measures, analyzes and reports financial and nonfinancial
information that helps managers make decisions to fulfill the goals of an organization. It focuses
on internal reporting and is not restricted by generally accepted accounting principles (GAAP).
government agencies, and banks. It measures and records business transactions and provides
financial statements that are based on generally accepted accounting principles (GAAP).
Other differences include (1) management accounting emphasizes the future (not the
past), and (2) management accounting influences the behavior of managers and other employees
(rather than primarily reporting economic events).
Management accounting is not restricted to these principles. The result is that
management accounting allows managers to charge interest on owners’ capital to help
judge a division’s performance, even though such a charge is not allowed under GAAP,
management accounting can include assets or liabilities (such as “brand names”
developed internally) not recognized under GAAP, and
management accounting can use asset or liability measurement rules (such as present
values or resale prices) not permitted under GAAP.
Management accountants can help to formulate strategy by providing information about
the sources of competitive advantage—for example, the cost, productivity,
advantage of their company relative to competitors or the premium prices a company can charge
relative to the costs of adding features that make its products or services distinctive.
The business functions in the value chain are
—generating and experimenting with ideas related to new
products, services, or processes.
—the detailed planning and engineering
of products, services, or processes.
—acquiring, coordinating, and assembling resources to produce a product
or deliver a service.
—promoting and selling products or services to customers or prospective
—delivering products or services to customers.
—providing after-sale support to customers.