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Accountancy
Key=20 concepts
Accountant =C2=B7Accounting=20 period =C2=B7Accrual =C2=B7Bookkeeping =C2=B7Cash=20 and accrual basis =C2=B7Cash=20 flow forecasting =C2=B7Chart=20 of accounts =C2=B7Convergence =C2=B7Journal =C2=B7Special=20 journals =C2=B7Constant=20 item purchasing power accounting =C2=B7Cost=20 of goods sold =C2=B7Credit=20 terms =C2=B7Debits = and=20 credits =C2=B7Dou= ble-entry=20 system =C2=B7Mark-to-m= arket=20 accounting =C2=B7FIFO and=20 LIFO =C2=B7GAAP=20 / IFRS =C2=B7General=20 ledger =C2=B7Goodwill&= nbsp;=C2=B7Historical=20 cost =C2=B7Matching=20 principle =C2=B7Revenue=20 recognition =C2=B7Trial = balance
Fields=20 of accounting
Cost =C2=B7Financial= =C2=B7Forensic&nb= sp;=C2=B7Fund =C2=B7Management =C2=B7Tax=20 (U.S.)
Financial=20 statements
Balance=20 Sheet =C2=B7Cash = flow=20 statement =C2=B7Income=20 statement =C2=B7Stat= ement=20 of retained earnings =C2=B7Notes= =C2=B7= Management=20 discussion and analysis =C2=B7XBRL
Auditing
Auditor's=20 report =C2=B7Control=20 self-assessment =C2=B7Financial=20 audit =C2=B7GAAS=20 / ISA =C2=B7Internal=20 audit =C2=B7Sarbanes= =E2=80=93Oxley=20 Act
Accounting=20 qualifications
CIA&= nbsp;=C2=B7 CA =C2=B7CPA= =C2=B7 CCA<= /A> =C2=B7 CGA =C2=B7 CMA= =C2=B7CAT= =C2=B7CIIA =C2=B7IIA<= /A> =C2=B7 CTP=
v t e

Management accounting or managerial accounting is = concerned=20 with the provisions and use of accounting=20 information to managers within organizations, to provide them with the = basis to=20 make informed business decisions that will allow them to be better = equipped in=20 their management and control functions.

In contrast to financial=20 accountancy information, management accounting information is:

primarily forward-looking, instead of historical;
model based with a degree of abstraction to support decision = making=20 generically, instead of case based;
designed and intended for use by managers within the organization, = instead=20 of being intended for use by shareholders, creditors, and public=20 regulators;
usually confidential and used by management, instead of publicly=20 reported;
computed by reference to the needs of managers, often using manag= ement=20 information systems, instead of by reference to general financial=20 accounting standards.

[edit]=20 Definition

IFAC Definition of Enterprise = Financial=20 Management embracing three broad areas: Cost Accounting; Performance = Evaluation=20 & Analysis; Planning & Decision Support. Copyright July 2009=20 Professional Accountants in Business Committee. International Good = Practice=20 Guidance: Evaluating and Improving Costing in Organizations [1] p.7

According to the Chartered=20 Institute of Management Accountants (CIMA), Management Accounting is = "the=20 process of identification, measurement, accumulation, analysis, = preparation,=20 interpretation and communication of information used by management to = plan,=20 evaluate and control within an entity and to assure appropriate use of = and=20 accountability for its resources. Management accounting also comprises = the=20 preparation of financial reports for non-management groups such as = shareholders,=20 creditors, regulatory agencies and tax authorities"(CIMA Official=20 Terminology).

The Institute=20 of Management Accountants (IMA)[2] recently updated its definition as follows:=20 "management accounting is a profession that involves partnering in = management=20 decision making, devising planning and performance management = systems,and=20 providing expertise in financial reporting and control to assist = management in=20 the formulation and implementation of an organization=E2=80=99s = strategy".

The American Institute of Certified Public Accountants(AICPA) states = that=20 management accounting as practice extends to the following three = areas:

Strategic Management=E2=80=94Advancing the role of the management = accountant as a=20 strategic partner in the organization.
Performance Management=E2=80=94Developing the practice of business = decision-making=20 and managing the performance of the organization.
Risk Management=E2=80=94Contributing to frameworks and practices = for identifying,=20 measuring, managing and reporting risks to the achievement of the = objectives=20 of the organization.

