The Role of Management Accounting in Decision Making

Reply to post 1
Ran, you post seems quite interesting. I feel that you seem to have undermined the role of
management accounting when compared with financial accounting. I believe that decision
making especially on the part of management is aided more by the former than by the latter.
This is because financial accounting tends to be mostly backward looking where the financial
performance of the company over the past period under consideration is considered. Even
though the management does provide a commentary about future outlook but the same seems
to be derived on the decision taken based on management accounting related information
(McLaney & Atrill, 2014).
These management reports could provide significant decision making capabilities to the
management based on the estimates provided. Using the estimated future outlook, the
management then decides on realistic goals that it aims to achieve which is then
communicated to the shareholders (Heisinger, 2014). I completely agree with the point you
made about customer focus being imperative for both for profit and not for profit
organisations. This is a key aspect which tends to drive business decisions as long term
wealth cannot be created without satisfying the customers and building a brand around the
same (Petty et. al., 2016).
References
Heisinger, K.(2014) Essentials of Managerial Accounting 4th ed. London: Cengage Learning.
McLaney, E. & Atrill, P. (2014) Accounting and Finance: An Introduction, 7th ed. Harlow:
Pearson Education Limited
Petty, J.W., Titman, S., Keown, A.J., Martin, P., Martin J.D. and Burrow, M.(2015),
Financial Management: Principles and Applications 6th ed. Sydney: Pearson Australia
Reply to Post 2
Saf, an addition that I would like to make relates to management accounting. The financial
status of the organisation is reflected through the use of financial accounting but this is only
true for external users. The management is aware of the financial performance of the
company based on regular updates with regards to production, sales and other information
such as variance report. I agree that the focus of financial accounting is more on quantitative
data which may be attributed to the lack of flexibility available. This is not the case in

management accounting as there is absolute leeway available with the company for present
their reports (McLaney & Atrill, 2014).
I completely agree with your stance on performance where profit is not the only objective.
Considering that the company needs to be sensitive to the needs to other stakeholders and
increased sensitivity of the shareholders with environment& social concerns, it is essential
that the business activities must be carried in a manner which aims to build wealth for the
shareholders in the long run. Further, decision making is imperative aspect of business which
is to be facilitated through the use of information (Bhimani et. al., 2017).
References
Bhimani, A., Horngren, C.T., Datar, S.M. and Foster, G.(2016), Management and Cost
Accounting, 4th ed. Harlow: Prentice Hall/Financial Times
McLaney, E. & Atrill, P. (2014) Accounting and Finance: An Introduction, 7th ed. Harlow:
Pearson Education Limited
Reply to post 3
As highlighted by you both management accounting and financial accounting tend to play a
pivotal role in decision making. From the management perspective, management accounting
is of significance as it deals with internal decision making. In order to facilitate the same, a
host of information is required for the top management to provide strategic direction
especially aimed towards the future. The accounting information systems tend to provide real
time information to the managers which allow them to take corrective action in a prompt
manner. Financial accounting primarily provides information for the use of external users but
for the internal users it is used as a key measure of performance which may be used to
determine the performance related pay (Deegan, 2014).
A noteworthy point that you have highlighted is that the organisation is not driven by only
profits but also customer satisfaction. In this regards, it is critical to highlight that there is a
paradigm shift with regards to performance measurement as companies are shifting towards
holistic systems such as balanced scorecard (Drury, 2016). In such measures, the role of
information is higher as non-financial information and parameters also become significant.
Going forward, decision making would require more information owing to rising complexity
and variables to be considered when making a decision (McLaney & Atrill, 2014).
References