Solution 1.3 | |
Outline the role of accounting as a support tool for management
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Accounting is often described as the language of business and is an essential support tool for business managers. Developments in the global economy have provided significant challenges for business managers. The accounting profession has had to develop and broaden its scope to provide relevant, timely, accurate and understandable financial information required in the modern economy of today. Managers use this information to develop efficiencies within their business, grow their business and ultimately gain competitive advantage over business rivals. From an accounting perspective, the role of management can be described as making decisions that are likely to ensure the viability of an organisation and to plan and control the implementation of these decisions. The role of accounting as a management tool involves the analysis and presentation of information to assist in the internal running of an organisation, and the preparation of budgets and standards so that control can be achieved. It involves providing information for planning, controlling, decision making and the formulation of business policy and strategy. Across all business sectors, management accounting helps provide answers to the following questions; what are future costs likely to be?, how do actual costs compare with budget? and is the organisation achieving the objectives set by management? Management accounting helps provide management with answers to the following typical questions that empower managers to plan, control and make decisions.
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