Adavantages of Management Accounting Information

The provision of management accounting information are for the intention of planning, control and decision making which may contribute to the success of an organization. Management accounting is the process of gathering information about economic activity that will be advantageous for the organization.

For the planning of an organization, the manager can use the historical, present and future information obtained from management accounting which based on the organization’s situation and position in predicting the organization’s future needs, setting clearer objective and implementing specific strategies that can bring achievement to the organization. After interpreting relevant management accounting information provided, it will be more efficient for the organization to apply and realize their planning and objective that had been set earlier.

For the planning of an organization, the manager can use the historical, present and future information obtained from management accounting which based on the organization’s situation and position in predicting organization’s future needs, setting clearer objective and implementing specific strategies that can bring achievement to the organization. After interpreting relevant management accounting information provided, it will be more efficient for the organization to apply and realize their planning and objective that had been set earlier.

Management accounting able to assists the manager in controlling organization’s cash flow and improve financial stability which included the costs and business operational expenses. With the management accounting information obtained, the manager is able to review the cost of economic resources and other business operations. Therefore, the manager is clearer and familiar with the estimation of cost needed to run the business. Manager can analyze the quality of economic resources consumed in producing goods by using the management accounting information.

As an example, if the overall quality of product would not be affected significantly by replacing with cheaper raw material, the manager can change towards a reduction of production costs. Budgeting is considered as major part of management accounting. To create an effective financial plan with lower operational expenses, manager able to analyze necessary and unnecessary business expenses based on the budget plan obtained from management accounting information in the pathway of saving money for the organization. In contrast, there is also some limitation of management accounting information which based on financial and cost accounting. The interpretation of financial information usually depends on the interpreters’ judgments. The accuracy of decision mostly will be affected by their personal bias or prejudices. Manager usually uses management accounting information as a decision-making tool. This is because management accounting information consists of specific and accurate details related to different competitors, market and industry the organization involved.

With the analyzed data such as competitive advantages, consumers’ demand, potential sales and consumers’ response to price change, manager is able to make decision among all other business opportunities. In contrary, there are some limitations of the management accounting information. The quality of the information is restricted with the proper understanding and knowledge of the management accountants who provided the information.

They may be lack of knowledge in related subject such as Statistic and economics, thus it will lead to inaccurate management accounting information. In conclusion, it is foreseeable that management accounting information is important and can be known as a business tool for the organization although it may has some limitations. But, it can also overcome by applying expertise and professional training for every level of management in the organization.

Therefore, the information still able to assists in internal operation management of an organization. Furthermore, all decisions of the organization rely heavily management accounting information due to the reason it identifies all the factors that will affect the organization to succeed.