Management accounting

The process of preparing management reports and accounts that provide accurate and timely financial and statistical information required by managers to make day-to-day and short-term decisions.

Unlike financial accounting, which produces annual reports mainly for external stakeholders, management accounting generates monthly or weekly reports for an organization's internal audiences such as department managers and the chief executive officer. These reports typically show the amount of available cash, sales revenue generated, amount of orders in hand, state of accounts payable and accounts receivable, outstanding debts, raw material and inventory, and may also include trend charts, variance analysis, and other statistics also called managerial accounting.

Cost accounting
Cost accounting is the process of collecting information about the costs of a company's activities, assigning selected costs to products and services, and evaluating the efficiency of cost usage. It is mostly concerned with developing an understanding of where a company earns and loses money, and providing input into decisions to generate profits in the future.

Cost
An amount that has to be paid or given up in order to get something. In business, cost is usually a monetary valuation of (1) effort, (2) material, (3) resources, (4) time and utilities consumed, (5) risks incurred, and (6) opportunity forgone in production and delivery of a good or service. All expenses are costs, but not all costs (such as those incurred in acquisition of an income-generating asset) are expenses.

Definition and Nature of the Work

Businesses have money coming inincomeand money going outexpenditures. Records must be kept of all this money. Companies must keep accurate records of their costs and their profits and losses to satisfy legal requirements and appease shareholders. Accurate financial records also help business people to see whether they are using their money efficiently. Management accountants, often referred to as corporate accountants or private accountants, preside over the financial record keeping of a business. They keep records of and analyze all the company's financial data such as revenue, income, taxes owed, and the amount of cash a company has. They prepare financial statements such as balance sheets, cash-flow statements, and income statements. They also present additional reports to senior managers so that they can make important decisions. In addition, management accountants supervise recordkeeping departments, such as bookkeeping and data processing. Management accountants often specialize in one area of accounting. Tax accountants keep track of how much tax a company owes local, state, and federal governments. They also look into all the ways a company can save money on its taxes through deductions and tax shelters. At the beginning of each year they compile all their tax data from the previous year and prepare and file returns. Cost accountants determine the exact cost of producing a product. Once the costs are known, accountants can suggest a selling price for the product that will recover costs and provide a profit. Cost accountants also try to identify ways to control production costs to keep them as low as possible. Budget accountants plan budgets for their firms and agencies. They plan expenditures so that money is used efficiently. They work with cost accountants to keep expenditures low. They analyze the budget on a regular basis to ensure that the company is on track financially and make budget recommendations if the company is not.

Advancement Possibilities and Employment Outlook

Management accountants have many opportunities to advance because their work is essential to the operation of any business or agency. Management accountants can start in junior positions assisting experienced accountants. Then they can advance to more responsible jobs in cost accounting, tax accounting, or systems accounting. Some accountants become supervisors of large bookkeeping departments. Others become the chief auditors or chief budget accountants of a company. A few go on to become treasurers or controllers. According to the U.S. Bureau of Labor Statistics, employment of accountants was expected to increase faster than the average for all professions through the year 2014. As the economy and businesses continue to grow more complex, more accountants will be needed to keep track of company finances and tax regulations. In addition, the continued globalization of big businesses will create a demand for accountants who understand international accounting rules. After the accounting scandals at large corporations at the turn of the twenty-first century, there is increasing pressure on businesses and government agencies to improve their accounting procedures, which should also lead to more opportunities for accountants.

Advantage
Often this area is referred to as "Reporting" in the company structure, but it is so much more than that! Management accounts are concerned with: o The process of identification, measurement and accumulation of product and service costs o Preparation of statements relating to materials, labor and overhead o Standard costs o Budgeting for decision-making o The communication of information used by management to plan, evaluate and control the entity as well as assure accountability over it's resources and assure their proper use (the reporting function). In addition management accounting is often responsible for ancillary reporting to nonmanagement groups. This can take the form of shareholder reports, reports to creditors, regulatory agencies inquiries and taxing authorities. Work activities

Analysing information and using it to make business decisions Formulating business strategy to create wealth and shareholder value Determining what information is needed by management and explaining numbers to non-financial managers Advising managers about the financial implications of projects Explaining the financial consequences of business decisions applying accounting techniques to plan and budget Monitoring spending and financial control Identifying and managing risk Conducting internal business audits.

Typical employers Mainly commercial organisations and industry sectors, including:

Banking and finance Energy, utilities and mining Food and drink Leisure and hospitality Manufacturing.

Career development A management accounting qualification provides a foundation for a variety of roles. Opportunities for progression in all areas of an organisation are plentiful and varied, depending on individual interests, aspirations and abilities. There are two main paths to follow. Progressing to head of financial planning and analysis is a route that allows access to a more sophisticated reporting and analysis environment. The alternative is to ultimately progress to a financial controller role and become finance director. In this case, it is recommended to consider a role in financial accounting. The role of a management accountant is also transferable to financial services up to manager level. There are also opportunities for self-employment.

