The use of managerial accounting in any industry Essay

The use of managerial accounting in any industry - Essay Example This accounting branch embraces accounting systems, methods, and techniques that can help the organization maximize its profits or minimize losses. Scholars opine that management accounting is the presentation of accounting information in a way that would assist the top management to create potential policies for managing its daily operations. Management accounting is not confined to financial management information, but it is about comprehensive information about overall organizational activities. It is evident that financial management alone is not capable of providing necessary information for performing managerial functions effectively. In contrast, management accounting is able to provide key information about cost, profits, and factors which are useful for the management to discharge their functions effectively. Management accounting can be considered as an extension of the management aspects of the cost accounting, and it is based on the principles of both cost accounting and financial accounting. It seems that management accounting is relevant to fast growing sectors like automotive industry because those sectors need an uninterrupted flow of various information to ensure improved value chain efficiency. This paper will explore the uses of managerial accounting tools in the automotive industry with particular reference given to management accounting practices in Toyota Motor Corporation. ... ute of Management Accountants (IMA), â€Å"management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’ strategy† (â€Å"definition of..†). The management accounting information is different from financial accounting information in several aspects. The management accounting information is basically forward-looking whereas financial accounting information is primarily historical. In addition, managerial accounting information is model based and is particularly intended to support decision making. This type of information is generally intended for the use by business managers but not by stockholders, creditors, or the general public. Therefore, managerial accounting information is highly confidential in nature. According to the American Institu te of Certified Public Accountants, the practice of management accounting is spread to other three areas such as strategic management, performance management, and risk management. Strategic management is about promoting the management accountant’s role as a strategic partner in the organization whereas performance management deals with improving the performance efficiency of the organization constantly. The risk management is vital to identify and manage risks that constitute a potential obstacle to the achievement of the organization’s long term objectives. A management accountant uses his professional knowledge, experience, and expertise to assist the company management to frame strategic policies and to improve operational efficiency and thereby promote value creation. Therefore, management accountants