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This research is carried out to highlight the necessity of accounting for decision makers and managers. Notably, managerial accounting is a specialty in accounting that is used in decision making. In light of this, this skill requires the understanding of the contemporary accounting skills as well as analytical skills in order to predict the impact of every decision on the overall business performance. Importantly, this skill also develops the accountants’ ability to check how external and internal business environments interact to shape and model the business in various directions. Further, the role of budgets and performance reports in planning and control will be highlighted. Moreover, delving deep into identifying the currents trends in management accounting and explaining as to why ethics and standards of ethical conduct are important to accountants will take place. In addition, the research will incorporate Toyota automobile manufacturer as a reference for the study. Finally, conclusions and deductions on the role of managerial accounting to non-profit organizations will be drawn.
Keywords: Management accounting, decision-making, budget
Table of Contents
Abstract 2
Managerial Accounting and Professional Ethics. 4
Uses and Users of Accounting Information. 4
Accounting and Decision Making. 5
Planning and Control 6
Budgets. 6
Performance Reports. 7
Current Trends in Management Accounting. 8
Non-Profit Organisations and Managerial Accounting. 9
Ethical Conduct in Accounting. 9
Toyota Illustration. 10
Conclusion. 11
Annotated Bibliography. 13
References. 17

Managerial Accounting and Professional Ethics

Management and accounting are two key functionalities in any business that are responsible for determining its success or failure.  Basically, management is tasked with the duty of coordinating and mobilizing of human resource to achieve pre-set objectives. In essence, it deals with creating corporate policy, planning, and organizing of a company’s resources. Accounting is the in-depth methodical recording of all financial transactions pertaining to a business. Consequently, management accounting is the provision of financial data and the subsequent advice to the business to aid in its organization and business development.
It is important to note that management accounting differs from financial accounting. While the former is used at the managerial level for future planning, the latter is primarily produced for external parties such as shareholders, governments, and banks (Ray, Eric, & Peter, 2014). Financial data is also used at the managerial level for evaluation and goal setting purposes. Additionally, management accounting is more flexible with its reporting as its duration may last from a couple of hours to some years even. Conversely, financial accounting reporting is less flexible and is usually yearly, half-yearly, or quarterly.

Uses and Users of Accounting Information

For any accounting information to make sense, it must be consumed by its intended audience. Notably, its consumers can be broadly categorized as internal and external users. Internal users include management who analyze this information to reflect on the performance and position of the business. Business owners also fall into this category as they synthesize this information to assess the viability and profitability of their investments. Finally, the employees who use this information to analyze company’s profitability and its subsequent effect on their compensation and job security are also internal users.
External users include creditors who use the information to determine the business’ creditworthiness, investors who want to know how safe their investments will be, and government authorities for assessment of tax compliance remittances. Additionally, business’ financial accounting may be used by the relevant regulatory bodies to determine the effectiveness of their policies. Further, consumers of business products may analyze its financial statements to determine its reliability in terms of supply of goods and services.

Accounting and Decision Making

Decision making refers to choosing a course of action among the variously presented alternatives. In management accounting, the assumption is that the best choice is that which will generate the most revenue and profits or that which will cost the least. Importantly, decisions made in business can be classified according to their nature or by their timeline. In general, when they are determined using their nature, they are categorized as either strategic or critical, and when using their timeline as short or long term (Warren, Reeve, & Duchac, 2015). A decision which is to be made is highly dependent on the set objectives and should be in line with them. Specifically, strategic decisions are broad-based and qualitative in nature. Normally, they are often dependent on the subjective interpretation of the management’s objectives. Notably, tactical decisions are more quantitative and emerge as a result of the strategic decisions.
Since businesses face various strategic decisions in their day-to-day operations, accounting know-how comes in handy. For instance, a business may be faced with a choice of pricing strategy or formulating a decision on the willingness to take a risk. In practice, it requires thorough, well-calculated, and informed accounting analysis to go through all the available proposals and choose the best one based on cost and revenue projections. If the accounting expertise is not present, it is highly likely that the decision will be taken from an ignorance angle and may result in eroding the gains envisioned in the first place.

