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What are New developments in management accounting techniques?
Imashi
There are many new developments in management accounting techniques. Many new software products have entered the market that assist managers in producing accurate accounting records.
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What is a sentence for the word accounting?
My mom works at accounting in a office in New York
What are the tools and techniques used in management accounting?
1st Tool : Analysis of Financial StatementsAnalysis of financial statements is the main tool of management accounting. In this tool, we collect four financial statement, one is profit and loss account, second is balance sheet, third is cash flow statement and fourth and last is fund flow statement. After this, we calculate more than 30 ratios and also analyze the financial statement by financial analysis, fund flow analysis and cash flow analysis. Main aims of analysis of financial statements are following :1. Profitability - its ability to earn income and sustain growth in both short-term and long-term. A company's degree of profitability is usually based on the income statement, which reports on the company's results of operations;2. Solvency - its ability to pay its obligation to creditors and other third parties in the long-term;3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate obligations;Both 2 and 3 are based on the company's balance sheet, which indicates the financial condition of a business as of a given point in time.4. Stability- the firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators.2nd Tool : Budgetary ControlThis is that tool of management accounting in which we make budgets for planning and control of fund. All budgets are made with past historical accounting data and future expectations. After this budgeted data is compared with actual recorded accounting data and performance is calculated on the basis of deviation between actual and expected performance.3rd Tool : Decision AccountingThere are lots of decision which businessman has to take on the basis of tools of management accounting. One of management accounting tool is decision accounting. It is helpful to take main decision which we can explain following ways :a) To buy or to construct any fixed assetb) Do's or Don'ts to do any business activityc) To choose best alternatived) Calculation the price of product4th Tool : Throughput accountingThroughput Accounting (TA) is a dynamic, integrated, principle-based, and comprehensive management accounting's tool that provides managers with decision support information for enterprise optimization. Actually this is the extension of decision accounting. Throughput accounting is relatively new in management accounting. It is an approach that identifies factors that limit an organization from reaching its goal, and then focuses on simple measures that drive behavior in key areas towards reaching organizational goals.5th Tool : MISWe MIS tool, management accountant provides information needed to manage organizations effectively. If we have to understand MIS, we need to understand ERP, SCM, CRM, DSS and other computer techniques for providing information with effective ways.6th Tool : Financial PolicyFinancial policy is that tool of management accounting which is needed to make good structure of capital mix We decide the proportion of share capital and loans in capital structure. Financial and operating leverages are also its sub-tools.7th Tool : Working Capital ManagementWith this tool of management accounting, we manage short term assets and short term liabilities. All cash management, debtor management and inventory management will include in working capital management. We make also working capital cycle for knowing the firm's ability to convert its resources into cash. If there is low time for conversion of raw material into sales and then cash from debtor, it is good indication.
Tools and techniques of management accounting?
1st Tool : Analysis of Financial StatementsAnalysis of financial statements is the main tool of management accounting. In this tool, we collect four financial statement, one is profit and loss account, second is balance sheet, third is cash flow statement and fourth and last is fund flow statement. After this, we calculate more than 30 ratios and also analyze the financial statement by financial analysis, fund flow analysis and cash flow analysis. Main aims of analysis of financial statements are following :1. Profitability - its ability to earn income and sustain growth in both short-term and long-term. A company's degree of profitability is usually based on the income statement, which reports on the company's results of operations;2. Solvency - its ability to pay its obligation to creditors and other third parties in the long-term;3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate obligations;Both 2 and 3 are based on the company's balance sheet, which indicates the financial condition of a business as of a given point in time.4. Stability- the firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators.2nd Tool : Budgetary ControlThis is that tool of management accounting in which we make budgets for planning and control of fund. All budgets are made with past historical accounting data and future expectations. After this budgeted data is compared with actual recorded accounting data and performance is calculated on the basis of deviation between actual and expected performance.3rd Tool : Decision AccountingThere are lots of decision which businessman has to take on the basis of tools of management accounting. One of management accounting tool is decision accounting. It is helpful to take main decision which we can explain following ways :a) To buy or to construct any fixed assetb) Do's or Don'ts to do any business activityc) To choose best alternatived) Calculation the price of product4th Tool : Throughput accountingThroughput Accounting (TA) is a dynamic, integrated, principle-based, and comprehensive management accounting's tool that provides managers with decision support information for enterprise optimization. Actually this is the extension of decision accounting. Throughput accounting is relatively new in management accounting. It is an approach that identifies factors that limit an organization from reaching its goal, and then focuses on simple measures that drive behavior in key areas towards reaching organizational goals.5th Tool : MISWe MIS tool, management accountant provides information needed to manage organizations effectively. If we have to understand MIS, we need to understand ERP, SCM, CRM, DSS and other computer techniques for providing information with effective ways.6th Tool : Financial PolicyFinancial policy is that tool of management accounting which is needed to make good structure of capital mix We decide the proportion of share capital and loans in capital structure. Financial and operating leverages are also its sub-tools.7th Tool : Working Capital ManagementWith this tool of management accounting, we manage short term assets and short term liabilities. All cash management, debtor management and inventory management will include in working capital management. We make also working capital cycle for knowing the firm's ability to convert its resources into cash. If there is low time for conversion of raw material into sales and then cash from debtor, it is good indication.
