Assignment On Managerial Accounting
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Added on 2019-09-30
Assignment On Managerial Accounting
Added on 2019-09-30
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Blog WritingTopic: What is the primary goal of managerial accounting?Keyword: Managerial AccountingManagerial Accounting is the process through which information is provided to the management of the organization for better decision making. Thus various costs, expenses, and revenues are measured, analyzed and interpreted for the managers to make informed decisions about the activities of the organization. The most important difference between managerial accounting and financial accounting is that the latter is used for reporting to the outside stakeholders of the company while the former assists in decision making within the company. Managerial accounting uses various forms of accounting which can help the decision makers take relevant decision based on the capability and goals of the organization. It helps to provide the metrics related to the operations and conduct of the business. Information related to the costs and expenditure helps to decide on the products and services offered by the company at prices which meet the needs of the target customers. The data from such metrics are used to plan and prepare the budget which is an important aspect of managerial accounting. Any deviations from the planned performance metrics indicate a sign of changesto be made for the achievement of the goals. Margin Analysis and Managerial AccountingOne of the attractive features of managerial accounting is that it helps to conduct margin analysis for better decision making. Decisions regarding the selection of the projects and opportunities are important decisions as it can help the company build competitive advantage for long term operations and performance. Including the aspect of margin, analysis helps the decision makers to gauge even the intricate details required to take correct decisions at the right time. Managerial accounting includes margin analysis, to ascertain the profits and compare them with various types of costs. It helps in determining the price to be charged for per unit of products and service. There are a number of margins which need to be calculated for providing information for managerial accounting. Some of the important ones include:Contribution Margin- This margin is calculated by deducting the variable expenses from the sales and dividing the figure by total sales amount. This margin has an
important role in managerial accounting as it helps the managers to see the impact ofthe variable costs on the business and other fixed costs. Profit Margin- The calculation of profit margin involves deducting all expenses from the sales and then dividing the figure by the sales amount. It is the most widely used margin in managerial accounting and closely watched by the managers to understand the performance of the organization. Gross Margin- This margin is calculated by deducting the cost of goods sold from the sales and then dividing the figure by the sales amount. The main difference between gross margin and contribution margin is that the contribution margin does not include fixed costs. It plays a role in managerial accounting by determining real product margins for the business. Operating Margin- This margin is calculated by deducting operating expenses and the cost of goods sold from sales and then dividing the figure by sales amount. It plays the role in managerial accounting by determining the actual results of operations before the financing costs are taken into consideration. The margins calculated for managerial accounting are plotted on a trend line to identify the drops and spikes in the margin as experienced during the course of the business. The goal of managerial accounting is served as it enables to investigate why such changes have occurred. The management of the company can track such changes and adopt measures to maintain constant margins. Goals of Managerial AccountingAccounting is one of the key aspects for gaining information about a company whether by theinternal or the external stakeholders. It helps to record and report the operations of the business which can achieve short and long term goals. Though managerial accounting is more concentrated towards the use of such information by the management and executives of the company, it includes all the aspects of financial accounting to achieve its goals. Some of the important goals of managerial accounting are as follows:Planning and DevelopmentManagerial accounting has the important responsibility to plan and create development reports for the company. The managers are required to make decisions about the allocation ofthe resources for the long term objectives of the company. They need to plan the future activities of the company which are based on the past performance of the organization.
Taking timely and precise decisions can help in exploring the opportunities in the dynamic business environment. Thus the managers are required to determine the future costs which will be borne by the company to achieve its target profits. Such an estimate is used for pricingthe products and services in the market. Controlling and EvaluationAnother major goal of managerial accounting is to assist in controlling and evaluating the business for its performance in a certain period. Such control and evaluation process provide information about the effectiveness of the business among the competitors. When any business organization plans for the future period, it is also important to see how well it has achieved the results. The controlling activities basically involve, assessing and analyzing the business for the achievement of the goals. Performance reports are used to fulfill this goal of managerial accounting. The comparison of the previous results with the current period results provide information on how well the company will meet its targets. Making DecisionsAnother important goal of managerial accounting includes making the decision for the present and future of the company. The information and data provided through such methods help in taking vital decisions for the growth of the organization. The managers have the responsibility to take a decision which can help build the competency of the organization. There are a number of decisions which are required to be taken in the daily conduct and operations. Managerial accounts help to establish the base of such decisions. Reporting for internal and external usersAnother major goal served by managerial accounting related to reporting for the internal and external users of the company. The performance of the company should be reported to the stakeholders and management who ascertain the position and suggest methods for improvement. The internal management has direct control and access to bring changes in the organization while the stakeholders can influence the decisions of the company through their power and control. Some experts even suggest that the stakeholders of the company should be prioritized so that their interests are not missed. The managerial accounting forms the basis of internal and external reporting as it gauges the performance of the company in any period. The reports created in managerial accounting is customized to suit the information needs of the managers and also include non-financial information which affects the operations of the organization.
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