Question

1. Discuss the relationships among data, information, and knowledge.

2. Discuss the primary purposes of financial accounting and of managerial accounting.

3. Discuss why the role of the managerial accountant changed in recent years.

Answer 1

Information is data put in context; it is related to other pieces of data. Data are elements of analysis. Information is data with context. Knowledge is created by the very flow of information, anchored in the beliefs and commitment of its holder.”

Relationships Amongst Knowledge, Information, And Data are explained in a diagram

To understand the relationship between information and knowledge is to know where the information resides. Recall that information is at its essence a message that is generated from activities and situations. However, information resides in storage media (database, print, video tapes, etc.) in the form of data, or in the human mind as knowledge (in its simplest form of know-what or the higher forms of know-how and know-why). If this is the case, then the overlap between data and information vis-à-vis information and knowledge becomes obvious, i.e. they occupy different space at the same time. This also explains why many perceive data and information, as well as information and knowledge as interchangeable. “…one man’s data can be another man’s knowledge, and vice versa, depending on context”. However, they are not interchangeable in terms of their accepted distinct definitions. So, what is a book: knowledge, information or data? It is all the above in various context. A book is knowledge from the author’s perspective, information for the potential reader, and data as well which is contained in a storage media (called ‘book’).

Managerial accounting information is aimed at helping managers within the organization make well-informed business decisions, while financial accounting is aimed at providing financial information to parties outside the organization.

The purpose of managerial accounting is to supply financial and nonfinancial information to the organization's management and other internal decision makers.

Financial accounting serves the following purposes: producing general purpose financial statements. producing information used by the management of a business entity for decision making, planning and performance evaluation. producing financial statements for meeting regulatory requirements.

Why the role of managerial accountant changed in recent years :

The change in management accountant’s functions and roles: From traditional to modern roles

The study of management accountants’ traditional role has customarily been based on the
work of Simon, Kozmetsky, Guetzkow and Tyndall (1954) in which they suggested three
separate roles for accountants: score-keeping, attention directing and problem-solving.
Simon et al (1954) argued that by understanding the information needs of their business
counterparties management accountants could influence their role in the organization.
Hopper (1980) proposed two archetypes of management accountants: book-keepers and
service-aid accountants. Academic literature has concluded that the book-keeper model
which prioritizes the production of periodic financial measures, best illustrates the
traditional role of management accountants in organization.Moreover,
studies have shown that management accountants representing the book-keeper archetype have been described with a number of labels such as:
and even “corporate police” . The bean counter role resembles closely that of a financial accountant with emphasis on reporting, control and compliant aspects of the accounting function. Neveltheless, management accountants are increasingly assuming the role of change agents in organizations. For instance, Russell claimed that “management accountants aren’t just managing change: they are initiating change”.the management accountants “need to recognize and facilitate the change taking place rather than resist them…they have the expertise to apply rigorous measurement discipline, ability to develop systems and a unique view across the business.”The management accountants will “be called upon to operate as managers of business value, and agents of change.” Similarly,that “new accountants are change agents and more-much more.” Although there is strong support for accountants’ proactive involvement in change,“the role is seen as one of support rather than involving proactively on the part of.

Traditional and modern roles of management accountants are as explains in a table below