ACC6001
Managerial Accounting
Group Research Project
Topics for Project: Growth and changes in Management Accounting
Weight 15%
Student name:
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Dr. …………………………..
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Table of Contents
ABSTRACT ................................................................................................................................................. 3
INTRODUCTION ........................................................................................................................................ 3
Uses and relevance of management accounting in management processes .................................. 3
Decision making process and management accounting...................................................................... 4
As the technology and business environment is changing, is the management account growing
in importance or is it becoming irrelevant. .............................................................................................. 5
Conclusion ................................................................................................................................................... 6
Work cited.................................................................................................................................................... 7
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ABSTRACT
An organization is usually faced with the challenge of making decisions, whether long term or
short term from time to time. Decision making is a comprehensive process involving the identification of
the problem and criteria for making decisions, allotting weights to those criteria, moves to creating,
analyzing and selecting problem solving alternatives, implementing the selected alternative and
evaluating the decision’s effectiveness(Atkinson, 2006). Making decisions is a crucial piece of
management. Decision-making is the procedure of picking among alternatives. Management accounting
is concerned with gathering and reporting internal financial data to encourage the decision-making
procedure. As opposed to financial accounting, management accounting is not needed to comply with
international accounting standards and guidelines. This makes a base for organizations to alter the
management accounting techniques, and create subjective, qualitative, quantitative and other methods to
help in decision-making.
INTRODUCTION
Management accounting is a branch of accounting that is concerned with preparation of
management reports and accounts to aid the management in DECISION-MAKING and control.
Management accounting provides monthly and annual reports that contain information that aids the
management in formulating strategies and policies for the organization, strategic planning for planning,
DECISION-MAKING, control of activities of the firm, and performance evaluation. It is also concerned with
gathering data, analyzing it, processing it into relevant INFORMATION, WHICH is then interpreted and
communicated to the relevant parties. The results can be used by different levels of management within
the organization for DECISION-MAKING and monitoring operations.
Uses and relevance of management accounting in management processes
Management accounting plays an important role in the organization’s management processes.
These processes include planning, organizing, controlling, direction, communicating and motivating.
In planning, the managers set the goals to be accomplished, set strategies and approaches of
how to accomplish them. Planning alerts the manager of possible future crisis likely to be encountered.
Management accountants provides information that guide in the formulation of the
future plans by
providing information to help in deciding what product to sell, in what market and at what prices and in
evaluating proposals for capital expenditure. It also provide data on past performance, creates budget
procedures and budget timetables in budgeting to help facilitate financial planning.
In control, management accountants will provide the management with relevant information that
enables managers compare the actual performance with expected performance and any deviations from
the expected are identified and corrective measures are taken. Management accounting provides the
control process with the relevance performance reports that compares the actual to the planned
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performance for each segment of the organization. Management accounting is an alert any other
activities that seem not to conform to plan.
In organizing, the managers use the information provided by management accountants to
establish a framework that allocates activities to be performed to the one to perform these activities. This
process will involve creation of units such as departments, branches and sections. Management
accounting provides performance reports and records of these created segments.
Motivation involves manipulating human behavior so that the participants will identify with the
objectives of the organization and make decisions that are in harmony with these objectives.
Management accounting provides financial budgets and performance reports to motivate the firm’s
employees.
To communicate means to make known, impart or transmit the information.
Management
accounting aids the communication process by installation and maintenance of an effective
communication system.
Decision making process and management accounting
The decision making process involves several steps. In the decision making process, the first
step is to identify the objectives that will enable the decision maker to assess attractiveness an objective
and what would make it more desirable than the other. Good decisions are based on the correct choosing
of objectives.
On choosing the objectives of the organization, the search for alternative course of action is done.
Strategies that can help achieve the objectives are chosen as many as possible. The search for
alternative causes of actions is based on the information available about the future opportunities and
environment. Management accounting provides the qualitative and quantitative information that will be
needed to assess the characteristic of these available opportunities.
On listing the potential alternatives, data relating to the alternatives is gathered and the potential
of each alternative is measured. The choice of alternative to be picked should portray high levels of
profitability than all other alternatives since the firm will commit resources and the overall state of the firm
will be affected by it for a lengthy period of time. These courses of actions taken affects the firm in the
long run and these decisions are referred to as long term or strategic decisions. They have profound
effect on the firm in the future. Management must also make decisions that affect the firm in the short run.
