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Accounting tools - Essay Example

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Accounting tools

Most of the companies are getting dominated by the international competition. The primary cause of this competition is demand based supply and widely accepted e-commerce. Since, the utilization of management accounting tools is important for most of the companies with the aim of developing logical and reliable business strategies. The primary features of management accounting are to help the organisation in the area of decision making, control and support strategic planning (Kaplan and Norton, 1996, p.58). In this essay, the researcher will stress on the different aspects of management accounting tools and the effectiveness of management accounting tools. Discuss and evaluate the purpose and effectiveness of management accounting for modern business In the modern business firms, the management accounting is mainly used for taking competitive decision making by collecting, communicating information and processing. This tool helps the management of the organisation to control, evaluate and plan on business process. This tool also relates to the present strategy of the business firm with the existing ones. The function of management accounting is multidimensional and interrelated with the various departments. The mechanism contributes in monitoring different activities in business and helps the businesses to meet the goal of the organisation. In this function, the management and the board is mainly focussed on those activities which are the key drivers of future financial result. This controlling activities influence the corporate governance activities of the organisation. With the help of various analysis report, the management accounting track the lack in control system also and measure the divergence from the expected result. In the variance analysis, the management compares the expected performance with the actual performance (Brickley, Smith and Zimmerman, 2005, p.256). The approval of financial decision also depends on the management accounting decision. Most of the members of the audit committee (at least 40 %) hold the specific qualification. But it has been seen that the common management accounting tools is used by the audit committee rather than the directors of the business firm. In this point of view, at the time of taking financial decisions, management accounting reports are not adequately presented. On the other side, it is noted that the decision of Director is not sufficient for 69 % of the companies. Most of the major financial decisions are taken by the senior management of the company by utilizing the key areas of management accounting tools (Blocher et al. 2010, p.54). Most of the traditional business firms did not evaluate the performance of CEOs and senior management before general annual meetings. The management accounting tools determinates the financial results from various segment of operation that signifies the performance of CEOs. The modern businesses maintain good corporate governance practices by following codes of business practices, compliance to relevant laws and rules and regulation. The corporate behaviour is important to maintain the corporate governance. So, corporate behaviour should be stringent in corporate DNA by maintaining the principals and ethics. The management accounting mechanism sets the standard behaviour for the purpose of hard coding. This mechanism also provides the periodic report which highlights corporate culture monitoring result. On the other side, this is a tool which is a custodian of ethics. So, it is very easy for the business firms to trace the fraud and mal practices. Comprehensive Implementation of Management Accounting Tools: In this part the researcher ...Show more


Presently the business environment is experiencing transformation from its traditional framework due to the competitive and dynamic nature of the business. Most of the companies are getting dominated by the international competition…
Author : miller41
Accounting tools essay example
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