Role of Managerial Accounting in Business Decision Making

This report discusses the role of managerial accounting in business decision making, including the importance of financial and non-financial information, forecasting future cash flows, and analyzing performance variance. It also highlights how managers rely on managerial reports to make informed decisions.

Running Head: Role of managerial accounting
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Project report: Role of managerial accounting

Role of managerial accounting
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Contents
Introduction.......................................................................................................................3
Role of managerial accounting.........................................................................................3
Financial and non financial performance.........................................................................4
Managers rely on managerial reports...............................................................................4
Result................................................................................................................................5
Conclusion........................................................................................................................6
References.........................................................................................................................8

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Introduction:
Management accounting is a process which helps the business to prepare the
managerial reports and the accounts in order to offer the accurate and timely statistic and
financial information to administrators. This information is used by the managers to make
various short term and long term decisions for the betterment of the organization. It analyzes
identities, evaluates, interprets and communicates the information about the organization with
the internal stakeholders so that the main goal of the business could be achieved (Hilton &
Platt, 2013).
Management accounting is quite different from the financial accounting. Managerial
accounting helps the business in forecasting the future and makes various decisions which
lastly help the business to chive the strategic goal of the business. In this report, the role of
managerial accounting, importance of financial and non financial information, managers rely
on the managerial reports etc have been studied to reach over a conclusion that how it help
the business to chive the strategic goal of the business.
Role of managerial accounting:
Managerial accounting helps an organization in various ways. The main role of
managerial accounting in an organization is as follows:
Assist the business in forecasting the future:
Managerial accounting evaluates that whether the company should invest in more
equipment? Do the company need to diversify the market? Acquisition must be done in the
business or not? It makes it easier for the business to make better decisions.
Help the business to take decision about make or buy:
Managerial accounting evaluates the production cost and the purchase cost of a
particular product in order to evaluate that whether the product must be manufactured by the
company or outsourcing must be done (Garrison, Noreen, Brewer & McGowan, 2010).
Forecast the cash flows:
It evaluates all the accounting transaction of the business which affects the cash level
of the business and on the basis of activities and current trend; it forecast the cash flow level
of the business.

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Understand the performance variance:
It evaluates the difference among the actual outcome and budgeted outcome in order
to measure that why the variances have occurred and how it could be resolved in the business
(Zimmerman & Yahya-Zadeh, 2011).
Analyze the rate of return:
It evaluates the total rate of return from a particular project to make the decision about
the investment.
Financial and non financial performance:
There are various management decisions in an organization which could be affected
because of the overall financial and non financial performance of an organization. All
business decisions require proper information that is normally related to the financial and non
financial position of the company. The financial and non financial figures and information
must be considered together by the managers as they assist the managers to assess better
decisions from the different perspective (Weygandt, Kimmel & Kieso, 2009).
Financial information is the information which could easily be expressed in terms of
figures and monetary terms such as the total sales, total expenses of the business, production
cost, land and building values etc. whereas, the non financial information could e not be
expressed in terms of figure an dollar values but affect a lot on the overall progress of the
business. The non financial information of an organization includes environmental effects,
social responsibilities, political situation etc.
In most of the case, it has been found that the main priority of the managers while
making any business decision is the financial information because it could be expressed and
understand in better way (Weygandt, Kimmel & Kieso, 2015). However, it must also be
considered by the managers that non financial factors also play crucial role in the business
and could affect the overall level of the business at any time.
Managers rely on managerial reports:
In order to identify the perspective and reaction of the managers on the managerial
reports and financial and non financial performance, two UAE organizations have been taken
into the concern which are Abu Dhabi national Takful Company and RAK properties. Abu
Dhabi national Takful Company is a takaful company which is mainly based in the Abu

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Dhabi market. The main product of the company is Green takaful. The company has been
formed in the year of 2003 and from that time, various changes have occurred into the
financial and non financial performance of the company. The managers of the company
evaluate all the financial and non financial factors while making a decision or planning the
strategies for the betterment and improvement in the organization (Home, 2018). On the basis
of the study, it has been measured that the strategy panning and the decisions of the company
are quite strong as the other factors could not affect the performance because they have
already been studied in the company while making the decision. Such as, in the year of 2016,
it has been estimated by the company that the financial performance of the company has been
improved at a great rate along with that the industrial and economical performance of the
company is also strong. The employees are enough motivated to work hard to achieve the
individual goals and the organizational goal, on the basis of that, a growth rate of revenue has
been decided by the company for the year of 2017. And the annual report (2017) explains that
company has been able to meet that objective because all the financial and non financial
factors have been considered by the company while making the decisions.
Further, RAK properties limited has been studied and it has been found that how the
financial and non financial information has been taken in concern by the company and how
the main aim of the business has been met. The company owns various properties in the Abu
Dhabi market. It runs various hotels and resort in the Emirates market from 2015 (Home,
2018). The company has been formed in the year of 2015 and from that time, various
changes have occurred into the financial and non financial performance of the company. The
managers of the company evaluate all the financial and non financial factors while making a
decision in the organization. On the basis of the study on the annual report (2017) of the
company, it has been found that all the decisions of the company have been made through
considering the financial items, figures and the non financial factors of the company such as
industrial and economical performance of the company. such as while deciding to invest in
the new property, the managers of the company have focused on the funds first and then a
market feasibility study has also been done by the managers so that the overall market
performance, demand, economical performance, occupancy etc of the business could be
measured and a better decision could be made accordingly.
Result:

