Semester Paper - managerial accounting PDF

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Managerial Accounting and Its Current Challenges

Semester Paper BACC-731- 40: Advanced Managerial Accounting

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Managerial Accounting and Its Current Challenges Introduction Managerial accounting gives financial documentation within the organization to executives and decision-makers. It, includes weekly or daily financial planning, enabling managers to make choices that boosts the efficiency and productivity of the organization. Managerial accounting consists of key elements of the financial reports of the organization, such as income, revenues, capital expenditures and controlling costs. The corporate management team of an organization needs to plan and estimate at a business-wide level (Tarver, 2019).Managerial accounting includes estimating and preparing for the coming months and years to predict the company's financial direction. Such projects also include revenue projections, but also costs. Usually, this high-level plan involves building a capital budget outlining the value of any long term investment. The budget summarizes the costs and estimates of purchasing and acquiring new equipment. In new projects, managerial accounting is often used to conduct cost-benefit analysis and provide continuing reports to existing projects. Such ventures may require large cash or investment outlays as well as new loans to fund them. As an outcome, managerial accounting is essential to assuring that these ventures are completed within the budget and in a timely basis, while still being profitable. Through managerial accounting, calculating and monitoring quality will help upper management make real-time decisions. Calculating results against estimates and plans helps avoid expensive overruns and encourages an organization to compete globally. There have been many issues with undue emphasis on short-term financial performance. Business expense allocations to profit centers confused the underlying microeconomics with the pricing structure of the divisions concerned. Executives tried to generate earnings through money

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transactions such as selling low market value assets, off-balance sheet financing, and reducing spending on tax deductible and quantifiable investments including product and process development, information technology, business development, and customer experience. The following are the reasons for the emerging issues in managerial accounting: 

In the 20s and 30s, there has been less emphasis on short-term profit.

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Promotions for management happened less frequently in the past.

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Organizations size has changed from small to fairly large. But long-term profit losses are not as evident in achieving short-term goals.

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Today executives are acquainted with the commodities, processes and technology of the company

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Executive bonus plans are widely used to promote a short-term focus.

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International competition and other developments have changed in the competitive marketplace so that the old control systems are no longer sufficient.

Purpose of Research The purpose of this research is to study the importance of managerial accounting and the issues faced in the 21st century. Review of Literature Managerial accounting has had a great history, closely linked to improvements in corporate strategy. There is no spontaneous change found in managerial accounting, it is guided by different factors. The demands of increasingly aggressive competition, emerging technologies, and the dominance of financial accounting dictate managerial accounting. The growing role of managerial accounting also adds that in its traditional methods, modern resource management, software-assisted design and manufacturing have agreed on the look of distrust (Dahal, 2019).

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Management accounting transition is driven by a sequence of variables, such as the environmental, financial, political, legal, social and cultural climate, adding further that the structures will revolve around the assumption that a commodity provides consumer value rather than value to its supplier through its attributes. Accountants and educators have been opposing managerial accounting since the late 1980s on the basis that such activities are not in the way of the drastic changes in the business environment. As a culmination of their argument, the current business accounting practice has lacked its relevance to the recent business climate, an increasing amount of advertisement has been developed. Constant environmental changes affect accounting procedures in management, leading to extreme difficulties nowadays faced by accountants in management. Due to globalization, market competition, information systems, and regulatory changes, improvements in the activities of companies inevitably change the approach of management accountants in an organization (Zainuddin and Sulaiman, 2016). Management accounting has undergone more metamorphosis in recent decades than in any other time in its history. The managerial accounting practices in the 21st century may advance into a broad range of cross-functional fields and translate into a wider reform, along with the management system. Conclusion Management accounting methodology represents an initiative for change, including the need for improvement, the sight for development and strategy, the stimulation of creativity. Furthermore, the evolution of production technology and managerial accounting methods has a major impact on the flow of information of today's global organizations. Current managerial accounting techniques need to close the ' gap ' between financial and technological information

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released by the organization's operating system. New methods should be combined with the cooperation of all managerial processes and information circuits at all levels between managerial accounting and managers (Dahal, 2019). Personal Thoughts Managerial accounting evolution is ecologically guided and closely connected to shifts in organizational strategy. It has grown from retrospective control roles to forward-looking data systems for strategic thinking and control and policy-making which combines semi-financial considerations. Therefore, new management accountants therefore need to concentrate more on policy and decision-making positions, rather than conventional budgeting and financial analysis. References

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Dahal, R. K. (2019). Changing Role of Management Accounting in 21st Century. Review of Public Administration and Management, 7(3).

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Tarver, E. (2019, November 2). When is managerial accounting appropriate? Retrieved from https://www.investopedia.com/ask/answers/062315/what-are-common-scenarioswhich-managerial-accounting-appropriate.asp

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Zainuddin, Z. N., & Sulaiman, S. (2016). Challenges Faced by Management Accountants in the 21st Century. Procedia Economics and Finance, 37, 466-470. doi:10.1016/s2212-5671(16)30153-8...