Management accounting information is used to inform decision-making, but it has limitations. What...

Question:

Management accounting information is used to inform decision-making, but it has limitations. What can the accountant do to minimize the limitations of management accounting?

Management Accounting

Management accounting refers to internal accounting for the use of management to make informed business decisions and to measure financial performance. Management accounting is more customizable and flexible when compared to financial accounting. Financial accounting refers to accounting for financial reporting purposes for external users to use.

Answer and Explanation:

An accountant can minimize the limitations of management accounting in several ways.

First, one limitation of management accounting is that the numbers don?t always tell the whole story. An accountant reduce the impact of this limitation by providing management with qualitative commentary regarding the results of the numbers.

Next, accounting in general can be difficult to understand. An accountant should visualize the data in charts and graphs to make it easier to understand. A good accountant should also use the most up-to-date data and to avoid use stale, irrelevant data.

Last, there are a variety of financial metrics management uses to measure performance. Inherently, this may lead to short-term bias social managers can hit numbers. An accountant should suggest the use of multiple types of metrics that aim to align both long-term goals and short-term goals.


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Managerial Accounting Functions

from Business Management: Help & Review

Chapter 9 / Lesson 1
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