ACCT602 : Management Accounting : Information Related to Decision Maki
1a. Describe and explain the differences between management accounting and financial accounting.
1b. Describe and explain the major functions of management accounting and give examples.
1c. Using your textbook and other relevant references, explain how concepts such as panopticism, control, and discipline may be relevant to management accounting, give examples.
Answer:
1 Part a
|
Basis |
Management accounting |
Financial Accounting |
|
Meaning |
The system offers reliable and relevant information to the managers which help them to make strategies, policies and plans effectively (Adler, 2013). |
It pays more emphasis on the preparation of financial statements of the company in order to provide financial data to the interested users. |
|
Type of information |
Monetary and non-monetary, both data is available. |
Only monetary information is available. |
|
Aim |
To assist the management in making relevant decisions by providing data on every matter. |
To offer financial information to outsiders (Needles & Powers, 2010). |
|
Format |
There is no specified format |
It is to be done according to the standards and as per the specified format. |
|
Time period |
They are prepared as per the needs and requirements of the company. |
They are prepared at the end of each financial year. |
|
Reports |
Detail reports including lots of information. |
Summarized reports reflecting the financial position of the entity. |
Part b
The functions are as follows:
- Planning
The accounting system provides relevant information related to decision making and all the budgets are been prepared as per the accounting reports. So, it can be said that it performs planning function by helping managers in estimating the results of alternative actions for achieving the organization’s goals. For example, management accounting prepares the data which assist the managers to identify the most profitable products to be produced (Drury, 2005).
- Organising
The system offers necessary reports to the managers which include information related to regulating and adjusting the operations and activities according to the changes happening in the organization. This is how it performs the function of organising. For instance, the reports prepared can contain the data on the product lines on the basis of which, managers can decide whether to add or eliminate a particular product line in the mix or not (Koontz, 2010).
- Controlling
Management accounting performs this function by delivering performance and control reports to the management that highlights variances between the actual and estimated performance. The data provided assists the manager in determining what is going wrong and what control measures should be applied.
- Decision making
The accounting system helps the management to prepare a formal structure of decision problems and places the best alternatives along with their consequences, so that managers can evaluate properly and take informed decisions.
Part c
Panopticism is a social theory developed by Michel Foucault who used the concept as a metaphor for control. The idea of Panopticon the power of control is constructive rather than being destructive. The concept works efficiently in respect to the behavioural changes. For instance, the employees of an organization would not misbehave or do unethical works because they know that they are been watched by the management (Brunon-Ernst, 2012). This shift in behaviour helps in establishing control in the company and is related to the management accounting system. Along with this, the concept of control and disciple is also linked with the accounting as the system provides managers with accurate reports and data which assist them in creating disciple and control in the organization.
References:
Adler, R. (2013). Management Accounting. New York: Routledge.
Brunon-Ernst, A. (Ed.). (2012). Beyond Foucault. United Kingdom: Routledge.
Drury, C. (2005). Management accounting for business. London: Cengage Learning EMEA.
Koontz, H. (2010). Essentials of management. New Delhi: Tata McGraw-Hill Education.
Needles, B. E., & Powers, M. (2010). Financial accounting. Cengage Learning.
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