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ACC 206 To Count or Not to Count






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ACC 206 To Count or Not to Count
Management Accounting
To Count or Not to Count
Principles of Accounting II
ACC 206
Management accounting and those whole wear the title of Management
Accountant play an extremely significant role in the success of any
business, large or small. The growth, progression and future worth of a
business relies solely on its financial status and the decisions made in
direct correlation to that status. These decisions vary throughout the
professional world however, they are vital in every arena. Though
managerial accounting and financial accounting differ one from another,
one cannot exist without the information of the other. Are management
accountants simply “bean counters” whose sole purpose or job
description is to decide which bean will actually sprout, take root,
regenerate and result in a profitable return? How is the decision of what
information should be considered made? How important is management
accounting? How vital is the information provided by management
accountants? To count or not to count, that is the real question.
Management is defined as directors and managers who have the power
and responsibility to make decisions to manage an enterprise. It is
comprised of the interlocking functions of formulating policies set by
corporations and the organization, planning, controlling, and directing
the firm’s resources to achieve the objectives of the policy. The size of a
firm’s management can vary from one person to hundreds or thousands
of managers. This number is dependent upon the size, locale, and
whether or not the company is multinational or not. In larger companies,
the board of directors acts as upper management and formulates the
policy which is to be implemented by the chief executive officer.
Business analysts and financiers agree that the highest importance is
the quality and experience of the managers, their integrity and ethical
practicing and the reliability of the decision they make when evaluating
the current and future worth of an organization.

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Accounting, by definition, is the practice and body of knowledge
concerned primarily with techniques for recording transactions,
maintenance of financial records, performing internal audits, reporting
and analyzing financial information to the management, and making
recommendations (advising) on taxation matters. It is a methodical
process of recognizing, recording, measuring, categorizing,
authenticating, summarizing, interpreting and exchanging financial
information. It discloses profit or loss for a given period, and the value
and nature of a firm's assets, liabilities and owners' equity. Accounting
provides information on the resources available to a firm, the measures
employed to finance those resources, and the results achieved through
their utilization.
Management Accounting
Management accounting focuses on information for internal decision
making by a company’s managers. It is a vital tool used by upper
management to successfully run a firm. The duty of gathering, sorting,
deciphering, evaluating and then interpreting said information is the sole
responsibility of the person filling the position of Management
Accountant. The accountants then use the results derived from their
tasks or duties for internal planning and control.
In this field of accounting, the provided information is used to help
managers plan and control business operations as they lead the
company and manage both the company’s plant equipment and human
resource department. Because of the futuristic nature of business
decisions that need to be made, management accounting often requires
forward-looking information. Managers are responsible to external
stakeholders, so they must plan and control operations carefully. With
planning and control comes an entirely diverse set of tasks.
When planning, the managerial accountant is required to choose goals
and decide how to achieve those goals. They have to make plans that
adhere to the common goal which is increasing the operating income or
profits earned by the relevance and activation of the plans made.
Additionally, they have to plan to achieve the goals set by a firm’s upper
management. These goals may be achieved by a number of actions that
may include but not be limited to going to measures such as raising
product selling prices in order to incur a greater profit or increasing

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advertising specifics and methods such as the target group; the amount
of desired media used; the type of media used; and the location, range,
and type of ad disbursement, in hopes of increasing sales.
With these plans, managers use budgeting as a tool to assure that set
goals are both realistic and attainable. Budgets are quantitative
expressions of the system developed for achieving objectives used to
co-ordinate or bring together business activities. Managers use these
budgets to show the expected financial impact of decisions and as help
with the identification process concerning the resources needed to
achieve the goals set during planning. In a nutshell, the main purpose of
the budget is to act as a control to the plan.
The execution of the plans and evaluating operations by comparing
actual results of said implementation to the budget is known as
controlling. It is in this arena or within the set boundaries of the budget
that managers can compare actual costs to budgeted costs to calculate
their performance. The resulting information, whether it is a gain or loss
of income, may serve as the most vital piece of information to any
company’s management team. This cost data will help management
decide if the plans that were made, the goals that were set, and the
decisions to move forward were good decisions or not. With controlling
also comes the responsibility to make decisions concerning adjustments
needed to improve the end results the layout developed and the
direction in which the management teams should consider in response
to these results.
Managers modify their management accounting systems in order to help
them make wise decisions. They weigh the benefits of their cultivated
systems and the information contained within them. Horngren & Harrison
suggests that “better information leads to better profits” (p 901). The
information and the benefits are compared and then measured against
the costs to create and run the system. This is referred to the
cost/benefit analysis.
This analysis and the information it provides is of the utmost importance
to the both the financial and management team. The cost/benefit
analysis is a type of measurement used to review the probabilities of the
various outcomes and the likelihood of these outcomes being repeated
over and over again. Management accountants, who sometimes function
as internal market traders, wants certain and precise knowledge, in

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