Operating accounting refers to the bespoke financial systems businesses implement for their internal strategic planning and management.
This tailored form of accounting is solely for the organisation’s internal use and is not intended for external reporting or public disclosure.
How is an operating accounting designed?
While management accounting does not necessitate strict adherence to statutory tax or corporate accounting principles, businesses may tailor these internal accounts to provide the most insightful overview of operational performance, aiding in sound decision-making.
Creating fully tailor-made accounting frameworks internally is not common, as it is a lot of work and requires a lot of resources. In addition, it is difficult to adapt within laws and regulations.
Regardless, businesses must still compile and maintain statutory financial records, including annual financial statements and other specific reports such as project or departmental accounts. Consequently, many organisations opt to base their internal management accounts on standardised accounting conventions to streamline processes and ensure consistency across all levels of financial reporting.