Managers 'horizons contract to he short-term cycle of their monthly profit

May 19th, 2015
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Louisiana State University - Eunice
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The financial accounting system treats many cash outlays as expenses of the period in which they are made even though these outlays will benefit future periods.

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driven by the procedures and cycle of the organization's financial reporting system, management accounting information is produced too late, too aggregated, and too distorted to be relevant for managers' planning and control decisions. With increased emphasis on meeting quarterly or annual earnings targets, internal accounting systems focus too narrowly on producing a monthly earnings report. And despite the considerable resources devoted to computing a monthly or quarterly income figure, this figure fails to measure the actual increase or decrease in economic value that has occurred during this period. Consequently:Management accounting reports are of little help to operating managers attempting to reduce costs and improve productivity. Frequently, the reports decrease productivity because they require operating managers to spend time trying to understand and explain reported variances that have little to do with the economic and technological reality of their operations. Management accounting systems do not provide timely and detailed information on process efficiencies, or they focus too narrowly on inputs, such as direct labor, that are relatively insignificant in today's production environment. Thus, the system not only fails to provide relevant information to managers, but it also distracts them from noticing the key factors important for production efficiencies.The management accounting system fails to provide

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