The Institute of Certified Management Accountants(ICMA), states "A = management accountant applies his or her professional knowledge and = skill in the=20 preparation and presentation of financial and other decision oriented=20 information in such a way as to assist management in the formulation of = policies=20 and in the planning and control of the operation of the = undertaking".=20 Management Accountants therefore are seen as the "value-creators" = amongst the=20 accountants. They are much more interested in forward looking and taking = decisions that will affect the future of the organization, than in the=20 historical recording and compliance (score keeping) aspects of the = profession.=20 Management accounting knowledge and experience can therefore be obtained = from=20 varied fields and functions within an organization, such as information=20 management, treasury, efficiency auditing, marketing, valuation, = pricing,=20 logistics, etc.

The International Federation of Accountants (IFAC) depicts the roles = and=20 domain of professional accountants in business (management accountants) = in its=20 publication Competent and Versatile: How Professional Accountants in = Business=20 Drive Sustainable Organizational Success [3]

[edit]=20 Traditional=20 vs. innovative practices

Managerial Costing Timeline = presented at IMA's=20 Annual Conference - Managerial Costing Conceptual Framework Session Sep = 7, 2011=20 (Orlando, FL). Used with permission by the author A.van der Merwe = Copyright=20 2011 All Rights Reserved.

Within the area of Management Accounting there are almost an infinite = number=20 of tools, methods, techniques and approaches floating around.^[1]

The distinction between =E2=80=98traditional=E2=80=99 and = =E2=80=98innovative=E2=80=99=20 accounting practices is perhaps best illustrated with the visual = timeline=20 (see sidebar) of managerial costing approaches presented at the = Institute=20 of Management Accountants 2011 Annual Conference.

Traditional Standard Costing (TSC), used in Cost = Accounting dates=20 back to the 1920=E2=80=99s and is a central method in management = accounting practiced=20 today because it is used for financial statement reporting for the = valuation of=20 Income Statement and Balance Sheet line items such as Cost of Goods Sold = (COGS)=20 and Inventory valuation. Traditional Standard Costing must comply with = generally=20 accepted accounting principles (GAAP US) and actually aligns itself more = with=20 answering Financial Accounting requirements rather than providing = solutions for=20 management accountants. Traditional approaches limit themselves by = defining cost=20 behavior only in terms of production or sales volume.

In the late 1980s, accounting practitioners and educators were = heavily=20 criticized on the grounds that management accounting practices (and, = even more=20 so, the curriculum taught to accounting students) had changed little = over the=20 preceding 60 years, despite radical changes in the business environment. = In=20 1993, the Accounting Education Change Commission Statement Number 4^[2]=20 calls for faculty members to come down from their ivory towers and = expand their=20 knowledge about the actual practice of accounting in the workplace.^<=
SPAN>[3]=20 Professional accounting institutes, perhaps fearing that management = accountants=20 would increasingly be seen as superfluous in business organizations,=20 subsequently devoted considerable resources to the development of a more = innovative skills set for management accountants.

Variance=20 analysis, which is a systematic approach to the comparison of the = actual and=20 budgeted costs of the raw materials and labor used during a production = period.=20 While some form of variance analysis is still used by most manufacturing = firms,=20 it nowadays tends to be used in conjunction with innovative techniques = such as=20 life=20 cycle cost analysis and activity-based costing, which are = designed with specific aspects of the modern business environment in = mind.=20 Life-cycle costing recognizes that managers=E2=80=99 ability to = influence the=20 cost of manufacturing a product is at its greatest when the product is = still at=20 the design stage of its product life-cycle (i.e., before the design has = been=20 finalized and production commenced), since small changes to the product = design=20 may lead to significant savings in the cost of manufacturing the = products.

Activity-bas= ed=20 costing (ABC) recognizes that, in modern factories, most = manufacturing costs=20 are determined by the amount of =E2=80=98activities=E2=80=99 (e.g., the = number of production=20 runs per month, and the amount of production equipment idle time) and = that the=20 key to effective cost control is therefore optimizing the efficiency of = these=20 activities. Both lifecycle costing and activity-based costing recognize = that, in=20 the typical modern factory, the avoidance of disruptive events (such as = machine=20 breakdowns and quality control failures) is of far greater importance = than (for=20 example) reducing the costs of raw materials. Activity-based costing = also=20 deemphasizes direct labor as a cost driver and concentrates instead on=20 activities that drive costs, As the provision of a service or the = production of=20 a product component.

