IGNOU : M.COM : MCO 5 : UNIT 1 : Q - 3. Explain the role of Management Accountant in a modern business organisation.

Ans. ROLE OF MANAGEMENT ACCOUNTANT

An Overview The term Management Accountant has been applied to any one who performs accounting work within a firm and it encompasses persons performing activities which range from :

i) Posting customers’ receivable accounts,

ii) Doing financial analysis for decision making, and

iii) Making high-level decisions in a large scale organisation.

There is no particular academic or professional accomplishments have been associated with the term. He plays a significant role in the decision making process of an organisation. The positional status of management accountant in an organisation varies from concern to concern depending upon the pattern of management system in the concern. He plays a significant role in the decision making process of the organisation heading the accounting department. In large organizations he is known as Financial Controller, Financial Advisor, Chief Accounts officer etc. He is responsible for installation, development and efficient functioning of the management accounting system. He plays an important role in collecting, compiling, reporting and interpreting internal accounting information. He prepares the financial and cost control reports to satisfy the requirements of different levels of management. He computes variances by comparing the actuals with the standards and interprets the results of operations to different levels of the organisation and to the owners of the business.

Thus, the management accountant occupies an important position in the organization. He performs a staff function and also has line authority over the accountants. If he participates in planning and execution of policies, he is equal to other functional managers. In most of the organisations, management accountant performs staff functions. He supplies information and gives his views about the data and leaves the final decision making to functional heads. If management accountant provides the facts accurately and are presented in a manner which allows proper analysis and interpretation then he cannot be held responsible for any wrong judgment by the management. On the other hand, if the information provided by the management accountant is biased, inaccurate and is not presented properly then he is responsible to the management for wrong decision making.

Functions of Management Accountant

The functions of the Management Accountant depends upon the position he occupies in the organisation and requirements of the organisation. The functions of the controller, by whatever name he is called, have been laid down by the controllers’ Institute of America which are as follows :

1) Planning and Control : Management accountant establishes, coordinates and maintains an integrated plan for the control of operations. Such a plan would provide, to the extent required in the business cost standards, profit planning, programmes for capital investing and for financing, sales forecast and the expense budgets, together with necessary procedures to effectuate the plan.

2) Reporting and Interpreting : Management accountant measures the performance against given plans and standards. The results of the operations are interpreted to all levels of management and to the owners of the business. This also includes installation of accounting and costing system and recording of actual performance to find out deviation, if any.

3) Evaluation of Policies and Programmes : He is responsible to evaluate various policies and programmes. The effectiveness of policies, programmes and structure to attain the objectives of the organisation to a large extent depends upon the caliber of the management accountant.

4) Tax administration : It is also the function of management accountant to report to the government as required under different laws in force and to establish and administer tax policies and procedures. He has also to supervise and coordinate preparation of reports to government agencies.

5) Protection of assets : The management accountant has to assure fiscal protection for the assets of the business through adequate internal control and proper insurance coverage.

6) Appraisal of External Effects : He has to assess continuously the effect of various economic and social forces and government policies and interpret their effect upon the business towards the attainment of common goals. The functions as stated above can also prove to be useful under the Indian context. Some of the above functions, in India are performed by Company Secretary, top level management, statistical department etc.