Managerial Accounting
Managerial Accounting Defined
Our textbook defines managerial accounting as, “an area of accounting aimed mainly at
serving the decision-making needs of internal users” (Wild & Shaw). While this definition gives
a general idea, it fails to truly describe the purpose of managerial accounting and why it can be
so useful. Managerial accounting works to connect managers of a company with vital
information that will allow them to achieve that company’s goals. In order to achieve this,
managerial accounting works to provide information on the price of a company’s products and
services, plan future activities, and compare planned and actual results (Wild & Shaw). In
general, this form of accounting looks at two major costs, those of planning and control
decisions. Planning involves long-term and short-term decisions that involve the future goals and
development of a company. Control involves watching over the activities of a company and their
employees as well as reviewing any potential planning decisions. Another important aspect to
understand about managerial accounting is how it differs from financial accounting. The biggest
difference in these forms of accounting is their overall goal. Managerial works to inform internal
users, while financial works to inform external users. Since financial accounting information is
focused on external use, this information is highly regulated as well to ensure consistency across
companies. Managerial accounting’s focus in internal use means that information can be
processed and reported how every they feel will best organize this information for internal
decision making (Ross). Another key difference is that financial accounting mainly focuses on
the past, historical information where managerial accounting is focused on the future. “External
users of financial accounting information must often decide whether to invest in or lend to a
company. Internal decision makers must plan a company’s future to take full advantage of
opportunities or overcome obstacles” (Wild & Shaw). Finally, while financial accounting
focuses on how a company runs as a whole, managerial accounting breaks companies down into
divisions or units in order to optimize every portion of a company’s performance (Wild &
Shaw). Managerial accounting ensures that managers have the best chance at running the most
efficient company possible by reporting valuable information on current internal activities,
comparing them with set plans, and using that information to make focused plans for the future.
Integrity in Business Relationships
In order to build and maintain relationships in a business environment, integrity is a key
component. Integrity is “the quality of being honest and having strong moral principles; moral
uprightness” (Dictionary.com). The Bible contains numerous verses that underscore the
importance of acting with honesty and integrity in relationships with others. One of these verses
is found in Proverbs 11:3: “The integrity of the upright guides them, but the crookedness of the
treacherous destroys them” (ESV). An article from Psychology Today discusses the two different
types of integrity and which one is necessary to build good working relationships (Russell,
2017). In her article, Russell (2017) explains that personal integrity is expected in the workplace
of all people, but behavioral integrity is what is necessary to build trust and build solid
relationships. She explains that the difference is that personal integrity is internal. It is primarily
the relationship you have with yourself, like when you act within your personal set of morals
and values. Behavioral integrity is being a person of your word. It is when what you say matches
your actions. Russell (2017) even points out that behavioral integrity is not necessarily doing the
right thing, but rather it is simply keeping your word. That is not to discount the important role
that personal integrity plays in building relationships, but without behavioral integrity as well,
people are unlikely to put their trust in you. Russell (2017) concludes her article by stating,
“Consistency matters. Time matters. Consistency affects the interpretation of your behavioral
integrity, over time, both positively or negatively. No consistency = no believability. No
believability = no credibility. No credibility = no trust that you'll do as you say.” Christians
should strive to model both types of integrity. In order to demonstrate personal integrity they
should live by what God wants them to do and make their decisions based on that, and to
exemplify behavioral integrity they should always keep their word and be discerning in promises
they make, and careful to not promise what they cannot fulfill. By doing this they will be able to
build and maintain strong working relationships with those around them.
Integrity in Managerial Accounting
One of the most important lessons and morals to practice in Managerial Accounting is
integrity. The reason why integrity is so important in the practice of Managerial Accounting is
because the attitude management portrays influences the rest of the employees in the operation.
If management “emphasizes only the bottom line of achieving goals then employees will
understand that they will be free to do whatever it takes to achieve their goals with all integrity
and ethical procedures aside” (Kelley, 2017). Ultimately, management’s attitudes and actions
affect the organization and they should strive to practice the right things and be a positive role
model to the employees and emphasize diligent work associated with practicing the right ethical
behaviors and procedures. A second reason why integrity is important, is that businesses require
accurate and unbiased financial and statistical information when making important business
decisions. “Here ethical standards are critical because they encourage information is unbiased”
(Lohrey, 2016). Also, in a legal stance, integrity is important due to the access management has
to employees’ personal records and information. If an accountant or manager was to mess with
this sensitive information, not only would this likely destroy the company and would face serious
repercussions including but not limited to fines, lawsuits, prison time, etc. A final and highly
important reason why integrity should be practiced with managerial accounting is that of a
Biblical application stated by Paul in Philippians 4:8 which says, “Finally, brethren, whatsoever
things are true, whatsoever things are honest, whatsoever things are just, whatsoever things are
pure, whatsoever things are lovely, whatsoever things are of good report; if there be any virtue,
and if there be any praise, think on these things.”