Planning and Control

            Planning entails the detailed process of formulating objectives and effectively communicating them to all employees of the organization. Generally, it is important that each and everyone understands these objectives to ensure proper flow and coordination of activities in the organization. Similarly, financial planning is undertaken in the form of budgets. If well executed, planning has the capability of increasing profitability through product growth and improved marketing. Conversely, control deals in evaluating on whether the formulated policy guidelines were implemented accordingly and whether the objectives were achieved.
From the onset, it is evident that managerial accounting is very instrumental in ensuring that these functions run smoothly. If inaccurate business decisions were initially taken, there will be inaccurate planning. In turn, there will be distorted results which will make the organization not achieve its objectives.


Budgets are primarily sets of inter-related plans which quantitatively document a business’ future operations. Simply, a budget serves as a yardstick through which business’ operating results are measured (Birt, Chalmers, Maloney, Brooks, & Oliver 2014). Additionally, financial budgets highlight the allocation of funds to various departments within an organization. Consequently, budgets are used as a benchmark for future operations. Basically, the budgeting process commences with a strategy planning session by the management. Primarily, the planning sessions are informed by the managerial accounting practices.
Financial budgets explicitly detail the source of financing, intended purpose, and other requisite information pertaining to financial expenditures. In fact, it is the budget that highlights any deficit arising, measures to supplement the deficits, and forecasts for the business. In light of this, it is prudent to have budget statements prepared as they are a major component in business planning. Moreover, it is through budgets that the managerial accounts pinpoint the financially needy departments while doing away with programs or departments not utilizing the resources properly. Nonetheless, budgets can be a cause of departmental animosity, especially if they are poorly drafted. Basically, this occurs where some departments appeared to be favored when they are allocated a bigger share of the available resources. Additionally, budgets may lead to wastages, especially since departmental heads will not want to remit unused resources back to the company for fear of lower allocations in the subsequent budget.

Performance Reports

            For any organization, it is important to periodically keep track of progress to find out if the right execution is happening or make amends towards the same. In light of this, performance reports come in handy as they measure results of specific activities in terms of success or otherwise (Wild, Shaw, & Chiappetta, 2013). Importantly, these reports are time bound for them to make any financial and managerial sense. For instance, a business may formulate a policy that every quarter a survey should be carried out to determine the reception of a product in the market. Alternatively, departmental heads may require evaluating their employees’ performance annually.
In essence, control is exercised by the definition of standards against which performance is measured. In effect, the generation of performance reports guides the management to make informed decisions. In the case of product performance report, they measure the variance of the output against the expected levels. Further, these differences are thoroughly analyzed to form a conclusion on ways that the business may improve their performance. Based on the analysis, the management accountants make suitable recommendations on corrective measures to stop this trend. Further, management accounting is vital in the monitoring process and the control of both cost and efficacy of the business processes.
Notably, employee reports may help in the control processes by educating the management on those that are performing well for subsequent rewarding or reprimanding. On the same vein, employee reports can give the human resource department invaluable insight on the type of people who are performing for future recruitment. For instance, the performance reports may show a trend of certain job descriptions. For example, a report may indicate that college graduates perform better compared to masters students. In this case, the human resource department will recommend the college graduates for improved effectiveness of the company.

Trends in Management Accounting

            For the increased accuracy in forecasting, the field of management accounting is constantly changing. In brief, the practices which were used a decade ago are being phased out, and it is highly likely that today’s method will have metamorphosed in a decade’s time. At the forefront of this change is the increased competitiveness nature of businesses and access to information.
Evidently, the drivers for this change can be clearly seen such as the economic shift from a manufacturing-based to a service-oriented and knowledge-based economy in the US.  Basically, the service sector accounts for more than 80% of the employment in the US. Effectively, this puts the service sector in the lead in designing and implementing control systems which guarantee efficient operations that help in the achievement of the set objectives.
Further, globalization of companies has seen international trade barriers drastically reduced between countries. In essence, this has led to a shift in the balance of economic power. For instance, companies in the United States have redesigned their accounting systems to make them more efficient at making financial predictions. Similarly, technological advancements have remained a key player in this continuous shift. Increased e-commerce and business-to-business (B2B) are also an emergent trend in the sector. Enterprise resource planning (ERP) systems have also served as a one-stop system carrying most functional roles into a single interface.
Noteworthy, one of the functions of management accounting is making strategic decisions which impact on increased work efficiency and reduced costs. Consequently, the implementation of the radical redesign of business performance such as automation of processes, use of computer-aided design, computer-aided manufacturing, and robots has significantly reduced operating costs. As a result, these methods have been adopted in businesses. In effect, this has resulted in reduced human interference, timely delivery of goods and services, and increased revenues.

