Premium Essay

Accounting in Management

In: Business and Management

Submitted By kklovesyou
Words 319
Pages 2
Accounting is the language of business. In management, accounting is used on a daily basis to make important decisions. Managers use balance sheets to determine the cash on hand so they can know how to pay for purchases-with cash or with a payable. The balance sheet also tells us accounts receivable and accounts payable. This is important because it can help prevent a loss of income by following up with receivables and an overdue payment on payables. Knowing the company’s budget and how to read it is also an important aspect of management. It is vital to stay on or under budget to generate a profit and to make sure projects are going as planned. Accounting information can also tell managers trends in the company’s sales and profits so if sales start falling managers can recognize this quickly and fix the issue so they can continue to turn a profit. Accounting information is used in part to set the company’s goals, look at the performance of the company-from individuals to departments to the whole, and to make decisions about products. Without accounting, managers would have to make decisions based on instinct, rather than based on the hard facts like they are able to do by using the resources given to us by accounting. Upper level management uses the net income to decide how many, if any, dividends are paid out to stockholders. It’s also important to know how much inventory the company has in its possession so managers can decide how to proceed with either ordering more or lowering the price of the current merchandise. The company can use accounting information to determine where they are using more money or resources than necessary and to decide strategic business moves such as opening new plants and shutting down plants that aren’t cost efficient. Managing the overhead costs in production is also a way accounting can be

Similar Documents

Premium Essay

Management Accounting

...------------------------------------------------- Management accounting From Wikipedia, the free encyclopedia | This article contains wording that promotes the subject in a subjective manner without imparting real information.Please remove or replace such wording and instead of making proclamations about a subject's importance, use facts and attribution to demonstrate that importance. (February 2012) | Accounting | | * Historical cost accounting * Constant purchasing power accounting * Management accounting * Tax accounting | Major types of accounting[show] | Auditing[show] | People and organizations[show] | Development[show] |  Business portal | * v * t * e | In Management accounting or managerial accounting, managers use the provisions of accounting information in order to better inform themselves before they decide matters within their organizations, which aids their management and performance of control functions. Contents   [hide]  * 1 Definition * 2 Scope, practice, and application * 3 Differences between financial accountancy and management accounting * 4 Traditional vs. innovative practices * 5 Role within a corporation * 6 Specific methodologies * 6.1 Activity-based costing (ABC) * 6.2 Grenzplankostenrechnung (GPK) * 6.3 Lean accounting (accounting for lean enterprise) * 6.4 Resource consumption accounting (RCA) * 6.5 Throughput accounting * 6.6 Transfer pricing * 7 Resources...

Words: 3095 - Pages: 13

Premium Essay

Management Accounting

...Handbook of Management Accounting Research Volume 3 Edited by CHRISTOPHER S. CHAPMAN Imperial College London, UK ANTHONY G. HOPWOOD University of Oxford, UK MICHAEL D. SHIELDS Michigan State University, USA AMSTERDAM – BOSTON – HEIDELBERG – LONDON – NEW YORK – OXFORD PARIS – SAN DIEGO – SAN FRANCISCO – SINGAPORE – SYDNEY – TOKYO Elsevier The Boulevard, Langford Lane, Kidlington, Oxford OX5 1GB, UK First edition 2009 Copyright © 2009 Elsevier Ltd. All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone ( 44) (0) 1865 843830; fax ( 44) (0) 1865 853333; email: permissions@elsevier.com. Alternatively visit the Science and Technology Books website at www.elsevierdirect.com/rights for further information Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for...

Words: 187223 - Pages: 749

Premium Essay

Management Accounting

...Chapter 18 Comparison of Management and Financial Accounting The role of management accounting Management accounting differs from financial accounting in many respects: * Primary users * Management accounting information: managers, employees, supply chain partners * Financial accounting information: owners or stockholders, lenders, customers, government agencies * Report format * Management accounting: flexible format, driven by user’s needs * Financial accounting: based on generally accepted accounting principles * Purpose of reports * Management accounting: to provide information for planning, control, performance measurement, and decision making * Financial accounting: to report on past performance * Nature of information * Management accounting: objective and verifiable for decision making; more subjective for planning (relies on estimates) * Financial accounting: historical, objective, and verifiable * Units of measure * Management accounting: dollars at historical, current market, or projected values; physical measures of time or number of objects * Financial accounting: dollars at historical and current market values * Frequency of reports * Management accounting: prepared as needed; may or may not be on a periodic basis * Financial accounting: prepared on a periodic basis (minimum of once a year) Management accounting provides relevant information at each stage...

