Role of Accounting Information in Decision Making Process
Accounting information plays an influential role in guiding decision making process in an organization. Our research shows that not all organizations would use accounting information in the same manner even though they might all utilize it for making better decisions. However some organizations might limit those decisions to the area of cost control while others would be comfortable using accounting information for making all kinds of strategic decisions from expansion, contraction to downsizing and technological overhaul.
Thus accounting information indeed has a significant place in the decision making process. However it all comes down to the level of trust that exists in a firm between accountants and senior management. The senior management must fully accept the information presented to them and also be able to rely on that in order for it to take it seriously and make decisions based on that information.
ROLE OF ACCOUNTING INFORMATION IN DECISION MAKING
Accounting information can have a significant bearing on decision making process. A decision requires choosing the right course of actions from among a list of possible options and alternatives. However this decision has to be guided by more than one thing such as accounting information, intuition, trends etc. The data and information available with accounting managers can be utilized to make important decisions such as expansion, downsizing, and recruitment and so on.
Management accounting plans an important role in guiding important decisions. It is defined as:
"[…] the process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication...
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