MANAGEMENT ACCOUNTING TECHNIQUES

Management Accounting Techniques

Table of Contents

Management Accounting Techniques3

Introduction3

Activity-Based Costing9

Activity Based Costing in Age of Information Technology11

Background of Activity Based Costing12

Allocation of Direct and Indirect Expenses14

Tracing Overhead and Indirect Costs16

Complete Management Accountant20

Organizational Roles of Management Accountants23

Increasing Emphasis on Organizational Strategy24

Impact of Information Technology27

Interaction with Other Organizational Members31

References35

Management Accounting Techniques

Introduction

The heart and core of this paper is to analyze the concept of Management accountancy is the term used to describe the accounting methods, systems, and techniques which, coupled with special knowledge and ability, assist management in its task of maximizing profits or minimizing losses. The accounting methods systems and techniques are those designed to meet the specific needs of the business concerned. The process of identifying, measuring, analyzing, interpreting, and communicating information in the pursuit of an organization's goals is known as managerial accounting. It is an integral part of the management process. Day-to-day work of the management team comprises of four activities: decision-making, planning direct operational activities and controlling.

Objectives of managerial accounting provide managers with information (e.g. the cost of products, budgets, cash flows). The information includes financial and nonfinancial data to help managers with strategic planning and decision making. Assists in directing and controlling (analyzing and comparing actual performance to budget plans; attention-directing to highlight successful or problem areas). It motivates managers to achieve the organization's goals by communicating the plans, providing a measurement of how well the plan was achieved, and promoting an explanation of deviations from plans. Measures performance not only for the entire organization, as in financial accounting, but also for many subunits as well (divisions, departments, managers). Assesses the organization's competitive position in the rapidly changing business environment. Looks at how well the firm is doing internally, in the eyes of its customers, from the standpoint of innovation and continuous improvement, and financially. Management accountant the person responsible to describe the financial policy, philosophy and strategy and the application of appropriate financial planning and controlling accounting systems. Compared to financial accounting, managerial accounting is a young discipline. Managerial concepts are still evolving. Several changes in the business environment are important to managerial accounting. They are as follows: Service versus manufacturing firms. Examples: telecommunications, financial services, and airline industries. Most services cannot be inventoried like manufactured goods.

Many of the techniques developed for measuring costs and performance in manufacturing companies have been adapted successfully to service industry firms. Emergence of New Industries: Discoveries such as genetic engineering challenges the field of managerial accounting as it seeks to provide relevant information in these new high-tech industries. Global competition: Intense international competition is forcing companies to strive for excellence in product quality and service more than ever before. JIT- raw materials are purchased or produced just in time to be used at each stage of the production process TQM-monitoring quality and measuring costs to maintain quality Continuous improvement- the constant effort to eliminate waste, reduce response time, simplify the design of both products and processes, and improve quality of customer service. Cost management perspective gives another ...