What Is Management Accounting And It's Advantages?

Management accountants seek to support management decision making by the provision of information and the analysis of financial performance. Whereas the financial accounts provide data for external use, management accountants provide data for internal decision making. The main functions of this management accounting are: To classify and calculate costs of production which is also known as cost accounting. To provide estimates of future expenses and revenues, this is a process known as budgeting. To provide data on which investment decisions can be based. To identify inefficiencies within the organization To control costs and manage the flow of cash. To seek opportunities, example to identify 'tax breaks', possible cost savings and movements in the foreign exchange rates this could be exploited by the firm. Management Accounting helps in Budgeting by classifying and calculating costs and estimating the costs and revenues for the future. Management Accounting plays a major role in the internal decision making for the organization. Management accountants also find ways to manage the organizations resources in a better way by doing cost savings. Management Accounting makes it possible for the management to understand the needs of the organization and those of the different departments. Using Management Accounting is very important because it helps in managing the internal operations of an organization. Just as financial accounting is vital for external investors and creditors, Management Accounting is important for the internal managers. So basically, this type of accounting helps identifying all the major aspects upon which a company's decisions are based. This helps immensely in managing the company and is especially useful for the managers for taking each step and deciding what needs to be done for every department. Not only will it calculate the costs but also find out how to save costs in future thus being very vital for any business.

Management Accounting and Financial Accounting Compared:

The field of accounting consists of three broad subfields: financial accounting, management accounting, and auditing. This classification is user-oriented. Financial accounting is concerned with communicating accounting information to external parties. Management accounting is concerned with generating accounting information for managers and other employees to assist them in performing their jobs. Auditing refers to examining the authenticity and usefulness of all types of accounting information. Other subfields of accounting include tax and accounting information systems. Because many students taking management accounting have just completed a course in financial accounting, it is useful to examine the ways in which management accounting differs from financial accounting: Financial Accounting Management Accounting Mandatory for most companies. Financial reporting is required by U.S. securities laws for public companies. Private companies with debt are often required by lenders to prepare audited financial statements in accordance with GAAP. Follows Generally Accepted Accounting Principles (GAAP) in the U.S., and other uniform standards in other countries. Mostly optional. However, it is inconceivable that a large company could operate without sophisticated management accounting systems. Also, legislation such as the Sarbanes-Oxley Act of 2002 sets minimum standards for public companies for their internal reporting systems. No general principles. Companies often develop management accounting systems and measurement rules that are unique and company-specific. Forward-looking: includes estimates and predictions of future events and transactions.

Backward-looking: focuses mostly on reporting past performance. Emphasis on reliability of the information Provides general purpose information. Investors, stock analysts, and regulators use the same information (one size fits all). Provides a high-level summary of the business Reports almost exclusively in dollardenominated amounts. A recent exception is the increasing (but still infrequent) use of the Triple Bottom Line.

Can include many subjective estimates.

Provides many reports tailored to specific users.

Can provide a great deal of detail. Communicates many nonfinancial measures of performance, particularly operational data such as units produced and sold by product type.

These differences are generalizations, and are not universally true. For example, GAAP allows some important choices, such as the FIFO or LIFO inventory flow assumption. Also, GAAP uses predictions of future events and transactions to value assets and liabilities under certain circumstances. Nevertheless, the differences between financial accounting and management accounting shown above reveal important attributes of financial accounting that are driven by the goal of providing reliable and understandable information to investors and regulators. These individuals are often far removed from the companies in which they are interested, so a regulatory and self-regulatory institutional structure exists to ensure the quality of the information provided to them. For example, financial accounting uses historical information, not because investors are interested in the past, but rather because it is easier for accountants and auditors to agree on what happened in the past than to agree on managements predictions about the future. The past can be audited. Investors then use this information about the past to make their own predictions about the companys future. As another example, financial accounting follows a set of rules (GAAP in the U.S.) that investors can study. Once investors obtain an understanding of GAAP, the fact that all U.S. companies comply with the same rules greatly facilitates investors ability to follow multiple companies. Also, the fact that financial reporting is mandatory for all public companies ensures that the information will be available. Management accounting, on the other hand, serves an entirely different audience, with different needs. Managers need detailed information about their part of the organization, so management accounting provides detailed information tailored for specific users. Also, managers must make decisions, sometimes on a daily basis, that affect the future of the business, and they need the best predictions of the future that are available as input in those decisions, no matter how subjective those estimates are.

