Influence Of Managerial Accounting Practices On Financial Performance Of Tea Processing Firms In Bomet County, Kenya

Abstract

Managerial accounting is known as accounting that specifically pertains to the management of a business or accounting related to managerial functions. Lately, the rapid evolution of the business environment has led to significant shifts in management accounting practices and the roles of management accountants in companies. Managerial accounting must evolve from an administrative function to a strategic one, moving away from being perceived as merely "bean counters" to being recognized as essential "business partners." The purpose of this study was to investigate the influence of managerial accounting practices on the financial performance of various tea companies in Bomet County, Kenya. The study's objectives were to evaluate how budgeting practices, back-flush accounting effects, activity-based costing role, and Inventory valuation influence tea processing companies' financial performance in Bomet County, Kenya. The study was grounded on the contingency theory , the new institutional sociology theory and the agency theory. The study utilized a descriptive survey design for the research. 59 participants were chosen from a pool of 59 people through census methods. Information was gathered through the use of surveys and structured interviews. The instruments were tested for reliability using Cronbach’s Alpha Reliability test, while content validity was assessed based on expert opinion. The study used descriptive and inferential statistics for examination, employing correlation and regression analysis as primary analytical techniques. Findings showed various inconsistencies in financial outcomes. Regression analysis findings indicated that the financial performance of tea companies was significantly affected by budgeting practices, back-flush accounting, activity-based costing, and inventory valuation in managerial accounting. An R square of 0.801 suggested that 80.10% of the changes in financial performance were influenced by the variations in managerial accounting practices like budgeting, back-flush accounting, activity-based costing, and inventory valuation. The results of Pearson Correlation Analysis also validated a positive correlation between the financial success of tea companies in Bomet County and their use of budgeting practices, back-flush accounting, activity-based costing, and inventory valuation. The study indicates that tea companies should investigate the potential benefits of utilizing specific managerial accounting techniques detailed in the Contingency and New Institutional Sociology Theories in order to enhance their financial results. Tea companies in Bomet County should utilize managerial accounting methods to improve their financial results.