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Management accounting

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Introduction

Management accounting is those areas of accounting concerned with financial planning, principally through the interpretation and use of financial data for important management of the business. The role of accounting is to provide relevant information, which will assist management with decision-making, planning economic performance, controlling costs and improving profitability. However, note that the information generated by the management accounting function is just one component part of the decision-making process. It is not the 'be all and end all'; it must be used in conjunction with other data. The purpose of this essay is outline the objectives of and the main stages in, a managerial planning, decision making and control process and describe the role served by managerial accounting in this process. The aim of management accounting is to provide management with information, which will help them to: * Achieve their objectives/goals. * Formulate policy. * Monitor and assess performance. * Appreciate the financial implications of changes in the internal and external environment in which the organization operates. * Plan for the future. * Make comparisons between alternative scenarios. * Manage more efficiently the scarce resources, which are at their disposal. * Control the day-to-day operations. * Focus their attention on specific issues, which really need their consideration. ...read more.

Middle

Management must devise realistic goals for it's firm, achievable in the short term preferably, otherwise there will be no benchmark for comparison between a firm's progress now and say, a year later. Having said that, it's often difficult for a firm to follow realistic goals as different participants within the organization may have their own disparate interests. However, the first and foremost objective in organizational planning is the maximization of the present value of the organization's future cash flows. This is adapted for a number of reasons: * It is quantitative and therefore provides a clear guide for future comparisons. * Unlike conventional profit calculations, which are based on arbitrary accounting measurements therefore doesn't have the problem of imprecision. * It deals directly with cash available to individuals for them to acquire satisfactory products or services. * It gives some leeway to the distribution of cash among all members concerned in the firm. Stage 2 : The collection and analysis of data about alternative courses of action The decisions made by management can be classified into long-term decisions, such as those involving significant changed with an organization's operation, or short-term decisions such as those, which only affects its running for a short time like the production of a certain product. ...read more.

Conclusion

* Planning It evaluates capital expenditures, identifies and measures information on products and markets and is especially critical in short term planning through budgets. * Implementation It develops accounting standards for operations, provides an internal reporting system for a particular business structure and this is known as "responsibility accounting". * Control This is broken down further into three aspects: 1. Monitoring performance and results Here, management accounting identifies any alterations from plans, gives prompt news on any unforeseen problems and explains the nature of results published with the organization. 2. Motivating It encourages staff to work at their best by rewards and incentives, and the budget and performance reports can influence outcome. 3. Communicating It serves as a language tool for most business organization and provides a useful link to information system. In conclusion, management accounting ensures the transformation process from inputs, through the production process to output is viable, and it plays a principal role in management decision-making. Management accounting is the process of identifying, measuring, accumulating, analyzing, preparing, interpreting and communicating information that helps managers fulfill organization objectives. Accounting responds to the need for quantitative financial information. It is interpreted as a language of economic activity. The purpose of accounting is ultimately to assist someone to make decisions by the accumulation of all accounting information. The information to be provided by the accounting system depends on who is making the decisions and for what purpose. ...read more.

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