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Management's efforts to achieve company objectives rest upon the twin functions of planning and control. The planning function is essentially a decision-making process dealing with the establishment of a desired profit; the preparation and availability of materials, labor force, and plant and equipment for the anticipated volume; and the creation of a communication system that permits reporting and controlling actual results against predetermined plans.
The control function deals with management's task of organizing and marshaling natural forces, human behavior, and material objects into a coordinated unit in order to attain the desired results. The connecting link between the originating planning function and the terminating control function is the cost accounting information system that permits effective communication, continuous feedback, responsibility accounting, and managerial flexibility. Modern cost accounting is rightly termed a tool of management, with emphasis on management. The processing and reporting of a firm's historical and projected micro-economic data assist management in developing new potentials, improving present opportunities, establishing more aggressive yet flexible control of operations, and enhancing the management process through objective evaluation of the feedback data.
The importance of cost accounting to the performance and success of any level of management in both problem identification and problem solving is emphasized throughout the year. While planning is essentially a decision-making activity, control intends to ensure realization of the planner's goals. Although the information and underlying data required for these two functions are often quite different, one expects the cost accounting system to provide the answers and respond to the needs of both functions. This dual responsibility of the cost accounting information system to both functions strongly influenced the authors in structuring the presentation given in this article.
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