These decisions are called operating decisions or short-term decisions since they do not commit the
firm’s resources for a lengthy period of term. Data must also be gathered on the short-term courses of
action and the management must decide which course of action to take.
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The appropriate course of action must be selected after the available courses have been
compared and the one that best satisfies the objectives of the organization have been spotted.
Once the course of action has been selected, then implementation takes place as a part of the
budgeting processing. The budgeting process involves a financial plan for implementing various decisions
that the management make and it communicates to the entire organization about the part they play in
implementing the management’s decision.
Finally, the actual outcome is compared to the planned outcomes and the diversions from the
plan represent the control process. To monitor the performance, management accountants produce
performance reports and handle them to the relevant managers responsible for the implementation of
various decisions. The performance reports compare the actual outcomes and the planned outcomes and
are issued regularly to provide feedback information by comparison. According to Garrison (2006), these
reports will highlight the activities that are not in in line with the plans so that corrective actions can be
taken. Management accounting is involved with maintaining budget and other records of measure.
Every decision made involves a certain degree of risk. Management accounting provides
techniques that are used to measure the relevance of each alternative decision made. Among the
techniques is a cost-benefit criterion. This technique enable one to evaluate the costs associated with
each alternative and the benefits derived from each of them. Decisions are not made with absolute
certainty. A good decision has higher benefits than their cost.in evaluating the courses of action,
management accounting techniques are used since every decision must be evaluated under the costbenefit criteria. For decision chosen, the cost should not exceed the benefits, unless for the social
decisions where the cost can be equal to the benefit.
Management accounting deals with both financial and non-financial data, numerical and nonnumerical. A management accountant maintains the records of each unit and quantity produced and
other relevant fields. In assessing the viability a certain course of action, this information is relevant and
thus the use of management accounting. Management accounting picks up data from all database and
summarizes it into reports to facilitate the decision making process. It is evident that every stage in the
decision making process require management accounting.
As the technology and business environment is changing, is the management account growing in
importance or is it becoming irrelevant.
Advancement in technology has had great impact on management accounting. Introduction of
software that can manage accounting work have simplified and enhanced data storage, data security and
data retrieval. There is no change that has occurred in the nature of the management information on the
role that the management accountants play. There has been elimination of routine job, with centralized
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information; access to the information is easier and faster (Jones, 2006). Storage of data can be done
with much ease and can be retrieved easily. Data security is improved due to backups.
With easily available information at the click of a mouse, there are more diversified opportunities
in the accounting field available to management accountants. There extensive knowledge on new
accounting systems and which works best for which activity. Accountants become more knowledgeable
on the best systems and in return, there are advancements in management accounting field.
There has been an improved performance measure in the field of management accounting. This
has been due to development of systems such as SAP and ERP systems. With introduction of these
systems, the accounting systems are integrated and the operations are improved. Management
accounting techniques such as sales analysis, profit analysis, cost control and variance analysis uses
these systems and this simplifies the work of the accountants with minimal involvement in the data entry
process. These systems has cause the work of the management accountant to be more efficient,
effective, better decisions, more responsive to the accounting problems, accuracy in forecasts and also
better understanding of the cost behaviors (Gazely and Lambert, 2006).
Conclusion
. Decision-making will involve making decision in an environment that is risk free or a risky
environment or an uncertain environment. Irrespective of the situation of the environment, an organization
will need to pick the best alternative that will maximize their return and lower the risk. Management
accounting uses techniques that can help in risk aversion, risk measurement and measurement of returns
to help the firm arrive at an investment decision all based on whether the firm is risk averse (decision
maker who acts on the assumption of the worst outcome and choses the decision with the least risk), risk
neutral (not concerned with the most likely outcome, he is indifferent to risk) or risk seeking (decision
maker who is interested in the best possible outcome irrespective of how small the chances of occurring
are). With management accounting in play, the decision maker can rely on the information given to them
to make a decision under any given environment.
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Work cited
ATKINSON, A. A. (2006). Management accounting. Upper Saddle River, N.J., Prentice Hall.
GARRISON, R. H., NOREEN, E. W., & SEAL, W. (2010). Management accounting. London, McGraw-Hill.
GAZELY, A. M., & LAMBERT, M. (2006). Management accounting. London, SAGE Publications.
GOWTHORPE, C. (2008). Management accounting. London, Cengage Learning EMEA.
JONES, M. (2006). Management accounting. Chichester, England, Wiley.
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