A Vital Role for the Financial Success of a Company
The main objective of any company is to earn a profit now and in the future. Profits are earned when payment for goods or services provided exceed the costs incurred by the company. These profits can greatly be enhanced by important decisions made by managers. Managers are responsible for making proper decisions to allow the company to be profitable. To ensure profitability and success, managers should utilize the functions of managerial accounting to assist in the decision making process.
Managerial accounting is the process of identifying, measuring, analyzing and
communicating financial information needed by management to plan, evaluate and control an organization’s operations (“Statements”). It’s the manager’s responsibility to the owner to ensure that the company is successful. Through managerial accounting, managers are provided information for internal planning and control to assist in leading the company. Good managerial accounting is vital to understanding the profitability of day to day activities and in predicting profitability in the future. The main objective is to provide the necessary information for decision making and to motivate the manager to meet company goals. This important information allows the manager to track costs and expenditures to assist in making critical decisions. Reports in managerial accounting are very detailed and pertain to different parts of the company. Such reports are generated daily or weekly so that managers can identify ways to set prices or cut costs.
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