A Critical Evaluation of the Accounting function in Informing Decision Making & Meeting Stakeholder/societal Needs & Expectations


Accounting information, according to Demski and Feltham (1976), can play two functions in decision-making, Decision-facilitating and Decision influencing. Decision-facilitating information is meant to minimise the pre-decision maker's uncertainty and, as a result, increase the likelihood of making better judgments with respect to the targeted objectives. As a result, decision-facilitating information is a direct input in decision-making and is intended to improve knowledge and decision-making prospects. Decision-facilitating information, in particular, aids belief change during the decision-making process (Baiman 1982). Accounting information about (planned) contribution margins, for example, may assist the sales manager in making profit-optimal pricing decisions, and relative contribution margins (per capacity unit) can be utilised to discover the ideal production programme in instances with capacity bottlenecks.
While information's decision-facilitating function is crucial in single-person decisions, its decision-influencing function is only useful in multi-person situations. Decision-influencing information is meant to influence the behaviour of (other) people, and in the case of management, to impact managerial decision-making in particular. Monitoring behaviour, measuring and evaluating performance, and rewarding or penalising performance are all examples of decision-influencing information. Of course, it is necessary for the individual whose behaviour is to be affected to be aware of the usage of decision-influencing information. Ex post deviations of actual from projected expenses will be determined (at least under certain situations) and will affect remuneration, for example, in order to drive cost-conscious decisions, the manager must know in advance (Anon, n.d.).





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