Decision Making with Managerial Accounting

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DECISION MAKING WITH MANAGERIAL ACCOUNTING1Decision Making with Managerial AccountingFocus of the Final PaperDue to varying business characteristics, the managerial accounting techniques applied in eachbusiness may differ. For example, a business in the start-up phase may rely heavily uponbudgeting and capital investment techniques; whereas, a business in the mature/maintainingphase may rely heavily upon cost management and quality control. Ultimately, the techniquesused by management should assist the business in achieving its short-term and long-term goalsthrough effective decision-making.For your Final Paper, you will analyze the role of managerial accounting in two parts. Part I willprovide a general overview of managerial accounting. Part II will provide examples of howmanagerial accounting theories and principles are applied in the business world. You may find ithelpful to reflect upon your own professional experiences for examples.Part I (three to four double-spaced pages, excluding the title and reference pages)Present the following:Define managerial accountingDescribe the role of managerial accounting and the management accountant in a business ororganizationDescribes ethical issuesconcerns for the management accountantDescribes at least three managerial accounting techniques available and their application withina business or organizationPart II (Four to six double-spaced pages, excluding the title and reference pages)Select at least three of the five topics identified below:Cost Management TechniquesCosting MethodsCapital Investment Decision TechniquesBudgetingQuality ControlFor each topic selected, present real world examples of the application of managerial accountingtechniques within a business or organization. Examples may be gathered from your ownprofessional experiences or from case studies obtained from credible sources (excludingtextbook examples explored in previous weeks). Presentation of each example should includehow a managerial accounting technique was applied in the business or organization’s decision-making model. Be sure to support your example with calculations when applicable.Introduction

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DECISION MAKING WITH MANAGERIAL ACCOUNTING2Managerial Accounting focuses on providing relevant & useful information to the managerswho will make use of the data forplanning, controlling & making well informeddecisions.These reports are prepared for the internal employees of the organization only.Since thereports are prepared for internal use only, there are no set standards or principles to befollowed in managerial accounting as in thecase of financial accounting.It is an excellentplanning & forecasting tool.Managerial AccountingThe Institute of Management Accountants defines Managerial Accounting as “the process ofidentification, measurement, accumulation, analysis, preparation, interpretation, andcommunication of financial information used by management to plan, evaluate, and controlan organization and to assure appropriate use of and accountability for its resources.Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies, and tax authorities.”(IMA,n.d.).Management Accountingprovides the datawhich the managers of an organizationgenerally use to make importantdecisions.E.g.: Managerial accountinghelps the manager todecide whether a particular project is doing well or not. Ifit is not doing well thenwhatchanges need to be brought about so that the objectives are achieved.Role of Managerial Accountant in BusinessManagerial accountants are the key figures of an organization & play a strategic role in thesuccess of an organization.Resource ofinformation:Managerial Accountants are thedata mineof anyorganization. Their primary task is to keep a track of financial data of their companywhich would be used by the management of the organization to base their decisions.For example,a manager of a manufacturing company needs to decide the price for the

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DECISION MAKING WITH MANAGERIAL ACCOUNTING3product. A major factor in determining the price of a product is the manufacturingcost. So the managerial accountant performs the cost analysis for the product & helpsthe manager to decide the price of the product so as to stay competitive in the market(Johnson, n.d.).PreparingBudget:Managerial accountants also prepare budgets. Some of thecommonly prepared budgets are sales budget, production budget, cash budget, labourbudget. These budgets help the management to decide &effectively put to use itsfinancial resources.Planning & Controlling:The information provided by themanagerial accountant inthe form of various reports generated by him also help in the planning & controllingfunction of the organization.In managerial accounting, the process of setting goals,determining resource requirements, and devising a means of achieving goals isreferred to as "planning." Monitoring financial results and measuring the outcome ofplanning processes within the enterprise is called "controlling." The person in chargeof an entity's accounting department is usually called the "controller." The controllergenerally plays a key role in both planning and controlling endeavours throughout theorganization (Mole, n.d.).Ethical Issues for the Management AccountantManagerial accountants are the employees of the organisation unlike the auditors who are noton the payrolls of the organization.Therefore, sometimes managers put unnecessarypressureon the accountant to make the reports that highlight his achievements & alter the datathatbrings forthhis weakness.It is the duty of the accountant not to give in to such pressures &present the true & actual picture of the organization.IMAhas played a key role in developing“Standards of Ethical Conduct forManagement Accountants”.These standards lay down theguidelines which areto be

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