FINANCIAL AND ACCOUNTING ANALYSIS

Financial and Accounting Analysis

Financial and Accounting Analysis

Introduction

The paper is discusses about the accounting and financial management and its core essence and the contribution of accounting and financial management in the business management. The paper includes the key differences between the two approaches along with the certain business limitation that occurs when the organization implements the financial and accounting management applications within the systems of the organization. The systems are equipped with the implications of financial and accounting management with respect to the issues and problems of the transaction and decision making (Milner, 1994, pp. 100-150). The purpose of management accounting in the organization is to support competitive decision making by collecting, processing, and communicating information that helps management plan, control, and evaluate business processes and company strategy.

Contribution of Accounting Management in Business Management

The traditional financial process consumes excess time, and adds very little value; it also restrains managers to respond quickly to changes in the environment of business. It focuses on performance incentives and fixed targets, which typically leads to unethical and dysfunctional, behaviour of the management. It is a traditional way of managing and controlling companies. Motivation, allocation of resources, planning, controlling and coordination of activities within an organization are and has been the primary purposes of budget. Severe criticisms and dissatisfaction toward the traditional budget have grown during the last decade (Leahy, 2002, pp. 20-76).

Benefits

Modern accounting budgeting is the foundation of an organization's management accounting system. It is a huge attention grabber of the researchers, as a valuable management accounting practice. All the researches produce evidence of consequences, considered dysfunctional, of budgeting (Leahy, 2002, pp. 20-76).

Various researchers suggest that budgets should be replaced with a combination of financial and non-financial measures, and performance is assessed against world-class benchmarks (Khan, 2006, pp. 113-137). Business units can also measure their performance against comparable units in the same organization (Khan, 2006, pp. 113-137). This shifts the focus from short- term profits to improving the competitive position year after year. Traditional Budgeting methods have many problems. The problem like, they are time consuming and expensive, Provide poor value to users, fail to focus on shareholder value, they are too rigid and prevent rapid response, protect rather than reduce costs, stifle product and strategy innovation, focus on sales targets rather than customer satisfaction, divorced from strategy, reinforce a dependency culture, can lead to unethical behavior (Leahy, 2002, pp. 20-76).

After examining all the weaknesses of accounting, managers seek a better solution. However, looking at the purposes of the process, it seems to be crucial for every enterprise (Jensen, 2011, pp. 32-42). The question now is how to handle this problem. There are two options. Either the accounting process can be attempted to be optimized, or the whole process can be eliminated and a new management philosophy can be created. Better accounting is an attempt to diminish the weaknesses and establish an effective accounting method (Chapman, 2006, pp. 116-125). The few approaches of Accounting are as follows (Leahy, 2002, ...