Q1. On your own words, outline the accounting principles and assumptions and explain each one.
Influence: Effective management accounting starts and ends with discussions, enabling management to break through blockages that prevent getting everyone on the same page, and build a road to integrated thought. Effective communication offers better and simpler perspectives, in this regard, to influence the decision-making process.
Relevance: Management accounting principles provide valuable relevant inputs to the company’s policy and decision makers as and when required on a routine timely basis. This principle details about the various guidelines regarding how the past and current information (both financial and non-financial) in the form of socio-economic and environmental data retrieved from internal and external sources are detected.
Analysis: The effect on value is analysed. This theory allows organizations to model various situations to understand their effect on value creation and preservation. This concept requires a detailed understanding of the business model and the macro-economic atmosphere. Good management accounting functions can turn knowledge into insight by analyzing the effect of the situations being considered.
Trust: Transparency and accountability make the decision-making system more trustworthy. Balancing short-term economic interests against long-term stakeholder value strengthens reputation and people’s confidence in the organization