Words: 2364 - Pages: 10

Premium Essay

Management Accounting

...do business. These competitors set up strategy and management accounting system to improve their quality, cost and time. They had high quality, delivered products on time, and had low price. These competitors took market share from Reel Tape Inc. One of the reasons that led to Reel Tape Inc. lost its market share was the lack of a good management-accounting system. (Jan Bell, Shahid Ansari, Thomsa Klammer, and Carol Lawrence, 1997) What is management accounting Management accounting is a system of measuring and providing operational and financial information that guides managerial action, motivates behaviors, and supports and creates the cultural values necessary to achieve an organization’s strategic objectives. (Jan Bell, Shahid Ansari, Thomsa Klammer, and Carol Lawrence, 1997) A good management-accounting system can help firms to produce low cost products, maintain quality and deliver on time. A good management accounting information is technical, behavioral and cultural. First, technology can provide relevant information for strategic decisions. Management accountants should obtain information what they want through companies’ information system. This information should be timely and accurate. It helps management accountants analyze companies’ financial situation and then make decisions. Second, behavioral can encourage actions that are consistent with an organization’s strategic objectives. The decisions that management accountants made can help to achieve companies’ objectives...

Words: 2784 - Pages: 12

Premium Essay

Management Accounting

...Introduction According to Chand (2015), costing techniques are used by management for controlling cost and making managerial decisions. It systematically records expenses and analyses the cost of each product manufactured or service rendered by an organisation (Hariharan, n.d.). Firms choose to adapt to a specific costing theory that caters accordingly to their needs and objectives. Part 1: Evaluation of Costing Theories Costing theories are very important in business decision making. According to Hariharan (n.d.), they serve managers as a guide to make correct decisions such as what price to quote, whether to place order for inputs or whether to abandon or add a product to the production line. Costing theories also determines the price of the best alternative use of a factor of production and results in an efficient allocation of resources (Chand, 2015). The business will adopt the most profitable production inputs by identifying unprofitable activities, losses and inefficiencies (Chand, 2015) Costing theories also helps the decisions regarding the capital expenditure through the estimation of long-run function (Chand, 2015). This function will be useful to managers when deciding on the expansion or contraction of plant size in the firm and confirming that the present plant size is just nice for the output level that is being produced (Chand, 2015). It improves the overall productivity of an organisation and acts as an important guide in bringing prosperity to the firm (Vitez...

Words: 1822 - Pages: 8

Premium Essay

Management Accounting

...labour, overheads and sales variance), practical applications Budgeting and budgetary control mechanism Activity based costing, Responsibility Accounting Target costing Objective Objective of this course is to help student understand: 1. The essence of management accounting-effective use of the accounting information for planning, control and business decision making. 2. To use cost accounting as a managerial tool for business strategy and implementation. 3. To understand analyse the costing tools and their business application for enhancing revenue and profitability of a firm,. 4. To analyse various aspects of costing such as, marginal costing, absorption costing, allocation of costs, standard costing and variance analysis, activity based costing, target costing etc. 5. To understand the process of decision making, planning and budgeting in a business organisation. Pedagogy Lectures Discussions on case studies Term Projects and presentations Discussion and presentation on published research papers on related topics. Text book: Management Accounting: Paresh Shah, OXFORD UNIVERSITY Press, Edition, Eighth impression 2012. Reference Books: 1. Managerial Accounting, by James Jiambalvo, third edition, pub. Wiley 2. Management Accounting, M Y Khan & P K Jain, Pub. Tata McGraw-Hill 3. Managerial Accounting, Ronald W Hilton/ G Ramesh Pub.Tata McGraw Evaluation and Weightage (Total 100 Marks) Class Quiz : 10 Marks Class Assignment...

Words: 601 - Pages: 3

Premium Essay

Management Accounting

...Question 1 Introduction Management Accounting aids organization in the achievement of its purpose by providing accounting information on whether the actual financial achievements have met its expectations. The reason of the existence of management accounting is to help an organization achieve its goal; it is a service for meeting the “needs” of management. These “needs” must be determined first before the management accounting can be put to use. Cost Accounting is a type of accounting process that capture the organization’s cost of production. Cost accounting involve in all the assessments of the input cost of production in each and every step from pre-production to post-production. Pre-production step is the process where events like marketing surveys, marketing researches, product sampling, and other activities related to the products that are conducted before the start of productions. Post-production is the process where activities like, customer services and after-sales services occurred. Cost accounting will take into account of every single tiny bits of information regarding the costs of production to analyze and project the output into detailed and organized cost information. While financial accounting is usually what the investors and other outsiders typically see, cost accounting is for internal usage which usually exist to aid the company managers in decision making. Cost accounting is most beneficial to use as a tool for management in budgeting and setting up cost...

