Managerial Accounting Practices - Essay Example

Managerial Accounting Practices Managerial accounting is one of the kinds of accounting that provides accounting information to managers of an organization in assisting them making “informed decision”. It provides basis to establish controls in an organizations and to review and improve efficiency in an overall environment of the organization (Northonline, 2007). In contrast to its sister area, financial accounting which is particularly related to providing financial data to external stakeholders, its purpose is to provide accounting information to internal stakeholder of an organization.

These stakeholders include employees, management and equity holders. The words, Management accounting, mean,“The process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources (wikipedia, 2007)”. The scope of studies done by management accountants enable them to serve their organizations in vast variety of tasks and role and they have the ability to assume different roles in different circumstances due to their great flexibility in changing their orientation as per required.

Management accountants provides helps organizations by performing all the budgeting and planning function for their organizations working on the basic information that they gather from different departments and different business processes. Managerial accounting helps organization in safeguarding their resources since they take into account all the variances that occur in a particular period and the exactly pinpoint the place where these variances occur. This helps management to take counter action of these losses of assets.

This greatly reduced the cost for an organization. Managerial accountants help organization to use their resources in the most optimal fashion. They do so by performing the JIT procedures and methods to ensure that only the minimum amount of inventory load is borne by organizations and departments receive materials and goods only when needed. This reduces burden in the form of reduced handling and storage cost of inventory. Management accountant helps financial accountants in preparing financial reports for external stakeholders such as stockholders, auditors and government officials.

They also prepare management reports for different levels of management depending on their requirement. These reports help departments analyze their performance during the past period and enable them to reorganize and restructure there activities for improvement. The key information provided by management accountants helps management to make decisions in their day-to-day operations. These operations may relate to directing and motivating employees to perform well based on their past performance.

Daily sales report, production report, procurement reports and issuance reports help managers decide where they are standing and what should be their objective or goal and to take measures to achieve those goals. Management accountants help management in deciding upon the current and desired strategic direction of an organization. They help organization in creating value at each step of product development cycle. Since they are familiar with the core of all the following activities in business processes, they can help organization by providing controlling measures for these activities to make them feasible, profitable and a source to add value to organization’s image (AGMRC, 2007).

Hence we can easily deduce from the above discussion that management accountants are not only book keepers but act as an essential building block in the establishment of a successful organization and these are the people who in their later careers assumes key positions such as CEO, CFO, Controller or COO in an organization. BibliographyWikipedia (2007). Retrieved on May 2, 2007: http://en.wikipedia.org/wiki/Managerial_Accounting AGMRC (2007). “Financial Performance measures”. Retrieved on May 31, 2007: http://www.agmrc.org/agmrc/business/operatingbusiness/financialperformancemeasures.

htmNorthonline (2007). “Managerial Accounting an Introduction”. Retrieved on May 2, 2007: http://northonline.sccd.ctc.edu/pbouker/ACC230_Folder/Chapter01_LectureNotes.htm