Page 406 - Introduction to Business

380 PART 4 Accounting

Management Accounting
The component of the accounting information system that provides information
management accounting to management is referred to as management accounting. Management account-
The component of the accounting ing is strictly concerned with the information needs of management, the only
information system that provides the
financial information needed internally internal user of accounting information. Although internal information require-
by business managers for efficient and ments may vary substantially between organizations, management accounting in
effective decision making most business firms includes similar kinds of financial analysis—for example,
cost-volume-profit analysis, capital budgeting, and inventory planning. Specific
steps in performing these types of analyses are virtually standardized. Addition-
ally, most business firms use similar types of internal documents and reports,
such as sales invoices, purchase orders, receiving reports, and budgets. There are
widely accepted guidelines on how these internal documents and reports should
be prepared.
Like other areas of business, technological innovation has had a profound effect
on how management accounting tasks are performed. For example, specialized
software is available to assist management accountants in performing many of the
different types of financial analysis. Specialized hardware devices such as bar code
readers may be used to help keep track of inventory. Telecommunications systems
allow purchase orders to be placed electronically. Despite these technological
advances, standard costing and variance analysis are done in much the same way
today as they were in decades past. Of course, computers have reduced the time
required to do such tasks. The competitive nature of the marketplace drives all
functions within a business firm, including accounting, to become more efficient
and productive. Using the latest technology is an essential ingredient for successful
business operations, including accounting.

Financial Accounting and External Users
financial accounting The component of
the accounting information system that of Accounting Information
provides financial information needed
by external users such as investors and The component of the accounting information system that supplies information to
lenders external users is financial accounting. External users of accounting information

In preparation for the holiday sales
just prior to Easter Sunday, a
worker in a field harvests buttercup
blossoms to be added to the flow-
ers inventory.

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