Unit FMA A1: Accounting for management

This unit is free. It assumes no prior knowledge of Management Accounting

Unit FMA A1: Accounting for management


A1. Accounting for Management

Purpose and role

Syllabus A1a)Describe the purpose and role of cost and management accounting within an organisation.

 Purpose and role of cost and management accounting

 The purpose of cost and management accounting is:

  1. To provide financial information to managers that will help them to plan the activities, control the activities for which they are responsible and see the financial implications of any decisions they may take.
  2. It serves management by providing information for planning, decision-making and control.
  3. It collects, manages and reports information in demand by managers, employees and decision makers internal to the organisation.
  4. Management information is generally supplied in the form of reports.

Reports may be routine (monthly management accounts) or prepared for a specific purpose (e.g. one-off decisions).

 Cost accounting and Management accounting

Cost accounting and management accounting are terms which are often used interchangeably. It is not correct to do so.

Cost accounting is part of management accounting.

Cost accounting is mainly concerned with:

  • Preparing statements (e.g. budgets, costing)
  • Cost data collection
  • Applying costs to inventory, products and services

Therefore, management accounting goes beyond cost accounting.

In general, cost accounting information is unsuitable for decision-making.

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