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MANAGEMENT ACCOUNTING TECHNIQUES ON ORGANIZATION DECISION MAKING PROCESS


Abstract

The concept of management accounting has, in the last two decades, been concerned with the collection and presentation of internal financial data in order to facilitate decision-making. Since management accounting is not required to comply with a national accounting standard, the company can customize management accounting methods according to company requests. To accommodate this, a series of advanced quantitative and qualitative approaches have been initiated in conjunction with the traditional approach to address the information need during the decision making process. It has are specific objectives as: to examine the factors influencing selection of management accounting technique in organization decision making, to examine the relationship between management accounting technique and organization decision making process, to identify the extent of adoption of Management Accounting Techniques.

CHAPTER ONE

 INTRODUCTION

  • Background of the study

Management process is a set of interdependent activities used by an organization to carry out their functions which include, planning, organizing, staffing, leading, and controlling. Brech (2010) recommends the following definition of management as the most appropriate for general usage: “A social process entailing responsibility for the effectiveness and economic planning and regulations of the operation of an enterprise in fulfillment of a given purpose of task.” Such responsibilities involve: Judgment and decision in determining plans and in using data to control performance and progress against plans; and the guidance, integration, motivation and supervising the personnel comprising the enterprise and carrying out its operations. There is always a temptation to make decisions by intuition easy rather than taking the difficulty of scientific decision-making. It derives its data from financial accounting, cost accounting and other documents. Management accounts will not replace management and management. It is only a tool of management. In this respect, the conventional approach to management accountability reveals an opposition between strategic management, management control and operational control processes. One of the aims of this study is to provide the company with management accounting information systems, which will help the company to use its management accounting instruments to gain competitive advantage. Many organizations combine their strategic and priorities formally or informally with management accounting information in order to manage operational functions and participate in long-term decision making. Since the concept of strategy management accounting is distinctive to the level that it refers to the inclusion of external with internal financial and non-financial information, the umbrella is often used to include cost management approaches such as activity-based management (ABM), target costing (TC), reengineering of business processes (BPR),just in time (JIT) total quality management (TQM), costing-based activities (ABC).Given that these methods to controlling costs have very particular origins when they are seen to be present, it does not come as a surprise that Strategic Management Accounting (SMA) is deployed in certain organizations in forms that are particularly business relevant. Diverse notions of SMA remain. While management accounting approaches such as traditional costing, cost–volume–profit review, responsibility accounting and operation related accounting may be accorded very detailed meanings, their deployment and the functions they perform within organizations appear to be contextually defined. SMA can likewise not be required to evidence a degree of organizational rigor that is common across structures or organizations because it serves a number of diverse management possibilities. e the techniques to be discussed in this write-up.

 

Decision making may be simply defined as choosing a course of action from among many alternatives. If there are no alternatives, then no decision is required. A basis assumption is that the best decision is the one that involves the most revenue or the list amount of cost. The task of management with the help of management accountant is to find the best alternative. From the descriptive model of the basic features and assumptions of the management accounting perspective of business, it is easy to recognize that decision making is the focal point of management accounting. The concept of decision making is a complex subject with a vast amount of management literature behind it. In management accounting, it is useful to classify decisions as: Strategic and tactical, Short-run and long-run.

  • STATEMENT OF THE PROBLEM

Organizations aim to incorporate into their operations and objectives the idea of management accounting techniques, as the company obligation concept evolved significantly at the beginning of the new century. Through collaborating with staff, customers, shareholders and the community as a whole, the organization are dedicated to contributing to sustained growth to meet the aspirations of the stakeholders and serve sustainable development at the same time. Business are under tremendous pressure from customers to increase the content and the information they contain, because they need facts and evidence to support them make their decisions. As a result, the poor consistency of these organization’ financial accounts provides misleading and unclear facts, which affects the probity of decisions by stakeholders. In order to improve the accuracy of financial reporting, the importance in revealing the aspects of management accounting techniques and other financial and non-financial disclosures is significant. Companies lacking appropriate Management Accounting skills may be unable to adjust to the pressure of this competition and may not succeed in the long run as it is very critical to survival of business. Some manufacturing companies in Nigeria are not even aware of the importance of Management Accounting Techniques which leads them to engage in activities which do not add value to their business and in which they do not have competitive ability thus leaving their core competent area to suffer and incur unnecessary costs Moreover, it is observed that there has been tremendous work on topics related to this, but most of them used descriptive analysis and a few among them that attempted to use models limited themselves to general applicability without them given consideration to managerial parameter affecting selection of management accounting techniques as planning and decision making tool and its impact in the effectiveness of those techniques. It is on view of this that the present study decided assess the effect of management accounting techniques and its effectiveness on decision making of the selected food manufacturing firms. Hence, the identified vacuum or gap which the study intended to fill.

  • OBJECTIVE OF THE STUDY

The study has one main objective which is sub-divided into general and specific objective, the general objective is to examine management accounting techniques on organizational decision making process;

The specific objectives are;

  1. To examine the factors influencing selection of management accounting technique in organization decision making,
  2. To examine the relationship between management accounting technique and organization decision making process,
  • To identify the extent of adoption of Management Accounting Techniques in decision making process.
  1. To proffer suggested solution to the identified problem
    • RESEARCH QUESTIONS

The following research questions were formulated by the researcher to aid the completion of the study;

  1. Are they the factors influencing selection of management accounting technique in organization decision making?
  2. Is there any relationship between management accounting technique and organization decision making process?
  • Does the organization adoption of Management Accounting Techniques in decision making process?
    • RESEARCH HYPOTHESES

The following research hypotheses were formulated by the researcher to aid the completion of the study;

H0: There is no relationship between management accounting technique and organization decision making process

H1: There is a relationship between management accounting technique and organization decision making process

H0: The organization does not adopt Management Accounting Techniques in decision making process

H2: The organization does adopt Management Accounting Techniques in decision making process

  • SIGNIFICANCE OF THE STUDY

The researcher believed that at the completion of the study, the findings will be of great importance to management accountant, as the study seek to explore the importance of the technique in decision making process in an organization, the study will also be of great importance to student of management accounting profession as the study envisage the role of management accounting in effective decision making in an organization. The study will also be useful to researchers who intend to embark on a study in a similar topic as the study will serve as a reference point to further studies. The study will also be useful to researcher, academia student’s teachers and the general public as the study will contribute to the pool of existing literature and also contribute to knowledge on the subject matter.

  • SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers management accounting techniques on organization decision making process. But in the course of the study, there are some factors that hinders the scope of the study;

 

  1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
  2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
  3. c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

 

1.8 OPERATIONAL DEFINITION OF TERMS

Management accounting

In management accounting or managerial accounting, managers use accounting information in decision-making and to assist in the management and performance of their control functions

Accounting technique

An accounting method consists of the rules and procedures a company follows in reporting its revenues and expenses

Decision making

In psychology, decision-making is regarded as the cognitive process resulting in the selection of a belief or a course of action among several possible alternative options. It could be either rational or irrational

1.9 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study

Author: SPROJECT NG