Page 11 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes 10. The major objective of ……………… is to make decisions through supplement presentation
of accounting information.
11. The key objective of ……………… is to supply information about the enterprise through
P&L A/c and balance sheet to outside parties-Mainly for external use.

1.3 Role of Management Accountants

A management accountant is a very important key person in the organization. His main job in the
organization is planning and control.
Planning is of two types. One is a short-term plan known as a budget. A budget is a quantitative
expression of management’s short-term intentions. Budget serves also as a tool for co-ordinating
the various activities and to the extent the actuals compared to budget works as a tool of
control.
The other type of planning is called long-term plan or corporate plan or strategic plan. This type

of plan is usually prepared for three to five years. Long-term plans indicate the management’s
intent where the organization should reach in that time span. By a series of budgets, long-term
plans are reached.

It is the responsibility of the management accountant to prepare both the type of plans and watch
their actual performance. For this purpose, he has to re-classify the accounting data and assemble
them to suit the user department’s need. He also has to scan the environment for external
information. He has to be particularly careful of the performance of his competitors and try and
obtain information about their long-term strategy.

The management accountant should arrange for various reviews of the budget and corporate
plan in order to take action on deviations. If the deviation or variances are seasonal he may not
take steps to correct the plans; otherwise he should modify the plan in consultation with the top
management.
The management accountant will undertake a number of special studies for capital expenditure;
make or buy decisions, lease or buy decisions.
It will be the responsibility of the management accountant to establish a good system for the use
of management, devise all paper work and prescribe the periodicity of reports and manner of
submission.
We have already seen the management accountant’s role as a purely staff function, in relation
to other departments. In view of the great use of management accounting, the controller now
attends all important policy meetings and participates. As one foreign publication has stated, “the
management accountant participates as the part of management in assuring that the organization

operates as a unified whole in its long-run, intermediate and short-run best interests.”
We may sum up saying, ‘the management accountant’s role is that of purveyor, processor and
presenter of information and also a planner for the achievement of corporate goals both short
and long-run.’

Self Assessment

State whether the following statements are true or false:
12. A budget is a qualitative expression of management’s short-term intentions.
13. Long-term plans indicate the management’s intent where the organization should reach in
that time span.
14. Short-term plans are also called strategic plans.

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