An Appraisal of the Nature and Significance of Management Accounting

An Appraisal of the Nature and Significance of Management Accounting

An Appraisal of the Nature and Significance of Management Accounting

 

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Chapter one on An Appraisal of the Nature and Significance of Management Accounting

INTRODUCTION

BACKGROUND OF THE STUDY

Management accounting is the development of information for insiders such as company managers. Managers use this information to measure the progress toward their goals and highlight any potential problems in advance. For example, managers want to know which products have the best sales And which are selling poorly. Which products tend to sell together? How  is inventory being managed? What about cash? Will the firm have enough cash to pay its upcoming debt payments? Acountants answers these questions with budgets , variance reports, sensitivity analysis, revenue reports, cost projections,and even analysis of competitors.When firms consider how to expand products and services, managerial accountants help formulate profit projections from revenue and cost projections. In short, managerial accounting has historically played a large part in the control and evaluation of the business and its performance.
Financial accounting provides information for outsiders. Whereas managerial accounting reports may break down performance for Managers by individual products or regions of the country, finanacial reports summarise the business as a whole, although they can be broken into Business segments and regions. In the case of Publicly held companies, these reports are the quarterly and annual financial  statements that they must file with the securities and exchange commission (SEC). During the last two decades ,the role of accounting departments within companies has changed. Instead of simply providing information to insiders and outsiders , accounting departments have begun the transition into being profit centers, instead of simply reporting the quarterly profits of the firm, accounting departments are asked to increase profits through application of accounting methods. Different methods often lead to different Levels of reportable profits.The reporting of profits, therefore can be both an art and a science. This process is known as managing earnings. For example, accountants may feel  pressure to meet internal targets .Managers may want to show their  employees and the board of directors that they were able to increase revenue and decrease cost. The research seek to provide an appraisal and of the nature and significance of management Accounting with a case study of Dunlope Plc.  

STATEMENT OF THE PROBLEM          

The inability of many organization to afford the service of a MANAGEMENT ACCOUNTANT is depriving many organization the needed Datas and information for quality management decision making.such organization lack the needed  accounting report s such as  budgets, variance reports, sensitivity analysis, revenue reports,cost projections etc. The effect is poor management decision leading to waste and improper use of resources, high cost expenditure, low revenue  and loss of profit.Management accounting is the development of information for insiders such as company managers. Managers use this information to measure the progress toward their goals and highlight any potential problems in advance, for example, managers want to know which products have the best sales and which are selling poorly. Which products tend to sell together?, How  is inventory being managed? What about cash? Will the firm have enough cash to pay its upcoming debt payments?Acountants answers these questions with budgets , variance reports, sensitivity analysis, revenue reports, cost projections,and break even analysis of competitors.When firms consider how to expand products and services, managerial accountants help formulate profit projections from revenue and cost projections. In short, managerial accounting has historically played a large part in the control and evaluation of the business and its performance. Therefore the problem confronting this  research is to  provide an appraisal of the nature an significance of management accounting with a case study of DUNLOP PLC      

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RESEARCH QUESTION

1   What is  the nature and significance of management accounting
2   What is the nature and significance of management accounting in Dunlop plc.  

 OBJECTIVE OF THE RESEARCH

1   To determine    the nature of management accounting
2   To determine the significance of management accounting
3   To determine the nature and significance of management accounting in DUNLOP PLC.

SIGNIFICANCE OF THE STUDY         

The study shall provide the  principles and methodology  of management accounting statements It shall  state its significance and provide use information to managers and accounting officers on the use of management accounting.      

STATEMENT OF HYPOTHESIS    

1.  Ho:  quality of management decision in Dunlop is low             
Hi:  quality of management decision in Dunlop is high         
2.  Ho  management accounting is not significant in Dunlop              
Hi: management accounting is  significant in Dunlop        
3.  Ho: Impact of management accounting on management decision  in Dunlop is low 
Hi  Impact of management accounting on management decision  in Dunlop is  high  

SCOPE OF THE STUDY     

The study focuses on the appraisal of the nature and significance of management accounting with a case study of Dunlop plc.    

DEFINITION OF TERMS  

MANAGEMENT ACCOUNTING: Management accounting is the development of information for insiders such as company managers. Managers use this information to measure the progress toward their goals and highlight any potential problems in advance, for example, managers want to know which products have the best sales and which are selling poorly. Which products tend to sell together?, How  is inventory being managed? What about cash? Will the firm have enough cash to pay its upcoming debt payments?Acountants answers these questions with budgets , variance reports, sensitivity analysis, revenue reports, cost projections,and even analysis of competitors.When firms consider how to expand products and services, managerial accountants help formulate profit projections from revenue and cost projections. In short, managerial accounting has historically played a large part in the control and evaluation of the business and its performance.  
FINANCIAL ACCOUNTING: Financial accounting provides information for outsiders.whereas management accounting reports may break down performance for managers by Individual pproducts or regions of the country, financial reports summarise the business as a whole  eg income statement, balance sheet, statement of cash flow.  
AUDITING: This is an independent examination of and expression of opinion on the financial  statement of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation.  
INTERNAL AUDITOR: Their responsibility is to oversee the firms financial and operating procedures, to check the accuracy of the financial record keeping to implement improvements with internal control to ensure compliance with accounting regulations and to detect  fraud.  

EXTERNAL AUDITOR:  External auditor are accountants from outside the firm who review the firms financial statement and its procedures for producing them. Their Job is to attest to the fairness of the statement and that they materially represent the condition of the firm.

 

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