Accounting and Control 1

	management

Accounting and Control

The last few sections have concentrated on the use of accounting information in the analysis of short-term and long-term decisions. The principles of relevant costing were applied in each case to guide the analysis and derive an optimum solution in economic terms. However, we also encountered some difficulties in deriving appropriate relevant cost information to evaluate these decisions and often needed to adjust or restate accounting information originally compiled primarily for routine reporting purposes. Also we encountered the potential for decisions to be influenced by managerial objectives which conflicted with the objective of shareholder wealth maximisation assumed by economic decision models.

In this section however, we shall turn our attention to the use of accounting information in the co-ordination and control of large organisations. We will examine the ways in which financial plans are established and how performance towards the achievement of planned financial performance is monitored and appraised.

The first half of the accounting section examined the formal published accounting reports through which the managers of a company are made accountable to the company's legal owners, the shareholders for the economic resources delegated to them. We are now going to see how accountability for the use of delegated economic resources is extended from the directors of the company, through the various management tiers to the operational activities of the company.