Individual Differences in Managerial Accounting Judgments and

Topic 1 DQ 1 (2/4) : Article: Individual differences in managerial accounting judgments and decision making https://doi-org.lopes.idm.oclc.org/10.1016/j.bar.2014.09.002 Summary: This article discusses how managers are often influenced in their decisions for their businesses by the information they are provided by managerial accountants. There are two examples that are looked at from textbooks which are the effect of knowing the outcome of a decision or revised budget forecast and the irrelevance of sunk costs (Butler & Ghosh, 2015). The management accounting control system (MCS) provides and uses different information to help decision makers within companies. They provide information so they can help companies assess whether the organization, or the members within it, are achieving the objectives at hand. However, it has been noted in the article that depending on the individual, they view the information in different ways. Depending on the decision maker, they can use the information provided to learn or adjust it which can lead to systematic differences in judgment. Throughout the article, the authors identify one cognitive difference as "comprehensive thinking ability", meaning the ability to think about multiple paths or alternatives (Butler & Ghosh, 2015). The costs that are involved with the decision maker's inability to use the information provided by the accounting system can be consequential to a company. The article provides an example of a company wanting to acquire another firm. When looking to make this decision, the decision makers need to look at a summary measure of net income or profit in order to make a correct decision in the long-run. If the decision makers cannot think about alternate outcomes, the wrong decision could be made. The article then goes on to report results from a series of studies that examine judgments caused by different levels of thinking abilities. Reaction: Overall, this article was very interesting for me to read. I would never think that managerial accounting and decision making are linked in the way that we discovered through this article. It made me think about how decision makers within companies need to take managerial accounting information into account when making big decisions for their companies. Oftentimes, decision makers just want to go off what they believe will be best for the company, but oftentimes there is information they can use to make the best decision possible. When an individual receives information from the managerial accounting department, they should be using it to help them realistically think about the profits for their company rather than just make a fast decision because they believe it could be the best decision. Overall, it taught me that I should be looking at alternate decisions whenever I have to make big decisions, rather than just make a fast decision that could end up being the wrong one. Butler, S. A., & Ghosh, D. (2015). Individual differences in managerial accounting judgments and decision making. The British Accounting Review,47(1), 33-45. https://doi-org.lopes.idm.oclc.org/10.1016/j.bar.2014.09.002