Part A
1. Explain the Principle of Management Accounting
It is a comprehensive term which integrates financial and non-financial statements through which management team can obtain useful information in order to take a better and effective decision.
A well-organized accounting management system plays a crucial role in offering information about the account status to the management team.
Management accounting is having a wide scope and it contains all kinds of accounting information.
Following are the principles of management accounting:
Influence:
Communication plays an important role in influencing management accounting. Good communication is the source of good management accounting.
The presence of good communication ensures that all the information get seamlessly communicated to the higher management, so that they can take a good decision and which ultimately benefits the organization.
Relevance:
Relevancy is also a major principle in accounting management. There is no doubt that a properly communicated information can be efficient, but it would be of no use if the communicated information is not relevant.
An organization runs on various functions which are related to finance, operations, marketing, human resource and many more.
All these functions and the relevant communicated information related to the organization helps decision makers of a company to make the best decision. (Zaman and Akbar, 2013).
Analysis:
The information which is provided to the management should be analyzed properly for a better outcome.
It is considered as one of the major principles of business that help management to analyze well communicated, and relevant information.
Because information, if not analyze, can give a false image of an organization to the higher management.
In order to make the right decision, management should analyze the information properly so that they can get the idea of the organization’s environment and make a better decision accordingly.
Trust:
Trust is the foundation which strengthens any organization or a company. This principle of management accounting is focused on the accounts manager.
It states that an accounts manager always carries great accountability and thus one must always behave ethically towards an organization or a company.
It is a moral duty of an accounts manager to analyze management accounting information in a correct manner, so that management of the organization can take an effective decision for the company.
Accounts manager should also take care of the trust of the stakeholders as they also hold a vital position in the process of making a company better.
All the responsibilities of an accounts manager must be fulfilled properly so that it gives a positive impact on the growth of the organization.
2. Explain the role of management accounting and the management accounting system in an organization
All the comprehensive information that facilitate management in their decision-making process, is referred to as management accounting.
Whereas the process of collecting relevant data from the business operation and then turn the data into management accounting information is known as the management accounting system.
Below is mentioned the role of the management accounting system and management accounting:
A. Planning:
Planning is the foremost step that is executed in order to accomplish long term and short term goal of a company.
With planning management can forecast the budget and make a proper estimate of all incomes and expenses to avoid any hassle in the future.
Through proper planning, the management accounting system can analyze the relevant information in order to achieve company’s goal.
B. Organizing:
In management accounting system, organizing is about building a framework through which management can establish hierarchy, roles, and responsibilities of each department.
Management accounting is very important in organizing, as it ensures the performance level of management people. In this way, organizing help proper adjustment of people in proper ways.
C. Controlling:
The process of measuring the actual performance and comparing it with the estimated performance in order to establish control in an organization comes in controlling.
Controlling through management accounting and management accounting system, helps the company to improve its overall performance.
D. Decision Making:
One of the major principle of management accounting and management accounting system is enabling the company to make the effective decision making.
Better decision making help company to run effectively with utmost efficiency.
3. What are the various techniques and methods used in management accounting?
Below are mentioned various kinds of management accounting system such as cost accounting system, inventory management system, price-optimizing system, job costing systems, and many more.
4. Explain, the benefits of the integration of management accounting into the organization.
Being one of the most important parts of any organization, management accounting enables the company to plan, organize, control and take a better decision after evaluating all the information related to the organization.
Whether it is finance or social, be it operations or human resources, management accounting is integrated at every stage of the organization. Thus, it enables top management to take a better decision (Robinson. et al, 2012).
Management accounting and organization’s growth is directly connected and benefits an organization in numerous ways, such as:
- Management accounting augment management’s efficiency.
- It makes the process of achieving the company’s goal easy.
- One can set the targets and fix the price of products through effective management accounting.
- With management accounting, expansion plan can be implemented properly.
- Management accounting enables the organization to forecast and prepare the budget in order to estimate its income and expenses.
- With properly implemented management accounting, an organization can help every individual in the organization to work towards the achievement of organizational goals and objectives.
- Management accounting also provides all the required tools and cutting edge techniques that help in increasing n reliable business functioning.
- One can cut short all the extra costs in an organization in order to enable the organization to earned benefits in the long run.
- With the help of management accounting, a company can execute its plan, and establish proper control at every level of an organization.
- With the help of management accounting, one can easily identify the overall performance of an organization.
- A well-implemented management accounting enables managers to take a better decision for the organization.
- Management accounting helps in flowing proper communication flow at every level of an organization.