How to use various accounting methods
Kristina Unutoa, Professor
Accounting is a critical part of running a business. Since there are various forms of accounting that can be used, it is important to know which technique is best to use for what companies since they are unique. Once a particular technique is established, it is also important to keep an open mind if there are changes that need to take place in the organization. Keeping an open mind helps the company adjust and move forward in a timely fashion
Most businesses exist to make a profit. Accounting is an important part in helping understand how the profits and ...view middle of the document...
Therefore managerial accounting involves comparison, analysis and business logic to process information provided (Scholasticus, 2011). Management accounting involves interpreting accounting information for management’s use. This interpreted information is reported either daily, weekly, or monthly. The information generated helps managers make decisions regarding about operations and strategy (AIU Online, 2012). Managerial accounting takes the information derived from financial and costing methods to make observations and decisions that will internally direct the company.
Lean manufacturing is a business philosophy that seeks to reduce waste and only produce to meet customer demand. It typically also means that a company will move from a functional division of work to work stations where where all of the processes are next to each other in order to manufacture a product or line. The concepts of lean accounting are better capturing the performance of their operations. Also, lean accounting causes numbers to be viewed in a different light. Rather than looking at the costs created by each department, all costs are organized by the value it creates for the customer that is associated with the product or product line (Kroll, 2004).
There are many differences between lean production methods and those of typical production. For example, for typical production, such as a mass production, it normally concentrate on efficiency and machine utilization which can lead to long run times and huge inventory levels. Certain parts of inventory can sit on shelves for long periods of time if there is no demand from customers. This would be considered a waste because the time, money and effort it took to make the merchandise could have been used toward inventory that customers actually need and demand. Lean takes this form of waste out by producing only what is needed. Also when items are produced in a lean environment side by side, it reduces that part having to move from department to department which takes time, eats up floor space and makes it difficult to track (Kroll, 2004). Traditional cost accounting targets everything in the costs of goods sold, including things like overhead. Lean accounting uses value stream costing uses more real-time data to generate reports on a...