A RESEARCH REPORT

ON

Managerial Accounting – A Source of Information

for an Efficient Management

Managerial Accounting for Safety Management

Airline Dynamic Efficiency Measures with

Managerial Disposability

The Usefulness of Management Accounting

Systems, Functional Differentiation and Managerial
Effectiveness

By

ESEOSA UWAILA

December 27, 2021

Faculty of Economics and Administrative Science

University of Kyrenia
 MANAGERIAL ACCOUNTING – A SOURCE OF INFORMATION FOR
AN EFFECTIVE MANAGEMENT

The International Federation of Accountants saw management accounting (prior to 1950) as a

technical activity required for the pursuit of organizational objections which was predominantly
oriented towards the determination of product cost. This later enlarged to providing qualitative
information of confidential character to management to enable them plan, control and make
effective decisions.

Management accounting systems first appeared in the United States during the 19th century
(Chandler 1977). Cost accounts were used to determine the direct labor and overhead costs of
converting raw materials into finished products.

In the 1950s, management accounting innovations were identified as discount cash flow, total
quality management, cusum charts and optimum transfer pricing.

In the 1960s, it was identified as opportunity cost budgeting, zero-base budgeting, decision tree,
etc. Later in the 1970s, it was identified as information economics and agency theory.

According to Chattered Institute of Management Accountants (CIMA), managerial

accountant is a branch of accounting that is concerned with the process of identifying,
measuring, analyzing, interpreting, as well as communicating information used by management
in planning, evaluating, controlling and making effective decision within an Entity.

The main objective of management accounting is to maximize profit and also to minimize cost.
Through the adoption of accounting methods, systems and techniques.

Various types of managerial accounting,

 Product costing & valuation

 Cashflow analysis
 Inventory turnover analysis
 Financial leverage metrics
 Constraint analysis
 Budgeting, tread analysis and forecasting
 Managerial accounting as a source of information for an effective management is growing, as
an expression of increased corporate autonomy, it will now be aimed at pursuing analytical
internal management unit, calculating inventories as the selling price negotiation with
potential customers, establishing profitability the products, works, services, preparation of
budgets by types of activities, costs, sub, cost-control necessary information in decision
making, etc..

The following are some ways managerial accounting information can assits firms and
institutions in effective management;

 Cost classification & calculation: Cost classification explains the efficiency of the
economic activity and the establishment the deviations from the proposed goal (Deju
& Patrut, 2006)
 Budgeting Control: Managerial accounting information helps managers in the
preparation of budgets for a future period of time, compare the actual results with
planned results and investigating causes and actions in the form of rewards.
 Decision making: Information obtained from managerial accounting helps in making
vital decisions such as financing decisions, investment decision in regards to capital
expenditure, sales & expansion decisions, etc.

Limitations of the managerial system is that it requires intelligent interpretation of available

data to produce result. Managerial accounting has a wide scope which covers both non-financial
and financial data and so a managerial accountant with limited knowledge and resource cant
prepare reliable information, thus misleading the organization.

Conclusion;

Management accounting is a very vital source of information to managers because it is used to

evaluate the performance of the firm and also to plan, control and effectively manage the
business (organization). Financial accounting measures an enterprise performance, but it does
not show how this performance was realized. To support it, managerial accounting proposes to
managers decision-making models relying on the theory. So, the accounting decision represents
the process of rational choice of a line of action out of several possible, starting from real, clear,
complete and relevant accounting information, on the one hand, and from previsions built based
on it in order to obtain a maximum effect with a minimum effort.

MANAGERIAL ACCOUNTING FOR SAFETY MANAGEMENT

Organizational safety can be defined as the capability of the organization to manage the
operations to sustain economic, social and environmental well-being.

Managerial accounting facilitates decision making process in organizations by providing

managers with high quality information that are relevant and also analysis on the organization
performance, cost and benefits of certain operations. Financial information are needed to guide
safety related decision making.

A high quality managerial accounting information in the working environment can help top
managers to obtain relevant information and also improve the efficiency of investments in safety
(Cheng Dhaliwal, Zhang 2013). Managerial accounting information on tangible activities such as
replacement of old machines, equipment maintenance and replacement, can help reduce the risk
level or accidents that might likely occur I the long run if those assets are not been maintained.

Worthy to note is the fact that when these production equipment are maintained or replaced, it
helps to bolster the level of Return on Capital Employed (ROCE) and this can help the
organization in easy expansion of business and also help assist them un the meeting up their
financial obligations. Management information are also needed to monitor the level of safety and
also motivate those in position to take the necessary actions (Hale 2009).

