Synergy of Strategic Management and Accounting Principles for Business Enhancement

Introduction

The strategic management is vital for the development of the business and makes proper decision by conforming the statutory guidelines. Accounting is of relevance as it helps business to utilize its finances in the most effective manner. For the enhancement of the business both financial along with management accounting is of importance for better analysis and problem solving. The objective is to consolidate the principles of accounting and management

Differentiate between financial accounting and management accounting

Accounting is about recording and summarising the monetary transaction in the business to keep the track of the financial transactions. The Financial accounting is about providing the true and fair picture view of financial position of the business. On the other hand, management accounting is about offering both qualitative along with quantitative information to the managers of the organisation so that proper decisions are made.

The major differences between financial along with management accounting is stated below:

Financial accounting keeps tracks of the financial information of the business on the other hand management accounting reports both the financial along with non financial information of the business (Adler, 2013).

In terms of valuation it is worthy to state that financial accounting concentrates about knowing the proper value of the assets and liabilities of the business. Management accounting is concerned about the values and productivity of the products.

Financial accounting is reported so that public are aware of the financial position however management accounting is used for the organisation and it is of confidential nature (Gupta, 2011).

Monetary information is attained through the use of financial accounting. Both monetary along with non monetary transactions are reported and informed in the management accounting so that decisions are effectively managed

Moreover, the differences of both forms of accounting are determined for proper evaluation of the business and its success in the long run.

Thus it is determined that financial accounting is regulated and is highly anticipated for the purpose of decision making.

Description of Break-even analysis stating that it is purely a theoretical exercise and not useful in practical situations

Break even analysis is regarded as valuable as it helps to make effective decision. It is a tool that helps in the analysis of the overall costs through determining the variable costs, fixed costs along with revenue. It is more theoretical and not practical as it determines the level of output in terms of revenue generation on the basis of costs. It calculates the margin of safety which implies that how many sales are to be taken in order to pay the costs for the business. It is theoretically viable because it analyses the level of sales in order to determine the total fixed costs of the business. The analysis results into neither profit nor loss thus its practicality is being concerned. The break even analysis is being used to set the revenue targets, make smarter decisions, cover the fixed costs (Cafferky & Wentworth, 2010). It is of relevance as it helps in making good business decision that impacts the cost structures along with the number of units that are to be covered for the aspect of profit making.

As per the theoretical factor break even analysis is of importance because it helps to manage the size of the units that are to be sold. It impacts the processing in terms of budgeting along with setting the target so that the approach is realistic. The monitoring and cost control is done in the most effective manner through the help of break even analysis owing to the use of components which is fixed cost and variable costs. As per the theory is concerned break even analysis is vital for price setting implications based upon the set long term pricing strategies. The Breakeven point is also being used in the most effective manner by considering upon sales or discounts to determine the amount of money spent (Cafferky & Wentworth, 2010). As per the financial strategies are concerned this tool is used by increasing the sales and by raising the prices so that the profit margin is augmented.

Conclusion

Thus from the analysis it can be comprehended that statutory along with management accounts are regarded as the benchmark for the purpose of strategic decision making. The accounting financial and management are different in its approach impacting the business. It is further comprehended that break even analysis is a theoretical exercise as it neither states profit or loss.

References

Adler, R., 2013. Management Accounting. Taylor & Francis.

Cafferky, M. & Wentworth, J., 2010. Breakeven Analysis The Definitive Guide to Cost-Volume-Profit Analysis. Business Expert Press.

Gupta, A., 2011. Financial Accounting for Management: An Analytical Perspective. Pearson Education India

Dig deeper into Strategic Insights into GSK with our selection of articles.