Management accounting techniques and concepts. Accounting Essay

Management accounting techniques and concepts
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Abstract
This paper explains what management accounting is and evaluates how it is different from financial accounting. Additionally, the role of management accounting in an organization will also be explained. The paper also evaluates some of the challenges that managers encounter when making and implementing decisions. Lastly, the effectiveness of two management accounting techniques will be outlined and explained.
Introduction
Management accounting is also referred to as the managerial accounting and it involves analyzing business costs and operations which are essential in preparing internal financial reports and accounting records which are used by the manager in making important business decisions that are vital in achieving the objectives and goals of an organization. It is important to note that managerial accounting focuses on identifying, measuring, analyzing, interpreting and communicating information to the managers to guide them in determining which is good for the development of the organization. This paper will examine the challenges businesses face when making and implementing decisions and evaluate the effectiveness of balanced scorecard as a key management accounting technique.
Managerial accounting also differs from financial accounting. This is because managerial accounting focuses on providing and analyzing information which is aimed at enabling the managers to make effective organizational decisions. It concentrates on the ways to inform internal decision makers (Southern New Hampshire Univerity, 2018). On the other side, financial accounting aims on creating and evaluating financial reports which are reported to government agencies or other stakeholders such as the creditors or investors are these statements less focused on making decisions that may affect the future projects of the business (Banke et al., 2017).
Management accounting is significantly essential in every organization. Some of the roles it plays in the business include helping in forecasting the future of the firm. Also, cost accounting may also help in understanding performance variance. Through proper and thorough analysis, it possible for managers to comprehend the variance between what was predicted and what was actually achieved (Rongala, 2015). Cost accounting also aids in analyzing and evaluating the rate of return. This is particularly essential because some projects may require heavy investments and the company would, therefore, want to analyze the expected rate of return for the available projects (Rongala, 2015). The organization chooses the investment opportunity that is most profitable.
Challenges facing business when making and implementing decisions
When making decisions, managers may experience several challenges, these include poor quality data is a major problem for many managers. Organizations operate in a data-centric world where managers are provided with complex and detailed financial statements that they are required to use when making essential decisions in the organization. Sometimes the data found in databases may be inconsistent and out-of-date, this makes it unsuitable and unreliable for the deci...