IntroductionThe definition of accounting involves four key ideas; it is a measurement process by nature, its scope consists of operational and financial information, its aim is assisting the organization in achievement of strategic goals and it is attributed in enhancement of the phenomena that is measured, provision of decision making information thus, supporting, encouraging and creating beliefs, shared values and mind sets. Accounting can also resulted into two sub disciplines that are financial and management accounting. Financial accounting involves providing the information outside the organization to the stakeholders. Management accounting consists of provision of information within the organization and involves collaborating in decision making in the organization, devising management systems on planning and performance, providing expertise in financial control and reporting with an aim of assisting the management to formulate and implement the strategy of the organization.
The main role of management accounting in the firm to support decision making that is competitive through collection, processing and communication of information that will assist the management in planning, evaluating and controlling the processes within the business and the firm’s strategy.
Moreover, the ability to use ad develop good management accounting is an essential ability for different individuals such as professionals in finance, managers in marketing and operations, information technologists and other executives in top levels. In most cases, large organizations have top accountants in every division known as a controller where a large portion of management accounting is performed in these divisions under the controller’s leadership. In addition, the controllers reports to the overall finance officer. In this case, all these individuals have the responsibility of ensuring that there is a flow of good information on accounting that supports the control, planning and evaluation work within the entire organization (Nagy, 2010).
The operations in an organization are based on the decision-making processes where the managers enhance the establishment of the most effective decisions for implementation. Management accounting requires application of mathematical calculations in order to come up with the decision that is effective to implement. Due to continual in complexity of business processes, management accounting has proved to be a very essential tool for making decision in the organizations. There is a variety of potential benefits for management accountants in the course of understanding the diverse explanations that exists in the processes of decision-making.
The process of decision-making involves creation of policies that will be employed in order to achieve the organization’s goals and objectives. In an organization, the decision making process involves a step-to-step activity. Making of the decision involves solving of problems that affect the stakeholders and the organization. Thus, the whole process is aimed at establishing solutions to problems various problems faced by the organization. Making of the decision involves various individuals and the ultimate decision to be employed as the organizational policy requires screening by the organization’s top management.
Due to increased competition and short life cycles of various products and services, employment of managerial accounting has been crucial in the success of organizations. This means that the management accountants must understand the implications of their decisions in a financial perspective. Managers must be aware of any major changes in the standards of financial accounting since these standards affect the reporting on the results on managerial decisions. Thus, the managerial accountants’ potential benefits in understanding of the diverse explanations that exists in the processes of decision-making can be discussed using the strategic cost management using the following themes; strategic position analysis and cost driver analysis.