SAMPLE PAPER

Introduction to Managerial Accounting

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Managerial accounting is concerned with collecting, processing, interpreting and communicating financial information such that such information is made useful in meeting goals of the firm as a whole. It is future focused unlike financial accounting which analyses historical information and is mainly concerned with what happened in the past financial period. It enables a firm to benefit from future based management skills such as budgeting which solely deals with the future (Roby, ?Gregory, Jenkins and ?Steve, 2008).This paper analyses the operations of S & L Inc. with a view of studying how managerial accounting is employable in solving some of its problems and can help it meet its long term goals.
S & L Inc. is a company that deals in construction materials like construction steel, cement, timber, glass and so on. Some of its products are imported but most of its products are either manufactured in its manufacturing division or sourced elsewhere locally. The company has several divisions notably sales and manufacturing divisions. These two divisions operate autonomously and manufacturing department which produce construction glass as its main product sell to the sales division and external customers. Some managers are of the view that these two divisions being parts of a single company, transactions between them should be done without charging profit while others are of the opinion that the manufacturing department should transfer to sales at a markup which has also raised a question as to what criteria should be used to determine this markup.
The company has seen rapid growth in recent years and management intend to expand the business further both in geographical coverage and by diversifying the type of products the business deals in. Managers are of the view that this can be done more efficiently by acquiring businesses which are already established and may be going through financial problems and then revive them. Importing steel is also becoming more and more expensive and the managers are thinking that maybe they should start manufacturing construction steel locally too. Environmentalists discourage cutting trees for timber and timber business is becoming less and less profitable as the government tightening environmental legislation concerning forest conservation. The company would also like to practice good corporate social responsibility and support environmental conservation. The management is therefore faced with a dilemma on whether or not to drop timber business as some of its regular client are timber buyers who would shift to competitors once they are unable to buy the product from S & L.
Regarding expansion through acquisition, the cost accountant has been instructed to come up with a comprehensive budget and a cash flow forecast that would determine whether the company is able to finance the proposed acquisitions and whether it would be worthwhile. Budgeting has two major advantages one being that it forces information to flow through the entire organization as it encourages communication and it also enables more focus to be put on the future and less distracted by current operations (Roby, ?Gregory, Jenkins and ?Steve, 2008). In depth cost benefit analysis is also being done by the cost accounting department of both divisions to find out if it would be worthwhile to produce construction steel locally instead of importing. Management though is finding it hard to quantify benefits that arise from practicing corporate social responsibility but they agree that dropping timber business would deny them a competitive advantage as most of their competitors sell timber so if the business is dropped, many clients would shift to competitors resulting in a major loss of revenue.
Reference;
Roby S., ?Gregory J., Jenkins, ?Steve J., (2008) Managerial Accounting: A Focus on Ethical Decision Making. Retrieved from;
http://books.google.co.ke/books?id=aNHQ_G6E9hAC&pg=PT355&dq=advantages+of+managerial+accounting&hl=en&sa=X&ei=zKoTUoGLJobxhQe74YDAAg&ved=0CFYQ6AEwBg
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