Management accounting and decision making Essay

According to Burger (2008) chronicle is the language of demarcation. A lot of people hark back its just numbers, further its really a lot more than that. There atomic number 18 a lot of atomic number 18as outside of numbers that requirement to be looked at, processes and procedures, what the t 1 of the company is. score will take you in just about any direction in a company. Wade Becker, CPA, Beard, miller Co. The job description of many professions is changing nowadays. The skills to perform a certain job require more skills to perform a particular job. If an example of breeding Technology is to be taken then it is realized that once they were left to do IT related jobs or make computers acetify however, in todays world IT nonrecreationals be now moving into higher level perplexity positions which require them to perform many other tasks which may non be forthwith related to the their profession.Therefore, a stereotypical role of an accountant was once considered a number person but todays era demands account professional to own and use interactive and communication skills to help with the decision making process across all beas of a business. In a coach-and-fourial ex jutation world all professionals mustiness communicate their ideas to other companies using ways which atomic number 18 tactful and sound. Siegel (2000) states that prudence accountants should be great communicators. Durry C (1992) believes that focus account is concerned with providing information to carriages that is people inside an organization who direct and control the operations. In the 19th Century financial accounting was considered to be the need of a society which later evolved to Management accounting. Management accounting became a prerequisite for more detailed information for stock control, product belling and decisions affecting the future. Accounting is facing numerous challenges, as Elkington (1998) states business people must increasingly recognise th at the challenge now is to help to deliver simultaneously economic prosperity, environmental quality and social equity.All this is making business managers to re-examine the practices that are currently led. Cokins G and Hicks D believe that Managerial accounting is part of an organisations way information system. To follow any business or an organisation aim managers engage in activities which involve an effective cost model as it fuel be a great asset to an organisation. A business or projects to be a success or failure three things need to be considered, forexample, cost, schedule and performance. A project should be continued within the means provided otherwise stakeholders struggle to finance the project and its aban dod. A success of a manager is when appropriate tools are employed and sound safe decisions are made and follow on with applying substantial level of expertise to have effective cost management.The world today is surrounded by increasingly advanced technology suc h as computer assisted manufacturing and flexible manufacturing systems. According to Cokins and Hicks organizations to compete in effect need to understand the cost of each product or element of their value chain from product design and purchase of material therefore natural cost is very important as mentioned in Cokins and Hicks article because it accommodates critical for warring action and increasing shareholders wealth in the current globally rivalrous economy. Management accounting systems are the benefactors of the precarious internal cost information. There has been few criticisms leading to the literature of Management accounting system and it has been labeled over-the-hill and there has been criticisms linked to its consistency as it has been thought that it does not provide consistent information with the current strategic management paradigm.Cokins and Hicks believe that systems designs elements should capture the circuit cardinal technology, promote a business b ased on effective cost model, quality and lead time. Precise and appropriate cost information is critical to managements decision making procedures (Cokins and Hicks) and the literature existence studied reveals Management accounting system reflects the organizational complications of the current world however traditional Management accounting systems do not replicate current organizational era as all costing procedures were designed around late nineteenth century. In traditional era product line diversity was not very common and cost of materials and direct labour were the main components of production cost but the environment today is surrounded around advanced technology and automation and that has led the prime cost to be the overhead component. The overhead costs are altering product cost because of the old management accounting system techniques. Management accounting needs a unique set of skills and behaviour.According to Cokins and Hicks Accounting Management framework giv es business a planned approach to address all factors that will manage accounts interface and todays reality. Cooper and Kaplan believe there are six critical factors which play a crucial rolein Accounting Management framework which also backs Cokins and Hicks journal being studied for this assignment. The front one is organizational structure. It includes factors such as whom and how you manage accounts, why and how you organize around them. The second account management success factor is people as they need the appropriate skills, knowledge and skills to experience and perform the role. The third factor is tools and technology as it must support the account management processes and must labyrinthine sense help as control. The fourth one is compensations structures as they drive out inhibit change or accelerate adoption. The fifth account management success factors are processes and methodologies as they should align with the customer, drive growth and opportunity plan and the l ast factor channels and alliances must be managed effectively through the account manager interface.it is up to an organization to structure their useful employees around their key customers and that can create a deep impact on their performance. First few metric decisions need to be taken in terms of placement of accounts management resources such as market and territory.Cokins and Hicks believe management team need to plan using