Reliability in Managerial Accounting
“Reliability” is the scientific term used across all studies to encompass verifiability as
well as consistent representation of data (Erb and Pelger, 2015). If we cannot be sure of the
consistency and verifiability of our data; particularly in this digital age, we cannot be sure of
anything—particularly in managerial accounting where making predictions and evaluations of
those predictions plays a large part. As a result internal and external audits must be routinely
performed to evaluate and ensure reliability inside and outside the company. These audits
protects the company, and ultimately its employees from costly fraud (Wild and Shaw, 2018).
Biblical Perspective of Managerial Accounting
Accounting is a subject in which lacks neglect within the Bible (Hagerman, 1982).
Although, the relationship distinguished between managerial accounting and religious
affiliations are found to be extraordinarily sparse in a researched setting (Carmona, 2006). The
Bible does not provide much insight in regard to accounting of any kind, how financial reports
should be prepared, or how a managerial accounting system should be established, but it does
however imply motivation for financial recording (Hagerman, 1982).
The Bible contains references to these motivations and current managerial accounting concepts,
along with recognizing the importance of such participation in the accounting and budgeting
process (Hagerman, 1982).For example, Jesus exclaims of a story entailing a man surrounded by
riches, who in which, had another individual manage his property. Furthermore, the rich man was
told that his manager was wasting valued income, so he brought the individual in for further
questioning. During this time, the owner bellowed, “What is this I hear about you? Turn in a
complete account of your handling of my property, because you cannot be my manager any
longer” (Luke 16:1-2). As Psalm 37:21 states, the wicked borrows and never pays for what they
have taken. “The minute a person goes into debt, he loses a portion of his freedom” (Fooshee,
2019). Respectively so, Jesus found heavily applied significance in properly handling accounts,
shining guidance towards the idea. When a person begins to take into account the overall impact
of recordkeeping through integrity and honesty, they seldom find themselves in financial
misfortune (Fooshee, 2019). When applying the principles of accounting, an individual will
always become aware of the condition of their income. For the Lord exclaims to keep good
records of any income as He has entrusted (Stott, 2015). As the Bible entails, each individual
must know the conditions of their flocks, providing attentive care to their herds; for riches do not
withstand forever (Proverbs 27:23). For any enterprises, that including finances, is created by
wise planning, common sense, and by maintaining well-informed of the facts (Proverbs 24:3-4).
As Ecculs, 14:7 states, “Whatever stores you issue do it by number and weight, spending and
taking put everything in writing.”
References
Bowyer, J. (2017). The theology of financial accounting.
Forbes.
Retrieved: https:// www.forbes.com/sites/jerrybowyer/2017/08/18/the-theology-of-financial-
accounting/#239ac7f6fd74
Carmona, S., Ezzamel, M. (2006). Accounting and religion: a historical perspective. Accounting History
11(2). 117-127. DOI: https://doi.org/10.1177%2F1032373206063109.
Fooshee, G. (2019). 10 financial principles that are biblical. Back to the Bible.
Retrieved:https:// www.backtothebible.org/post/10-financial-principles-that-are-biblical
Hagerman, R. L. (1982). Accounting in the Bible. Journal of Accountancy, 153(000006).48.
Retrieved: https://search.proquest.com/openview/daf983566af2516a38e37235e8bbac27/1?pq-
origsite=gscholar&cbl=41064
Kelley, P. (2017). What is Management Integrity in Accounting? Retrieved from
https://bizfluent.com/about-7269503-management-integrity-accounting-.html
Lohrey, J. (2016). Summarizing the Role of Ethics in Managerial Accounting. Retrieved
from https://yourbusiness.azcentral.com/summarizing-role-ethics-managerial-accounting-
27684.html
Research Insights: A Study of the Replacement of “Reliability” by “Faithful Representation” in the
IASB/FASB Conceptual Framework. (2015). International Federation of Accountants.
Retrieved from https://www.ifac.org/global-knowledge-gateway/business-reporting/discussion/
research- insights-study-replacement.
Ross, Sean. (2019). How Financial Accounting Differs from
Managerial Accounting. Investopedia. Retrieved
from: https:// www.investopedia.com/ask/answers/041015/how-does-financial-accounting-differ-
managerial-accounting.asp
Russell, Nan S. (2017, April 24). What kind of integrity is needed to build trust at work? Psychology
Today. Retrieved from https:// www.psychologytoday.com/us/blog/trust-the-new-workplace-
currency/201704/what-kind-integrity-is-needed-build-trust-work
Stott, J. (2015). 9 principles of biblical financial management. Truth Applied.
Retrieved:https://truthappliedjs.com/9-principles-of-biblical-financial-management/
Wild, John & Shaw, Ken. (2018). Managerial Accounting (6th edition). New York, NY: McGraw-
Hill Publishing
