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Certified management accountant Career Paths, Management Accountancy

Part 1: Management Accountancy

1.1 Introduction

The field of accounting is rapidly evolving due to the affordability and availability of accounting software. Gone are the days of green visors and adding machines; computers have taken the fiscal calculating out of the hands of people. With programs busy crunching the numbers, accountants are now expected to take on a variety of responsibilities that previously lay outside the scope of their job description. This change was highlighted in a recent Forbes article describing how the modern conception of an accountant has become one of a trusted business advisor who interprets finances to guide “financial planning, analysis, forecasting, internal controls and decision support.”

1.2 Definition of Accounting

Accounting or accountancy is the measurement, processing, and communication of financial information about economic entities[1][2]such as businesses and corporations. The modern field was established by the Italian mathematician Luca Pacioli in 1494.[3]Accounting, which has been called the "language of business",[4] measures the results of an organization's economic activities and conveys this information to a variety of users, including investors, creditors, management, and regulators.. The terms "accounting" and "financial reporting" are often used as synonyms.

1.3 Branches of Accounting

Different branches of accounting came into existence keeping in view various types of accounting information needed by a different class of people viz. owners, shareholders, management, suppliers, creditors, taxation authorities and various government agencies, etc. There are three main branches of accounting which include financial accounting, cost accounting and management accounting.

Accounting Cost Accounting Management Accounting Financial Accounting

Figure: Branches of Accounting

ΠFinancial Accounting

Financial Accounting is based on a systematic method of recording transactions of any business according to the accounting principles. It is the original form of the accounting process. The main purpose of financial accounting is to calculate the profit or loss of a business during a period and to provide an accurate picture of the financial position of the business as on a particular date. The Trial Balances, Profit & Loss Accounts and Balance Sheets of a company are based on an application of financial accounting. These are used by creditors, banks and financial institutions to assess the financial status of the company. Further, taxation authorities are able to calculate the tax based on these records only.

v Cost Accounting

Cost accounting deals with evaluating the cost of a product or service offered. It calculates the cost by considering all factors that contribute to the production of the output, both manufacturing and administrative factors. The objective of cost accounting is to help the management in fixing the prices and controlling the cost of production. It also pin points any wastages, leakages and defects during manufacturing and marketing processes.

w Management Accounting

Management accounting refers to a function of tracking internal cost for any business process that helps an organization, firm or an individual in making decisions related to production, operation and investment in market. The role of management accountant include collecting, recording and reporting financial data from several units of an organization, observe and analyze their budget and suggest their funding and allocation.

This branch of accounting provides information to management for better administration of the business. It helps in making important decisions and controlling of various activities of the business. The management is able to take decisions efficiently with the help of various Management Information Systems such as Budgets, Projected Cash Flow and Fund Flow Statements, Variance Analysis reports, Cost-Volume-Profit Analysis reports, Break-Even-Point calculation, etc.

Management accounting and financial accounting are not to be confused with each other. Both are different. Management accounting serves the needs of the management in decision makings regarding minimization of the cost factor and enhancing of profit making. Financial accounting serves the needs of shareholders, creditors and financial institutions for ascertaining the financial position of the company. Management accounting records are kept secret for the use of management only. They are not made public.

Besides the above mentioned three branches of accounting, there are many other branches which are in practice and very useful for various purposes as mentioned below:

¦ Auditing is a branch of accounting where an external certified public accountant known as Auditor inspects and certifies the accounts of a business for their accuracy and consistency. Sometimes internal auditing is also practiced where an employee of the same company audits the accounts on the regular basis and aids the management in keeping accurate records for audit purpose.

¦ Tax Accounting deals with taxation matters. Its functions include preparation and filing of various tax returns and dealing with their legal implications. Tax accountants aid in minimizing tax payments and also help financial accountants in preparing financials for tax reporting to various authorities. Tax accounting involves consultancy regarding the effect of taxes on different aspects of business, minimizing tax through legal ways and also verifying consequences of tax payable on business.

¦ Fund Accounting deals with keeping records for funds of non-profit business entities. Separate fund accounts are maintained for separate works like welfare schemes of different nature to ensure proper utilization of funds.

¦ Government Accounting is done for Central Government (National Government) and State Government budget allocations and utilizations. Keeping records ensures proper and efficient utilization of the various budget allocations and safety of public funds.

¦ Forensic Accounting also known as legal accounting enables calculating damages or settling disputes in legal matters. Investigations are done and calculations are carried out to evaluate the damages accurately.

¦ Fiduciary Accounting is the accounting and evaluation of a third party’s business and property maintained under the guardianship of another person.

1.4 Managerial Accounting

Managerial accounting is the process of identifying, analyzing, recording and presenting financial information so internal management can use it for the planning, decision making and control of a company.

While financial accounting is used for reporting to the external investors, shareholders and stakeholders, managerial accounting is information provided to the company's internal managers and the business's owners so they can plan and control the business's activities.

1.5 Functions of Managerial Accounting

Figure: Functions of Management Accounting

The management process implies the four basic functions of:

u Planning.

v Organizing

w Controlling, and


Management accounting plays a vital role in these managerial functions performed by managers.

¨ Planning

Planning is formulating short term and long-term plans and actions to achieve a particular end. A budget is the financial planning showing how resources are to be acquired and used over a specified time interval.

