Accounting Information Essay

Published: 2020-02-04 01:02:17
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Category: Problem solving

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Managers need accounting information and need to know how to use it. Critically evaluate this statement. Accounting information provides managers with data needed to determine whether a business is at a profit or a loss, how much debtors owe, companys liabilities, and much other financial information. Accounting measures business transactions and as such can help direct managers in the right course with concrete information. Principally accounting information is a tool for managers to make business decisions on a timely manner. For example, if by using accounting information, managers notice that the trend is for sales to decrease, then they can take measures to stop this trend. Maybe they need to change prices or decrease expenses to handle the down-trend. The key is that accounting gave them the clue that something may not be going according to plan and as we know planning is an important role in business management.

Lately we have witnessed an ever expanding basis of knowledge for the design of effective management accounting systems. New areas of expertise have continually provided new visions, opportunities and challenges to the conventional approaches. Perspectives drawn from economic theory have provided a sound basis for selecting information related for decision making and the application of mathematical skills has added to our potential for thoroughly analyzing complex problems. Moreover the developments in computer technology have ensured the means for providing immediate information to the managers who need it.

Because of all of that, I think an accounting for managers needs no longer be seen as just a calculation of post events but as a function which has a dynamic and positive role in encouraging managers to learn from their past experiences and to anticipate the contingencies of their uncertain tasks. There are signs of real progress. However, while a great deal of attention has been devoted to the different ways of designing management accounting systems, I think comparatively little consideration has been given to the different ways of using accounting information. Yet the final impact which any accounting system makes on managerial behavior is dependent not only upon its design and technical characteristics but also upon the exact manner in which the resulting information is used.

Even the most sophisticated system can contribute little or nothing to the efficiency of a companys operation if the information is ignored.1 More generally, however, despite any amount of care and consideration which may have gone into the design of an accounting systems, its value may be questionable if managers use the information in an inappropriate manner, attributing either too much or too little validity to it or being unaware of its intended purposes.

Few management accounting systems ever achieve a perfect representation of the underlying structure of economic and financial events, and a careful and considerate use of the information is always important to compensate for the many unavoidable inadequacies of the system. I think managers should identify the handful of critical information variables that they need to keep a close eye on in the company. Insist that internal accounting reports highlight these factors. Managers need to get on top of problems as soon as possible. To solve a problem, managers first have to know that they have one. I think only managers who know how to use accounting information properly can identify the most important numbers that they must closely watch to know how things are going.

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