Sample Essay on Management Accounting

In an organization, managerial accounting integrates several aspects of accounting with the aim of enhancing the quality of information that the management receives about the different metrics of business operation. Management accounting is founded on four principles that assist management accountants to structure their processes and promote effective decision-making for long-term profitability. At the engineering firm, the management accounting principles can be effective in improving the performance of the organization.

In the organization, the principle of influence is used in strengthening the processes of decision-making. This is done by integrating insightful information at all the phases of decision-making in the engineering process. The management accountants use this principle to ensure that an integrated thought process is encouraged. It ensures the assessment of the most important information for projects and provides important recommendations for decision-makers. The specific managerial accounting activities that are useful under this principle include project management with regard to cost-effectiveness and quality control.

Relevance is the other management accounting principle that is applied by the management accountants at the engineering firm. Under this principle, management accountants are required to search for the most suitable resources for information relevant to decision making (Cooper, 2020, February 26). Under this principle, management accountants often ensure that they have a clear understanding of client requirements, which is often the most important tool for managerial accounting decisions in the organization. The specific managerial accounting activities at this point include project appraisal, regulatory adherence, and compliance, as well as pricing decisions.

The principle of value involves the management accountants carrying out an assessment of information along the pathway of value generation. As such, the management accounting processes at the organization often gauge the available opportunities and concentrate on the risks, the expenses and the ability of an engineering opportunity to generate value. In addition to that the management accountants at the firm often carry out a situation analysis as a way of applying the principle of value. The specific managerial accounting activities that are important under this principle include risk management, internal controls, as well as management and budgetary control activities.

The principle of credibility is another important management accounting principle that is applied to the engineering firm. This principle relates to the management of short-term business interests, relative to the long-term value for the shareholders (Cadez & Guilding, 2012). The management accountants at the organization apply this principle by engaging in activities that enhance trust and reliability for the clients of engineering projects. The managerial accounting activities that are useful at this point include discount management, internal audit, resource management, as well as cost transformation and management.

References

Cadez, S., & Guilding, C. (2012). Strategy, strategic management accounting and performance: a configurational analysis. Industrial Management & Data Systems.

Cooper, A. (2020, February 26). Four Managerial Accounting Principles Every Business Must Comply With. https://www.cogneesol.com/blog/four-managerial-accounting-principles- to-comply-with