Management Accounting Environment
Every organization small, medium and large needs someone to be in charge of day to day activities that is going to be responsible for decision making, planning, controlling, directing personnel, outlining organization structure and will be responsible for taking strategies in competitive advantages. In today’s business environment, corporate organizations need to take every advantage they can to remain competitive due to highly increasing competition in the market, i.e. electronics commerce ( e-commerce) and introduction of new technology day by day.
Customers need specialized products and service and accurate information ...view middle of the document...
Management processes are the methods that aid the structuring, investigation, analysis, decision-making and communication of business issues. Examples include strategic planning process, talent planning, expense and capital budgeting, performance management systems, product planning and management cost accounting. Its purpose is to ensure a disciplined and consistent approach to analysis and decision making. It facilitates the use of a logical thought process that is consistent with the objectives of the firm. The capital budgeting process, for example, is based on financial market disciplines that encourage wise investment.
Furthermore, management processes should be seen as a support to and not a replacement for management judgement. These processes require the development of expectations about the future and provide guidance in light of the associated assumptions. The wise manager uses these tools as inputs to decision making which, when combined with business acumen, provide a solid basis for choice.
Management accounting is the provision of financial and non-financial decision making information to managers. It is also a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an accounting is the process of measuring organization’s strategy.
Management Accounting defined
Management Accounting is the process of measuring and reporting information about economic activity within organizations, for use by managers in planning, performance evaluation, and operational control.
Planning: For example, deciding what products and services to make, and where and when to make them. Determining the materials; labor, and other resources that are needed to achieve desired output. In not-for-profit organizations, deciding which programs to fund.
Performance Evaluation: Evaluating the profitability of individual products and product lines. Determining the relative contribution of different managers and different parts of the organization. In not-for-profit organizations, evaluating the effectiveness of managers, departments and programs.
Operational Control: For example, knowing how much work-in-process is on the factory floor, and what stages of completion, to assist the line manager in identifying bottlenecks and maintaining a smooth flow of production.
Management Accounting is used by businesses, not-for-profit organizations, government, and individuals. Businesses can be categorized by the sector of the economy in which they operate. Manufacturing firms turn raw materials into finished goods, and we also include in this category agricultural and natural resource companies. Merchandising firms buy finished goods for resale. Service sector companies sell services such as legal advice, hairstyling and cable television,...