How Managerial Accounting Adds Value To The Organizations

3231 words - 13 pages

1.0 ABSTRACT
Managerial Accounting is tools for business decision making. The use of management accounting information is a key for organizational success. This essay will explain on the importance of managerial accounting process in organization to successfully carrying out the day to day as well as long term activities and goals. First, it describes how the evolution and change in managerial accounting. Second, the essay looks at the role of managerial accountants. Third, it explains several function of managerial accounting that tend to contribute the adds value to organization.

2.0 INTRODUCTION

According to the Chartered Institute of Management Accountants ( CIMA ), Management ...view middle of the document...

Second managerial accountants are now held responsible for strategic cost management that is they assist in evaluating how well the company is employing its resources. As a result managerial accountants now serve as team members alongside personnel from production, marketing and engineering when the company make critical strategic decision.
Businesses use accounting as a method to know how they are performing and to see if there is a balance between what the company acquires and what the company takes out. The balance should be maintained so that a firm operates for a longer time. Accounting systems are said to have different forms, one is financial accounting and the other is management accounting. Financial accounting and reporting is essentially a means to provide information. Financial accounting is focused on the financial issues of the company and it provides financial related information to internal and external people concerned with the company. The main focus of financial accounting is making sure that the stakeholders are given positive financial information. As a complement to financial accounting, companies make use of management accounting to check its performance and know which operating part of the firm they are not doing well.
Management accounting or managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies and tax authorities. There are similarities between managerial accounting and financial accounting information because they both draw upon data from an organization basic accounting system. This is the system of procedures, personnel and computers used to accumulate and store financial data in the organization.

3.0 LITERATURE REVIEW
The Association of Chartered Certified Accountants ( ACCA, 2000 ) has stressed out the importance of study of accounting by quoting “ the history of accounting throws light on economic and business history generally and may help us better predict what is on the horizon as the pace of global business evolution escalates “. In the early 20th century, traditional accounting still focused on financial accounting while the professionals are too rigid to change the management accounting practices ( Simon Dekker, 2000 ). Managerial accounting has its roots in the industrial revolution of the 18th and 19th century.
According to the International federation of Accountants ( IFAC, 2002 ), the period before the first Management Accounting Revolution is known as the “ classical period “ and ended in the late 1950’s. Johnson and Kaplan ( 1987 ), stated that the Industrial Revolution during 18th and 19th centuries presented new...

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