Value of Managerial Accounting in essay

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The above extension or explanation of the responsibility of a managerial accounatant mainly highlights the fact that a managerial accountant has responsibilities not only to the finance department of an organization but also the entire team that is working within the organization. Hence, along with the classification, calculation, assessment, understanding, and transferring all the relevant financial data, the managerial accountant is also responsible for helping the business team:

Customer satisfaction reports and assessments,

The balanced scorecard procedures for the overall sales,

In understanding the finances for the creation of a new good or service,

The factors that channel or guide the business activities metrics, and Research on superior functionality strategies (Johnson & Kaplan, 1987).

It is important to note here that the managerial accounting is different from the basic financial accounting because the latter only helps keeps a record of all financial expenditure or balance while the former helps the business design future financial plans (Johnson & Kaplan, 1987).

It is also very important to note here that while in the 1980s the overall importance of the managerial accounting section wasn't very high and it accounted for a very small part of the business, with the recent developments however, the managerial accounting sector has grown to be a significantly important process to control and channel an organization's internal activities through a methodology of strict and through monitoring which makes it an integral part of the management control theory of any organization.

Important breakthroughs in Managerial Accounting

Grenzplankostenrechnung (GPK)

Grenzplankostenrechnung (GPK), as the name suggest, is a German structure. This was developed in the 1950s and it primary task was measuring costs of an organization. The GPK, as it is commonly known, was constructed with the intention of giving the organization an efficient and precise categorization of all managerial costs induced and the methods or formulas that were used to conduct the calculations of the costs. The two most popular translations of Grenzplankostenrechnung are the Flexible Analytic Cost Planning and Accounting (Sharman, 2003) and the Marginal Planned Cost Accounting (Friedl, 2005). Most of the books use notably Flexible Plankostenrechnung und Deckungsbeitragsrechnung as the name for the GPK mechanism (Sharman, 2004; Kilger, 2002).

Hans George Plaut and Wolfgang Kilger were the creators of the concept and mechanism of GPK. The former, an automotive engineer, and the latter, an academic, coordinated towards a similar objective which was to design and implement a structure and process that would classify, present a precise and improved set of data on the overall costs of an organization (Sharman, 2004; Kilger, 2002).

Lean Accounting

The lean accounting or lean companies usually comprise of those companies that employ the Toyota Production System. The term was first introduced in the 1990s and became most popular recently in 2005-6. The lean accounting phenomenon mainly denotes that the conventional and old processes of accounting can only apply to businesses that have a mass production structure and does not necessarily apply with the efficiency to the business activities that exist during the production and marketing phases.

Resource Consumption Accounting (RCA)

The Resource Consumption Accounting (RCA) is another important concept within the managerial accounting domain that first surface in 2000. The universally accepted definition of RCA is that it is a flexible, all-encompassing and thorough structure that allows the administration to make decisions for the success of a project based on accurate and verifiable data. RCA underwent efficient developments in 2001 at the Consortium for Advanced Manufacturing-International (CAM-I). The concept was integrated as part of the Cost Management Section and was consistently polished and tried, for the next several years, through the use of numerous surveys, investigative studies, researches and focus groups. This, consequently, led to the foundation of the RCA Institute which served as the launching pad for the RCA procedure into the corporate and business world.

Transfer Pricing

Managerial accounting is also used very regularly within the banking industry with few basic differences in application from the normal corporate world. Some of the fundamental rules and theories that were developed in the business world are carried through in the banking industry; however, the managerial accounting procedures within a bank are more or less specific and specialized. One of the carried through theories of managerial accounting into the banking industry is the concept of transfer pricing. Transfer pricing basically gives each section of an industry a price value based on how much revenue that section is able to generate in comparison to the costs allocated to it.

Within the banking industry, the transfer pricing concept is used under slightly different dynamics as it helps the administration to decide on the interest rates that the bank allocates to each financial activity or loan. For examples, the managerial accountant in a bank will decide the level of percentage that the businesses will receive from the bank based on the percentage of revenue that they bring forward for the back and/or the percentage of financed that the bank will take from the various businesses that use the bank's service to give funds or have financial transactions with their customers.


The paper explained the definition of the concept of managerial accounting and explained its value within an organization. The managerial accountant concept is different from the generalized finance accounting phenomenon because of one basic aspect i.e. managerial account plans the financial expensed and direction of financial endeavors for a company in the near or long-term future whereas the general financial accounting oehenomenon mainly keeps an historical record of all the financial expenses and balances that an organization has made over the years of its existence. Alongside this, some of the other aspects of managerial accounting that make it valuable for an organization include: intelligent use of all financial and tangible resources; construction and efficient practical implementation of the strategies regarding business policies, activities and marketing; strengthening the decision making process; strengthening all internal organizational behaviors, conducting research on customer satisfaction; understanding the finances for the creation of a new good or service, amongst others.


Friedl, Gunther; Hans-Ulrich Kupper and Burkhard Pedell (2005). "Relevance Added: Combining ABC with German Cost Accounting." Strategic Finance (June): 56-61.

Garrison, R.H., P.E. Noreen, 'Managerial Accounting', Irwin McGraw Hill, 1999

Horngren, C.T. And G. Foster, 'Cost Accounting, a Managerial Emphasis', Prentice-Hall, Inc. 1987

Johnson, H.T. And R.S. Kaplan, 'Relevance Lost: The Rise and Fall of Management Accounting', Harvard Business School Press, 1987.

Kaplan, R.S., D.P. Norton, 'The Balanced Scorecard - Measures that Drive Performance', Harvard Business Review, January - February 1992.

Kaplan, R.S., D.P. Norton, 'The Strategy Focused Organization', 2001, Harvard Business School Publishing Corporation.

Kaplan, R.S. And a.A. Atkinson, 'Advanced Management Accounting', Prentice-Hall International Inc. 1989

Kilger, Wolfgang (2002). Flexible Plankostenrechnung und Deckungsbeitragsrechnung. Updated by Kurt Vikas and Jochen Pampel (11th Edition ed.). Wiesbaden, Germany: Gabler GmbH.

Sharman, Paul a. (2003). "Bring on German Cost Accounting." Strategic Finance (December): 2-9.

Sharman, Paul a.; Kurt Vikas (2004). "Lessons from German Cost Accounting." Strategic…[continue]

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