The paper 'Management Accounting in Organizational Decision Making' is a perfect example of a Management Essay. Management accounting plays a significant role in an organization as it supports competitive decision making by collecting, processing, and transmitting information that assists in management planning, control, and evaluation of business processes and organization’ s strategy. Information and information system affects organizations by invading the models and management analysis fields. Accounting information provides components and elements of an organization that provides the management with information used to process financial events (Zare, et al. 2013).
Managers also use accounting information to make substantiated decisions. This essay will focus on the challenges faced by organizations when making and implementing decisions. The essay will also identify two key management accounting techniques and concepts applied in decision making. Management accounting is geared towards the provision of information to the management who considered it as an informational tool that is significant in making decisions and maximizing profitability. The management has three major roles; planning, organizing, and control (Eierle & Wolfganag, 2013). Management accounting assists in setting future goals by providing information that can be used in making decisions on whether to adopt a new production system, select the organization’ s price policy, and appreciation of the invested capital.
The interaction between the organizational processes and management accounting assists in the identification of organizational structure and for a better understanding of methods that determines authority. Concerning control, management accounting maintains the verification process of the methods and the extent to which the objectives have or have not been achieved (Diaconou, 2002). Control is one of the basic functions of management within an organization means that the implementation of policies is monitored and performances are evaluated.
Management accounting provides the organization with information that is used for studies that allow an analysis of deviations from budget and effective decision making. Organizations are faced with numerous decisions in every business day. However, there are general challenges experiences when making these decisions. One major challenge is the ability to filter valuable information and present it in a way that it becomes useful for the managers to make business decisions. While making decisions, managers must extract value from various business reports to inform decisions.
The extraction of information is limited by availability, consistency, user-friendliness, and accuracy. Organizations face uncertainties about the consequences of the decisions. Every decision has hidden within it a guess about the future and the consequences. The standard theory of rational choices presumes that the individual making a decision must have the knowledge and recognize the possible outcomes of the decision (Agid & Augustine, 2012). Nevertheless, this is somehow impossible as human beings are rational as their cognitive abilities and resources available determine their ability to seek and process information.
The universal theory presumes that preferences are consistent and stable. However, with time, preferences change and become consistent with one another. According to the theory of rational decision making, the decision-makers can rationally resolve conflicts through the evaluation of the conflicting alternatives and by choosing alternatives that all the decision-makers agree upon by the use of decision rule. However, the challenge is that in such circumstances, it is always difficult to come up with decision rulemaking that leads concessions to go perpetually and ultimately results in conclusion with no agreement (Burstein & Holsapple, 2008).
This is the reason why managers make decisions by relying on confidence rather than the formal settlements that enable then to reach a compromise.
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