Question

This course has covered various aspects of managerial accounting that are meant to give you the foundation needed to understand, analyze and evaluate a company’s performance as a company manager as well as an external user of financial information.

• Given your personal and professional goals, which of these tools will be of greatest benefit to you (describe at least 3)? Why? Be specific
• PLEASE PROVIDE DETAILED ANSWER

Answer 1

Managerial accounting is the practice of identifying, measuring, analysing, interpreting, and communicating financial information to managers for the pursuit of an organisation's goals. The tools which will be of greatest importance to us being a company manager in understanding, analysing and evaluating company's performance are the following:-

1. Historical Cost Accounting-

As the name suggests historical cost accounting involves gathering the historical data about the costs involved in each job. The historical data collected in this technique is then compared to the present standard costs. The results obtained are used by the managers in decision-making, cost controlling and future planning.

2. Cost Accounting-

There can be situations when differences arise between the estimated cost of a product and its actual costs. The main function of cost accounting technique is to present the cost data according to various departments, products, branches, and processes of the organisation. The data is then compared with the estimated cost. This then enables the managers to find out the reasons for these cost differences.

3. Financial Planning-

In the financial planning technique, the managers plan to advance the primary financial objectives of the organisation. Not only this, but it also involves determining the procedures that will be used to achieve that objective. The managers determine how much capital will be required, how will the company generate the funds and how the income will be distributed. This technique is useful as it identifies the complete financial status of the company. Financial planning is a separate topic with wide possibilities.