Answer to Question #290282 in Management for Ben

Question

Explain the way in which cost accounting, management accounting, activity management and financial reporting are inter related

Answer 1

Cost accounting is a form of managerial accounting that aims to capture a company's total cost of production by assessing the variable costs of each step of production as well as fixed costs, such as a lease expense. Managerial accounting is a branch of accounting that is concerned with the identification, measurement, analysis, and interpretation of accounting information so that it can be used to help managers make informed operational decisions. Activity management is the process of recording everything a worker does throughout a typical day, in the order that it is done, all while labeling their activity correctly. Activity management systems create an easily accessible format for tracking the performance of both employees and employers. Financial reporting is the process of documenting and communicating financial activities and performance over specific time periods, typically on a quarterly or yearly basis.

All these four aspects are inter-related since they are used to ensure optimal utilization of resources within an organization. Cost accounting helps the management foresee the cost price and selling price of a product or a service, which helps them formulate business policies. With cost value as a reference, the management can come up with techniques to control costs with an aim to achieve maximum profitability. Management accounting monitors and measures the overall performance of organization. It uses various tools like variance analysis which measures the company performance with pre-established standards for finding out the deviations. Managers by identifying all variations in performance of company are able to take corrective measures accordingly for removing them.

Activity management is an essential key to the success of a firm as it helps to control the direction of the business and increase efficiency. Managing activities would help the workers prioritize their daily activities. Activity management relies on the ideology that in a personal or group organization of workers, information from higher levels of management control every action that takes place in the enterprise, therefore proper recording process is critical and it cannot take place without managing the activities. Monitoring financial documentation is necessary for effective debt management and budget allocation and provides insight into key areas of spending. Monitoring income and expenses ensures companies track debts regularly to remain transparent in competitive markets. Companies use financial reports to organize accounting data and report on current financial status.