Is increased precision in accounting always desirable Discuss this Essay

Is increased precision in accounting always desirable Discuss this with reference to management accounting techniques such as either costing methods or performance measurement or both - Essay Example managers are supposed to apply appropriate management accounting concepts and technologies in processing historical and forecasted economic data to take necessary decisions for the betterment of the organisation and stakeholders. This paper offers an insight into the management accounting techniques and shows one significant difference between financial and managerial accounting is that the latter emphasises less on the precision of the accounting data. The focus of this report would be to investigate the importance of precision in management accounting techniques. A conclusion has been inferred from the whole analysis part. Management accounting helps the management to carry out the managerial functions with more efficiency. This is done to enhance the profitability of the organisation by gathering the required information from various sources. The process includes gathering required information and analysing them systematically to make the relevant decisions. However, as decision-making becomes more comprehensive and complex, this requires management to re-evaluate all of their strategic options. For example, an organization may now have to decide whether to produce the parts internally or purchase parts produced by others. Using management accounting will provide valuable assistance to the organisations’ management to make decisions in each and every field of activity (Patankar, 2008). Many large companies use activity Activity Based Costing (ABC) today. In the traditional approach, the cost used to be calculated in three steps: accumulate the cost in the production and non production units, allocate the non production units costs to the production departments and allocating the total accumulated cost to the product, service or any other cost objects. In this process, products are also charged for idle capacity or unused resources. Such distortions have been removed in Activity Based Costing, which calculates cost based on cost pools or activity centres.