This research has revealed the key information on the implication of the managerial accounting information by the managers and business decision makers to increase the overall profitability of company. The text is based on the research that has been made for constructing the professional journals. The research that is used for presenting the information provided below is done by three different authors. All the data in this research have been collected from the secondary sources such as journal articles, web information and books. However, three main articles have been evaluated and compared to assess the implication of the managing accounting information and its impact on the financial performance and future business outputs.
How implication of the managerial accounting information by the managers and business decision makers in their business operations could result to increase the overall profitability?
The main aim and objective of this research is to analysis the author’s view point in three articles given on the implication of the managerial accounting information by the managers and business decision makers to increase the overall profitability of company. This will help in assessing how managers could increase the business efficiency and outcome of the business by using the managerial information effectively.
The main hypothesis of this research is that all the information of the business will not vary and financial information and accounting financial tools are interlinked to each others. They could be used to assess the financial performance and future prospects of organization.
“Management Accounting Information System and Effective Business Decisions: An Evaluation of Quoted FMCG Manufacturing Firms”.
The first professional journal used to make the research is, “Management Accounting Information System and Effective Business Decisions: An Evaluation of Quoted FMCG Manufacturing Firms”. The journal is written by three authors being Kenneth Enoch Okpala, Taofeek Sola Afolabi, and Dare Adegbola. The study suggests that effective decision making in any business depends and is impacted highly by the information that is provided by the management accounting function. This indirectly increases profitability as the business’s profit is dependent completely upon the decisions that a business makes. The results of this study are generated through the research that has been done on the Fast moving Consumer Goods industry. The findings gathered by the author shows that the information that the management accounting system generates has a highly significant and favourable impact upon the decisions that the managers take (Hakeem, & Bambale, 2016).
However, along with the taking of decisions, the management accounting information system also explains those decisions that have been taken in line. This improves the transparency in the whole processes. The result that the author gets shows that the FMCG companies that have a good technological support in their management system and are equipped with skilled heads in their management accounting function are attaining sustainable and profitable growth in their business. The whole credit of this growth is to the good technological system and professional heads. This author had also supported the same fact that the previous authors have concluded into (Kaplan, & Atkinson, 2015). Nonetheless, increasing transparency will help company to sustain its business longer. It would also be used to set up equilibrium between the cost of capital and financial leverage which will help company to manage its finance at the time when the business condition is not good or there are sluggish market factors.
The second professional journal is, “The System of Management Accounting Information to Support Decision Making.” This journal is written by Dam Bich Ha, Dam Gia Manh, and Doan Van Anh. The study says that there is a need of strong information system to be put in place in business to achieve success and move beyond competitors. The focus is the application of these information systems as decision making systems in the organisations all over the world, but mainly in Vietnam. The author believes that when a proper decision support system, i.e. the management accounting information system is put in the organisation, it certainly provides the organisation generally and the managers particularly a lot of far reaching benefits. The quality of the decisions significantly gets improved when a proper decision making system is positioned into place (Laudon, & Laudon, 2016). The main output of using the managing accounting information is that business managers could easily forecast the possible future issues at spot and make strategic financial planning to mitigate those issues in effective approach (Otley, 2016).
However, the author suggests that in order to establish a proper management information system the managers needs to bring an innovation in their way of thinking and have to improvise their methods of working. It could be done by installing the accounting software such as MYOB, XOXO and SISA which will assist in better recording and managing financial information in business The information that is found from the management information systems helps the managers in progressively improving the profitability and growth of their own organisations (Ismail, & King, 2014).
The third journal is, “Management Accounting and Its Impact”. This journal is written by Shpetim REZNIQI, Artan NIMANI, Valbona ZEQIRAJ, and Nevruz ZOGU KOSOVO. The authors have provided the benefits of management accounting by differentiating it from the ways financial accounting behaves. The stark contrast presented is that the financial accounting information is for the outside users of the organisations while the management accounting information is only for the internal management and usage. The profitability of any organisation depends upon the quality of the planning, controlling, reporting and decision making. All these things are possible only when proper information is available. This information is available only when a proper information system is available (Otley, 2016).
