The Role of Accounting in Organizational Control

Topics: Control theory, Process control, Management accounting Pages: 12 (3655 words) Published: November 11, 2012

By: Abdur Rehman (IIUI)

Table of Contents

Introduction 3
Key Theories in Organizational Control6
* Key Theories8
Role of Accounting in Organization’s Control10
* Working of Control Theory at Workplace12
References 14
online sources15

Accounting is the gathering and compilation of information for decision makers – including investors, managers, lenders, public and the regulators. Accounting schemes influence performance and management and have affects on organizations, departments, and even countries. Information controlled within an accounting scheme has the influence to manipulate actions. Accounting information systems are largely strong behavioral drivers in the perspective of a corporation - where bottom line and profits are every day concerns. In this paper we will discuss the role of accounting plays in organizations control. Accounting has impact on each and every aspect of the organization from record keeping to manufacturing and from sales to further investment. It is accounting concepts and details in shape of Financial Accounting, Cost Accounting, Management Accounting or whatever you may call which gives insight of an organization for the stake holders to think and plan for future. Accounting prompt owners to expand, managers to plan, equity investors to invest, bankers to lend, tax officials to calculate and buyers to spend etc. we will briefly discuss different calculation concepts which are based on the accounting data which effect investment and leads to ultimate organizations control. Organizations are sets of agreements among persons or groups who are aggravated by self-interest for the collection of resources and contribute to the information to achieve control in the organization. Accounting and control provides a similar utility in organizations. We shall try to highlight some control theories and role of accounting in up-coming pages.

Accounting is the main means of serving managers of an organization, potential equity investors, creditors and bond holders, equity investors, creditors and bond holders of an organization, customers and suppliers of an organization and other stake holders to take decisions. Accounting is somewhat to facilitate people in their individual lives a lot as it affects organizations. We all use bookkeeping thoughts when we map what we are going to accomplish with our wealth. We have to chart out how much of it we will use and how much we will keep. We may engrave a chart, recognized as a financial plan, or we may merely maintain it in our minds. Though, when people usually talk about accounting it means the kind used by trade and other business organizations who also keep a record of it which is then used by different stakeholders including owners, buyers, investors, tax officials, banks etc. for a variety of rationales. (Frank Wood, 1997, p 4) Generally speaking Accounting can be defined as “distinguishing, manipulative and matching economic information to let well-informed selection and decision by users of the information. (Frank Wood, 1997, p 253) Accounting can also be defined as "the language of business" because it is the essential device for recording, coverage, and evaluating economic proceedings and dealings that influence business ventures. Accounting procedures gather all the aspects of a business's financial presentation including from capital expenses, payroll costs, and other responsibility to sales proceeds and owners' equity. Financial data enclosed in accounting documents is then interpreted and used as essential in reaching to the actual picture of a business's true financial comfort. Equipped with said meaningful knowledge, businesses can make suitable financial, managerial and strategic decisions about their future opportunities; on the other hand, unfinished or...
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