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Management Accounting and the Environment

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Accounting procedures and processes are very much a product of the organizational and wider environments in which they operate. Recently, the role of management accounting changes because of legal and social influences on the finance and accounting function, and environmental variations resulting from the size of the organization, ownership patterns, and organization structure. Management accounting in Charity organizations is the application of accounting techniques to provide management with the information to assist in the processes of planning and control. There is a clear overlap with financial manage­ ment in that management accounting is concerned with the use of funds, and with financial reporting in that management accounting uses the data collected as a basis for its calculations (Andersen, 1989). There are different approaches which help to identify the future goals of Charity organizations and detect the threats.

Accountants’ examination of Charity organizations gives useful insights into the nature of the strategy itself. Management accountancy in Charity organizations is normally associated with more rational approaches to reporting. Perhaps its greatest contribution lies in providing the management accountant strategist a broad framework for analyzing the position of organizations at a particular moment in time.

It can also be useful in the development of a number of strategic options that attempt to tackle opportunities and threats, build on corporate strengths and avoid weaknesses. An important consideration is that for most management there is a choice of strategy (Collins, Davies, Weetman, 1992). The new environment needs the approach based upon the assumption that information is readily available to the accountants and an accurate assessment can be made of its likely impact on organizations. This is not always the case and the entire process is subject to behavioral influences.

The so-called rational techniques have been criticized as 'pseudo-science'. Nonetheless, this is the basic approach used by many researchers (Kirkham, Loft, 1993). In the 1980s the emergence of an increasingly complex and turbulent business environment called for modifications in the rational approach. The environment plays an important role in charitable organizations because there are more groups for whom the financial records are of potential interest.  

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