THE IMPACT OF THE MANAGEMENT ACCOUNTING ON ORGANIZATIONAL PROFIT MAXIMIZATION A CASE STUDY OF EMENITE PLC

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background Of The Study

Modern business organization operates in an environment that is considerably complex. Since the 1970’s managers have had to cope with rising interest rates, materials, shortage crises, inflation and environment regulations to mention a few. And the traditional method of analyzing problems and making decision have been found in capable of effectively handling this increasing complexities due to the change that exist within the environment it becomes an important characteristics of a good management to be able to evaluate the past changes to react to current changes and to be able to predict the future changes. In this direction management needs information continually which will help in the planning and controlling of the operation of the organization. The need for accountability has given rise to cost accounting system, which provides information that is useful to management for internal reporting objectives. Due to the complexities in the system of most organization the system of cost accounting is equally becoming complex and reluctantly a body of professional with special expertise in this is created. This body of professional is called the management accountants and the area of study is know as management accounting Lucey (2007) define management accounting as the process of identification, measuring, accumulating, analyzing, preparation, interpretation and communication of financial information used by management to plan events and control within an organization and to ensure proper use and accountability of its resources form the above definition it means that the management accountant has a range of function to carry out in organization.

According ICMA “management accounting is the presentation of accounting information in such a way as to assist management in the creation of policies and in the day-to- day operation of an undertaking”. To achieve this aim the management accountant is interested in the past, the present, and the future. Useful information can be extracted form past result which together with report of current performance can point the way to immediate management action. In the same vein forecasting the future enable the management to evaluate current result more readily and may also reveal areas of business which requires corrective actions. According to David (2005) defined management accounting as “The application of professional knowledge and skill in the preparation and presentation of accounting information in a way to assist the management in the formulation of polices and in the planning and control of operating of the undertaking it is designed to provide information for internal problem solving. The management accounting system of planning and control is designed to spur-up and help chief executive search for and selecting short run and long run goals and implementing plans apprising performance and pin- pointing deviations from plan. To be able to do all these the management accountant must posses some knowledge of account. He must have a through understanding of the operations of the organization in which these system are implemented and the appropriate technology to apply in each case for the provision of management information. Information provision depends solely on the type of business. It is obvious that the management of a manufacturing company will need information that will enable them consider the factor aecting cost of production, cost of classification, cost reduction, product pricing market shares of the products choice of the product lines diversification and investment. However a trading company needs information that will concentrate decision on customers demands advertisement and product branding.