Monday, January 27, 2020

Key Management Accounting Guidelines

Learning Objective 5: Describe three guidelines management accountants follow in supporting  managers.

(1) employ a cost–benefit approach,
(2) give  full recognition to behavioral and technical considerations, and
(3) use different costs for different purposes.

Cost Benefit Approach
In short, decisions should benefit the company more than they cost. Accounting is particularly useful in this endeavor, as their job revolves almost entirely in recording and analyzing value and cost.

Behavioral and Technical Considerations
Technical considerations include providing the right information in an easy to read format.
Because management deals with people, it's also important to use information to spur action and positive motivation in people, rather than just underlining people's underperformance.

Different Costs for Different Purposes
GAAP vs internal Accounting

What guidelines do management accountants use?

Well first of all they make sure that any decision they recommend brings more value or benefit to the company than it costs. They relay this information in a concise and easy to read way, usually with the aim of motivating its readers. Different formats are also necessary, depending on GAAP or whatever part of the organization the information is traveling to internally.

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