Duncan
WILLIAMSON

Introduction to Management Accounting

Management Accounting Within the Organisation

Key management accounting lesson the management accountant is a servant. Notice that the definition tells us that the management accountant provides information required by management: not for themselves or their accounting friends; but for other management colleagues. Bear this point in mind as you study management accounting and everything it contains. When you are asked to provide information, draw up a statement … anything: you are doing it on behalf of someone else.

Figure 1 Traditional Organisation Chart

In this traditional organisation chart view of a business, we see that everyone is working inside their functional structure. That is, Production people work for the Production department(s), Marketing people work for marketing, ICT (Information and Computer Technology) people work for ICT and so on.

Whilst this traditional view is fine in that it identifies where everyone belongs, it doesn't really identify where everyone works and what kind of work they do. A matrix organisation chart, however, like Figure 2, gives us this additional information.

Figure 2 Matrix Structure

Whilst you might not fully agree with everything in Figure 2, it does give us the idea of how people really work within an organisation. Figure 2 shows us that people in the production department tend to work only for themselves; whereas marketing staff work for themselves and the production department.

Similarly, the ICT department carries out work on behalf of all departments as far as networking is concerned; but only for itself, Marketing and R&D as far as the web site is concerned.

The Finance function is still split into three areas, two of which are shown here, and much of their work involves the rest of the organisation.

Next Take a Management Accountant's View of Everything

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Duncan Williamson
3 March 2003 revised 27 April 2004