Other approaches that can be viewed as innovative to the U.S. is the = German=20 approach, Grenzplanko= stenrechnung=20 (GPK). Although it has been in practiced in Europe for more than 50 = years,=20 neither GPK nor the proper treatment of 'unused capacity=E2=80=99 is = widely practiced=20 here in the U.S. Thus GPK and the concept of unused capacity is slowing = become=20 more recognized in America, and "could easily be considered = 'advanced' by=20 U.S. standards".^[1]

One of the more innovative accounting practices available today is Res= ource=20 consumption accounting (RCA). RCA has been recognized by the International=20 Federation of Accountants (IFAC) as a =E2=80=9Csophisticated = approach at the=20 upper levels of the continuum of costing techniques=E2=80=9D^[4]=20 because it provides the ability to derive costs directly from = operational=20 resource data or to isolate and measure unused capacity costs. RCA was = derived=20 by taking the best costing characteristics of the German management = accounting=20 approach Grenzplankostenrechnung (GPK), and combining the use of = activity-based=20 drivers when needed, such as those used in Activity-based costing. With = the RCA=20 approach, resources and their costs are considered as = =E2=80=9Cfoundational to robust=20 cost modeling and managerial decision support, because an = organization=E2=80=99s costs=20 and revenues are all a function of the resources and the individual = capacities=20 that produce them=E2=80=9D.^[4]

[edit]=20 Role within = a=20 corporation

Consistent with other roles in today's corporation, management = accountants=20 have a dual reporting relationship. As a strategic partner and provider = of=20 decision based financial and operational information, management = accountants are=20 responsible for managing the business team and at the same time having = to report=20 relationships and responsibilities to the corporation's finance=20 organization.

The activities management accountants provide inclusive of = forecasting and=20 planning, performing variance analysis, reviewing and monitoring costs = inherent=20 in the business are ones that have dual accountability to both finance = and the=20 business team. Examples of tasks where accountability may be more = meaningful to=20 the business management team vs. the corporate finance department are = the=20 development of new product costing, operations=20 research, business driver metrics, sales management scorecarding, = and client=20 profitability analysis. See Financial=20 modeling. Conversely, the preparation of certain financial reports,=20 reconciliations of the financial data to source systems, risk and = regulatory=20 reporting will be more useful to the corporate finance team as they are = charged=20 with aggregating certain financial information from all segments of the=20 corporation.

In corporations that derive much of their profits from the = information=20 economy, such as banks, publishing houses, telecommunications companies = and=20 defence contractors, IT costs are a significant source of uncontrollable = spending, which in size is often the greatest corporate cost after total = compensation costs and property related costs. A function of management=20 accounting in such organizations is to work closely with the IT = department to=20 provide IT=20 Cost Transparency.^<=
SPAN>[5]

Given the above, one widely held view of the progression of the = accounting=20 and finance career path is that financial accounting is a stepping stone = to=20 management accounting. Consistent with the notion of value creation, = management=20 accountants help drive the success of the business while strict = financial=20 accounting is more of a compliance and historical endeavor.

[edit]=20 An alternative=20 view

A very rarely expressed alternative view of management accounting is = that it=20 is neither a neutral or benign influence in organizations, rather a = mechanism=20 for management control through surveillance. This view locates = management=20 accounting specifically in the context of management control theory. = Stated=20 differently, Management Accounting information is the mechanism which = can be=20 used by managers as a vehicle for the overview of the whole internal = structure=20 of the organization to facilitate their control functions within an=20 organization.

[edit]=20 Specific = concepts

[edit]=20 Cost = accounting

Cost accounting is a central element of managerial accounting.

