Use of Accounting Information by Managers May Not Lead to the Best Decision - Essay Example

? c) The use of accounting information by managers may not necessarily lead them toward the best decision The main concern of financial accounting is reporting to the relevant external parties. This includes the owners, creditors and analysts. In most cases, these external parties do not have unlimited access to these information that is considered to be internal to the organization (Chandler, 1990 pg 7). They are also not in a position to specify what information will be presented to them. Instead, these external parties have to rely on the general reports that are presented to them by the companies. The presentation of this information is normally done by a company representative. This mandate normally falls on the manager and he is faced with the task of deciding what ought to be presented and what to withhold. The reporting structure of every company is often standardized and well defined. The methods that are sued in the preparation and the reports that are to be presented are governed by standard rules that are set by the organizations in question. Additionally, the external parties are only presented with the aggregated and summarized data (Chandler, 1990 pg 7). This is in great contrast with organizational managers that need a more detailed report and information. In most cases, the information required can be adopted from familiar formats. The subsequent chapters of the report are dedicated to revealing typical examples of budgets and segment income reports among others. A manager needs to have a fundamental awareness of the processes involved in financial accounting (Hoskin, Macve & Stone, 2006 pg 9). It is also important for them to be aware of the resulting financial statements that are important requirements to understanding the framework used in these distinctive managerial accounting reports. Besides this, managers are also in a position to request for reports that are tailored to only specific tasks that are vital in decision making. These reports are pertinent to assuming a more free-formed format. It is, therefore, important for managerial accountants to be in a position in which they can easily adapt their generalized accounting knowledge in the development of personalized data and reports that are rational and which uphold sound management processes. The information in managerial accounting tends to be focused on activities, products and departments. This information also cuts across a broad range of key functional areas that are inclusive of finance and marketing among others. In most organizations, internal auditing units are referred to as strategic finance to the wide scope of duties that they perform (Hoskin, Macve & Stone, 2006 pg 9). Managerial accounting information is based on internal specifications that are given for data presentation and accumulation. In this case, the internal specifications ought to be clear, concise and consistent. This means that great care should be taken to ensure that any submitted reports are sufficiently rational to enable the managers to make good decisions. It is also important to replace specific reporting periods with real-time data that will facilitate quick response. On the same note, forecasted outcomes from these real-time data would be vital for planning within the organization. Besides these, cost information should be done in such a way that would mandate managers to focus and be held accountable for their business segments and components. The crucial function of any given manager is to manage and take control over organizational problems (Horngren, Bhimani et al, 2008 pg 44). This is to mean that every organization has its own share of problems and it is the work of the manager to deal with them. However, this does not necessarily mean that the role of the manager is to deal with organizational problems. Their functions go beyond that. Managing requires one to be adept and have numerous skills set. A manager requires visionary and leadership skills besides having the ability to mobilize both financial and human resources. In order for this to happen, a manager needs to understand how different actions influence human behavior both within and outside the organization. It is also important for good managers to have endurance that would see them through setbacks and challenges and still find a way to forge ahead. Conversely, each action taking by an organizational manager is based upon some form of decision. This means that good decision making skills are vital to one becoming a successful manager. Good decision making is rarely done out of perception or gut feelings. Diligent accumulation and information evaluation can be attributed to proper and consistency in decision making (Waether, 2013 pg 17). Managerial accounting can, therefore, be seen as a way through which information that is crucial to decision making can be attained. Managerial decision can be categorized into planning, directing and controlling in any given business process. If these activities are correctly executed, an organization would be in a position to create its business value. However, a failure to carry out these activities is an avenue to organizational failure. it is, therefore, important to note that business values emanate from proper decision making that are a result of planning, directing and controlling organizational activities (Waether, 2013 pg 17). At the same time, sound decision making can be achieved through reliance on good and sound information. Any given organization must plan for its success. This means that managerial accounting is crucial in decision what course of action ought to be adopted in order to come up with a desired outcome (Drury, 2012 pg 96). Any given plan must offer thoughtful consideration to the financial realities and constrains of the organization as well as its anticipated monetary budget. Although a given business organization is made up of different individuals, they must all work together towards the achievement of its goals. Budget is a vital component when it comes to planning within an organization. They offer outlines of the financial plans that are meant for a given organization. In any given company, its budgeting process must take into account their ongoing operations, corporate financing and their capital expenditure. Directing is the second way through which managerial decisions are out into action. For a plan to be realized, it requires numerous actions and directions. These actions have to be timed and well coordinated with the resources that are required being ready to actualize the plans. This means that a managerial accountant has to be in a position to put plans into actions (Drury, 2012 pg 108). They must be informed on whether productive resources are scheduled appropriately, if the inventory is ready when needed and whether transportation is available among other roles. At the same time, the management should be in a position to demonstrate that they are compliant with the regulations and contracts at hand. All this cannot be possible without the resources that are provided by accountants to the management. In almost every situation, things do not necessarily go as planned. It is the role of the management to make concerted efforts to monitor such situations and adjust in the case where deviations are necessary (Clinton and Van der Merwe, 2006 pg 86). In this case, the managerial accountant plays a major role in this process such as exploring alternative strategies that can be used to remedy the already unfavorable situations. All these show that managers do not have to rely on accounting information in order to make sound decisions. Situations and plans often go out of hand without being foreseeing (Clinton and Van der Merwe, 2006 pg 86). The role of the manager in this case it to take charge and find means through which all these could be controlled. Although the accounting information is necessary in making plans and decisions within an organization, it is not the only factor that should be considered. A manager should have leadership skills that would allow him to make swift and eloquent decisions depending on the situation that an organization is currently facing. Bibliography Chandler, A. (1990). Scale and Scope: The Dynamics of Industrial Capitalism, Cambridge, MA. The Belknap Press of Harvard University Press. Clinton, B. D. and Van der Merwe, A. (2006). Management accounting-approaches, techniques and management processes. New York: Thomas Reuters Drury, C. (2012). Management and Cost Accounting 8th Edition, London: Cengage Learning. Hopper, T., Northcott, D and Scapens, R. (2007) (eds). Issues in Management Accounting, 3rd Edition, Essex: Pearson/FT-Prentice Hall.  Horngren, C., Bhimani, A., Foster, G. and Datar, S. (2008). Management and Cost Accounting 4th Edition, Essex: Pearson/FT-Prentice Hall Hoskin, K., Macve, R., & Stone, J. (2006). Accounting and Strategy: towards understanding the historical genesis of modern business and military. In Bhimani, A. (Ed.), Contemporary Issues in Management Accounting. Oxford: Oxford University Press• Seal, W., Garrison, R., Noreen, E. (2012). Management Accounting 4th Edition, McGraw-Hill Waether, L. M. (2013). Managerial accounting: principles of accounting. New York: Routledge Read More