MANAGEMENT ACCOUNTING

Management Accounting in Business Organizations



Management Accounting in Business Organizations

Introduction

Management accounting is a practice in which accountants organize financial information that can be used by managers to make business plans and strategies. A management accounting information system describes management accounting that comprises both the classical functions of an accountant, such as the organization of financial statements, and the incorporation of computer programs that are used to optimize an overall process. Many experts believe that a system includes accountants, data, procedures, and computer programs. When professionals talk about information systems, however, they are normally referring to accounting software. To choose the best management accounting information system, it can be helpful to first make sure that you have a list of needs and expectations so that you can narrow your search to include only products that meet your needs.

Management accounting makes planning easier for managers. In order to plan, managers use statistical data from management accounting. An example of this is going to be used about a seasonal mall kiosk. The kiosk is set up each year, at the same mall, and in the same location. To plan for each season, management use the previous year's sales, popular items sold the previous year, and operation costs or employee salaries. This data is used to determine how many employees can be hired, daily and yearly sales goals, and products that need to be sent to that location. When planning is done poorly, the kiosk could be understaffed or overstaffed, have little or no popular products, and not meet daily or yearly goals (Tinker, 2006, pp 369). For this example, popular products are delivered one month after the kiosk opens which can cause a loss of sales and not meeting goals. With any popular product not being available, some customers who were going to make large purchases or recommend the kiosk to their business or family and friends won't make a purchase at all and will likely give negative feedback to everyone they know. This shows poor planning which can and should be prevented. The budget is a quantitative expression of the plan that managers use to coordinate the business's activities. The budget shows the expected financial impact of decisions and helps identify the resources needed to achieve goals. Using the previous example, a budget is set for labour, travel, and set up/take down. With no budget in place, the company is sure to lose money, so managers use the previous year's data to set the budget each year.



Discussion

Functions of Management Accounting

Management accounting is basically concerned with the processing of data so that it may serve management needs. The fundamental object of management accounting is to assist the management in its main task of optimising profits. The assistance is given by presenting the information in various statements to enable the management to take correct policy decisions. The following are the basis functions of management accounting;

Forecasting and planning

Forecasting is essentially a technique of anticipation. It is on the basis of forecasting that ...