Consider the role of management accounting in relation to the company for which you work (or

have worked). Discuss how the principles of management accounting can be utilized. What

specific managerial accounting activities would be useful?

Introduction

Management accounting, also called managerial accounting or cost accounting, is the process of

analyzing business costs and operations to prepare an internal financial report, records, and

account to aid managers’ decision making process in achieving business goals

(myaccountingcourse.com ).

ROLE OF MANAGEMENT ACCOUNTING IN PROCTER & GAMBLE

1. Help predict the future

Predicting the future helps answer many questions, such as: Should the company invest in more

assets? What are the most appropriate markets for expansion and is the expansion suitable for

this period or not? Should they buy another company? Management accounting helps in

answering these important questions and predicting future trends in the business.

2. Assist in making purchasing decisions

Is it cheaper to import a material or product or manufacture it locally? Cost, product availability

and time to availability are the deciding factors in this choice. Through management accounting,

visualizations will be developed to build the optimal corporate strategy.

3. Forecasting cash flows

The forecast of cash flows has a big impact on the business, because it is necessary to think

about many questions such as what cost the company will incur in the future? Where will its
revenues come from, and will the revenues increase or decrease in the future? Management

accounting involves budgeting and trend charts, and managers use this information to determine

how funds and resources will be allocated to generate projected revenue growth.

4. Helping to understand differences in performance

Inconsistencies in business performance are the differences between what was expected and what

was actually achieved. Management accounting uses analytical techniques to help management

build on positive spreads and manage negative spreads.

5. Rate of return analysis

Before embarking on a project that requires a huge investment, the company will need to analyze

its Expected Rate of Return (ROR).

If you were given two projects or two investment opportunities, how would you choose the most

profitable and suitable company for them? How many years will the company be associated with

the project? What are the potential cash flows? These are all questions that can be answered

through management accounting (Oliver Lee &2015) .

MANGERIAL ACCOUNTING ACTIVITIES AND HOW PRINCIPLES OF

MANAGEMENT ACCOUNTING CAN BE UTILIZED

1.) By using the concept of budgeting, the firm can find out whether actual results are favorable

or unfavorable. If the results are unfavorable, then the deviations should be calculated, analyzed

and sorted.

2.) The capital budgeting technique can be used to determine the optimal field for investment by

comparing the available alternatives.

3.) Product analysis can help in comparing products on the basis of revenue, demand and cost.

Thus, resources can be diverted from products with lower demand and revenue to products

which require greater demand and bring more revenue to the company.

4.) Using the ROI technique, a decision can be taken to transfer funds from a source of low

return to one that provides a higher return.

5.) Trend analysis can help compare current financial figures with those of previous periods,

letting the company see if it is able to outpace the benchmark.

6.) Predictions can be made on a rationale basis regarding the expected net cash flows in the

future.

7.) With the ratio analysis tool, various measures can be calculated, and their effect can be

known. Various types of ratios such as profitability ratios, liquidity ratios, turnover ratios etc. can

be calculated and used to assess the overall performance of the business.

Hence, not only Procter & Gamble, but every organization also uses some management

accounting techniques to evaluate their current business and take a leading role in the businesses

it does in the future (Wikipedia ).

References:

What is Management Accounting and its Importance? Oliver Lee June 8, 2015

 https://www.invensis.net/blog/what-is-management-accounting-and-its-importance/#:~:text=

%20The%20Role%20of%20Management%20Accounting%20in%20an,Helping%20Understand

%20Performance%20Variances%0ABusiness%20performance%20discrepancies...%20More

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What is Management Accounting? AS myaccountingcourse.com Website

https://www.myaccountingcourse.com/accounting-dictionary/management-accounting

Management accounting principles AS wikipedia

https://en.wikipedia.org/wiki/Management_accounting_principles