The paper "The Role of Managerial Accounting in the Management Process" is a wonderful example of a Management Assignment. The business world continues to experience tremendous operational changes over the last few decades. The significant changes in the business environment are a result of the evolution of technology. The invention and adoption of new technology have seen organizations rethink their way of doing things. Further, the increase in global competition has prompted businesses to devise new methods of conducting their activities. Organizations are now using different management approaches in their operations.
Management accounting is one of the systems that continue to experience significant changes due to adoption of new technologies (Horngren et al. , 2002) The process of management accounting involves the preparation of management reports. The management report ensures the provision of accurate and timely information. The financial information provided in the accounts allows managers to make informed decisions. It is very difficult for managers to make daily decisions without the help of managerial reports. There usually arises confusion between the management and financial accounting systems and organizations end up giving different interpretations (Bromwich, 1990).
Financial accounting involves the preparation of financial reports at the end of a financial period, which is usually one year. The financial information contained in the annual reports usually applies to external users especially the investors. On the other hand, management accounting entails the preparation of management accounts within a very short period. The reports are usually produced on a weekly or monthly basis. The information contained in management reports is usually meant for internal use. The users of the information include departmental managers and the Executive Officer.
The information provided assist managers in making short term decisions. Some of the information in the report includes the amount of cash available, proceeds from sales, total credit and debt (Bromwich, 1990). The following report analyzes the purposes and significance of management accounting in an organization. It also evaluates various cost structures appropriate for businesses. Further, the report seeks to determine the most suitable methods of computing break-even, profitability, and capital input costs. Discussion Purpose of Management Accounting Management accounting plays a significant role in an organization. In particular, the impact the system has on the future growth and sustainability of businesses.
Following the rapid growth of businesses, it is essential to understand clearly the purpose of management accounting. The main purpose of accounting management is to assist organizations to achieve their objectives. The system is not merely meant for providing financial reports on a weekly or monthly basis. However, the management reports serve a higher purpose of ensuring that the business can achieve its strategic goals. To understand the purpose of management accounting, it is important to know the various attributes of the system (Bufan, 2013).
First, is the technical aspect of the system, which provides information that is relevant for decision making. The second one is the behavioral aspect; the aspect promotes the adoption of actions in line with the goals of the business. The third element of management accounting is the cultural aspect; this aspect creates an environment where cultural values and beliefs are shared. Relevance of Management Accounting The system of management accounting plays an important role in the management of organizations. The following are areas in which management accounting is relevant.
First, the system is very relevant to the planning function of management (Bufan, 2013). During the planning process, the managers depend on management accounting knowledge. Management accounting assists planners in coming up with plans for providing accounting information that is essential for planning. The information helps planners to decide on the products to produce, the target market and the price at which to sell the products. The decision on which products/services to offer is significant to the growth of a business. Failure, to make an informed decision may result in the collapse of the business.
After deciding what product/service to sell, it is important to determine the target market for the products/services. Further, it is important to decide the price of the products/services. The management accounting information helps planners to decide on the type of product to sell, a suitable market for the products and the price of the products.
Alhabeeb, M. J., 2012, “Break‐Even Analysis,” Mathematical Finance, 247-273.
Bromwich, M., 1990, “The case for strategic management accounting: the role of accounting information for strategy in competitive markets,” Accounting, Organizations and Society, 15(1), 27-46.
Bufan, I. D., 2013, “The Role of Managerial Accounting in the Management Process,” Anale.SeriaŞtiinţeEconomice.Timişoara, (XIX), 73-76.
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., and Schatzberg, J., 2002, “Introduction to Management Accounting,” Chapters 1-17, Prentice Hall.
Worrell, E., Laitner, J. A., Ruth, M., and Finman, H., 2003, “Productivity benefits of industrial energy efficiency measures,” Energy, 28(11), 1081-1098.