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Decision Making with Managerial Accounting

Discusses decision making with managerial accounting.

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    DECISION MAKING WITH MANAGERIAL ACCOUNTING 1 Decision Making with Managerial Accounting Focus of the Final Paper Due to varying business characteristics, the managerial accounting techniques applied in each business may differ. For example, a business in the start - up phase may rely heavily upon budgeting and capital investment techniques; whereas, a business in the mature/maintaining phase may rely heavily upon cost management and quality control. Ultimately, the techniques used by management should assist the business in achieving its short - term and long - term goals through effective decision - making. For your Final Paper, you will analyze the role of managerial accounting in two parts. Part I will provide a general overview of managerial accounting. Part II will provide examples of how managerial accounting theories and principles are applied in the business world. You may find it helpful 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 accounting Describe the role of managerial accounting and the management accountant in a business or organization Describes ethical issues concerns for the management accountant Describes at least three managerial accounting techniques available and their application within a business or organization Part 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 Techniques Costing Methods Capital Investment Decision Techniques Budgeting Quality Control For each topic selected, present real world examples of the application of managerial accounting techniques within a business or organization. Examples may be gathered from your own professional experiences or from case studies obtained from credible sources (excluding textbook examples explored in previous weeks). Presentation of each example should include how 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 ACCOUNTING 2 Managerial Accounting focuses on providing relevant & useful information to the managers who will make use of the data for plan ning , control ling & making well informed decisions. These reports are prepared for the internal employees of the organization only. Since the reports are prepared for internal use only, there are no set standards or principles to be fo llowed in managerial accounting as in the case of financial accounting. It is an excellent planning & forecasting tool. Managerial Accounting The Institute of Management Accountants defines Managerial Accounting as “the process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used by management to plan, evaluate, and control an 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 Accounting provides the data which the managers of an organi zation generally use to make important decisions. E.g.: M anagerial accounting helps the manager to decide whether a particular project is doing well or not. If it is not doing well then what changes need to be brought about so that th e objectives are achieved . Rol e of Managerial Accountant in B usiness Managerial accountants are the key figures of an organization & play a strategic role in the success of an organization.  Res ource of information: Managerial Accountants are the data mine of any organization. Their primary task is to keep a track of financial data of their company which 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 ACCOUNTING 3 product. A major factor in determining the price of a product is the manufacturing cost. So the managerial accountant performs the cost analysis for the product & helps the manager to decide the price of the product so as to stay competitive in the market (Johnson, n.d.) .  Preparing Budget: Managerial accountants also prepare budgets . Some of the commonly prepared budgets are sales budget, production budget, cash budget, labo u r budget. These budgets help the management to decide & effectively put to use its financial resources.  Planning & Controlling: The information provided by the managerial accountant in the form of various reports generated by him also help in the planning & controlling function of the organization. In managerial accounting, the process of setting goals, determining resource requirements, and devising a means of achieving goals is referred to as "planning." Monitoring financial results and measuring the outcome of planning processes within the enterprise is called "controlling." The person in charge of an entity's accounting department is usually called the "controller." The controller generally plays a key role in both planning and controlling endeavours throughout the organization (Mole, n.d.) . Ethical Issues for the Management Accountant Managerial accountants are the employees of the organisation unlike the auditors who are not on the payrolls of the organization. Therefore, s ometimes managers put unnecessary pressure on the accountant to make the reports that highlight his achievements & alter the data that brings forth his weakness. It is the duty of the accountant not to give in to such pressures & present the true & actual picture of the organization. IMA has played a key role in developing “Standards of Ethical Conduct for Management Accountants”. These standards lay down the guidelines which are to be

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