

Management accounting relies on a set of foundations, namely:

Accounting principles: They are the foundations that are represented by a set of accounting systems, and are used by managerial accounting to prove economic activities through records and documents, and then classify them with the aim of identifying specific facts related to the main and subsidiary activities of the economic unit in order to implement control over them.
Administrative foundations: They are the foundations that managerial accounting cannot achieve success without, and these foundations are divided into the following:
- Organizational structure: It is the structure that guarantees the role of management accounting in assisting management in implementing control and planning on project functions, while making sure to achieve a balance between the organizational structure and the volume of special activities in the economic unit, while organizing responsibility centers; Whether within departments, departments or production lines.
- Sound administrative system: It is the system on which management accounting relies, and is concerned with administrative organization and the effective participation of human elements in the application of administrative processes such as planning, organization, and control.
Statistical foundations: They are the foundations that depend on the merger between statistics and managerial accounting. Because this accounting has become the main assistant for statistics, just as any work unit depends on the presence of necessary quantitative data that helps in applying administrative operations.