You are a middle manager. What performance reports do you rely on? Are they produced by Financial...


You are a middle manager. What performance reports do you rely on? Are they produced by Financial or Managerial accountants?

Financial and Management Accounting

Management Accounting plays a vital role in providing information to the top management that can help in the planning function. This can help in providing reports which estimates the effects of some actions that happened on the prior year against the target goals for the incoming year which was called the budgeted financial statements. On the other hand, in the control functions, management accounting provides performance reports that highlight the variances between the expected and the actual performance. This report aids the top management to investigate if the variance is significant in value and most of all will be important in the decision-making of the top management. However, in the financial accounting it involves the compliance with the external reports and also the reporting of the net income. Financial accounting is based on principles. And the reporting area is to the outside parties which is the customers/shareholders.

Answer and Explanation:

If I am a middle manager, performance reports reported by the managerial accountants is the one I will rely on. Since I am in the operations, I will be more interested in checking the performance it it is efficient and effective, if the production is over target and the budget is under in the spending, then the performance is well and no further issues to discuss. But if the production is under target and the budget goes beyond its spending limit, then the management will rethink and attend to its risk and will mitigate and resolve the issue. However, reports made by the financial accountant is also useful since it is based on accrual accounting and the reports shall be properly monitored too so that the outside parties will be interested in the company

Learn more about this topic:

Role of Financial Accounting in Management & Decision Making

from Accounting 201: Intermediate Accounting I

Chapter 12 / Lesson 1

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