Question

Discuss and apply four accounting techniques and methods to make managerial decisions.

Answer 1

Operational control , Product and customer costing, management control and strategic control are the four accounting techniques and methods to make managerial decisions. The four different functions relate to the different demand for management accounting information.All these are part of management accounting. Management accounting is the term used to describe the accounting method and techniques coupled with special knowledge and ability which help the management for decision making.

Accounting methods refer to the basic rules and guidelines under which businesses keep their financial records and prepare their financial reports. There are two main accounting methods used for record keeping the cash basis and the accrual basis . Small business owners must decide which method to use depending on the legal form of the business,its sales volume, whether it sells goods to customers on credit , whether it maintains inventory, and the tax requirements set forth by the Internal Revenue Service. Some form of record keeping is required by law and for tax purposes, but the resulting information can also be useful to managers in in assessing the company's financial situation and making decisions. It is possible to change accounting method later, but the process can be complicated. Therefore it is important for small business owners to decide which method to use up front based on what will be most suitable for their particular business.  

Accounting records prepared using the cash basis recognize income and expenses according to real time cash flow, income is recorded upon receipt of fund, rather than based upon when it is actually earned. expenses are recorded as they are paid , rather than they are actually incurred. Under this accounting method, it is possible to defer taxable income by delaying billing so that payment is not received in the current year . Likewise, it is possible to accelerate expenses by paying them as soon as the bills are received in advance of the due date

A company using an accrual basis for accounting recognizes both income and expenses at the time they are earned or incurred, regardless of which cash associated with those transactions changes hands. Under this system, revenue is recorded when it is earned rather than when payment is received. Expenses are recorded when they are incurred rather than when payment is made.