Management Accounting Harvard Case Solution & Analysis

  1. An explanation of the principles of management accounting.

The most important branch of accounting is managerial accounting. Managerial accounting provides the information related to the obtained resources and their utilization in the business,to manager. The accounting information, reports and all the financial statements should be considered to meet the requirement of the specific problem or company.The accounting information is modified and adopted to meet the needs of the management. There are four following principles of management accounting:

  1. Communication will providea better insight that is more significant. The start and ending of any decision is based on the communication. The strategy and decision making process requires communication.
  2. The provided information must be appropriate and relevant. The most important role of accounting management is to provide the relevant information to the decision and strategy makers and on time. This can be achieved through building a perfect balance between:
  • The present, future and past information of the company’s account.
  • The external and internal information about the company.
  • The non- financial and financial information.
  1. By using the scenario analysis and models, makers analysed the valuable impact. To build different scenario models, the management accounting uses the relevant information. This provides greater insight about the available options.
  2. The last principle is “stewardship builds trust”. The objective of this principle to manage the resources and relationship in order to protect the assets, reputation of the company and its value(Accounting Web, 2017).

Figure # 1 Global management accounting principle
Management Accounting Harvard Case Solution & Analysis

  1. The role of management accounting and management accounting systems.

Role of management accounting:

The management of a company needs detail comprehensive information for the formation of current budged financial statements. These financial statements are provided to the external parties for different purposes.

  • In order to make day-to-day decisions, managers use the central theme of managerial accounting.
  • The focus of managerial accounting is on the future. In managerial accounting, past performance is used as a benchmark.
  • Through managerial accounting, the manager can easily divide the total operation of the organization into various segments.
  • The upper management needs relevant information and it is also a key factor. The reporting frequency is flexible with managerial accounting. Through the provided information, the upper management can easily analyse the trade-off between the benefits and cost received from the action.

Role of management accounting system:

  • The most important source of relevant information for an organization is the management accounting system. This relevant information will be used for decision making processes.
  • The decision maker uses relevant information gained from the management accounting system.
  • The management accounting system gives historical data to the management. This historical data is used to formulate the budget and future performance of the company.
  • Through the management accounting system, one can easily analyse the cost effect on the net income of the company.
  • The sales department also uses management accounting system in order to predicate the future demand of the products.
  • The management accounting system supports the ERP implementation and post-merger integration process...............

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