Decision Making In Management Accounting

Introduction

Decision Making is the principle of management process. Decisions are made to solve problems, attempting the situations, handling crises and resolving conflicts that are predictable. Decision Making is at the essential of planning. The Concept of decision making involves defining the difficult, finding, comparing and choosing action course. Decision making is the learning of classifying and selecting choices based on the values and of the decision maker’s preferences. Decision making is the practice of sufficiently decreasing uncertainty and doubt about changes to allow a reasonable choice to be made from among them. Decisions are made at all level of management to make sure organizational or business goals are achieved. Furthermore,

Decision-making involves the selection of a course of action from among two or more possible choices in order to arrive at a solution for a given problem. Management accounting also involves the evaluation of different strategies and actions by the application of concepts such as budget, break even analysis and activity based costing.

Controlling- In management accounting system control process starts by defining standards which performance may be measured such as standard costs, budgets. Any variance between targets and results are evaluated, actual results are measured and where necessary, corrective actions is to be taken. Management accounting have an important role in the control of cost, monitoring, and control the efficiency of the repetitive processes that the projects undertaken by an organization.

Budget- A necessary planning component is budgeting. Budgets sketch the financial plans for an organization. Budgets measure the financial targets to be achieved by the management of an organization. The control function evaluates whether an organization plans were implemented effectively and often leads to recommendations for the future. Many organizations compare actual results with the initial budget to evaluate performance of departments, employees, or the entire

Forecasting is the process of estimate of the expected financial performance and position of a business in the future. Common types of forecasts include cash flow forecast, balance sheet forecast and projected profit and loss. Forecasting is the starting point in determining the resource requirements of a business which are counted into budgets.

For example: The information accessible by managerial accountants is normally used by managers to forecast the expected financial performance. Managers want to know what products are best to manufacture now, but also desire to know where they should focus their efforts in the future. Managers use the information to develop strategies and specific goals for the future. Planning requires that managers align the company’s purposes with its available resources. A manager’s ability to forecast depends on the budgets developed by accountants and lead to organizations