Words: 1581 - Pages: 7

Premium Essay

Management Accounting

...MANAGEMENT ACCOUNTING Study Material Prepared By INSTITUTE OF COST AND WORKS ACCOUNTANTS OF INDIA for Junior Accounts Officer(Civil) Examination Conducted By CONTROLLER GENERAL OF ACCOUNTS 1 BASICS OF COST ACCOUNTING 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 ♦ ♦ Evolution of Cost Accounting, Cost Concepts and Cost Classification Introduction Evolution of Cost Accounting Financial Accounting and Cost Accounting Management Accounting Financial, Cost and Management Accounting Cost Concept and Cost Object Cost Management Cost Classification Methods of Costing Techniques of Costing Specific Cost Systems Cost Department and its relationship with other Departments Installation of Costing System Specimen Questions with Answers Test Yourself Page . No 1 1 2 3 4 .5 6 7 10 12 13 14 16 17 18 20 1.0 EVOLUTION OF COST ACCOUNTING, COST CONCEPTS AND COST CLASSIFICATION 1.1 INTRODUCTION Traditionally, cost accounting is considered as the technique and process of ascertaining costs of a given thing. In sixties, the definition of cost accounting was modified as ‘the application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and ascertainment of profitability of goods, or services’. It includes the presentation of information derived therefrom for the purpose of managerial decision making. It clearly emphasises the importance of cost accountancy achieved during the period by using cost concepts in...

Words: 102642 - Pages: 411

Premium Essay

Management Accounting

...analysis is an area of accounting that provides management with relevant data. Discuss management’s use of this data for purposes of profit planning, policy formulation, and decision-making. It is essential to a business’s going concern that management executes proper profit planning, policy formulation and decision making. This is achieved with the help of tools such as cost-volume-profit (CVP) and break-even analysis. Break-even analysis determines the point at which revenue received equals the costs associated with receiving the revenue. Break-even analysis calculates what is known as a margin of safety, the amount that revenues exceed the break-even point. This is the amount that revenues can fall while still staying above the break-even point to ensure that profitability is maintained. The information used to determine and analyze the breakeven point includes fixed, variable and total costs and the associated sales revenues. A breakeven chart is a strategic tool used to plot the financial revenue of a business unit against time or sales to determine the point when sales output is equal to revenue generated. This is recognized as the breakeven point. It analyses the relationship between fixed and variable costs and to predict the effect on profitability of changes to those costs. The concept of CVP analysis examines the relationship among factors that impact on profits such as total revenue, total costs, and operating income. Specifically management can use CVP analysis...

Words: 434 - Pages: 2

Premium Essay

Management Accounting

...NATURE OF MANAGEMENT ACCOUNTING [SUMMARY] What is Management Accounting? Management Accounting is the process within an organization that provides information used by an organization’s managers in planning, implementing and controlling the organization’s activities. Management Accounting as One Type of Information Information is a fact, datum, observation, perception or nay other thing that adds to knowledge. An organization’s day-to day activities requires a considerable amount of operating information. This information provides the raw materials for the summarized information that is reported in the financial accounting and management accounting processes. Management Accountants Those employees of an organization who are responsible for the design and operation of the management accounting system are called management accountants. Treasurer – responsible for more outward directed tasks such as arranging loans and other external sources of funds. Steps to become a Certified Management Accountant File an application for admission and register for the CMA examination Pass all four parts of the CMA examination within a three year period Satisfy the experience requirement of two continuous years of professional experience in management and/or financial accounting prior to or within seven years of passing the CMA examination. Comply with the standards of ethical conduct for practitioners of management accounting and financial...

Words: 835 - Pages: 4

Premium Essay

Management Accounting

...Question 1 Introduction This report aims to compare the differences between Traditional costing system and Activities Based Costing (ABC) system. The advantages and disadvantages of both concepts determine which method is more superior for the business. Traditional costing concepts Traditional costing is to consider how much will cost to produce a product. It plays an important role in the business to predicting the profitability of a product. Traditional costing is also well known as the conversional method costing, which refers to the allocation of manufacturing overhead costs to the product manufactured (Harold, n.d.). Traditional costing assigns manufacturing overhead on the basis of volume of a cost driver, such as direct labor hours, production machine hours or direct material hours, all of which are needed to produce an item and the number of units produced. Different from activity- based costing, traditional costing is emphasis on costing information of external financial report in the business, because it provides the value of cost of goods sold. Many manufacturing companies use traditional costing system in order to divide the total cost of a product by the direct labor cost. Generally, the traditional costing method users make the assumption that the volume metric is the underlying driver of manufacturing overhead cost. Hence, under traditional costing method, accountants regard manufacturing costs only to product. Whereas, some cost such as administrative expenses...

