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Financial and Management Accounting: The Contribution to Effective Business and Management - Essay Example

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Financial and Management Accounting: The Contribution to Effective Business and Management

From the research it can be comprehended that for efficiently running a business the management of a company should make it sure that the money available to them is utilized at the best manner. The main objective of the company management is optimally using the resources available to them. Here comes a conflict between the management and the shareholders of the company about the objective of the business. But it has been widely maintained that the long term objective of the business should be shareholders’ wealth maximization and the short term objective should be profit maximization of the company. For achieving the goal the accountants make it sure that the accounts are recorded properly and they have to prepare financial statements periodically based on these. The stakeholders of the company i.e. the shareholders, the customers, banks, government, the management of the company are interested in the financial statements. Their future decisions about the company depend on the financial statements which describes the financial condition of the company at a certain date. The shareholder of the company takes decisions about whether or not to invest in the company further; the customers get interested if the company is performing well. The role of the management accountants also depend on those financial statements. They have to plan for the future based on the statements. This paper is an attempt to analyze the role of management and financial accounting and the benefits, limitations of the approaches with the help of some current practices. Financial Accounting This field of accountancy is concerned with the preparation of the financial statements which are used by the stakeholders of the company for different purposes. The financial accountants summarize the day to day accounting records and prepare the financial statements for a period. It should be making sure by the accountants that the information disclosed by them are precised, transparent so that it reflects the actual financial condition of the company. The management has to make sure that they are abiding the rules of the financial boards such as Financial Accounting Standards Board (FASB) and the statements are prepared according to the principles like Generally Accepted Accounting Principles (GAAP). The report made by the company management should be relevant for the users of those statements. The companies should make it sure that the published statements are properly audited by the external and internal auditor. The auditors’ job is to check that the reported statements are transparent and according to the financial reporting standards. The stakeholders of the company can take the decision based on the audited statement as the reliability is more than the unaudited statement. Financial accounting also makes strong the corporate governance of a company. In the late 90s the compensation of the U.S. executives has been reduced generally due to the direct role of accounting. The board can decide about the compensation and bonus of the employees on the basis of the financial statements (Bushman and Smith, 2001, p.242). Efficient corporate governance in a company assures the successful continuity of a business. For reporting the financial statements the accountants should identify the stakeholders’ area of interest. A research done in China suggests that domestic investors of China are interested more on gaining in short term basis than the financial data; where the international investors are more interested on the book values for evaluating the stocks than the earnings information available to them (Wu, Koo and Kao, 2005, pp.15-18). This example suggests that the financial accountants of the company should emphasized more on the data in which the investors are ...Show more

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This research aims to evaluate and present financial and management accounting: the contribution to effective business and management. This paper is an attempt to analyze the role of management and financial accounting and the benefits, limitations of the approaches with the help of some current practices. …
Author : darius00
Financial and Management Accounting: The Contribution to Effective Business and Management essay example
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