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The business world is changing rapidly. New business forms can be seen in organisations such as Airbnb and Uber. Indeed, referring to “uberisation” of business, [Rice and Martin, 2015] in a recent article (see: http://theconversation.com/what-if-your-managers-work-could-be-replaced-with-an-algorithm-42687) highlights the role of managers in such changing organizational structure. Clearly, if the role of managers is changing, then must be the role of management accounting too.
Please Critically discuss the following two questions with full explantion,
How changing business forms have changed the roles and duties of the management account?
How management accounting can contribute, both in financial and non-financial aspects, toward the success of modern organizations?
Expert Answer
Today Management Accounting is very important and plays a pivotal role in the organisation. Managament accounting does not consist of mere accounting entries, ledgers, posting transactions but is relevant with making reports, data, statistics which is more useful for top management who are involved in decision making.
Timely submission of reports containing budget or budget variances or looking past trend , analysing change owing to change in price, political environment, economic condition has become very important to take quick decisions and forecasting future opportunities. These are not mere numbers but overall reflection of health of an organisation and is an indicator of future actions required to be taken for health sustainability and growth of an organisation.
When financial aspects are concerned, Management accounting can be useful as it provides the figure of sales, percentage increase in sales compared to previous period, Expense analysis, Management accounting is useful for non financial aspects also like whether to continue new segment of business, decisions based on expansion, horizontal or vertical expansion in organisation, discontinuance of loss making product, forecasting future trend or fashion.
Earlier management accounting was confined to normal reporting of entities to its top management but now scenario has changed owing to competition, changing trends, changing taste, availability of technology and new options coming up every day. Hence management accounting has become one of the most important part of the organisation now.