Words: 3455 - Pages: 14

Premium Essay

Management Accounting

...Management Accounting first emerged as a significant activity during the early industrial revolution, in the leading industries and enterprises of the day. As such, Management Accounting arose after financial accounting, which can trace its origins to its stewardship role in European merchant trading ventures beginning in the Italian Renaissance. Two leading industries of the industrial revolution that played important roles in the early history of management accounting were textiles and railroads. New trend and concepts in Management Accounting are as follows: Just-in-time (JIT): During the last two decades of the 20th century, many companies implemented just-in-time programs designed to minimize the amount of inventory on hand. These companies identified significant benefits from reducing all types of inventories—raw materials, work-in-process, and finished goods—to the lowest possible levels. Total quality management (TQM): Quality programs go by several names, including TQM, zero defect programs, and six sigma programs. Theory of constraints: The theory of constraints is an operations management technique that decreases inventory levels and increase throughput in a manufacturing setting. Lean production and the lean enterprise: In recent years, the term “lean” has been adopted by some organizations to describe the organization’s comprehensive effort to apply state-of-the-art management practices to improve quality and customer satisfaction, reduce costs and production...

Words: 509 - Pages: 3

Premium Essay

Management Accounting

...fit the current production. Secondly, the manufacturing space has been reset but the direct labour standards was not been renewed yet. The changes of manufacturing space are reduce time per unit of product in the long term. The company should update the costing system in order to improve the costing accuracy. Therefore managers can get the more accuracy product cost data. Moreover, they can improve their products and settle the appropriate price after update the costing system. 2. The fixed overhead variance: Explanation of FOH variances and comment on management observation: Ordinarily, the variances of budget and volume lead to FOH variances. Additionally, it also shows the variances of the actual fixed overhead and the fixed overhead absorbed. However, the favourable variances has some limitation although it looks good. Therefore, a favourable variances means low correlation with other variances on management observation. Consequences for the firm: (one page only, do not change settings, font, margins etc. *delete this line*) PART C Discussion (2 full pages maximum, double spaced, excluding Bibliography) According to analysis in Schedule 6, the existing OH system shown that the OH rate per direct labour is $14. While on the other hand, the activity based costing (ABC) system shown the OH rates in four aspects, which are DL-related, designing, purchasing and testing. They all have different OH rates. The details of Oh rates of ABC system are significant specific...

Words: 612 - Pages: 3

Premium Essay

Management Accounting

...ACCT102 MANAGEMENT ACCOUNTING Heineken & SATA CommHealth 18 November, 2013 AY 2013/2014 Term 01 Prepared for: Dr. Jennifer Koh Prepared by: G8, Group 5 Julius Denarro Roberts Zheng Ming Junious Lim Yi Jun Lim Chee Yang Mohammad Hazwan Bin Mohammad Hanafiah Neo Wei Ler Tristan ! ! ACCT102 Management Accounting G8, Group 5 Executive Summary Introduction of Beer Business Costing Technique Chosen PROCESS COSTING 1 2 2 2 Assumptions Processes of Manufacturing Beer DEPARTMENT ONE: STAGE 1 - MIXING DEPARTMENT ONE: STAGE 2 - BREWING DEPARTMENT TWO: PACKAGING 3 4 4 4 5 Process Costing DETERMINING FIGURES CALCULATING COST PER EU 6 7 8 Cost Reconciliation Recommendations CAPPING & LABELLING BOTTLES & UTILITIES TRANSPORTATION 9 10 10 11 11 Introduction of Outpatient Business Costing Technique Chosen ACTIVITY BASED COSTING (ABC) JUSTIFICATION 12 12 12 12 Assumptions List of Activities and Cost Drivers Traditional Costing COMPARE AND CONTRAST WITH ABC UNDER ABC METHOD UNDER TRADITIONAL COSTING METHOD 13 13 14 14 16 16 Recommendations Conclusion Learning Points Reflections Bibliography Appendix 1 (Heineken) Appendix 2 (SATA CommHealth) 18 20 21 23 24 25 27 ACCT102 Management Accounting ! G8, Group 5 EXECUTIVE SUMMARY ! Our project aims to apply costs concepts in the beer manufacturing and hospital service industry. The companies we will be using for our case studies will be Heineken and SATA...

Words: 4699 - Pages: 19

Premium Essay

Management Accounting

...| | |Activity-Based Costing | |Product/Cost Relationships | | | | | | | |by | |Troy Buchanan | | | | | 11/5/2007 ...

Words: 1203 - Pages: 5