Barriers to Effetive Communication
Beginning with management accounting which is defined in Managerial Accounting as the provision of information required by management for such purposes as formulation of policies, planning and controlling the activities of the enterprise, decision taking on alternative courses of action, disclosure to those external to the entity (shareholders and others), disclosure to employees and safeguarding assets. Management accounting includes information that is normally not provided outside an organization and is usually tailored to meet specific management information needs.
The prime objective of management accounting is to provide necessary information to the management for an effective and efficient execution of managerial functions and just a few of the other objectives of management accounting are enumerated as follows:
It should enhance effective planning within an organization as it looks forward to show what is likely to happen in the future. Planning can be short-term or long-term and it is the role of management accounting system to provide information for what to sell, where and at what price. Various statistical forecasting techniques like time-series analysis and regression analysis are used in management accounting to guide proper planning and policy-making.
Management accounting applies various useful techniques such as standard costing, budgetary control and management audit, to ensure an effective managerial control over the use of resources of the enterprise. Management control is a control system which assures that the resources of the enterprise are effectively and efficiently used for achieving its goals and objectives. Management accounting plays a significant role to the management in ensuring the existence of a proper managerial control system
In extension management accounting facilitates effective decision making as it provides information that is required in day to day running of the business. Management accounting provides necessary and relevant information to the management in the process of its decision-making. The success of the management highly depends upon effective decision-making. Management accounting provides the above information to the management by applying marginal costing technique, differential costing technique and absorption costing technique, for an effective and accurate decision-making.
Financial accounting on the other side is referred to in Managerial Accounting as that part of accounting which covers the classification and recording of actual transactions of an entity in monetary terms in accordance with established concepts, principles, accounting standards and legal requirements and presents as accurate a view as possible of the effect of those transactions over a period of time and at the end of that time.
Financial accounting maintains a record of each transaction and helps to control the companys assets and liabilities such as plant, equipment, stock,