Non-Profit Organisations and Managerial Accounting

Since non-profit organisations (NGOs) are mostly concerned with providing humanitarian and welfare services such as hospitals, schools, libraries, and relief food, they mostly fall under the service sector. Being a service industry, labor costs the main costs for NGOs. Consequently, all the processes that may lead to a reduction of these costs are welcomed. In light of this, managerial accounting comes in handy in implementing the required automation processes which will go a long way to help them cut on this cost. In effect, government agencies and ministries are more inclined in the service industry as the NGOs; in such a way, the foregoing measures also apply them.

Ethical Conduct in Accounting

Ethical conduct is important in the accounting profession as it deals with the core function of all business processes. Importantly, it is on the basis of information provided by the accountants that most financial decisions are made (Klein, 2015). With this in mind, accountants must hold themselves to a higher moral ground as any other way will be disastrous. Primarily, accountants should be competent in the execution of their duties. To this end, they are required to keep updating their knowledge on the most current practices. Again, they should practice utmost integrity and in effect be incorruptible. In turn, this will aid in ensuring that financial reports are not doctored in favor of an entity just because money or other benefits have changed hands.
On the same accord, credibility is another aspect that should not fall short with the accountants. Ordinarily, this calls for a thorough scrutiny of all the sources of information used to arrive at a given conclusion. Due to the sensitivity of their activities, accounts should exercise confidentiality on their businesses (Horngren, Sundem, Strattin, Schatzberg, & Burgstahler, 2010). Obviously, malicious persons are always on the look-out for sensitive financial matters and if accountants do not maintain high levels of confidentiality, they might end up ruining a business.

Toyota Illustration

Toyota is a Japan-based automobile manufacturer giant, and as of February 2016, it was the 13th largest company in the world by revenue. Like all companies, Toyota set out with the objectives of gaining market share in the world of the automobile industry. Since its formation, key managerial decisions have significantly and effectively contributed to Toyota’s success to date. Consequently, Toyota production system has four components to aid in its strategic planning, namely long-term thinking informs management decisions, problem-solving process, organization value addition, and continuously solving root problems to drive organizational learning (Horngren, Sundem, Strattin, Schatzberg, & Burgstahler, 2010).
Importantly, they use the just-in-time (JIT) accounting system. In brief, the JIT is an inventory management system where a manufacturer orders for materials when clients place an order for the goods. Notably, this system has benefitted Toyota in its tremendous growth. Moreover, it has enabled for model diversification since production runs are short. Generally, this enables them to move from one model to another with ease. On the same note, the lack of inventory guarantees reduced storage costs while averting breakages and damages costs (Horngren, Sundem, Strattin, Schatzberg, & Burgstahler, 2010). Further, Toyota runs an extremely robust ethical code of conduct for its managerial accounting personnel and by extension all employees. Among the virtues incorporated are honesty, fairness, accuracy of financial disclosure, and appropriate disclosure. Effectively, this robust management technique and manufacturing process enable Toyota to make maximum profits and sales.


            Summing up, it is important to cultivate the culture of developing managerial accounting skills as they are beneficial for not only increased revenue generation but also for enhanced efficiency. In retrospect, decisions which will make work easier for the employees are very instrumental. Noteworthy, this ensures that the employees are not overly burdened with tasks, which could otherwise be carried out by automation of processes or robots. For instance, an organization may limit the number of customer attendants through automation software which logs the issues raised. In essence, this frees up employees and enables them to attend other duties, as such making optimum use of the available resources.
Additionally, ethics forms a key component of managerial accounting, and adherence to the code of conduct is mandatory. From the research, it is understood that the responsibility bestowed on accountants is based on trust, and betraying it will be failing in duties. Further, it was clarified that cases of bankruptcies, for instance in the United States, experienced in the last decade were to some extent attributed to unprofessional ethics in the accounting field. To avert this, good ethics should be consistently upheld in the accounting profession.