The basic objectives of safety management accounting includes minimization of accidents,

improvement on the level of investment. One of the major problem in safety related investment
is that the monetary costs of an investment are usually well known, but the monetary value of the
benefit is difficulty to calculate. The efficiency of the improvement should be evaluated when
trying to ascertain the costs of safety investment this efficiency of the improvement can be
enhanced by collaborating with Occupational Health and Safety (OHS) professionals in
planning and decision making activities (Grant 2003). Investment in safety related issues often
yields positive returns that can assist the firm in easy expansion and make appropriate investment
and financing decisions.
Quality of accounting information required for management safety;

Gallemore and Labro (2015) highlighted that high internal information quality is characterized
by useful, accessible and reliable information that are collected and consumed within the
organization. This high information quality in view, contains more of accounting information
which can be either qualitative or quantitative in nature with the aim of assisting managers and
management analyses and make appropriate decision that are financial and investment based so
as to achieve their stipulated objectives.

This high quality managerial accounting information includes, production cost that will enable
management to know the cost incurred in the production process and also employee morale
(Horngren 2012) that helps boost manager – employee by the adoption of timely and efficient
communication skills based on vital information within the organization that will result in
managers making informed business decision.

High quality managerial accounting information is associated with more Tax- motivated income
shifting (Weaver 2018) which was discovered by Gallemore and Labro (2015) after measuring
information quality using four observable report qualitative which are management forecast
accuracy, absence of material weakness, earnings reporting speed and absence of restatements.

Management accounting information enables managers to meet short-run budget by adjusting or

down-sizing the rate of spending on activities that are not two relevant but on only those that are
necessarily unavoidable.

As stated earlier, it also helps to ensure positive returns on capital employed (ROCE) that will
benefit the organization based on increased productivity level. Managerial accounting
information also helps top managers coordinate the operations among different department of the
firm (Gallemore and Labro 2015) and therefore allocate workloads more efficiently.

Conclusion & Recommendation

Managers should ensure that they relate or effectively communicate with managerial accountants
often so as to enable them receive vital information that will assist them in achieving positive
investment returns and also boost the morale of employee based on the level of individual
achievement in the course of production, sales, investments and other administrative activities
been carried out in the organization.
THE USEFULNESS OF MANAGEMENT ACOUNTIUNG SYSTEMS,
FUNCTIONAL DIFFERENTIATION & MANAGERIAL EFFECTIVENESS

The concept managerial accounting system was defined by (Horngren, Bhimani, Datar & Foster,
2002) as these parts of the formalized information system used by organization to influence to
behavior of their managers that leads to the attainment of organizational objectives.

The design of this managerial accounting system was conceptualized in terms of two
interrelated dimensions level of details and frequency of reporting. In terms of the level of
details, three critical element have been identified which re being widely adopted by managers
which are very useful to them. These element includes the operating budget, the standard
costing system and the reliance on operational information.

The operating budget is very essential in that it is used to schedule and record department
revenues and expenditure including materials and salaries. Basically, a budget is usually
generated for the forth-coming period and periodic budget follow up reports are issued to provide
information to departmental managers based on the level of progress towards the budget targets.

The standard costing system aids the managerial decision making by providing projected cost on
the products. It provides information on the product level.

Usefulness of managerial accounting system (MAS) in organizations for managerial

effectiveness;

Managerial accounting systems are useful to different line of organization, for instance in a
manufacturing firm the below listed are the uses of MAS

 For ascertaining material cost: MAS has been designed to assist managerial
accountants in the determination of the cost incurred in the purchase of materials both in
units and in batches, used for either production or construction purposes.
 For determining the cost of labor: MAS also aids managers to ascertain the total
amount incurred on labor employed for production activities, cost pf labor is very vital
 because it determines to a large extent the progress level of the transformation of raw
materials into finished products.
 Determination of revenue: Revenue is been generated from the sale of finished
products and also from the excesses of the return on capital employed (ROCE).
Managerial accounting system has been designed to enable management determine
revenue from sales and investment so as to ensure they take decisions (effective
decisions) that are investment and finance based geared towards achieving
organizational goals.
 Capital employed: Managerial accounting system aids managers make effective
investment decisions based on the capital invested in the course of carrying out
organizational activities which includes production, sales and distribution.
 Depreciation: Determination of the level of depreciation on the asset used in
organizations is very vital because it helps to know when to replace those worn out
equipment and when to repair them so as to ensure high level of productivity and also
avoid workers injuries as a result of accidents that may occur through the use of faulty
equipment.

In addition to the usefulness of the managerial accounting system, the aviation industry
adopt it and other accounting information to enable them know the prices of aviation fuel,
costs that will be incurred for the maintenance of the equipment used and also to keep the
airplanes in good condition so they can achieve expected returns (profit).

CONCLUSION

Managers at their respective levels and departments adopt the managerial accounting system
when performing and monitoring different functions in the organization to ensure that they
make effective decisions and effectively manage the affairs of employees within the
organization and also bolster their performance level in order to achieve organizational
goals. Managerial accounting system is useful I n ascertaining the cost of performance, firm
one process of production to another, prepare budgets, allocate and apportion cost to the
financial institutions, it can be used to determine the payback period (the shortest period of
which debtors are expected to repay their loans).
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