Managerial accounting involves planning, organizing, and controlling. Explain these activities and then explain why these phases are referred to as a continuous cycle?
How do ethics play into the decisions made by management?
Planning involves setting business objectives and forecasting the future needs of the business. The plans can be short or long term. Management accounting also provides for the budgetary processes as part of planning processes.
Controlling involves setting up the internal structures that would enable the company achieve its objectives. Control in business processes enables identification of performing and non-performing sections of the business.
Organizing involves creating organizational structures that enable the business to operate smoothly. Organization involves making the right decisions for the business and communicating the right information and at the right time and to the right person.
The three phases are referred to as a continuous process in accounting as planning involves setting the objectives of the business in accounting and it mostly relating to financial budgeting for a particular financial period.
When ideas are generated in the initial phase of accounting, a plan is then conceived and financial estimates are derived. A financial forecast is then generated.
The plans are implemented through organization by the management using the estimates and forecasts generated during the planning section. This is the commercialization stage where the business operates. It can earn a profit or a loss.
The controlling stage is involved in analyzing the operations of the business in the realization stage. If a loss has occurred then the operations are evaluated and the fed backs are utilized again when the accounting process starts again in the next accounting period.
|Organization and Implementation|
|Planning and Financial Forecasts|
The Continuous Accounting Cycle
|Controlling and Evaluation|
Financial ethics in business decisions have significant effect on the business as well as to individual business managers. Following the collapse of giant companies that were involved in accounting malpractices, ethics in financial management has been a critical subject. The decisions to invest in particular ventures that are significantly in trouble may lead to suspension of trading licenses of such companies by the Securities and Exchange Control (Cooper, 2005).
References Cooper, J. (2005). Financial Statement Fraud: Corporate Crime of the 21st Century. Retrieved October 17, 2015 from