Annotated Bibliography
Birt, J., Chalmers, K., Maloney, S., Brooks, A., & Oliver, J. (2014). Accounting:
            Business reporting for decision making (5th Ed.) Sydney: John Wiley & Sons Australia Ltd.
The authors illustrate the process of decision-making and emphasize the need for thorough and unbiased judgments informed of facts. Additionally, the book highlights the importance of business reporting as a source of informed credible decisions. The book gets into length on explaining issues of business reporting. Specifically, it highlights how to effectively collect unbiased data, document it, and analyze it. It is of no use to have this data if it is not used so it advocates for it to be used prudently. In essence, the book highlights the application and interpretation of the various business reports. Particularly, this accounting information forms the basis upon which business decisions are made. It emphasizes the need for the information to contain clear explanations. Given that, these decisions are then used to propel the organization towards the achievement of its goals and objectives. The book posits that poor business reports ultimately lead to poor decision making, and these goals and objectives may not be realized.
Horngren, C., Sundem, G., Strattin, W. Schatzberg, J. & Burgstahler, D. (2010). , Managerial accounting, the business organization, and professional ethics, author. In Horngren (Eds.), C., Sundem (Eds.), G., Strattin (eds.), W. Schatzberg (Eds.), J. & Burgstahler (eds.), D. (2010). Introduction to management accounting (15th Ed.). Upper Saddle River, NJ: Pearson Education.
Introduction to management accounting gives students and business leaders important insight on the ethical behaviors needed when carrion out business operations. Basically, the book starts with a basic approach on the main elements of accounting by introducing the reader to the main reason for accounting and how to form a budget. Gradually, the book introduces the reader to more complex managerial tasks such as the trend analysis of business. Nonetheless, the guided approach that this book uses ensures that the reader properly understands all the topics. Moreover, the book offers in-depth explanations on the issues under discussion. Better still, it also uses examples which enable the reader to view how the matters under discussion are applicable in real life. In general, this is a good read for any business person and individuals in managerial levels. Importantly, it enables them to form critical judgments and have insights on the probable repercussions of their decisions.
Klein, G. (2015). Ethics in accounting: A decision-making approach. Hoboken, NJ: John Wiley and Sons Publishers.
Klein sets the tone with insisting on the importance of ethical conduct in the accounting profession. Decision making is also an ethical task, and the author gets deeper into what it means to be an ethical accountant. Further, he explains how important it is to maintain credibility in discharging of the duties. Klein reiterates the sensitivity of the financial reports and that their implications should not be accurate. He advises that they form a base to so many key business decisions and they should be accurate to enable effective decision making. Failure to this can lead to detrimental losses and to the loss of costly investments. In addition, the author continues by encouraging young professionals to cultivate a culture of trustworthiness and honesty in their careers. He advises that this starts as a personal initiative which should become a habit. Gordon also relates good decision-making as a product of a nurtured and mature professional ethics.
Ray, G., Eric, N., & Peter, B. (2014). Managerial accounting (15th Ed.). New York, NY: McGraw-Hill Education.
 Managerial accounting gives an in-depth analysis of the various decision-making skills employed by an entity. It continues to reiterate the importance of the accounting know-how in the process of decision-making for increased profitability and efficiency. Fundamentally, it informs of the three functions which managers must perform well for an effective organization. Particularly, these functions are planning operations, controlling activities, and making decisions. Further, the book points out at the accounting information needed to effectively carry out these functions, its collection, and its interpretation. The book also gets into details on the emergent trends in the management accounting field. For instance, it highlights the technological advancements and, in particular, the use of robotics and automation of services using software. The authors, however, explain that these measures serve to cut costs and generate more revenue while ensuring that the organizations remain competitive.
Warren. C.S, Reeve, J.M., & Duchac, J. (2015). Financial & managerial accounting (13th Ed.). Mason, OH: South-Western College Publication.
The authors explain the varying differences between financial accounting and managerial accounting. Further, the book puts across the various uses unto which accounting information is used and the key players in each segment. The book is interactive as it allows the reader to experiment with data and view the impact when the data is altered. The usefulness of management accounting in relation to achieving the set goals, objectives, and missions discussed. Conversely, the assessment of past performances, future directions, and evaluating and rewarding decision-making performance is listed as some of the benefits of managerial accounting. For the accountants, the authors highlight the importance of them taking personal initiative to ensure competence and professional judgment. Evidently, this is insisted since often information of accounting nature is based on inexact measurements. In such a way, assumptions are used from time to time. The book also lists some of the professions where accountants may work such as audit, tax, and consultations practices.
Wild, J., Shaw, K., & Chiappetta, B. (2013). Financial and managerial accounting: Information for decisions (5th Ed.). New York, NY: McGraw-Hill Professional.
The authors lay out the important information influencing decisions in organizations. They also explain the various functions and differences between the managerial and financial accounting. Specifically, the book defines accounting as the language of business and discusses the role of accounting information in making economic decisions. addition, the research also proves informative by explaining the importance of financial accounting information for external parties, notably, the investors and creditors. Further, the book documents various types of accounting systems, namely financial accounting, management accounting, and tax accounting. Additionally, it highlights factors which are considered when invoking an accounting system. Key among them is the determination of what information is needed. Moreover, it gives a distinction between financial reporting and financial statements. Importantly, the book gives clear insight on what accounting experts should check when making managerial decisions. In light os this, this book is important to students and teachers in the management profession.


