1.2 Subject of managerial accounting

Subject of management accounting is administrative information. Traditionally information of management accounting had financial character, that is it was submitted in dollars, rubles, yens or other monetary units. However recently the area of management accounting was significantly expanded addition with operational and physical (non-financial) information, such as quality of production, indicators of duration of process, and value judgment, as, for example, satisfaction of clients, the creative potential of employees and operational qualities of a new product.

Information of management accounting - financial and operational data on kinds of activity and the processes which are carried out in the organization; functioning of its structural divisions; products let out by it and services; clients of the organization.

So, information of management accounting can be:

- "quantitative" (that is connected with figures, as, for example, documentation on commodity stocks, administrative reports, etc.);

- "qualitative" (that is information of non-financial character which supplements a picture, drawing attention of the management to the corresponding problems which don't have monetary value).

Quite often qualitative factors are ignored by heads. It occurs when the data prepared as an auxiliary material for decision-making, indicate directly one decision. Similar practice isn't effective as qualitative aspects of decisions are same important, as well as quantitative, and the most qualified decisions can be made only at the accounting of all available information[3].

In order that administrative information could be used effectively, it has to answer some certain criteria:

1 . The brevity - information has to be accurate, not contain anything superfluous.

2 . Accuracy - the user has to be sure that information doesn't contain mistakes or admissions. Information has to be free from any jugglings.

3 . Efficiency - information has to be ready by then when it is necessary.

4 . Comparability - information has to be comparable on time and on departments/divisions.

5 . Expediency - information has to be suitable for that purpose for which it is prepared.

6 . Profitability - preparation of information shouldn't cost more, than benefits from its use.

7 . Not tendentiousness - information has to be prepared and presented so that it was impartial.

8 . Addressing - information has to be brought to the executive; thus it is necessary to observe confidentiality.

Quite often heads receive information which demands additional processing. As a result, the decisions made on the basis of this information, are inexact or are accepted with delay and lose the relevance. Information can be processed before hit to the head, certain forms of providing information are thus used. Accuracy and brevity of received information allows to make decisions quickly and, as a result, increases the speed of working processes. Thus an important point is qualification of the head. As the system can't replace personal experience and judgment.

Demand for information of management accounting is various at each hierarchical level of the organization. At operational level where raw materials or the bought details and knots are transformed to finished goods and where clients are served, information is necessary mainly for control of operations and for their improvement. This information detailed and often repeating; it is measured most often natural, instead of financial performance, and by the nature rather technological, than economic.

In process of movement to higher levels of the organization it is visible that middle managers carry out monitoring of works and make the decisions concerning financial and material resources, production, services and clients. They can receive information of management accounting much less often, and information will be more aggregated and submitted in financial performance. Managers use this information as the instrument of expeditious diagnostics; she can warn them about existence of such aspects of daily activity which differ from the expected. Information can be used also for improvement of planning and adoption of more successful decisions.

The heads belonging to the highest echelons of organizational management, receive total information of management accounting on economic operations and the events occurring at the level of the certain employee, the client and division. They use this information for justification of the decisions having long-term consequences for the organization (adoption of strategic decisions).

Chapter 2. Functions and methods of managerial accounting