Management accountants work on the measurement, analysis, and reporting of a company’s financial information and data to help company managers conduct strategic budget planning in order to achieve their business goals. In “Does management accounting play role in the planning process?”, the authors examine the relationship between management accounting information and data, and the overall company plan through the example of the Brazilian companies. Furthermore, the authors emphasize the importance of considering management accounting information and data, which is the information that helps conduct strategic budget planning in the overall company plan. Since the management accounting information reflects a company’s financial advantages and disadvantages, it connects to budget control immediately. In addition, it further affects a company’s profits and revenues positively. Therefore, it is one of the most crucial information that companies should consider when it comes to making an overall company plan. To support this idea, the authors conducted a research among 2281 medium and large-sized Brazilian companies by using the analytic hierarchy process (AHP) and statistical cluster analysis. That is, the authors grouped the companies’ strategic budget planning processes into five profiles and applied statistical tests to assess the five clusters. In addition, the authors compared the data changes of each profile and cluster to examine how strategic budget planning data related to the final revenue data in reality. As a result, the authors came up with a conclusion that companies with poor implemented strategic budget planning processes are more likely to result in failure of accomplishing their business goals. The authors concluded, “The most significant conclusion to be drawn is that poor configuration of the planning process comes from a poor configuration of the management accounting attributes (Journal of Business Research 249).” The article underlines the consequences of not including a structured management accounting scheme in the overall company planning process by providing a direct research example of the Brazilian companies. This direct research example of the Brazilian companies includes realistic financial data of the profiles and clusters of the Brazilian companies, which not only support the authors’ claim that management accounting information, which is the information that helps conduct strategic budget planning, do play an important role in a company’s planning process as strong evidence, but also enable company managers to understand different profiles and data in order to make decisions regarding the appropriate profile for their needs. It is important since the research could be beneficial not only to the scholars who read academic journal articles and conduct researches but also directly benefit the current company managers who are panicking on making strategic budget plans. As a result, by demonstrating a realistic example of the Brazilian companies with accurate numeric data, the article conveys the idea that company managers should take management accounting information into account in their overall planning process. Additionally, it also assists company managers by providing them with useful ideas in order to develop a thorough overall company plan, which then helps them to accomplish their business goals.
To accomplish business goals, management accounting plays an important role in a company’s overall planning process. In addition, the main activity of management accounting is cost accounting. Cost accounting concentrates on finding out the costs of production and deal with the resource sacrifices of internal financial details of an individual company, which is connected closely to a company’s strategic budget planning. And strategic budget planning is relevant since it directly impacts whether a company could reach their business goals or not. In the book “Cost Accounting: Analysis and Control”, the author Gordon Shillinglaw provided a specific explanation of management accounting in terms of its main activity, cost accounting, by revealing how accountants analyze and control cost accounting data and information in order to conduct management accounting tasks, which further helps company managers conduct strategic budget planning and achieve business goals. It is crucial since cost accounting composes the main part of management accounting, and management accounting is considered as the key to structuring a successful overall company plan. Therefore, Shillinglaw emphasized the importance of conducting cost accounting by explaining how it actually connects to management accounting. To explain cost accounting, he clarified what cost accounting actually is by writing that “it is typically concerned primarily with four activities: cost finding, cost analysis, cost recording and cost reporting (Shillinglaw 12).” He then continued on interpreting the functions and purposes of conducting the four primary cost accounting activities respectively. First, cost finding refers to the measurement of the costs of individual products, departments, or other segments of a firm’s operation. Second, cost analysis is the activity of estimating the relationships between costs and various determinants of costs. Next, cost recording is the classification and distribution of costs among the various ledger accounts. And last, cost reporting is considered as the communication of cost data to various interested departments and parties of a firm (Shillinglaw 12). By dividing the broad term “cost accounting” into four primary activities by categorizing their functions and purposes, the author also presented the underlying connection between each activity. That is, cost finding forms the foundation of cost accounting, and cost analysis further analyzes the result of the cost finding. Additionally, cost reporting is based on the data and information of cost analysis. Eventually, cost reporting reports the final result of the previous three cost accounting activities (Shillinglaw 12). As a result, the author demonstrated that the four major activities of cost accounting relate closely to each other so that if a mistake in one activity occurs, it will reduce the accuracy of the following activities, which leads to the failure of providing a precise cost accounting data and information. The inaccuracy of cost accounting data and information will result in an incorrect management accounting decision, which runs a risk of influencing the whole company negatively. Therefore, by performing the four cost accounting activities, accountants receive cost accounting data and information. And by analyzing the cost accounting data and information, accountants are able to conduct management accounting tasks and provide useful management accounting information that helps company managers conduct strategic budget planning in order to achieve business goals. As a result, the four cost accounting activities are crucial to management accounting and it is important to conduct the four cost accounting activities in order to achieve business goals. In addition, by breaking the big term “cost accounting” into four activities and indicating the relationships between each activity, the author emphasized the idea that the four activities in the cost accounting process are unreplaceable and important since they all affect and contribute to the result of the cost accounting data, which impacts the result of management accounting. Besides, by combining the functions and results of the four activities, accountants can analyze a company’s costs of production and provide a useful data and information for the purpose of management accounting, which is to minimize costs and to maximize benefits of a company. To sum up, through the author’s division of the term “cost accounting” and the explanation of the relationship between the four primary cost accounting activities, the importance of the cost accounting activities is emphasized. Since the four cost accounting activities indirectly control the accuracy of the management accounting data and information, they determine whether a company’s overall plan is successful or not.
Management Accounting 