Managing Accounting for Business - Essay Example

It also needs to know different methods of cutting down the costs to design an effective pricing strategy, to enhance the profit for its business. In this process, the management has to take many decisions upon choosing the best suitable alternatives in different situations.These decisions encompass various steps in the business cycle. They range from deciding upon the right quantity to produce, right price for the product, acquisition, liquidation, investment involving several alternative options.

All these decisions rely upon the company’s financial records for the current as well as previous years. This is the step where accounting information is required. Therefore, accounting information needs to be evaluated at the first step of the decision-making process because management can be enabled to decide upon different alternatives only if the company’s complete accounting information is readily available.The management is the major user of accounting information to decide upon choosing different alternatives to influence the product costs to fix a price for that particular product.

Management uses cost accounting to determine the accurate costs incurred in producing and distributing a product. These costs may be Avoidable costs that can be reduced fully or partially by choosing an alternative or they may be relevant costs that differ between various alternatives and here, the management has to enter into the decision-making process. In this process of decision making, the management comes across various constraints, which may be the company’s policies, lack of resources, product demand, or the machine’s working capacity.

Therefore, the accounting information required in the management and organizational decision-making process must include a set of steps to deal with the constraints, as given by Goldratt, E.M. (1990) in the theory of constraints.