Managerial accounting, also known as the management accounting, elaborates the use and provisions of accounting information that are required by the managers, accountants and auditors in an organization. It helps them to take necessary decisions regarding any issue arising in the organization. It also assists them to get acquainted with the management control functions which prevent them from taking any wrong decision which may harm the operations of the company. It chooses a forward looking approach which predicts the future from the past performance of the company. It is not based on the historical models that obstruct the management decisions when implemented. It is solely designed to help the management to take the necessary decisions and is not disclosed to the shareholders or the creditors. Naturally, it is highly confidential.
Managerial accounting thus helps an individual in an organization or the organization as whole to take right decisions in the areas where concern is needed. It is important to study the roles of managerial accounting which will affect the behavior of the individuals who build the organization. The organizations repeatedly make judgments and decisions regarding the amount and kind of information which are supplied to employees and based on the given information, the employees proceed to judge and decide (Coombs, Hobbs and Jenkins 4).
The selected research area seems interesting because it identifies the main framework of the financial system in an organization. Finance being the main backbone of any organization, it is a very crucial area of concern. With an established financial system, an organization can identify whether the financial resources are well managed and organized in its different departments. The over and under utilization of resources are also identified in the true sense. Managerial accounting is a part of this whole financial system. It is interesting to know the basics of the huge system which contributes to the financial improvement of the organization. The types of information that are needed for management accounting system are provided by the day to day operation of the business (Boyns and Edwards 29).
Managerial accounting increases the value of an organization by certifying the efficiency and the effective use of the scarce resources which also include the financial resources. Thus, it provides with information that are important for improving the abilities of the employees. The managers are able to evaluate the performances of the employees and take important decisions which are necessary for the improvement of their morals. They are encouraged to achieve their as well as the organizational goal (Hoque 67).
The managerial accounting systems aim at aligning the interest of the employees with the owners by directing them to give their full attention and effort towards the achievement of their goals. The activities that benefit the organization also highlight their performance on the whole. The information that is provided by the managerial accounting to the mangers is as follows:
1) Provides with necessary information that are important for managerial decision making and planning.
2) It provides information about the individual which motivates them (Zimmerman 4).
Thus, it can be stated that the two abovementioned functions are the decision facilitating roles of the management that influences the operation of the entire organization.
Thus, it is important to study the functions of managerial accounting information along with their influence on the behavior of individuals who constitute the organizations. It helps the managers to take relevant decisions which are appropriate for the continuation of the business operations. The managers can repeatedly judge and make resolutions about the type and amount of information that are supplied to the employees. The employees in turn design their own decision and process of work based on that information. However, there are evidences provided by the agency model and other economic behavior models which indicate that the decisions and judgments of both the owners and the employees are not necessarily of high quality. Thus, the managerial accounting system is required to measure the quality of the decisions and judgments that are taken by both the groups of individuals in an organization. It also highlights the determinants of the quality of decisions and reports regarding the efficiency of each factor that is involved in the process of evaluation.
The study also provides important information to the organization as a whole. The study highlights the cost and benefits of managerial accounting practices. It provides information which is related to important decision making within the organization. Apart from providing information regarding the operation of the organization, it also motivates the employees. It helps the organization to take decisions associated with changes or modification of the managerial accounting principles which will help in motivating the employees to a greater extent. The researchers provide a base for this information which is needed by the organization. It helps in eradicating the discrepancies between the interest of the employee and owner. It also assists the organization to mitigate the agency problems which arises due to moral hazards and poor selection of the employees (Coombs, Hobbs and Jenkins 4).
The study also highlights the evidences that are put forward by the agency theory about the moral and ethical principles along with the economic incentives. It determines the social motives and values of the individual towards the informal information system of the organization. It also compares the behavior of the individual in compliance with the formal procedures of governance to check whether the employees are performing their best to meet the goals and expectations of the organization.