The Importance Of Managerial Accounting In Business Decisions

1169 Words 5 Pages
The Importance of Managerial Accounting in Business Decisions
Marni L. Wertz
Pennsylvania College of Technology

Abstract
Financial and managerial accounting reports provide important information about a business. Financial statements report on the past while managerial reports are used to make decisions about the future. Managerial accounting reports are used specifically by business management within an organization. Business managers’ activities include planning, directing, and controlling, and these activities are guided by the information provided through managerial accounting reports. The Importance of Managerial Accounting in Business Decisions
Accounting information is used to make significant business decisions. Accountants
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Accountants can use estimations to make projections in their reports; these reports do not have to follow the guidelines of GAAP or be verified by a certified public accountant. Managerial reports are completed as needed, and they can look into a company’s future a year or more. These reports do not have to be of the entire company; they can show a business broken into subunits. Examples of managerial reports are: profit and loss statement, job costing or process costing report, and budgets – sales (derived from the sales forecast), operating, master, participative, financial, and long-range. Managerial accounting reports try to predict the future of a company. This can include, but not limited to, how the following would affect the business - changing the number of units produced and the impact on production costs and profitability, to accept or reject a special order, producing a product internally or outsourcing, to continue or discontinue a product line, and also what price to charge for a product (Weygandt, Kimmel, & Kieso, …show more content…
Combinations of these essentials allow a company’s diverse activities and human resources to produce a successful business. Supervision includes overseeing the work of subordinates by their superiors. Managers must motivate and encourage their employees to help ensure quality work. Management leads the company in the planned direction. Effective communication is needed to pass along management’s objectives. (Management, 2015)
Controlling is management’s way of keeping a company on track to meet the planned objectives. Managers cannot plan for every situation, but they must have the ability to get a company back on track when it deviates from the planned objectives. One reason for controls is to prevent scandals. Controlling can help management predict deviations from objectives before they occur. The steps for controlling are: establishing a standard of performance, measuring the performance, comparing the performance with planned standards and identifying any deviations, and correcting those deviations. (Management,

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