Importance of Management Accounting in Decision-Making Process
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Added on 2021-01-02
Importance of Management Accounting in Decision-Making Process
Added on 2021-01-02
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MANAGEMENTACCOUNTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1LO 1 and LO 2.................................................................................................................................11. Importance of management accounting in decision-making process of organisation............12. Explanation of different types of management accounting system which used in reportingand its integration in business operation.....................................................................................23. Critically evaluating benefits of management accounting system and MA reporting incontext of organisational process................................................................................................34. Calculation of absorption and marginal costing and reconciliation statements......................6LO 3 and LO 4.................................................................................................................................9Planning tools of management accounting which indicate levels of effectiveness for Nero Ltd.Organisation................................................................................................................................9Use of planning tool in solving financial problem of organisation...........................................11Effective tools of management accounting in solving financial problems of Nero Ltd...........12CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................15
INTRODUCTIONManagement accounting is the tool which used to prepare management reports andaccounts in organisation (Kaplan and Atkinson, 2015). These are statements which provides anaccurate and statistical financial information to managers in developing short term decisions andto analysing day-to-day business operations. This report provides an assessment which relates toimportance of management accounting in developing decision making process in Sewportcompany. Types of management accounting system is also to be elaborated in this report with itscritical evaluation. Further, an explanation is to be provided on three planning tools used in MAand its level of effectiveness for solving financial problems of Nero Ltd organisation. Thus,illustration is given on importance of management accounting in achieving organisation success.LO 1 and LO 21. Importance of management accounting in decision-making process of organisationBusiness owners and managers of Sewport company have to face numerous decisions inregular operations of organisation (Importance of Management Accounting, 2018). Therefore, fordeveloping effective decision in organisation, management accounting statements providesuseful and accurate information which is related to day-to-day business operations. Suchinformation will relate to profit margin and labour utilisation which overall helps management indeveloping effective decision in achieving success of organisation. Its importance are as follows-Relevant Cost Analysis:Management accounting information used by mangers of company in deciding products whichneeds to produce for increasing sales volume of organisation. For developing effective products,MA helps in analysing revenue which earned by company and expenses which incurred fordeveloping business operations (Otley, 2016). Therefore, this accounting tool used to determinewhether to add any product line in organisation or to discontinue business operations.Activity-based Costing Techniques:This is the technique which helps management in determining activities which required toperform in selling products of organisation among customers. This is the activity which overallhelps in deciding which product has demand in business market which overall helps ingenerating profit for Sewport company.1
Make or Buy analysis:Importance of managerial accounting is to provide information related to manufacturing processof company. This process used to analysis overall revenue and expenses which incurred bycompany during its business operations. This analysis overall helps in developing decision inmanufacturing product which provide more profit to company. Utilizing the Data:Management accounting provides information which helps in analysing utilization of resourcesin organisation. Statements which provide effective guidance in developing decisions whichhelps in improving performance of Sewport company are budgeting, financial statements andbalance scorecards. Creates budget which helps in developing growth:This is the accounting process which helps in developing effective budget for operating businessoperations in business market (Cooper, Ezzamel and Qu, 2017). Set budget with information ofMA overall develops long-term profitability and growth of the company. These are the importance of management accounting which is used by owners ofSewport, in developing effective decision-making process. Decisions which developed withconsidering information of management accounting will overall result in long term profitabilityand growth of organisation.2. Explanation of different types of management accounting system which used in reporting andits integration in business operationManagement accounting system is the software which is used in Sewport organisation totrack accounting activities of company. Its objective is to provide information related to internaloperations of company. This information develop more emphasis on planning and controllingprocess of company. Different types of management accounting system which used in preparingreports are as follows-Cost Accounting Systems:It is a framework which used by Sewport organisation in estimating the overall cost ofproducts and services which offered by company in business market. This accounting systemevaluate profitability, inventory valuation and cost control of goods and services of company.2
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