Management Accounting Essay

1508 words - 7 pages

The role of management accounting is seldom varies between public sector and private sector as this system are used to facilitate organisations in planning, controlling and making decision. The purposes of its usage might show a slight difference due to the different objectives that have been sets by public and private. Disregard these minor differences, public and private sectors using the management accounting in order to obtain forward looking information that will facilitate their management process. All organisations, whether private or public, need information to plan and control their operations and to assist managers in their decision- making (Cooper, Funnell, Lee 2012, p. 160). ...view middle of the document...

This financial information will facilitate management in controlling their operation in order to avoid any insufficiency and also monitor and assess the organisation performance. Management accounting also incorporates non-financial information such as manpower levels and usage, labour and material inputs and cost centres. This non-financial information will help management in formulating organisation policy and manage their operation efficiently and effectively. Just as all organizations have objectives, so all organizations make plans (Jones 2000, p. 15).

The objective of private sector is profit maximization, while public sector strives to meet societal demand and satisfaction. The management of private sector needs to determine the output and price level that will give organisation the greatest returns in selling their goods and services. However, public sector is the budget governed organization that require their management determine either their budget allocation is sufficient in providing essential goods and services for society and ensure that the necessity available for everyone equally. Those research and information required can be obtained from management accounting system. Public sector assesses public interest, political compromise and income, while private sector obviously assesses income and revenue more than public sector. Even though income is not the main objectives for private sector, but they can still make a profit from their operation, but the profit earned are next to be used as capital to run their operations. (Blaug, Hoener, Lekhi 2006, p. 47) Stated that the managers of public sector will need to be entrepreneurs, explorers and constantly searching for how they could better create public value. It is best conclude that the public value has become a management tool for public sector in planning and controlling their operations. In the meantime, Private sector is keen to use budget as their management tool. Nevertheless, both sectors still use management accounting system to ensure their operation and business run well.

The role of management accounting, therefore, is to provide relevant information that will assist management with decision-making, planning economic performance, controlling costs and improving profitability (Chadwick, 1993, p. 34). The purpose in using management system by public and private are similar, and it is playing an important role in organisation as it hold organisations’ future. Public sector need non-financial information more than private sector, as private sector need more information on its financial performance. This system will help public sector allocate the exact fund in carrying their operation supplying essential goods and services for society by tracing its internal operation cost. It also helps private sector prescribe remunerative prices for their products and services by tracing their precise operation cost. For example, public sector needs a precise information about the cost...

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