What is Management Accounting
In simplest terms, it is an accounting process that involves management reports and accounts with the end of providing accurate and timely statistical and financial information. The information that you will submit will be used in the day-to-day operation of the business including being referenced in short-term decisions made by managers.
In contrast to financial accounting that is geared more towards the delivery of information to external stakeholders, the management accountant will generate weekly or monthly reports that are intended for use by internal audiences. This means the information will be suited for high level managers including the chief executive officer.
The role of the management accountant is critical in starting and maintaining a solid and professional accounting practice that will contribute to the growth of the business. Management accounting is also commonly referred to as cost accounting or managerial accounting.
Management Accounting Course
The management accounting course will include among others the concepts of cost accounting with special focus on relevant planning, controlling, and decision-making activities that will help organizations. There is also substantial time devoted tackling accounting systems that are valuable to managers in particular to resource allocation as well as performance evaluation. These are helpful in manufacturing environments and similar industries.
The financial and management accounting course will include the following subject areas:
- Introduction to the nature and purpose of accounting;
- Financial accounting reports used in decision-making;
- Double-entry recording processes for the preparation of financial reports;
- Statement of cash flows;
- Interpretation and analysis of budgets and financial statements;
- Audit and external review;
- Introduction to management accounting;
- Cost accounting and cost allocation systems;
- Understanding the concepts and relationships of cost-volume-profit;
- Relevant cost for decision-making;
- Measurement of performance; and
- Strategic and business planning.
The Accounting Report
What does the management accounting report contain? Normally, the information that can be seen in a management accounting report is first of all confidential and considered for internal use only. The report is not calculated based on generally accepted accounting principles, but rather on the bases of the informational needs of the management of the organisation.
The management accounting report would normally show how much cash is available, the generated sales revenue, amount of orders in hand, state of accounts receivable and accounts payable, raw material and inventory, and outstanding debts. The report can also include variance analysis, trend charts, and other pertinent statistics to the operation of the organization.
Management Accounting vs Financial Accounting
In case it isn’t clear to you, there’s a difference between financial accounting and management accounting. In management accounting, it is a combination of accounting, management and finance with the techniques and business skills needed to increase the value of an organisation. The management accountants should be qualified to work across businesses and not just in the area of finance. This means extending to providing advice to managers based on the financial implications for big decisions, crafting of business strategies, and monitoring of business risks.
In financial accounting, the preparation of reports will be based generally on the past performance of the organisation. The reporting requirements will be in line with the production of financial information to be used with other functions of the business but may have nothing to do with revenue, cash flow, and outstanding debts. Financial accounting does not require combining financial information with non-financial information, which means it does not show a complete picture of the standing of the business.
Like in many countries, there are many opportunities that await management accountants. In fact there is an upswing in the demand for these types of accountants particularly in the need for financial accountants, business analysts, and even senior managers.
The organisational roles will vary distinctly depending on the employer, as well as whether the accountant is a newly qualified one or an experienced professional. Normally, the strong demand is for those who have substantial experience working in bigger and similar organizations.
Aside from having the proper work experience, it is equally important that the management accountant be able to show adept commercial awareness. This is because there is a continued focus on improving business operations as well as cost-benefit analysis.
Professional management accountants should wisely consider all the possibilities before deciding to take on the role. For example, if you need to move from another locality, you need to take a look at the impact on the cost of living.
Will you be able to bring your family with you? If not, consider the expense of traveling back and forth to be with your family, relatives, and friends. If you have children, you also need to take a close look how taking on the role of management accountant in another locality will impact the education of your child. These are factors that will affect your performance and personal life.
Management Accountant Salary
The salaries of management accountants are considerably high, but not necessarily comparable to those in other regions. Newly qualified accountants will be able to expect a minimum of AU$60,000 aside from benefit packages. Those with substantial experience with bigger accounting firms can command around AU$70,000 to AU$80,000.
The average salary though is about AU$70,588 a year with those at entry level receiving around AU$69,539 a year in salary. Management accountants with over 20 years of experience normally move on to other fields of endeavor.
Taking Up Management Accounting
There is no doubt that going for a university education will cost a substantial amount of money. However, can you really put a price tag on the value of education as an investment tool for your future? Eventually, the investment in money and time in studying management accounting will pay off in many fronts. It is worthwhile to mention that the Australian government will fund around 60% of the Commonwealth Supported Place while the student will shoulder the cost of the remaining amount as part of the student contribution. Let’s see if you are ready to take on this challenging profession.