The importance of managerial accounting in the workplace? BBA or FINANCE

Managerial accounting is concerned with the use of economic and financial information to plan and control many activities of an entity and to support the management decision course. Management accountants play important roles more specifically in planning & coordination with production, marketing and financial functions. A subset of the managerial accounting profession is cost accounting which relates to the determination and accumulation of products, processes, or service costs. Management and cost accountants are focused on the internal aspects of a business to keep it efficiently running and profitable. Managerial and cost accountants use a lot of the same data used by financial accountants. The difference lies in the fact that the data used for managerial accounting is more likely to be used for a future orientated purpose whereas the financial accounting process is showing what has already taken place. Examples of future orientated planning are budgets, benchmarking, and profit projecting. This also means that managerial accountants can take a more proactive approach when it comes to tackling business and economic troubles that can and due arise for many companies. Planning is a key part of the management process and although there are many descriptions of that process, a generally accepted definition would include reference to the process of planning, organizing and controlling businesses' activities so that the organization can

achieve its desired outcomes. Being able to anticipate what revenues will be and forecasting the expenses that will be incurred to achieve those revenues are critical activities in the budgeting process. That ability is crucial to many aspects of a company and allows employees' to make more educated business decisions. The internal orientation that management accountants have to their companies differs from the predominantly external orientation of financial accounting. Financial accounting is more externally important to such people as investors and shareholders. Management accountants work hand and hand with other internal departments such as merchandising, accounting, marketing, web and more. An example of this would be a managerial accountant working with a merchandiser to figure out how many units of a garment they can purchase in the next year and still have a good profit margin. The benefit of management accounting is that it is not constrained by generally accepted accounting principles, which means that approximate results can be generated quickly for decision-making activities. Which means while accuracy is valued in the data, relevance is more important for managerial accounting reporting. This is also helpful because it allows the managerial accountant to adapt to different economic climates, business strategies and departments changing needs. In order to become a managerial accounting professional a bachelor's degree with a major in accounting is usually a requirement. A management accountant should possess great analytic and people skills since they will be dealing with many different people and departments in a professional role. A management accountant may also become a Certified Management Accountant (CMA) by passing a respective board four-part test. The CMA examination is given in a computer-based format using objective questions only. In addition to the status that comes along with this professional designation, CMAs are often given greater professional responsibilities and higher compensation than those who do not have a CMA title. There are many helpful resources that are available to managerial accountants acquire valuable information that pertains to their professions. An example of a helpful resource is The Institute of Management Accountants (IMA) that is dedicated to advancing the role of the management accountant and financial manager within the business organization, and provides relevant professional certification. Becoming a member of the IMA would be helpful to anyone in a business role that involves making decisions based on financial information. The American Institute of Certified Public Accountants (AICPA) states that management accounting as practice extends to three areas: strategic management, performance management and risk management. Strategic Management is advancing the role of the management accountant as a strategic partner in the organization. Performance Management is developing the practice of business decision-making and managing the performance of the organization. Risk management is contributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the organization. The future possibilities for managerial accountants are endless. Since they are used so much in planning financial aspects of business they will always play a crucial role in a wide range of companies. The career path of a managerial accountant is a safe one because it is timeless and able to adapt to ever changing analytics and technologies that can aid in the planning process.

An Assignment
on Management of financial Institutions
Course Code: Fin- 4210
Prepared To:
Dr. M. Abu Misir

Chairman & Professor Department of Finance Jagannath University, Dhaka.

Prepared by:
Mohammad Fayez Uddin ID NO: 07882684
BBA-Fin, 2nd Batch 4th year, 2nd Semester Department of Finance Jagannath University, Dhaka.

Date of Submission: 31-05-2012

Jagannath University, Dhaka

An Assignment
on Management of financial Institutions
Course Code: Fin- 4210
Prepared To:
Dr. M. Abu Misir

Chairman & Professor Department of Finance Jagannath University, Dhaka.

Prepared by:
Rifat Islam
ID NO: 07882682
BBA-Fin, 2nd Batch 4th year, 2nd Semester Department of Finance Jagannath University, Dhaka.

Date of Submission: 31-05-2012

Jagannath University, Dhaka

An Assignment
on Management of financial Institutions
Course Code: Fin- 4210
Prepared To:
Dr. M. Abu Misir

Chairman & Professor Department of Finance Jagannath University, Dhaka.

Prepared by:
Nur-A-Afsana ID NO: 07882701
BBA-Fin, 2nd Batch 4th year, 2nd Semester Department of Finance Jagannath University, Dhaka.

Date of Submission: 31-05-2012

Jagannath University, Dhaka

An Assignment
on Management of financial Institutions
Course Code: Fin- 4210
Prepared To:
Dr. M. Abu Misir

Chairman & Professor Department of Finance Jagannath University, Dhaka.

Prepared by:
Sharmin Mannan ID NO: 07882722
BBA-Fin, 2nd Batch 4th year, 2nd Semester Department of Finance Jagannath University, Dhaka.

Date of Submission: 31-05-2012

Jagannath University, Dhaka