Managing Operations and Finance

Managing Operations and Finance
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Contents
Introduction...........................................................................................................................................3
Role of Management Accounting and difference with financial accounting..........................................4
Investment appraisal..............................................................................................................................7
Importance of business plan and budgeting.........................................................................................10
Balanced scorecard method.................................................................................................................12
Conclusion...........................................................................................................................................14
References...........................................................................................................................................15
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Introduction
Management Accounting has become a very essential part of business management and
business organizations are giving Management Accounting equal importance as financial
accounting. Management Accounting helps in improving the internet performance of the
company by evaluating the data collected with the help of financial accounting. Therefore it
can be said that the success of a business organization is dependent on effective and efficient
financial as well as management accounting (Otley, 2016). This report will identify some of
the basic differences between financial accounting and Management Accounting along with
the importance of Management Accounting in a business organization. This report will also
use project appraisal techniques for selection of a particular project on the basis of its
financial viability. At last usefulness of the balanced scorecard, the method will be discussed.
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Role of Management Accounting and difference with financial accounting
Management Accounting has become a very essential part of business management as it
helps business managers to take important business decisions. Data collected by business
managers through financial accounting is taken as primary data in Management Accounting.
Information provided by managerial Accountants helps in the development of long term as
well as short term business strategies (Weygandt, Kimmel and Kieso, 2015). Importance of
Managerial Accounting in business can be explained with the help of the following factors-
Productivity and profitability of a product- management of the company can easily
identify the profitability and productivity of a product with the help of financial statement
analysis which is a part of managerial accounting. Management uses trend analysis of
historical data for evaluating whether a particular product is profitable or not. Decisions in
relation to expansion or shutdown can be taken with the help of managerial accounting.
Purchase for manufacturing decision- Decisions in relation to production or purchase of
raw material is also important to maintain effective balance in the cost structure (Appelbaum
et.al, 2017). With the help of managerial accounting, the various factors can be considered by
business managers before taking such decisions in the interest of the company.
Managerial decision making- Managerial accounting please very important role in the
decision-making process of managers. Different Tools and techniques of managerial
accounting such as budgeting, cost analysis, break-even analysis, etc. are used by managers
or before evaluating any business decision.
On the basis of these factors, it can be said that the importance of managerial accounting is
equal to financial accounting if not more.
Difference between financial accounting and managerial accounting
Managerial accounting Financial accounting
Reports generated with the help of
managerial accounting are used for internal
purpose only.
Managers are required to prepare reports in
financial accounting that will be shown to
every stakeholder in the organization
(Narayanaswamy, 2017).
There are no specific rules and regulations
governing Management Accounting in
Specific rules and regulations such as
financial accounting standards and financial
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