[edit]=20 Grenzplankostenrechnung (GPK)

Main article: Grenz= plankostenrechnung=20 (GPK)

Grenzplankostenrechnung is a German costing methodology, developed in = the=20 late 1940s and 1950s, designed to provide a consistent and accurate = application=20 of how managerial costs are calculated and assigned to a product or = service. The=20 term Grenzplankostenrechnung, often referred to as GPK, has best been = translated=20 as either Marginal Planned Cost Accounting^<=
SPAN>[6]=20 or Flexible Analytic Cost Planning and Accounting.^<=
SPAN>[7]

The origins of GPK are credited to Hans Georg Plaut, an automotive = engineer=20 and Wolfgang Kilger, an academic, working towards the mutual goal of = identifying=20 and delivering a sustained methodology designed to correct and enhance = cost=20 accounting information. GPK is published in cost accounting textbooks, = notably=20 Flexible Plankostenrechnung und Deckungsbeitragsrechnung^<=
SPAN>[8]=20 and taught at German-speaking universities today.

[edit]=20 Lean=20 accounting (accounting for lean enterprise)

Main article: Lean = accounting

In the mid- to late-1990s several books were written about accounting = in the=20 lean enterprise (companies implementing elements of the Toyota = Production=20 System). The term lean accounting was coined during that period. = These books=20 contest that traditional accounting methods are better suited for mass=20 production and do not support or measure good business practices in = just-in-time=20 manufacturing and services. The movement reached a tipping point during = the 2005=20 Lean Accounting Summit in Dearborn, MI. 320 individuals attended and = discussed=20 the merits of a new approach to accounting in the lean enterprise. 520=20 individuals attended the 2nd annual conference in 2006.

[edit]=20 Resource consumption accounting (RCA)

Main article: Res= ource=20 Consumption Accounting

Resource Consumption Accounting (RCA) is formally defined as a = dynamic, fully=20 integrated, principle-based, and comprehensive management accounting = approach=20 that provides managers with decision support information for enterprise=20 optimization. RCA emerged as a management accounting approach around = 2000 and=20 was subsequently developed at CAM-I the Consortium for Advanced=20 Manufacturing=E2=80=93International, in a Cost Management Section RCA interest group = in December=20 2001.

[edit]=20 Throughput=20 accounting

Main article: Throughput=20 accounting

The most significant recent direction in managerial accounting is = throughput=20 accounting; which recognizes the interdependencies of modern production=20 processes. For any given product, customer or supplier, it is a tool to = measure=20 the contribution per unit of constrained resource.

[edit]=20 Transfer = pricing

Main article: Transfer = pricing

Management accounting is an applied discipline used in various = industries.=20 The specific functions and principles followed can vary based on the = industry.=20 Management accounting principles in banking are specialized but do have = some=20 common fundamental concepts used whether the industry is manufacturing = based or=20 service oriented. For example, transfer pricing is a concept used in=20 manufacturing but is also applied in banking. It is a fundamental = principle used=20 in assigning value and revenue attribution to the various business = units.=20 Essentially, transfer pricing in banking is the method of assigning the = interest=20 rate risk of the bank to the various funding sources and uses of the = enterprise.=20 Thus, the bank's corporate treasury department will assign funding = charges to=20 the business units for their use of the bank's resources when they make = loans to=20 clients. The treasury department will also assign funding credit to = business=20 units who bring in deposits (resources) to the bank. Although the funds = transfer=20 pricing process is primarily applicable to the loans and deposits of the = various=20 banking units, this proactive is applied to all assets and liabilities = of the=20 business segment. Once transfer pricing is applied and any other = management=20 accounting entries or adjustments are posted to the ledger (which are = usually=20 memo accounts and are not included in the legal entity results), the = business=20 units are able to produce segment financial results which are used by = both=20 internal and external users to evaluate performance.

[edit]=20 Resources and=20 continuous learning

There are a variety of ways to keep current and continue to build = one's=20 knowledge base in the field of management accounting. Certified = Management=20 Accountants (CMAs) are required to achieve continuing education hours = every=20 year, similar to a Certified Public Accountant. A company may also have = research=20 and training materials available for use in a corporate owned library. = This is=20 more common in "Fortune=20 500" companies who have the resources to fund this type of training=20 medium.

There are also numerous journals, on-line articles and blogs = available. The=20 journal Cost Management (ISSN 1092-8057)^<=
SPAN>[9]=20 and the Institute of Management Accounting (IMA) site are = sources=20 which includes Man= agement=20 Accounting Quarterly and Strategic Finance publications. = Indeed,=20 management accounting is needed in an organization.