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On the basis of the study on Abu Dhabi national Takful Company and RAK
properties it has been found that both the companies and their managers are taking the
concern of financial and non financial information both to make the organizational policies
and reach over a conclusion about the various decisions of the company. In terms of Abu
Dhabi national Takful Company, it has been found that the total contribution of the comapny
was AED 320.8 million by the end of year 2016 and on the basis of this, it has been estimated
by the managers of the company that the growth of the company in next year would be 20 to
22% because the financial figures of the company are in the favour of the company and
represents that there is continuous growth in the overall turnover and net profitability level of
the business (Annual report, 2016). Along with that, the industrial factors and the economical
position of the UAE market explain that the performance of the country is continually
improving which would help the business to meet the common goal of the business. On the
basis of that, the decision has been made by the business and it has been found that the
overall 225 growth has been taken place in the total revenue of the business (annual report,
2017). It represents that the consideration of the financial and non financial information are
crucial in the business as it makes it easier for the business to take better decision for the
overall growth of the business.
Further, the study has been performed over RAK properties limited. In terms of RAK
properties Company, it has been found that the total invested properties of the comapny were
AED 1660,887 thousand by the end of year 2016. The managers have evaluated that there are
various new properties and the investment into those properties would improve the market
share and the overall performance of the company in the market. the managers of the
company has focused on the funds first and then a market feasibility study has also been done
by the managers so that the overall market performance, demand, economical performance,
occupancy etc of the business has been measured and through this study they reach over a
conclusion that the investment into the new project would lead to the performance of the
company at better level as the financial and non financial performance of the company, both
are in the favour of the company (Bayut, 2018). After taking this decisions, the investment
properties of the company has been AED 2023147 thousand by the end of year 2017.
Because of this decision, the occupancy rate, market share and the total profitability level of
the business has also been improved and it represents that the consideration of the financial

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and non financial information are crucial in the business as it makes it easier for the business
to take better decision for the overall growth of the business (Annual report, 2017).
Conclusion:
To conclude, it has been found that the financial and non financial, both the
information play crucial role in an organization. Ignorance of any information (whether its
financial or non financial) could affect the overall performance at huge level. So, it is
concluded and recommended to the managers to do not rely on any of the financial and non
financial information as whole. Both the information must be taken into concern as whole so
that the best decisions could be made by the business. The financial and non financial
information offer a better base to the business to make decision and achieve the overall
objective of the business.

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References:
Annual report. (2016). Abu Dhabi national takaful company. (online). Retrieved from:
https://takaful.ae/wp-content/uploads/2017/02/TAKAFUL-AR-2016-English.pdf
Annual report. (2017). Abu Dhabi national takaful company. (online). Retrieved from:
https://takaful.ae/wp-content/uploads/2018/03/Annual-Report-2017.pdf
Annual reports. (2017). RAK properties. (online). Retrieved from:
https://rakproperties.net/wp-content/uploads/2018/09/2017-Annual-report.pdf
Bayut. (2018). Investment in RAK properties. (online). Retrieved from:
https://www.bayut.com/mybayut/expert-advice-investing-rak-properties/
Garrison, R. H., Noreen, E. W., Brewer, P. C., & McGowan, A. (2010). Managerial
accounting. Issues in Accounting Education, 25(4), 792-793.
Hilton, R. W., & Platt, D. E. (2013). Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Home. (2018). Abu Dhabi national takaful company. (online). Retrieved from:
https://takaful.ae/en/
Home. (2018). RAK properties. (online). Retrieved from: https://rakproperties.net/
Warren, C., Reeve, J. M., & Duchac, J. (2013). Financial & managerial accounting. Cengage
Learning.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2009). Managerial accounting: tools for
business decision making. John Wiley & Sons.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & managerial accounting.
John Wiley & Sons.
Zimmerman, J. L., & Yahya-Zadeh, M. (2011). Accounting for decision making and
control. Issues in Accounting Education, 26(1), 258-259.