As per the views of Melnyk, Bititci, Platts, Tobias, &Andersen, (2014), it is found that the author has recommended that in this era of globalisation and high competitive era, every organisation needs to introduce a management accounting system. The establishment of this system however shall depend upon the working area of the organisation and the size in which the entity operates. In the digitalized arena it is important that every entity makes use of technology to achieve maximum profit from the information that it has. Moreover along with the information system it is all required that the managers that are handing every division are also expert as well as professional. Along with all this, all the ethical standards are required to be followed by the organisation.
Looking upon all the view that the different authors have presented, it seems that the management information system has lot to add to the organisation’s profitability. The internal reports that are generated by the management accounting system provide the managers with productive information about the running performance of the entity and the ways where it is lacking. The future of entity is also shaped as per the decisions that are taken by the organisation (Patel, 2015).
Through the use of managerial accounting system, the entity’s foundations of profit can be identified. Through this identification, the major decision for these areas can be taken more seriously and effectively (Collier, 2015). Through the reports that are generated by the management accounting systems, all the statistics can be used to get a deeper insight in the financials. Using these financials a lot of calculations can be made and all those calculations can help in providing a tool to improve the profit of the company. The management accounting system helps in using several modern techniques like activity based costing, relevant cost analysis, or make or buy analysis from the organisation’s information (Collier, 2015). Any business is it small or large, have to make concrete decisions and that too dependent solely upon the specific information dealing with that organisation. All the information can be collected at a single place using the management accounting system. That information is correct as well as relevant to help in improving the business performance and ultimately the profit of the organisation. A proper analysis and not any intuition can help the company to grow and achieve the targets (Marshall, & Steinbart, 2017).
These above synthesis’ and details gathered from the different journal articles have revealed that business organization could easily lower down the cost of capital if they have used management accounting information is effectively used in business operation. It is analyzed that company could easily perform ratio analysis, top down analysis, bottom up analysis to assess the financial implication of business and its future outcome. I have learned how I could assess the financial impact on the business and the recourses which I could take to mitigate these issues. I will be using this managerial accounting information while accepting the particular project, determining the required rate of return and time value of money. It will not only save me from the possible losses but also assist in creating value on my invested capital in particular business. It will be easy for me to track the financial performance of my own business and will allow me to select the particular project which will give me better return on capital employed. This sort of information is very much necessary for taking the strategic decisions and financial planning. If this information are not handled in proper manner then it might negatively impact the business may also result to loss of capital (Hakeem, & Bambale, 2016).
Conclusion
The following research is designed to understand the implications that the information generated by management accounting provides for the bringing a rise in the profitability of business. These three articles have shown how company could benefits its business operations by using the managerial information to take effective business decision. However, this information is helpful to make forecasting, strategic planning and financial planning in business which will further be used to lower down the cost of capital and increasing the return on capital employed. The crux of this research is that if implication of the managerial accounting information by the managers of organization is done effectively then it will lower down the cost of capital, increase the return on capital employed, reduce the blockage of funds and increase the efficiency of the deployment of the capital in the better return output of the projects.
References
Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for decision making. Australia: John Wiley & Sons.
Hakeem, S. A. A., & Bambale, A. J. A. (2016). Mediating Effect of Liquidity on Firm Performance and Dividend Payout of Listed Manufacturing Companies in Nigeria. Journal of Economic Development, Management, IT, Finance & Marketing, 8(1) 33-43.
Ismail, N. A., & King, M. (2014). Factors influencing the alignment of accounting information systems in small and medium sized Malaysian manufacturing firms. Journal of Information Systems and Small Business, 1(1), 1-20.
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. UK: PHI Learning.
Laudon, K. C., & Laudon, J. P. (2016). Management information system. Australia: Pearson Education India.
Marshall, B. R., & Steinbart, P. J. (2017). ACCOUNTING INFORMATION SYSTEMS. Australia: Pearson Education Limited.
Melnyk, S. A., Bititci, U., Platts, K., Tobias, J., & Andersen, B. (2014). Is performance measurement and management fit for the future?. Management Accounting Research, 25(2), 173-186.
Otley, D. (2016). The contingency theory of management accounting and control: 1980–2014. Management accounting research, 2 (2) 45-62.
Patel, F. (2015). Effects of accounting information system on organizational profitability. International Journal of Research and Analytical Reviews, 2(1), 168-174.
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