Management Accounting Guidelines for Agricultural Producers

• Management Accounting Works
• Know True Costs of Production
• Integrate Produciton and Financial Information
• Cost/Profit Centers for Profitability

Whereas, financial accounting systems focus on external reporting for the overall organization, management accounting is a means to accumulate financial information in harmony with other production information (metrics) for internal reporting and analysis of the producer’s business by production segment for purposes of resource ‘management’ and decision making. A management accounting system also provides financial
accounting information for the entity as a whole.

A management accounting system should provide information for five broad purposes:

1. Formulating overall strategies and long-range plans, including new product development, major shifts in production methods, and investment in both tangible and intangible assets, and frequently involves special purpose reports.
2. Resource allocation decisions such as product and customer emphasis and pricing. These discussions frequently involve reports on the profitability of products or services, brand categories, customer, distribution channels, and so on.
3. Cost planning and cost control of operations and activities, involving reports on
   revenues, costs, assets, and the liabilities of divisions, plants, and other areas of
   responsibility.
4. Performance measurement and evaluation of people, including comparisons of actual results with planned results. It can be based on financial or nonfinancial measures.
5. Meeting external regulatory and legal reporting requirements because regulations and statutes typically prescribe the accounting methods to be followed.

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