Importance of management accounting to a manufacturing firm?
Management accountingAccording to the Chartered Institute of Management Accountants (CIMA), Management Accounting is "the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its Resource (economics) resources. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies and tax authorities" (CIMA Official Terminology).The Institute of Certified Management Accountants (ICMA), states "A management accountant applies his or her professional knowledge and skill in the preparation and presentation of financial and other decision oriented information in such a way as to assist management in the formulation of policies and in the planning and control of the operation of the undertaking." Management Accountants therefore are seen as the "value-creators" amongst the accountants. They are much more interested in forward looking and taking decisions that will affect the future of the organization, than in the historical recording and compliance (store keeping) aspects of the profession. Management accounting knowledge and experience can therefore be obtained from varied fields and functions within an organization, such as information management, treasury, efficiency auditing, marketing, valuation, pricing, logistics, etc.Significance of management accounting to a manufacturing FirmProviding Information for Decision Making and Planning and Proactively Participating As Part of the Management Team in the Planning ProcessesPlanning is a very essential tool in every manufacturing firm. An entity needs to plan the location of its plants, introduction of new product lines and the strategies required to maintain the assets of the firm. Management accounting assists the firm to make cost-benefit analysis of each alternative and the best decision taken. For example, a soap manufacturing firm before undertaking the manufacture of a new type of soap will collect and analyze data on projected sales volumes, profit margins and costs of inputs. Management accounting provides this data. Any decision taken by the management team in the planning process has an effect on costs, revenues, and management accounting data are essential in estimating those effects. For example, management accountingManagement accounting would enable management to for example, budget for the cost of establishing a new plant and alternatives evaluated for the acquisition of the best plant. Budgets will also include targets to be met in the manufacture of goods. Targets include production volume, sales volume, profit, expenses, pilferage, losses and employee training. These data will be collected, analyzed and summarized for management use in the form of budgets prepared by the management accountant. Management accounting data such as daily sales report is crucial in making decisions as to the number of units to produce.Assisting Managers in Directing and Controlling Operational ActivitiesOperational activities form an integral part of the manufacturing process. The control function enables the operational managers ensure that activities conform to set standards. Detailed reports of various kinds prepared by the management accountant provide feedback as to whether the set standards are being met. Controlling is very essential in inventory control, total quality management and benchmarking in manufacturing firms. A performance report compares budgeted to actual results. In a manufacturing firm performance reports will indicate where some parts of production activities are not proceeding as planned so that corrective measures are instituted to reduce losses. E.g. measures of quality, including internal and external failure rates, yields, and rework can be computed. Measures of productivity efficiency, such as machine availability, throughput and lead times, average inventory levels, and set-up times can be calculated.Motivating Managers and Other Employees toward Organizational GoalsA well motivated staff enhances performance and productivity. Organizations are able to achieve their goals if employees are well motivated. Management accounting through budgeting motivates managers to direct their efforts toward achieving the organizational goals. In a manufacturing firm a budget indicates how resources are to be allocated and what activities are to be emphasized. Employee empowerment is the concept of encouraging and authorizing workers to take the initiative to improve operations, reduce costs, and improve product quality and customer service. For example, employees can be given incentives to develop new products for the organization.Measuring the Performance of Activities, Subunits, Managers, And Other Employees within the OrganizationManagement accounting assists management in measuring the performance of employees in executing organizational objectives. Performance measurement is used as a basis for rewarding performance through positive feedback, promotions and pay rises. Performance measure may be productivity per worker on which compensation may be based. Management accounting also provides data about the performance of the various sub units product lines, geographical units and divisions. These measures are important in determining whether a particular process or subunit (e.g. Quality Control Unit) in the firm is an economic viable unit.Assessing the Organizations Competitive Position and Working with Other Managers to Ensure the Organizations Long Run Competitiveness in the Industry.Globalization has heightened competition and among industries. Management accounting plays a crucial role in ensuring that an organization competes effectively and survives the competition. The financial strength of the organization must be prominent on the agenda of management. Innovative measures must be instituted and operations streamlined. Competitive prices must be adopted by the organization. Data on other competing products must be collected and carefully analyzed before investment decisions are taken. Cost benefit analysis is also important in the adoption of a particular method of production (labour or machines), make or buy decisions, inventory management and outsourcing. Management accounting provides the necessary data for these very essential decisions to be made.ReferencesDrury, C. (2004). Management and Cost Accounting. London: Thompson Learning.Garrison, & Noreen, (2000). Managerial Accounting. New York: Thompson Learning.Hilton, R.W. (1999). Managerial Accounting. New York: Irwin McGraw-Hill.Ingram, et al, (2001). Managerial Accounting: Information for Decisions. Ohio: Thompson Learning.By Kumor Reuben SeyramBachelor of CommerceSchool of BusinessUniversity of Cape Coast, Ghana.
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