Friday, 18 December 2015

Why Management Accounting is Essential in any Organisation

In any business or organisation management accounting is required to plan and manage the activities and to make decisions.  Managerial or Management accounting refers to Recognising, estimating, inspecting and exchange of information which helps the managers with financial data and helps them to make decisions within the organisation and govern the appropriate control over the resources within the organisation. Decision makers or accountants within the organisation plan managerial accounting procedure to achieve the opportunity of knowledge. Managerial accounting includes terms financial accounting and cost accounting.

In management accounting, financial accounting relates to giving the information to those that are outside the organisation such as shareholders, stockholders, government agencies, creditors on the other hand Cost accounting includes the procedure of adjust the cost of accurate results or activities. Decision makers implement cost accounting information for both that is within the organisation and outside the organisation.

Managerial accounting primarily executes two purposes, first is to originate daily reports which involves information about planning, cost management and controlling of performances of organisation. Second is to produce details for managers which are used in strategic decisions and tactical decisions and these details are generated by accountants .These decisions involves occurrence like pay for product and services ,selection of important product, spending on resources and develop polices.

Management accounting is required in business because it helps to improve the business performances and also enhances the financial position of business. Management accounting enhances the execution of organisation operations; with the increase in organisational performance managers can take promotional determinations. With the help of financial statements managers can decide how to do growth of organisation and improvements. One of the main advantages of management accounting is to administer the organisation cash flow activities within the organisation. With the help of management accounting, managers are able to handle organisation critical decisions and help to solve these decisions.

Main functions of management accounting is to plan the business or organisation activities on the basis of reports, formulating plans and organizing business activities by assigning work to people who are working in organisation , controlling business performances through financial statements and on the basis of these results it helps to make decisions . Managers can make decisions of organisation by recognizing problems of organisation, set the goals and targets, by making different methods to a particular course of action, collecting information about each course of action and to make decisions by choosing one method out of all.

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