## **Learning Outcomes**

By reading this article, you will be able to classify the main sources of business data, identify internal and external sources, and distinguish between primary and secondary information. You will assess the advantages and limitations of published and online data for management accounting. You should be able to explain information costs, including the types of costs involved in data collection and processing, and analyse key practical risks and considerations when using externally published or online data.

## **ACCA Management Accounting (MA) Syllabus**

For ACCA Management Accounting (MA), you are required to understand data sources and their relevance in management accounting. The focus should be on data types, information reliability, and the cost-benefit issues of using various data. This article covers:

- The identification of machine/sensor, transactional, and human/social data sources
- Distinction between internal and external information sources
- Evaluation of published information and internet data, including strengths and weaknesses
- Cost classifications for collecting, processing, and managing information
- Approaches to assessing the value and risks of published and online information

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. What is the key difference between primary and secondary data sources?
2. List two strengths and two limitations of using published online data for management decisions.
3. Which of the following is an example of an indirect cost of information production?  
   a) Staff wages for data entry  
   b) Barcode scanner purchase  
   c) Staff downtime during software training  
   d) Subscription to a statistical journal
4. Why should managers be cautious when relying solely on data gathered from internet sources?

## **Introduction**

Modern management depends on accurate, relevant and timely information. Data is collected and processed into information for planning, control and decision-making. This requires understanding where data comes from, how it is processed, and what additional costs or risks exist, especially when using external sources. Published and online data are convenient and accessible, but care must be taken to evaluate their reliability and cost-effectiveness for the organisation.

## DATA SOURCES IN MANAGEMENT ACCOUNTING

Business information may originate inside or outside the organisation. Knowing the main types and sources of data ensures that decision-makers select appropriate and trustworthy information to guide their actions.

### Main types of data sources

- **Machine/sensor data:** Collected automatically by equipment or devices, such as production line sensors, barcode scanners, or digital meters.
- **Transactional data:** Generated from business activities, such as sales orders, invoices, or payroll transactions.
- **Human and social data:** Captured from staff observations, customer surveys, interviews, social media activity or web posts.

> **Key Term: Primary Data**  
> Data collected first-hand by the organisation for a specific current purpose through direct measurement, surveys, or observation.
>
> **Key Term: Secondary Data**  
> Data previously gathered by others, or for another purpose, and then used by the organisation for analysis or comparison.

### Internal Information Sources

These originate from within the organisation:

- Accounting records (ledgers, journals)
- Payroll and HR systems
- Production reports
- Internal surveys or operational audits

Advantages include direct relevance, easy access, and the ability to verify collection methods. However, limitations may appear if the system does not collect a needed variable or the data requires significant analysis to be useful.

### External Information Sources

External sources offer a broader environment context:

- Published government statistics (e.g. economic indicators, employment data)
- Industry reports from trade associations
- Market data from online databases, financial news, or competitor websites
- Commercial data services or subscription research

These sources may provide valuable context and benchmarks, but the data may not be fully aligned with the organisation’s circumstances or may lack recent updates.

## PUBLISHED AND ONLINE DATA: USES AND LIMITATIONS

External published and online data are increasingly used in research, planning, and benchmarking. However, their value and limitations must be carefully assessed.

### Strengths of published and online data

- **Accessibility:** Large volumes of data can be retrieved quickly from government departments, professional organisations, and online platforms.
- **Breadth:** Enables industry-wide or macroeconomic analysis not possible through internal records alone.
- **Cost savings:** Buying or accessing existing reports or datasets is usually cheaper than collecting comparable data directly.

### Limitations of published and online data

- **Relevance:** Published data may not fit the precise needs or context of the organisation.
- **Timeliness:** Data may be out of date by the time it is published, especially with print or static web sources.
- **Completeness:** Not all variables or populations are covered. Summarised figures may lack the detail needed.
- **Accuracy and reliability:** Errors, assumptions, or changes in collection methods can affect reliability. Online sources may not be independently verified.
- **Consistency:** Definitions and classifications may differ between sources, making comparisons difficult.
- **Potential bias:** Organisations producing data may have a vested interest or apply selective reporting.

> **Key Term: Information Reliability**  
> The extent to which information is trustworthy, complete, and can be depended upon for decision making.
>
> **Key Term: Information Timeliness**  
> The degree to which information is current and available when required for decision making.

