ACCOUNTING QUESTIONS 3
Themanagement accounting technique that was adopted by the BritishPostal System was the use of the stamps in charging people forposting letters. The stamps became the new method of charging astandard cost compared to the old costing system that depended on thedistance to post the letters. The longer the distance, the higher thecost of sending the letter. However, with the introduction of thestamp, a standard cost rate was charged for posting a letter despitethe distance. The method was effective because it led to the growthof sales and massive use of the stamps up to the current day.
Managementaccounting bases its foundation on the future activities, processesand programs that are identified as cost drivers. Through the costdrivers, management accounting analyses and presents future businessoperations in terms of the cost anticipation. This helps themanagement of a business to make decisions that are informed by thecosting process. The implication of management accounting onfinancial accounting is therefore the use these costing methods topredict the future financial statements and reports of a business.
Whilefinancial accounting uses historical data to present the financialperformance and position of a business, management accountingprovides the costs of future business ventures. This means that,management accounting predicts financial accounting by providingfuture accounting estimates in current time, based on the past data.At the same time, management accounting uses historical data andinformation from financial accounting to investigate the costimplications of all the activities of a company’s present activityand predict future financial status. Therefore, the two accountingfields are important to an organization by providing information tothe management for decision making.