Accounting for Managers: Interpreting Accounting Information for Decision Making, 4th Edition

Part III

Using Accounting Information for Decision Making, Planning and Control

Part II was concerned with the use of financial information, primarily for external reporting purposes. Part III shows the reader how accounting information is used by managers. While an analysis of financial statements is useful, particularly for external interested parties (e.g. shareholders, bankers and financiers, the government), the information is of limited use to the internal management of the business because:

• it is aggregated to the corporate level, whereas managers require information at the business unit level;
• it is aggregated to annual figures, whereas managers require timely information, usually at not less than monthly intervals (and for sales information, weekly or even daily);
• it is aggregated to headline figures (e.g. total sales), whereas managers require information in much greater detail (e.g. by customer, product/service, geographical area, business unit);
• it does not provide a comparison of plan to actual figures to provide a gauge on progress towards achieving business goals.

Consequently, the chapters in Part III are concerned with management accounting: the production of accounting information for use by managers. This information is disaggregated (to business unit level), more regular (typically monthly) and is more detailed for management decision making, planning and control. Management accounting is not regulated by accounting standards and is not subject to audit. This ...