Managerial Accounting Analysis of Concepts and Techniques

Topics: Management accounting, Cost accounting, Cash flow Pages: 12 (4213 words) Published: July 22, 2013
Managerial Accounting Analysis of Concepts and Techniques
Managerial Accounting BUS 630

Managerial Accounting Analysis of Concepts and Techniques
Introduction/Thesis Statement
Managerial accounting is a concept used in businesses to manage internal systems. Understanding the importance of effective decision making, planning and control creates a foundation for value within the company on a more in depth level. Planning and controlling is measured by performance based on budgeting accounts. Understanding the concepts and techniques used in managerial accounting helps to insure functioning operations within each department and has the ability to create a completive edge. Competitively speaking, managerial accounting gives employees who understand the techniques and concepts an advantage towards promotions. Companies are seeking employees that will grow with the company and become an asset. Part 1

Managerial Accounting Defined and Explained
Managerial accounting also called management accounting is the part of accounting that provides economic and financial information for managers and other internal users (Etramway, 2007). Managerial accounting provides valuable information to managers who direct and control operations inside the organization. Managerial accounting is contrasted with financial accounting that provides valuable information to stockholders, creditors and other members that are outside of the organization (Geense, 2005). Management uses managerial accounting to determine what it needs to run the business. Managerial accounting provides information on the costs of an organization’s products and services, budgets, performance reports and activities such as planning and controlling which can direct managers in the right direction when making decisions about products costs, selling prices, unit quantities and demands on capability recourses.

Outside organizations such as Securities and Exchange Commission (SEC), Internal Revenue Service (IRS) set rules on how accounting should be done and what and how to report income and transactions (Geense, 2005). The SEC requires an annual and quarterly report provided in a certain format and the IRS requires a tax return every year provided in a certain format. Managerial accounting does not give rules on how to run and manage accounting within the business. Management accounting needs to determine where the revenue is coming from to manage the business. Information from a financial statement will provide the total revenue within a business but the president of a company may want to know if the total revenue came from the United States, overseas or sales and also may want to know which department of sales is providing the most profit (2005).

Managerial accounting is designed to assist the firm's managers in making business decisions (Schneider, 2012). Very few restrictions are imposed by regulatory bodies and generally accepted accounting principles. Therefore, a manager must define which data is relevant for a particular purpose and which are not (2012). Throughout the process of gathering information managers can determine which business decisions are crucial to the business based on three management functions. The three management functions include planning, directing and controlling.

Planning involves all of the objectives within a business from strategy, goals and purpose (Geense, 2005). Planning is an important process that determines the overall objectives. Planning sets the foundation of the company and leads to directing the strategy, goals and purpose. Directing involves, but not limited to the starting process of hiring, organizing, building or locating all aspects of the potential business. Controlling is a type of feedback that informs the manger if the directing and planning processes are working in the direction of the goals (2005).

For example, an organization such as a bank has planned to originally be a nationwide organization....

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