Management Accounting and Control: Role and Importance of Management Accountant

The report has been prepared to outline the need for a management accountant in an organization. The roles and responsibilities of a corporate accountant are taken up to induce more strategic business decisions. The report will outline the need for relevant and irrelevant costs in a business. It has shown some examples to show the advantage of using relevant cost and irrelevant cost in different business processes, like make or buy or replacement, or special order preparations. The last part of the report has tried to sum up the advantages and limitations of activity-based costing in a business. How activity-based costing has improved the productivity of the business. The method used to demonstrate the business costs based on the activity being undertaken. A case study has been taken in respect of producing better illustrations to satisfy the purpose of hiring a management accountant.

Management accountant

Management accountant is also known as a corporate accountant. He is a professional who works in a particular business. His job is to deal with organizing financial tasks in an organisation. He handles a series of transactions, like preparing reports, thus to improve the financial health of a company. The Company herein is an advertising agency which performs advertising and public relations for other companies. The duty of a corporate accountant is to examine the participation of various costs in the business, to inspect measures for the company to reduce such costs and hence improve the productivity of the company. They help in supplying the company with vital financial information, which enables top management to make proper decisions for the organization. His role in the company is to ensure success factors within a company (Recent Management Accounting Research Articles, 2013).

Key roles of a Strategic Management Accountant:-

• Budget Preparation: The need for budgets for Jessup Ltd is to make sure that they are not spending in excess to generate profitable returns. The role he plays is to prepare budgets for every department for the upcoming period to narrow down unnecessary expenses. The budgets are prepared to monitor the expenses of the company. Budget preparation is designed to cover costs and other resources, which aim to improve current activities. The accountant also inspects on a periodic basis whether the department is following the budgeted plan or not.
• Financial Reports: A management accountant initiates the accounting process. Recording, Collecting, Summarising, Journalizing and Presentation of financial transactions are the primary management accounting functions that support business performance. The functions of business and operations undertaken by the organization are presented in quantitative form. The financial reports ensure the business strength and profitability of the enterprise. Jessup Ltd prepares accounts to watch over the business expenses and sources of income of the company for a specified period (Dury, 2008). The accounts will provide detailed information about Jessup Ltd, which will help to decide, create, design and marketing of new advertising plans for the upcoming years. The financial reports will help to proceed with the purchase of new media of marketing media for Jessup.
• Forecast: Forecasting means identifying the future period, how it will going to be? Like forecasting of sales, revenue forecasting, and cost forecasting are some of the essential requirements of strategic decision-making in management accounting that need to be considered. Corporate accountants need to predict the future of the business by analyzing the potential markets. Jessup will forecast to predict possible competitors in a specific market. It will also help to know whether the industry is in a boom or a declining phase.
• Internal Management: Internal management offers, e.g. protecting cash, fixed assets, and safeguarding financial statements. The management accountant plays the role of managing the internal control systems. The integrity of systems, protection from intrusion and devitalizing the financial information of the organization. Jessup uses an internal control system for protecting from such situations, i.e. preparation of documents within the guidelines and review. To ensure the documents are prepared with highest accuracy and precision according to the standards (Epstein, 2011).
• Provide Support: The role of the management accountant is to provide advisory support to management and other interested authorities on guiding and providing the necessary information on business decisions and plans of the organization. The management accountant avail the decision support for enhancing the productivity of the organization. Decisions in Jessup are basically framed on the basis of high risk or low risk associated with a project. The decision of business given by management accountant are particularly gives an edge over other decisions (Warren, 2011).
• Strategic Planning: Strategic planning helps to improvise the strategic goals and plans of the company. Strategic accountant will design a plan which will help to align all the necessary resources. It is prepared as an action plan for the business. It helps to focus on the company's strengths, weaknesses, threats and opportunities of the company. Strategic planning in Jessup identifies alternatives, so he employ what will be the best alternative to use for the organization (Lucey, 2003).
• Managing Taxation: Taxation policy in a country is widely different from industry to industry. The duty of a management accountant is to supervise taxes of the company. To follow the guidelines and tax planning to avoid over burden and penalty. Taxation laws in Jessup create a big gap between the operating profit before and after tax. Applying taxes and use of exemptions and deductions are managed by the accountant (Cost and management accounting, 2013).
• Asset management: Asset management helps to keep the business in a cyclic motion, which will improve the growth of the organization (Coombs, 2005). The biggest risk is maintaining the quality of the business operation at high standards. Asset management will assist in planning for the future and aid in better decision-making for the organization. Jessup will employ a strategic accountant to support in making better bookkeeping and better planning for the future. The asset management will support mitigating risks of the company.

Relevant costs are usually used in:

• Decisions on Discontinued Operations: The use of relevant and irrelevant costs deals in guiding management decisions over continuing or discontinuing operations. The cost will determine whether the operation is acceptable or not for the profitability of the company.
• Make or buy decisions: The management has to focus on the decisions on purchasing a product or manufacturing it themselves. The cost associated with producing or buying, if producing the product is less than purchasing it. The company will manufacture the product or vice versa.
• Special order decision: Special order decisions are those in which the company will decide to prepare a special order for one time only, to judge whether the cost of preparing is more or less. If the preparation of the product is less than the budgeted the order is taken (Ribeiro, 2006).
• Replacement: Replacement decisions are those when the product is replaced. The purchase of machines and plant is based on such decisions. Whether the replacement is beneficial or not is scaled.

Conclusion

The above report has been very illustrative in showing the purpose of a management accountant's need in a business. A strategic decision, the need for financial information, preparation of budgets and other functional managerial roles are taken up by the professional. All such activities are done to produce a summarized data on the prediction of future market trends and patterns. The purpose of the personnel is to provide a deep analysis of the organization's financial health within an organization for a specified period. The role of an accountant is to judge the efficient cost centre in the business (Bogt, 2012). The techniques and strategies he employs to produce the highest yield for the company. Also, check out Management Assignment Help.

The task is to go over the transaction of the enterprise, and evaluate an effective method of employing an efficient cost method to give the highest productivity and cost reduction for the company (Sciulli, 2004). Cost for any business is adjudged by how they treat the costs as relevant and irrelevant costs in a corporation. Identify relevant and irrelevant cost. How the irrelevant cost can be minimised in a business? The use of activity-based costing is used to draw an outline of the business performing on the activities taken (Rodríguez, 2012). The practice will help to increase productivity and support in reducing the costs of the business. The method is been widely used by many companies. But the procedure is very costly, and special training is required.

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References

• Albelda, E., 2011. The role of management accounting practices as facilitators of environmental management: Evidence from EMAS organizations. Sustainability Accounting, Management and Policy Journal. 2(1). pp.76 - 100.
• Bardy, R., 2006. Management control in a business network: new challenges for accounting. Qualitative Research in Accounting & Management. 3(2). pp.161 - 181.
• Bogt, H. and Helden, J., 2012. The practical relevance of management accounting research and the role of qualitative methods therein: The debate continues. Qualitative Research in Accounting & Management. 9(3). pp.265 - 273.
• Burns, J., Hopper, T. and Yazdifar, H., 2004. Management accounting education and training: putting management in and taking accounting out. Qualitative Research in Accounting & Management. 1(1). pp.1 - 29.
• Busco, C. and Scapens, R., 2011. Management accounting systems and organisational culture: Interpreting their linkages and processes of change. Qualitative Research in Accounting & Management. 8(4). pp.320 - 357.

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