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Managerial Accounting

Essay by   •  November 6, 2018  •  Course Note  •  260 Words (2 Pages)  •  68 Views

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Management accounting was believed to involve only costing in its practice. In recent times, however, this branch of accounting has demonstrated that it has the potential to contribute to other aspects of business.

Proctor (2012) points out that ratio analysis is one aspect of management accounting that adds value to business. Particularly, it is conducted with information provided directly by the financial accounts to help managers improve the future performance of their organizations. Working capital management is another noticeable area as it takes into account when organizations do not have sufficient cash to enable their operations to run smoothly. This can literally mean the difference between life and death for a business (Proctor, 2012).

Turning to another aspect of business, Novas and Gaspar (2017) states in their findings that management accounting systems, defined as formally structured information and communication systems, play a relatively important role in the development of human capital and structural capital. As a result, companies are contributing to the effective development of human capital and structural capital as they develop management accounting systems and utilize management accounting information in their management process.

With regards to another area of managerial accounting, Zaleha et al (2011) shows findings from the survey which demonstrates that analysis of financial statements was perceived to contribute most towards risk management. The majority of the respondents agreed that the management accounting function was significantly involved in the organization’s risk management. They also perceived that budgetary control, budgeting, and strategic planning, all of which are aspects of managerial accounting, played important roles in managing risk.



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