Birt, J., Chalmers, K., Maloney, S., Brooks, A., & Oliver, J. (2014). Accounting: Business reporting for decision making (5th Ed.). Sydney: John Wiley & Sons Australia Ltd.
Horngren, C., Sundem, G., Strattin, W. Schatzberg, J., & Burgstahler, D. (2010). , Managerial accounting, the business organization, and professional ethics, author. In C., Horngren (Eds.), G., Sundem (Eds.), W., Strattin (eds.), J. Schatzberg (Eds.) & D., Burgstahler (eds.). (2010). Introduction to management accounting (15th Ed.). Upper Saddle River, NJ: Pearson Education.
Klein, G., (2015). Ethics in accounting: A decision-making approach. Hoboken, NJ: Jack Wiley and Sons Publishers.
Ray, G., Eric, N., & Peter, B. (2014). Managerial accounting (15th Ed.). New York, NY: McGraw-Hill Education.
Warren. C.S, Reeve, J.M., & Duchac, J. (2015). Financial & managerial accounting (13th Ed.). Mason, OH: South-Western College Publication.
Wild, J., Shaw, K., & Chiappetta, B. (2013). Financial and managerial accounting: Information for decisions (5th Ed.). New York, NY: McGraw-Hill Professional.
In order to avoid awkwardness, it is better to paraphrase.
*NOTE: When the last comma in a series comes before and or or it is known as the Oxford comma
Use commas after introductory a) clauses, b) phrases, or c) words that come before the main clause.

  1. Common starter words for introductory clauses that should be followed by a comma include after, although, as, because, if, since, when, while.

While I was eating, the cat scratched at the door.
Because her alarm clock was broken, she was late for class.
Hyphen (-)  Use a hyphen for compound adjectives before the noun:  Example: well-known actor, full-time job, 20-year sentence
Make sure all prepositions agree with the verb (in English, most verbs have only one or two prepositions that can be used (results in, not results to).
In order to avoid awkwardness, it is better to paraphrase.
Punctuation error:
Non-restrictive relative clause is followed by a pair of commas.
Please, follow
In sentences where two independent clauses are joined by connectors such as and, or, but, yet, so, for (do not mix with preposition ‘for’), nor, put a comma at the end of the first clause.
Unnecessary capitalization. The word combination is a common name and thus should not be capitalized. Please, refer to the text of the source article; it is never capitalized in it. The abbreviation, however, should be in all caps.
Subject-verb disagreement (If the subject consists of two or more words connected by “and”, the subject requires a plural verb. However, if the two subjects connected by and are preceded by “each”, “every”, or “many”, the subjects require a singular verb).
Please, study Slide 239
Archaic words: There are some transitional words that people shy away from now:

  • first, second, third…
  • therefore
  • thus
  • in introduction, in conclusion, in summary

In sentences where two independent clauses are joined by connectors such as and, or, but, yet, so, for (do not mix with preposition ‘for’), nor, put a comma at the end of the first clause.
Dangling modifiers – extra phrases that relate to the wrong thing in the sentence. Not Flying over the fields, the cows looked like ants (meaning the cows were flying) but As we flew over the fields, the cows looked like ants.
Punctuation error:
Use commas to set off transitional expressions and similar elements that are not essential to the meaning or the structure of a sentence.
Archaic words: There are some transitional words that people shy away from now:

  • first, second, third…
  • therefore
  • thus
  • in introduction, in conclusion, in summary

Please, follow
Please, study Slide 34