Managerial Accounting

Essay by daniaali November 2014

download word file, 6 pages 0.0

When it comes to decision making, one of the most powerful tools a business owner has at their disposal is the use of managerial accounting practices. With a seemingly never ending stream of decisions to make, business owners can utilize this tool in order to inject input driven by data into these decisions. By definition, managerial accounting is using internal financial information in order to plan, make decisions, and maintain control business activities. In contrast with financial accounting which prepares data for outside parties, managerial accounting remains an internal tool to be used toward the individual business's improvement (Geense, n.d.).

Management accounting plays a significant role in business operations. Managers and decision makers within an organization use the data collected in order to create budgets and make financial plans. It helps determine what is to be sold and at what price. It determines the optimal profit a company can make post production costs on a particular product.

It also assists in planning the management of cash flow, helps determine how a company will finance operations in order to keep operations at the company smooth and efficient. It provides cost estimate data for new projects and helps managers decide between projects. It also provides solid data to measure business performance in the matters of budgeted expenses and actual expenses revealing the financial health of an organization. If discrepancies arise or changes are needed, these are easily and readily identifiable via the data provided by managerial accounting practices (Jan, n.d.).

Management accountants play a vital role within an organization. They serve as an advisor to managers and decision makers educating them of the possible financial implications of potential projects before they take them on. Additionally, they play the role of the educator in regards to predicting the financial consequences of decisions to...