[edit]=20 Management accounting tasks/ services = provided

Listed below are the primary tasks/ services performed by management=20 accountants. The degree of complexity relative to these activities are = dependent=20 on the experience level and abilities of any one individual.

[edit]=20 Related=20 qualifications

There are several related professional qualifications and = certifications in=20 the field of accountancy including:

Management Accountancy Qualifications
- CIMA
- ICMA
- CMA=
Other Professional Accountancy Qualifications

[edit]=20 See also

[edit]=20 References

^ ^a=20 ^b=20 Clinton, B.D.; Van=20 der Merwe, Anton (2006). "Management Accounting - Approaches, = Techniques, and=20 Management Processess". Cost Management (New York: Thomas = Reuters RIA=20 Group) (May/Jun).
^=20 Accounting = Education=20 Change Commission (1993). "Positions and Issues". Issues Statement = Number 4:=20 Improving the Early Employment Experience of Accountants. = Sarasota, FL:=20 American Accounting Association. http://www.aaahq.org/AECC/PositionsandIssues/issues4.htm= . Retrieved 2 November = 2011.
^<= /A>=20 Clinton, B.D.;=20 Matuszewski, L.; Tidrick, D. (2011). "Escaping Professional = Dominance?".=20 Cost Management (New York: Thomas Reuters RIA Group)=20 (Sep/Oct).

^ ^a=20 ^b=20 Professional Accountants in Business Committee = International=20 Good Practice Guidance: Evaluating and Improving Costing in=20 Organizations. New York: International Federation of = Accountants. July=20 2009. p. 24. http://www.ifac.org/publications-resources/evaluating-an= d-improving-costing-organizations-0=20 Professional Accountants in Business Committee.=20 Retrieved 10 November 2011.
^<= /A>=20 * "Taking Control of IT Costs". Nokes, = Sebastian.=20 London (Financial Times / Prentice Hall): March 20, 2000. I= SBN=20 978-0-273-64943-4
^<= /A>=20 Friedl, Gunther;=20 Hans-Ulrich Kupper and Burkhard Pedell (2005). "Relevance Added: = Combining ABC=20 with German Cost Accounting". Strategic Finance (June):=20 56=E2=80=9361.

^<= /A>=20 Sharman, Paul A.=20 (2003). "Bring On German Cost Accounting". Strategic Finance=20 (December): 2=E2=80=939.

^<= /A>=20 Kilger, = Wolfgang=20 (2002). Flexible Plankostenrechnung und = Deckungsbeitragsrechnung.=20 Updated by Kurt Vikas and Jochen Pampel (12th ed.). Wiesbaden,Germany: = Gabler=20 GmbH.

^<= /A>=20 "Cost=20 Management". Thomson Reuters. 2011. http://ria.thomsonreuters.com/estore/printdetail.aspx?ID= =3DZMCMP. Retrieved November 12, = 2011.

[edit]=20 External = links

CAM-I=20 Consortium for Advanced Manufacturing=E2=80=93International
AICPA Financial Management Center =E2=80=93 = Resource for CPAs=20 working in business, industry and government.
Institute of Management Accountants =E2=80=93 = Resource for=20 Management accountants (CMA's) working in industry.
Chartered Institute of Management Accountants = =E2=80=93 Chartered=20 Institute of Management Accountants
[4] =E2=80=93 International Federation of = Accountants

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Categories: =

Types = of accounting
Mana= gement=20 accounting
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Hidden categories:=20

Management=20 accounting

Contents

[edit]=20 Definition

[edit]=20 Traditional=20 vs. innovative practices

[edit]=20 Role within = a=20 corporation

[edit]=20 An alternative=20 view

[edit]=20 Specific = concepts

[edit]=20 Cost = accounting

[edit]=20 Grenzplankostenrechnung (GPK)

[edit]=20 Lean=20 accounting (accounting for lean enterprise)

[edit]=20 Resource consumption accounting (RCA)

[edit]=20 Throughput=20 accounting

[edit]=20 Transfer = pricing

[edit]=20 Resources and=20 continuous learning

[edit]=20 Management accounting tasks/ services = provided

[edit]=20 Related=20 qualifications

[edit]=20 Methods

[edit]=20 See also

[edit]=20 References

[edit]=20 External = links

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