Management Accounting Essay
1907 Words8 Pages
Management in business and human organization activity, in simple terms means the act of getting people together to accomplish desired goals. Management comprises planning, organizing, ->resourcing, leading or directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal. Resourcing encompasses the deployment and manipulation of human resources, financial resources, technological resources, and natural resources.
Management can also refer to the person or people who perform the act(s) of management.
Basic functions of management
Management operates through various functions, often classified as planning, organizing, leading/motivating and controlling.…show more content…
This is because of the different emphasis: management accounting information is used within an organization, typically for decision-making.
According 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 resources. Management accounting also comprises the preparation of financial reports for non management groups such as shareholders, cr->ors, regulatory agencies and tax authorities" (CIMA Official Terminology)
The American Institute of Certified Public Accountants(AICPA) states that management accounting practice extends to the following three areas:
Strategic Management—Advancing the role of the management accountant as a strategic partner in the organization.
Performance Management—Developing the practice of business decision-making and managing the performance of the organization.
Risk Management—Contributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the organization.
The Institute of Certified Management Accountants (ICMA),
If you are looking for some example topics to write your analytical essay on cost and management accounting reporting systems, consider these twenty great topics below:
- The Layout of Primary Accounting Statements Including Balance Sheet and Profit and Loss Sheets: Why They Are Necessary
- The Link between Primary Statements and Trial Balance
- Reasons Why Adjustments Are Made Including Bad Debt, Depreciation, Accruals, and Prepayments
- The Difference between Partnership Businesses, Sole Traders, and Limited Companies
- The Need for Accounting Principles Which Allow for Reliability, Comparability, Relevance, and Understanding in Accounting Details
- How Various Accounting Concepts Relate to Aspects of Accounting Management
- The Lifecycle for Fixed Assets from Their Acquisition to Their Disposal, as well as the Depreciation therein
- Treatment for Revenue and Capital Expenditure as well ws the Differences between Them
- The Advantages and Disadvantages of Share and Loan Capital
- The Components to Share Capital and How to Make Accounting Entries for Returns on Capital
- How to Dissect Financial Statements and Reach Conclusions about the Financial Situation of an Individual Organization
- How Accounting Ratios React to Different Transactions
- Why Business Relies upon Accounting Budgets
- How to Prepare Cash Budgets While Appreciating Business Benefits and Limitations within the Company Forecast
- Why Rising Finance is Imperative to Business Success and How Businesses Raise Finance
- How to Recalculate Goodwill for the Retirement and Admission of New Partners
- How Tools Can Be Used by Accounting Management to Identify Missing Figures
- How to Prepare Balance Sheets and Trading Profit and Loss Based on Incomplete Business Records
- How Accounts for Partnerships Differ between Sole Traders, Partnerships, and Limited Companies
- How to Remove Partners and Add New Partners to Accounts
Aren’t those topics interesting? While they are a great place to start you may also check out some helpful facts on cost and management accounting systems or glance at a guide on analytical essay writing. It is also highly useful to see an example which is why you will find a sample essay below:
Analytical Essay Sample: The Layout of Primary Accounting Statements Including Balance Sheet and Profit and Loss Sheets: Why They Are Necessary
Financial statements are the key to business. Every business entity has to deal with financial reports which are the core area to notice. Annual accounts are the most common ones. However, meeting of shareholders takes place quarterly, which decides about the financial statements. Management has to set themselves a pattern according to which they should prepare financial statements. Yearly accounts are suited to most of the companies. However, this is not a set rule. There is an option of preparing quarterly of semi-annually accounts as well. A company has to have a formula which they should apply regarding preparation of financial accounts. Accounting standards are without a doubt a key to look into. SECP has provided many guidelines that must be adhered to. Certain laws and provisions must also be provided for while preparing financial reports.
Some of the key financial statements covered include the balance sheet, the income statement, the statement of retained earnings and the statement of cash flows. There are two types of layout for a balance sheet. A vertical as well as horizontal layout can be considered. Both approaches to the layout are acceptable, and a company can go for one according to their conventional mode of work. The income statement shows the income generated in the period plus the expenses that were paid for. It gives an exact view of the income present with the company or the entity at the end of the period. Accrual basis of accounting has to be applied in which income is to be recognized in income statement when it is received, and expenses are accounted for when they are incurred, not when they are actually paid for. This way a comprehensive income and expenditure statement are prepared. Net profit or loss is shown at the end. If income were greater than expenses, then there would be a net profit, and if expenses were bigger, then there would be a net loss to be recognized in the income statement.
There are two methods of preparation of income statement being used alternatively. Single-step and multi-step income statements are the two options. You can follow any one of the mentioned approaches for the preparation of the income statement. Income statement relates to a certain period of activity.
Retained earnings are affected by profits with the company. Any payments from the profits such as dividends would decrease the balance of retained earnings, and vice versa. Net loss of the company will have a negative impact on retained earnings and profits and will add to the account of retained earnings. At the end, the final figure is calculated by means of addition and deletion of amounts. The statement of retained earnings provide for changes in the retained earnings from period to period. Consolidated financial statements are also prepared which depicts the events that are to occur over a period of time in the future. The statement of shareholder’s equity is another name for the statement of retained earnings. This statement helps the investors and creditors to conclude about the financial position of the entity.
A balance sheet as previously discussed also revolves around the accounting equation. Assets are always equal to liabilities+ owner’s equity. The recognition of the asset or a liability in the financial statements is vital. Fair value recognition is the best method to present a true and fair view of the financial transactions.
The statement of cash flows provides an insight about the inflows and outflows of the business. Such inflow or outflow is in monetary value and you can have an idea of what amount of cash has gone out of business, and how much cash business has received for a given period. There are three sections of the statements of cash flows, and you must prepare a statement of cash flow accordingly. 1) operating activities, 2) investing activities and 3) financing activities. The order should be the same as mentioned. You can come across net cash received or paid out on operating, investing and financing activities. At the end, you can sum up all three activities to come up with total cash paid in or out for the given period. Non-cash items are accounted for to come to a genuine and realistic amount of cash in or out for a given period. For example, dividends are cash paid out, but these are not expenses to the business. Such accounting is done in case of the statement of cash flows to come across real cash in or out for the period.
Atkinson, Anthony A. Management Accounting. Upper Saddle River, N.J.: Prentice Hall, 1997. Print.
Atrill, Peter, and E. J McLaney. Financial Accounting For Decision Makers. Harlow, England: Pearson Education, 2013. Print.
Atrill, Peter, E. J McLaney, and Peter Atrill. Management Accounting For Decision Makers. New York: Prentice Hall/Financial Times, 2005. Print.
Datar, S. M., Rajan, M. V., & Horngren, C. T. (2013). Managerial Accounting: Decision Making and Motivating Performance. Pearson Higher Ed.
Drury, Colin. Management And Cost Accounting. London: Chapman & Hall, 1992. Print.
Hansen, Don R, and Maryanne M Mowen. Cost Management. Mason, Ohio: Thomson/South-Western, 2003. Print.
Horngren, Charles T. Management And Cost Accounting. London: Prentice Hall Europe, 1999. Print.
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