The accounting information created and used by management is intended primarily for planning and control decisions. Because the goal of creating and using management accounting information differs from the reasons for producing externally reported financial information, its characteristics are different. The followings identify internal accounting information characteristics.
Importance of Timeliness In order to plan for and control ongoing business processes, accounting information needs to be timely. The competitive environment faced by many enterprises demands immediate access to information. Enterprises are responding to this demand by creating computerized databases that link to external forecasts of industry associations, to their suppliers and buyers, and to their constituents. Time lines for development and launch of new products and services are becoming shorter and shorter, making quick access to information a priority.
In addition to needing timely information for planning purposes, enterprises are constantly monitoring and controlling ongoing activities. If a process or activity goes out of control, the enterprise can incur significant costs.
Identity of decision Maker Information that is produced to monitor and control processes needs to be provided to those who have decision-making authority to correct problem.
Oriented toward the Future The objective is to motivate management to make future decisions that are in the best interest of the enterprise, consistent with its goals, objectives, and mission.
Measures of Efficiency and Effectiveness By comparing the enterprise’s resource inputs and outputs with measures of competitors’ effectiveness and efficiency, an assessment can be made of how effective management is in achieving the organization’s mission.
Management Accounting Information—A Means As with financial information, management accounting information is a means to an end, not an end in and of itself. The ultimate objective is to design and use an accounting system that helps management achieve the goals and objectives of the enterprise.