Tuesday 29 January 2019

Management Accounting and Financial Accounting

Accounting information systems in an organization has two main subsystems: 

Management Accounting and Financial Accounting
The system of management accounting and financial accounting systems. Accounting information system is a subsystem of management information system of the company as a whole.

Management Accounting System, namely the unification of management which includes the presentation and interpretation of the information used for the formulation of strategies, planning and controlling activities, decision making, optimization resource use, disclosure to the owner and outside parties, disclosure to workers, the safeguarding of assets in order to generate information to internal users, such as managers, executives, and employees.

Management accounting specifically identify, collect, measure, classify, and report information, which is useful for internal users in planning, control, and decision making. An integral part of the management with regard to the identification process of presentation and interpretation/interpretation of the information is useful for:
  • Formulating strategy.
  • The process of planning and controlling.
  • Decision making.
  • Optimization of the decision.
  • Disclosure of shareholders and outside parties.
  • Disclosure of organizational entity for employees.
  • Protection of organizational assets.

Financial Accounting

Whereas financial accounting is part of accounting with regard to the preparation of the financial statements to outsiders, such as shareholders, creditors, suppliers, as well as the Government. The main principles used in financial accounting is the accounting equation (Assets = Liabilities + capital). 

Financial accounting related to the problem of recording the transaction for a company or organization, and the preparation of the periodic reports of the results of the registration. This report was drawn up for the public interest and are commonly used to assess the achievements of the company owners or managers of managers as a financial liability against the shareholders.

Essentials of financial accounting is the existence of Financial accounting standards (SAK) which are the rules that must be used in the measurement and presentation of financial statements for external interests. Thus, expected users and compilers of financial statements can communicate through this financial report, because they use the same reference, namely SAK. SAK began to be applied in Indonesia in 1994, replacing the year Indonesia Accounting prinsi 1984.
Comparison between management accounting and financial accounting can be classified in a number of factors:
  • Restrictions on input and process
  • The Type Of Information
  • Time Orientation
  • The level of aggregation
  • The vastness of

A Crisis In management Accounting

For a couple of months ago, the accounting profession is experiencing great changes and events, most of which only focuses on the performance and financial accounting issues (such as financial accounting rules are complex, ethical aspects in the profession and so on). While we take in the journal argued that the crisis in management accounting as great as a crisis in financial accounting. Then it can be deduced with regard the crisis which occurred in management accounting are:

The User Factor

A traditional management accounting focus solely on providing to internal users such as factories, divisions, or the internal environment of the company and did not follow the company's economic expansion, especially on the external part of the business that consists of inventory, joint venture, and a special purpose company to another. In line with the demands of a more global note focus on the ability of management accounting to measure and evaluate internally and externally fields within the company to optimize the decision to be taken by the parties external. The parties are as follows:

The internal Party

internal Party is the party that is in the structure of the organization. Management is the party that is most in need of a proper accounting and reporting accurately to take good decisions and correct. Examples include managers who see the financial position of the company to decide whether to buy the building for a new branch office or not.

External Parties

A. Investors

Investors need financial information company to determine whether to embed the capital or not. If the predictions investors will give you a good profit, then investors will deposit a capital to the company, and vice versa.

B. The shareholders/owners of the company

The owner of the company who have a stake in the company section requires financial information company to be aware of the extent to which progress or setbacks experienced companies. Shareholders will benefit from the dividends that will be even greater if the company profit is great.

C. Government of

the magnitude of the tax payable to the Government company or organization largely based upon the information in the financial statements of the company.

D. Creditors

if the company is being pressed for fresh funds and requires the company will probably borrow money on creditors such as borrowing money in the bank, owed on goods suppliers. The lender will provide funds if the company has good financial condition and will not have a great potential for the losers.

E. Other party

actually still many others from outside companies that may use the report/accounting information of an organization such as employees, unions, auditor public accountant, police, students, journalists, and many others.

The Restrictions on Inputs & Process

Accounting Management does not depend on the principles of accounting. The SEC and FASB set accounting procedures that must be followed to the financial statements. input and process of financial accounting must be clear and limited. Only certain economic activities that qualify as input and processes, should follow the method of receipt by the public. Unlike financial accounting, management accounting has no specialized institutions that govern format, content, rules in selecting the input and process, and the preparation of financial statements. The Manager is free to choose whatever information they wanted-provider can authorize on the basis of cost-benefits analysis (cost-benefit analysis).

