Accounting in business filed measures the data today activities, processes the data into reports, and communicates the results to decision makers and stake holders.
It provides proper ways to understand the activities of companies particularly administration and manufacturing functional activities. This paper aims to ascertain the accounting techniques used for managerial decision making in common business and entity operation. This paper covers the accounting segments in practical application such as strategies and tools in accounting for discovering expenses and revenues, Creating budgets and forecasting ideas for growth, provide financial information to steer company decisions and highlights different tools and techniques of accounting gears such as financial and cost accounting information, mathematics and future forecasting methods and other miscellaneous tools to calculate internal aspects of the business entities. Addition to this, this paper also focus short‑run and long-run decision-making and the researcher climaxes the upcoming and most likely new accounting and management tools to be used in near future as ending point. The study also established that financial managers who are focusing more on financial statements and reporting perform accounting tasks.
Key Core areas in Application of Accounting in Managerial Decision Making
1. Analyzing Expenses and Revenue
2. Creating Budgets and Forecasting Ideas for Growth
3. Providing Financial Information to Steer Company Decisions
Snapshot of Practices of Accounting Gears
|1. Based on Financial Accounting Information|
|Ratio Analysis||Cash & Fund Flow Analysis||Return on Capital||Financial Correlation|
|2. Based on Cost Accounting Information|
|Marginal & Labour costing||Standard & Differential Costing||Analysis of Cost Variances||Absorption Costing|
|3. Based on Mathematics|
|Operations Research||Linear Programming||Network analysis & Queuing Theory||Simulation & Game Theory|
|4. Based on Future Information|
|Budgeting & Targeting||Variance & Trend Analysis||Forecasting & Project Appraisal|
|5. Miscellaneous Tools|
|Managerial Reporting||Integrated Auditing||Financial Planning & MIS||Revaluation & Decision Making Accounting|
The Role of Accounting in an Organization
1. Helping Forecast the Future.
2. Helping in Make-or-buy Decisions.
3. Forecasting Cash Flows.
4. Helping Understand Performance Variances.
5. Analyzing the Rate of Return
Short‑run Versus Long-run Decision-making
1. Net income.
3. Return on total assets and total equity
4. Earnings per share
The Accounting and Management tools most likely to be introduced soon are –
As an indication of how the management accounting discipline is developing in the short-term it is particularly interesting to look at those tools which respondents intend to adopt within the next two years, as follows (figures in brackets are the number of respondents intending to introduce that tool):
1. Customer profitability analysis
2. Rolling forecasts
3. Activity based management
4. Environmental management accounting
5. Product/service profitability analysis
6. Post completion audits
7. Business process re-engineering
The business is a place where that allows multiple decisions of different nature, dimension and duration of earning of the business enterprises. To understand a decision is necessary to analyze the process, the steps that led to this choice, the behavior of decision makers involved, influences and power exercised. In order to answer to our research question, the research tries to find some of the role played by financial accounting analysis in managerial decision-making such as -
a. Assistance to corporate managers to know and analyze the past, present situation to focus the blue print for the future of the company.
b. Visualize the cause and effects events that are not distinguishable by daily activities.
c. Deliver a quantitative indication of the entities in terms of financial, operational and investing activities of the firm.
d. Guide the executives to prepare the future actions and deeds to be handled in the complex business environment.
e. Accounting apparatuses in managerial decision provides intangible, reliable and comparable information for resolution budgeting.
f. Accounting tool package include subjective and quantitative information for handling business abnormalities.
g. Successful manager has to be convincing when making a decision but visionary when implementing it.
2. Alexandra-Daniela Socea, “Managerial decision-making and financial accounting information”, Procedia - Social and Behavioral Sciences 58 ( 2012 ) 47 – 55.
3. Ciuhureanu, Alina, “Management Accounting – Managerial Obligation or need”, Revista Academiei Fortelor Terestre”, 2018, Vol. 23 Issue 4, p282-287
Dr. Senthil Kumar, is an Associate Professor of Finance and Business Management in Skyline University Nigeria. He has a PhD. in Business Management from Bharathiar University, India.
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