BUS630: Managerial Accounting
April 15th, 2013
Managerial accounting is an internal business function that deals with the day‐to‐day operation of a business. A managerial accountant gathers and reports information that helps managers in decision making and unlike financial accounting it does not have to follow established standards and principles. It is concerned with such matters as profitability in relation to both cost and volume of sales, budgeting, making decisions about pricing, and the general productivity of the business (Schneider, 2012). This information is of value to managers and helps them to make decisions about projects, new products or services, reorganization of departments, and other internal matters. How important are the new approaches such as just in time, activity based costing and flexible forecasting, to managerial accounting? Definition of managerial accounting
The definition of managerial accounting, also called cost accounting, is that, it is the process of identifying, measuring, analyzing, interpreting, and communicating information within an organization to achieve the organizations goals. Managerial accounting is not subject to the same rules and principles as is financial accounting (Schneider, 2012). Financial accounting is mandatory and its statements must comply with the generally accepted accounting principles (GAAP). These statements are used to report the company’s status to external users such as; investors and creditors. With managerial accounting operational reports, are only used inside a company to help managers make decisions. Managerial accounting emphasizes the future while the past is the emphasis with financial accounting.
Role of managerial accounting and the management accountant in a business or organization Managerial accountants add value to an organization by maintaining accounting records, preparing financial statements, generating managerial reports and analyses, and coordinating the company’s budgeting (Schneider, 2012). With this information managers can direct and control operational activities, measure performance, allocate business costs to goods or services, prepare operational budgets and forecast production output or sales. Numerical information consists of operational statistics; units produced raw materials and labor hours used. Non-numerical or qualitative information are associated with customer satisfaction, employees moral, access to markets and image of the company. Management should also evaluate the cost of value-added versus non-value added activities. In many businesses today managerial accountants are overseen or supervised by a controller who is responsible for performing managerial accounting activities, such as planning and controlling activities necessary for decision making. Ethical issues/concerns for the management accountant
The Institute Management of Accountants (IMA) developed “Standards of Ethical Conduct for Management Accountants”. These standards require the compliance with four basic principles: competence, confidentiality, integrity, and objectivity (IMA, 2011). Management accountants are not expected to police a business however they are expected to report any unethical behavior they find regardless of any impact on the business (Schneider, 2012). The company’s financial operations internally and externally must be accurate and valid. A company must establish and communicate written policies regarding ethical behavior based upon the specific company values. Ethical issues can result from managerial accounting activities such as overproduction, cost allocation, asset replacement and conflicts of interest. As with all financial reports, production reports can easily be manipulated. One way this can be done is by changing the estimated the stage of completion of the work in process....