Nowadays the imposition of costs conventionally have started turning to the left and the imposition of cost based on activity/activity based costing system (ABC-system). In the development of management accounting in contemporary issues in a awful lot of management techniques begin to be applied, such as the method just in time (JIT), total quality management (TQM), target costing, and customer orientation.

Performance assessment the current manager has already started to experience a shift. If the first judge the performance of a Manager enough just from a financial perspective, but now to get a more comprehensive picture of the two perspectives should be known as the balanced scorecard. Performance assessment will be carried out from two sides, namely financial (financial) and non financial appraisal such as customer/customer, growth and learning, as well as internal business processes.

The Balanced scorecard is the latest issues in management accounting. The balanced scorecard is a strategic management system that lays out the mission and strategy of an organization into operational objectives and performance benchmark for four different perspectives, namely a financial perspective, the customer perspective, internal business perspective, and the learning and growth.

Type of Information

information types management accounting
management accounting Information can be linked to three things, namely the object information (product, Department, activity), an alternative that will selected, and the authority of managers. Therefore, management accounting information is divided into three types of information:

1. A full Accounting Information (Full Accounting Information).

Full accounting Information includes information of the past as well as future information. Full accounting information that contains information useful for past financial information reporting to the top management and parties outside the company, analysis of profit generating ability, giving answers to the question "what is the cost that has been issued for something ", and the determination of the sale price in the cost type contract.
Full accounting Information containing future information beneficial to the preparation of the program, the determination of the normal selling price, transfer pricing, and the determination of the sale price which is set by the Government.

2. Differential Accounting Information (Differential Accounting Information).

Differential Accounting Information is an estimate of the difference of the assets, income, and/or costs of alternative actions in the other. Differential accounting information has two principal elements, namely is the future of information and different between the alternative faced by decision makers. Differential accounting information that is only concerned with the cost differential fee called (differential costs), which is only concerned with the income differential income called (differential revenue), and corresponding to the assets called differential assets (differential assets).

3. Accounting information Accountability (Responsibility Accounting)

liability Accounting Information is information assets, income, and/or costs associated with managers responsible for the particular responsibility center. Responsibility accounting information is information that is important in the process of management control because such information is to give the relationship between financial information with managers who are responsible for planning and its implementation. Accounting information accountability thus constitutes the basis for analyzing the performance of managers and also to motivate the managers in carrying out their plan that poured in their respective budgets.

Management accounting information system is not bound by a formal criteria that describe the nature of the inputs, processes and outputs. These criteria are flexible and based on the objective to be achieved.

General purpose accounting system management:

Provide the necessary information in calculating cost of goods, products, services and other desired destination management.

Provides information used in planning, controlling, evaluating, and ongoing improvement.
Provide information for decision making. Information management accounting can help identify a problem, resolve problems, and evaluate performance. So, management accounting information is required and used in all management stage, including planning, control, and decision making.
Information financial accounting

financial accounting Information is information aimed at General (general purposes) are presented in accordance with generally accepted accounting principles (GAAP) to thank. This information is used for internal and external parties. Financial accounting information is presented with the assumption that the information required of investors, creditors, prospective investors and creditors, management, Government, and so forth can represent the other party's information needs in addition to investors and creditors. Thus it takes a uniform information to all parties concerned with the business of the company. In General, financial accounting Information compiled and reported periodically so that it can not meet the needs of the management of the information that is timely. In addition, financial accounting Information is presented with a format too rigid so it is less able to meet the needed information management. 

According to Statement of Financial Accounting (SFAC) No. 2 of the qualitative characteristics of financial information is as follows:


Relevant information capacity means that can push a decision When utilized by users for the purposes of predicting future outcomes based on the genesis of time then and now. There are three main characteristics, namely:

  • Timeliness (timeliness), that information is ready to be used before users lose meaning and capacity in decision making.
  • Predictive value of (predictive value), that information can assist the user in making predictions about the final results of the December incident, present and future.
  • Feedback (feedback value), i.e. the quality of the information that the user can confirm the allow expectations that have occurred in the past.