### **Worked Example 1.1**

A retailer considers using online market data about competitor product prices from consumer comparison websites. The data is updated weekly, but some retailers may not publish discounted prices or out-of-stock items.  
**Question:** Should the manager rely solely on these prices to set their own retail pricing strategy?

> **Answer:** No. The published online prices may not include frequent promotions or reflect stock availability. Using this data as the only input could result in mispricing and lost sales. It is suitable for understanding general trends, but must be cross-checked with additional information.

### Evaluating data quality online

When using online data, managers should consider:

- Who produced or published the data?
- How was the data collected and is the method disclosed?
- How recent is the data, and how often is it updated?
- Are there any identified limitations or exclusions?
- Is the information consistent with other reputable sources?

### **Exam Warning**

> Beware of treating all online information as equally reliable. Information from user-generated or unofficial sources (such as discussion forums or crowd-sourced platforms) is especially prone to errors and bias. Always check for corroboration.

## INFORMATION COSTS

Collecting, processing, analysing and storing information incurs both direct and indirect costs. These costs play a key role when management accountants decide what information to collect and use.

### Types of information costs

- **Direct costs:** Clearly attributable to a specific data collection or handling process, such as purchasing market research reports, buying a subscription database, or investing in scanning equipment.
- **Processing costs:** Administrative costs for storing, sorting and analysing data, including staff costs, computer processing, and system maintenance.
- **Indirect costs:** Those not directly allocated to data collection but still associated, such as staff training, loss of productivity during software changeovers, or the consequences of information overload.
- **Opportunity costs:** The value of decisions forgone by selecting one source of information or method over another.

> **Key Term: Direct Data Capture Cost**  
> The specific, traceable costs involved in obtaining data, such as staff wages for data collection or purchase of equipment used solely for capturing data.
>
> **Key Term: Indirect Information Cost**  
> Costs that are not directly attributable to a single information-gathering activity, such as system downtime, lost staff time, or general overheads incurred during data collection or processing.

### **Worked Example 1.2**

A company is considering introducing an employee survey delivered online to assess workplace satisfaction. The following costs are involved:

- External consultant to design survey: \$2,000
- Staff time to complete the survey: \$1,000
- HR time to collate responses: \$700
- Disruption to regular work: \$500 (estimate)

**Question:** Which costs are direct, and which are indirect?

> **Answer:** The consultant fee, HR collation time, and survey platform costs are direct costs. Staff time lost to completing surveys and disruption to regular work are indirect costs, as the time spent impacts other activities but is not readily measurable for each specific survey.

## COST-BENEFIT ANALYSIS OF INFORMATION SOURCES

Management accountants should weigh the value of information against its associated costs before investing in new data sources.

- Does the benefit of improved decision-making exceed the cost of data acquisition and processing?
- Can internally gathered information suffice, or is external data justified for strategic decisions?
- Could information overload from extensive external sources reduce managerial effectiveness?

### **Revision Tip**

> When assessing new sources of data, always compare the marginal benefit of more precise or up-to-date information with the marginal increase in cost or complexity to obtain it.

## RISKS AND ISSUES IN USING ONLINE DATA

- **Security:** Sensitive or confidential information may be exposed unintentionally.
- **Data protection:** Use of personal data harvested via online sources must comply with relevant regulations.
- **Obsolescence:** Online data can be changed or removed at any time. Websites may be relocated or deleted.
- **Manipulation/fake data:** Be aware of deliberately misleading information or data altered by unauthorised parties.

## **Summary**

Selecting suitable data sources and understanding the true cost of information is essential for effective management accounting. Internal and external sources should be evaluated for accuracy, timeliness and relevance. Published and online data provide accessible benchmarks but come with risks related to completeness, reliability and potential bias. Management accountants must also weigh direct and indirect costs of information against its benefits and potential risks, particularly with online data.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- The differences between machine/sensor, transactional, and human/social data
- Internal versus external information sources
- The merits and limitations of published and online data for decision making
- The distinctions between primary and secondary data
- The various direct and indirect costs of collecting and processing information
- Practical risks and quality issues associated with online and published sources

## **Key Terms and Concepts**

- Primary Data
- Secondary Data
- Information Reliability
- Information Timeliness
- Direct Data Capture Cost
- Indirect Information Cost

Data sources and information costs - Uses and limitations of published and online data