methodology a number of factors to create a ranking based on the business goal for the affiliation and business leader to deliver. Once these methodologies are selected they can play a racy role in team structure and it will help to deal with issues such as ownership or shareholders Cokins and Hicks discuss the difference between cost accounting and managerial accounting and the strength of their article is that managerial accounting is tied with GAAP whereas cost accounting is use within a business to manage that particular business.Accounting standard s of a country provide guidelines to an accountant so they can be used while reporting economic transactions of a business. United Kingdom accounting has improved a lot as mentioned in the journal being studied for this particular assignment. Managers have immense pressure to improve financial management practices to improve service to the community and it is not only done on national level. Managerial accountants have to keep accountant standards fair globally and that is mainly done through Accounting Standards Committee. What gets measured gets managed, What needs managed gets measured (Peter Drucker) notable quotes has cause many criticisms but if the practices and development mentioned in Cokins and Hicks journal are to be analyzed, one can conclude this quote has some truth. Managers of a businessoften use this quote indicates that active management of businesses should be given importance instead of accountability to gain desired goals. It will lead to inhabit in todays wor ld of information age competition therefore businesses should ensure they are using management systems resulting from their strengths.Any business main task is to develop an active measurement system as it is main part of the management process. Good management practices lead to using certain measures to plan, down and improve certain aspects of an organization. According to Kaplan, (1994) measurement is a difficult task because it is not related to science so there are no facts and does not have rules between variables. Furthermore, systems which are used by management accountants will make sure that actions are taken according to the strategies and objectives developed. There has been an immense step of research on management accountants and the research evidence has proved that businesses which are using a developed measurement system are developing and gaining benefit therefore, Gates (1991) states an organizations objectives and severity of measures, varies, depending on peo ple, culture and past experiences of the organization. The management accountant was developed after 1980s and it was seen a golden era in management accounting research as it saw red-hot techniques and practices beneficial to the management accounting.One of the techniques developed in 80s was strategic management accounting and some of the processes which menstruate under the category of strategic management accounting are activity based costing and balance scorecard. The balance scorecard emerged after it was realized that there is a need of an integrated system which can be used to measure both financial and non-financial performances. It helps companies to view their performances on a regular pedestal and it gave a clear view of what should be measured in order to balance a particular business financial sights. The balance score card consists of four functions known as learning and growth office. It means how to achieve a certain organizations goals and how will a business will sustain its ability to change and improve. the second perspective is financial and its aim is to succeed financially and is mainly concerned with making a good impression to shareholders. Another perspective is based on customers as they can determine sales and to achieve business goals a good impression is to be made upon customers.The last perspective is known as internal businessprocesses. It mainly deals with how to satisfy customers and shareholders and what business processes must a certain business excel as. (Kaplan and Norton1996) Balance scorecard is one of the necessities for any organization and it is used by the management to accomplish vision and strategies of an organization and it has few other benefits too such as, making sure managers are managing every single variable within an organization and are not working upon favoritism. If more developments are to be discussed and strength of Cokins and Hicks journal than one must not forget one of the major developmen t in an accounting field known as Activity-based costing. Kaplan and Cooper gave this idea a new extraction as it was not very well known in previous years. According to Kaplan (1996) manufacturing costs are determined by amount of activities and the key to effective cost control is maintaining the effectiveness of the activities alphabet recognizes better cost pools for indirect costs and then implies cost drivers to relate the expenses in the cost pools to activities of an organization. ABC has become more popular in recent years but faces a lot of criticisms too due to the fact that sometimes businesses face difficulties in implementing this technique.ABC is enhanced further by Activity-based management as they believe in planning and measurement and class them as key factors in a competitive business environment. To conclude, If an organization has accounts managers or not a success can only be achieved if a successful profile is valued. It can be done through an industry as i t will help determine to what extent an account manager is an industry expert and the second is through customers as it is vital for an accountant to understand the businesses being worked upon. The profession Accountancy has seen many developments and criticisms however, since 1980s there has been many changes in management accountancy. The new changes are focusing on measurement tools within a business to manage its aims and objectives.Management techniques are discussed briefly in this essay and they emphasize on Cokins and Hicks journal that management decisions can be made better by using effective management measurement tools and it leads to improving the management of an organization. There can be problem with new measurement techniques as nothing in life comes with a guarantee however, new ideas can be used on the basis of guess work and the new contributions could be a way forward.