Reliable, it means the quality of the information is guaranteed to be free of errors and distortions or biased and have been assessed and presented properly in accordance with its purpose. Reliable has three main characteristics, namely:

  • Can be checked (veriviability), that is the consensus in the measurement accounting options can be assessed through the ability to assure that the information presented are based on a particular method gives the same result when diverivikasi with the same method by independent parties.
  • Honesty is the representation (representation faithfulness), namely the existence of a match between the numbers and the task akunatnsi as well as his sources.
  • Neutrality (neutrality), a neutral financial information intended for the General needs of the users and regardless of the specific needs regarding the assumption and desire tertrentu the users specific information.


The power of appeal (comparability), comparable financial information presents the similarities and differences that arise from the basic similarities and differences in basic corporate and transactions and not merely the difference of treatment accounting.


Consistency (consistency), that uniformity in the assignment of wisdom and accounting procedures that do not change from period to period.

Orientation Time

financial accounting is more inclined to the orientation of the past and is reported after the incident occurred. Although management accounting also noted and reported after the incident took place. This strongly confirms the provision of information. Management, for example, not only want to know how the costs incurred for the production process, but also want to know what your costs will be incurred to produce a product. By knowing what charges are used to such a production can help purchase raw materials planning and pricing, in addition to other things. Future orientation was used to support managerial planning and decision making.

In this article a lot of criticism saying that management accounting has become short-term-oriented. A company requires the truth of information to gauge the company's performance effectively, therefore on balance scorecard should not just one report that explains what happened but must be based on the variability of key factors that impact on the economic performance of the company in the future. And companies often do not report overall internally to understand the long term objectives of the company. So there is no description of the entire company, which ultimately led to a crisis in management accounting

Level of Aggregation

management accounting provides the size and internal reports used to evaluate the performance of the company, product line, Department, and Manager. The point the information is very detailed in need and provided. Financial accounting on the other hand focuses on the overall performance of the company and give a more aggregate perspective. 

There are several stages in the internal performance measure:


Reported net income on purchasing materials in the early line on management reporting and use the cost of capital to assets. In this phase, use the basic income statement of the company consists of several components:
  1. gross income
  2. (-) cost of raw materials (BBB)
  3. Income after
  4. income Adjustment BBB (refund, discount)
  5. net income after BBB
  6. internal Costs and outsource
  7. operating Margin
  8. Interest (the cost of capital assets x net)
  9. net income before taxes
  10. Taxes
  11. Net profit after tax


For the purpose of internal performance measurement, presentation of the margin should be in the report is the net profit after taxes on net income after the BBB.


Report the additional size (operating leverage), which measures the change in percentage of net profit between two periods of change percentage of net income thus reaching economies of scale that are positive.


Focus on outsourced activities, such as the cost of information technology. The size of the total cost of the outsourced activity not only listed in the Bill but also include internal activities such as debt group trade, procurement, and management required to support outsourced activities.
As for the external reporting elements can be described as follows:

The Extent

Management accounting is much broader than the financial accounting. Management accounting covering aspects of managerial economics, engineering industry (industrial re-engineering), management science, and other fields also. 

Extent on management accounting has the nature of objectivity and relative praise not as important as financial accounting, management accounting as a future-oriented and does not affect the outside parties. The decisions taken on the basis on the information accent estimates (estimates or observation), without seeing first the realities of actually happened. Therefore, the decisions taken must be quick as the action that will be performed of the results obtained observation. In other words, the action taken in the form of preventive measures. That is, try to estimate what will happen in the future in the short term, responded with the hope of making a profit. 


There are some of the issues faced by the profession. Management accounting requires the truth of information for effective performance measurement. Management accounting should be ready to provide management with the whole image of the company. Report to the parties within the Organization to:

  • Planning
  • The briefing and the granting of motivation
  • Control
  • Evaluation work
  • The emphasis on taking decisions that affect the future.
  • Emphasis on relevant data.
  • Required information in a timely manner.
  • The stacking is a report on the detailed segments about departments, products, customers, and employees.
  • no need to follow the principles of accounting.
  • Is not mandatory.

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