“Accountability breeds responsibility” – This is a famous quote by Dr. Stephen R. Covey gives the meaning of accountability in rather general terms. The concept of accountability can be defined as the process through which a person is held answerable for his actions and deeds. Under the umbrella of the organization the notion of accountability can be stated as the phenomenon through which whether a person at the higher level of hierarchy or at the lower level is accountable for his works and services that he renders to the organization. Accountability from the organizational perspective bears great importance as it is the measure through which the performance of the organization and a person serving can be judged and analysed.… Read the rest
Management Accounting
Characteristics of Good Management Accounting Information
Management accounting information should comply with a various number of characteristics including verifiability, objectivity, timeliness, comparability, reliability, understandability and relevance if it is to be useful in planning, control and decision-making.
The first characteristic of management accounting information are verifiability .Verifiability means observable to outsiders, in the context of a model of information. It refers to the ability of accountants to ensure that accounting information is what it purports to be. It also means that the selected method of measurement has been used without error or bias. The outsiders cannot see them and so references to those variables in a contract between the two parties cannot be enforced by outside authorities.… Read the rest
Parts of a Cost Accounting System
Cost accounting is linked to tax accounting, financial accounting and managerial accounting because it is an important component of each discipline as cost accounting involves determining the cost of something, such as a product, a service, an activity, a project, or some other cost object. These costs are needed for several purposes. For example, the costs of products and services produced and sold are needed for both tax and external financial statements. In other words, tax and financial accounting depend on cost accounting to provide cost information. Information about costs is also needed for a variety of management decisions. For example, cost estimates are needed to determine whether or not a product or service can be produced and sold at a profit.… Read the rest
Purposes of Cost Allocation
Cost allocation is the assigning of a common cost to several cost objects. For example, a company might allocate or assign the cost of an expensive computer system to the three main areas of the company that use the system. A company with only one electric meter might allocate the electricity bill to several departments in the company. Cost allocation implies that the assigning of the cost is somewhat arbitrary. Some people describe the allocation as the spreading of cost, because of the arbitrary nature of the cost allocation. Efforts have been made over the years to improve the bases for cost allocation.… Read the rest
What is a Fixed Budget?
A budget can be defined as a management tools that put the managers in control of a financial health of the organisation. The objective of the budget is to measure of the financial structure of the organisation and budget is a tool that forces management to be accountable in a structured and objective way. How manager manage the budget is key to their value. Budget facilities the planning and resources allocation and help to estimate, itemized, analysis and examined the entire product and service that organisation offers to customer. Budgeting is a simple process of consolidating budget and adhere them as closely as possible.… Read the rest
Establishing and Maintaining Strong Internal Control
Internal control is designed and implemented by an entity’s management, those charge with governance of the entity, and other personnel to provide reasonable assurance regarding the achievement of objectives. In addition, internal control is also can be refer to a process wherein the structure of the organization, the information system and authority are designed in such a way that it can helps the organization achieve its objectives and goals. Internal control plays an important role in how management meets its stewardship or agency responsibilities. For example, internal control for a bank is the systems, policies, procedures, and processes effected by the board of directors, management, and other personnel to safeguard bank assets, limit or control risks, and achieve a bank’s objectives.… Read the rest