Introduction to Management Accounting
Introduction:
The management accounting and the financial accounting provides the fundamental base for presenting the organizations' past, present and the future performance. However, financial accounting deals with preparing financial reports under the strict regulations of the country specific generally accepted accounting principles and follow the reporting regulations of the stock exchanges. The financial accounting provides information regarding past years' performance and it is primarily used by the stakeholders .
On the contrary, management accounting plays an active role in planning, preparing budgets, assessing performance, evaluating reasons for variances, taking control actions. Along with this, management accounting involves decision making related to scale of operations, purchase of machinery, and so on. Management accounting is not necessitated to disseminate its information to public, and serves primarily the purpose of managers for planning, controlling and decision making. The frequency of preparing management accounting reports vary on the company's tradeoff with its financial resources. It can be prepared on monthly, quarterly or annual basis .
Traditionally, a group of accountants were considered as alienated from the rest of the organization, who were primarily engaged in collating a huge lot of paper data and analyzing this data for managers using budgeting, variance analysis and such other techniques manually . Thus, their primary role was to monitor and control the performance based on numbers.
In the recent past, the role of the managers have become more active, rather than the tradition passive role of data collection and its interpretation. The reason associated with such a transformation has been the changes in the external environment, where the companies are operating in the globalised world, with better international technology, and thus, the companies experience varying trends. The external environment have been characterized with the major financial scandals as well.
With changing business era of globalization during the past 2 decades have reduced international boundaries, changed the supply chain networks, availability of information on real-time basis. The changes have also been visible in reducing product life cycles, informed competitions. This have changed the management accountants task of storing, retrieving and processing the information.
Customer management, that is, retaining existing customers as well as fetching new customers have also become an increasing concern for management accountants. Customers are the king for today's business. To retain them, maintaining product quality along with adequate pricing have become another area to be focused by management accountants.
Technology change have impacted the traditional decision making roles for the management accountants. For instance, the improved software have made plethora of information available. Similarly, production technologies have become very advanced, for instance, advanced manufacturing technologies, robotics, computer aided manufacturing, etc. as well as automation of the supply technologies have necessitated management accountant to learn new technologies, be more active decision makers and store, process and disseminate the data using latest technologies.
Management accountants have come under the ethical purview as well, due to the record accounting scandals experienced due to the negligence of the accountants in recording transactions and preparing the appropriate financial reports. The has resulted in the changes of the existing regulations, as well introduction of the new regulations, for instance, Sarbanes Oxley Act in 2002 and changing company laws of respective countries. These new regulations have increased the documentation requirements. Thus, the management accountant have an ethical responsibility to uphold the trust of the stakeholders as well as comply with these new or modified regulations .
The report given by IMA (1999, p.3) depicted the changed role of management accountants as a member of cross-functional team, who spend more time in evaluating the information rather that producing the standard reports. The management accountants have been considered as business analysts, who are engaged in better communication and decision making.
Chartered Management Accountant designation:
Jablonsky et al. (1993) highlighted the requirement for the changing skill requirement for management accountants. The author emphasizes that need for team playing, understanding strategic issues, leadership qualities, analytical skills using complex financial models, and extreme reporting requirements in all levels of hierarchy.
The professional title of Certified management Accountants (CMA) been offered by Institute of Management Accountants (IMA) as a professional accreditation for being a management accountant. The certification is indeed not necessary to work as a management accountant, however more than 60,000 management accountant are registered with CMA across the world. It acts as a platform of providing professional assurance as well as the knowledge sharing portal that keep the accountants updated. Thus, CMA designation provides a certified degree that focuses on the broad range of courses in analysis and decision support, thereby offering better prospects to management accountants of growing in the organization hierarchy .
Conclusively, the role of management accountants in today's world have changed tremendously since past 2-3 decades. The information storage and report preparation have been automated using computing software, thus, giving scope to management accountants to focus more on analysis and decision making in a fast paced global industry.
References
(IMA), I. o. (1999). Counties More, Counties More: Transformation in teh Management Accounting Profession. Montvale, New Jersey: Institute of Management Accountants Publishing.
Copeland, J. (2005). Ethics as an imperative. Accounting Horizons, 35-43.
Hopper, T. (2007). Issues in Management Accounting. Pearson Education.
IMA. (28. February 2014). CMA Certification. Von IMA: Association of Accountants and Financial Professionals in Business: http://www.imanet.org/ima_home.aspx abgerufen
Jablonsky, F., Keating, P., & Helan, J. (1993). Business Advocate or Corporate Policeman. New York: Financial Research Foundation.
Needles, B., Powers, M., & Crosson, S. (2013). Financial and Managerial Accounting. Cengage Learning.