¨ Organizing

Organizing is a process of establishing an organizational framework and assigning responsibility to people working in an organization for achieving business goals and objectives. The type of organizational structure differs from one business enterprise to another. In the organizing process, departmentalization can be done by setting up divisions, departments, sections, branches.

¨ Controlling

Control is the process of monitoring, measuring, evaluating and correcting actual results to ensure that a business enterprise’s goals and plans are achieved. Control is accom­plished with the use of feedback. Feedback is information that can be used to evaluate or correct the steps being taken to implement a plan. Feedback allows the managers to decide to let the operations and activity continue as they are, take remedial actions to put some actions back in harmony with the original plan and goals or do some rearranging and re-planning at midstream.

¨ Decision Making

Decision-making is a process of choosing among competing alterna­tives. Decision-making is inherent in each of three management functions described above, namely, planning, organising and controlling. A manager cannot plan without making decisions and has to choose among competing objectives and methods to carry out the chosen objectives. Similarly in organising, managers need to decide on an organization structure and on specific actions to be taken on day-to-day operations. In control function managers have to decide whether variances are worth investigating.

The decision-making process includes the following steps:

¹ Identifying a problem requiring managerial action.

¹ Specifying the objective or goal to be achieved (e.g. maximizing return on investment).

¹ Listing the possible alternative courses of action.

¹ Gathering the information about the consequences of each alternative.

¹ Making a decision, by selecting one of the alternatives.

Management accounting plays a critical role in step 4 of the decision-making process. Manage­ment accounting system contains a storehouse of valuable information for predicting the results of various courses of action. The management accounting can assist management in formally structuring decision problems as well as placing the alternatives and their consequences in a form that will be easier for management to evaluate. While developing and gathering information for decision making purposes, the management accountant should include qualitative information also in his report to help managers better in their decision-making tasks.

Management Accountants perform three important roles—

ΠProblem solving;

 Scorekeeping;

Ž Attention directing.

8 Problem Solving

Comparative analysis for decision making. This role asks, of the several alternatives available, which is the best?

8 Scorekeeping

Accumulating data and reporting reliable results to all levels of management. This role asks how I am doing.

8 Attention Directing

Helping managers properly focus their attention. This role asks which opportunities and problems should I look into.

1.6 Managerial Accounting Techniques

The following points highlight the top eighteen techniques management accounting. The techniques are:

©Quantitative Management Accounting Techniques

œ Cash flow Statement Analysis

œ Ratio Analysis

œ Budgetary Control

œ CVP Analysis

œ Variance Analysis

œ Fund Flow Analysis

œ Standard costing

œ Variable Costing

œ Target Costing

œ Absorption Costing

œ Inter-firm Comparison


œ Differential costing


œ Opportunity Costing

œ Responsibility Accounting

œ Segment Reporting

© Qualitative Management Accounting Techniques




œ Process Reengineering

œ Kaizen Costing

© Both Qualitative & Quantitative Management Accounting Techniques

œ Balance Scorecard

ª Cash Flow Statement Analysis: Cash Flow Analysis is the evaluation of a company’s cash inflows and outflows from operations, financing activities, and investing activities. In other words, this is an examination of how the company is generating its money, where it is coming from, and what it means about the value of the overall company.

ª Ratio Analysis: Ratio is an expression of relationship between two or more items in mathematical terms. Exhibition of meaningful and useful relation between different accounting data is called Accounting Ratio. Ratio may be expressed as a:b (a is to b), in terms of simple fraction, integer, or percentage.

ª Budgetary Control: Budgetary control refers to how well managers utilize budgets to monitor and control costs and operations in a given accounting period. In other words, budgetary control is a process for managers to set financial and performance goals with budgets, compare the actual results, and adjust performance, as it is needed.

ª CVP Analysis: CVP analysis is one of the managerial techniques to show the relationship among cost volume and profit.

ª Variance Analysis: Variance Analysis, in managerial accounting, refers to the investigation of deviations in financial performance from the standards defined in organizational budgets.

ª Fund Flow Analysis:Funds flow statement is a statement which discloses the analytical information about the different sources of a fund and the application of the same in an accounting cycle. It deals with the transactions which change either the amount of current assets and current liabilities (in the form of decrease or increase in working capital) or fixed assets, long-term loans including ownership fund.

ª Standard Costing: Standard costing is an accounting technique that some manufacturers use to identify the differences or variancesbetween 1) the actual costs of the goods that were produced, and 2) the costs that should have occurred for those goods. The costs that should have occurred for the actual good output are known as standard costs.

ª Variable Costing: Variable costing is a managerial accounting cost concept. Under this method, manufacturing overhead is incurred in the period that a product is produced. This addresses the issue of absorption costing that allows income to rise as production rises.

ª Target Costing: Target costing is an approach to determine a product’s life-cycle cost which should be sufficient to develop specified functionality and quality, while ensuring its desired profit. It involves setting a target cost by subtracting a desired profit margin from a competitive market price.

ª Absorption Costing:Absorption costing is a managerial accounting cost method of expensing all costs associated with manufacturing a particular product and is required for generally accepted accounting principles (GAAP) external reporting.

ª Inter-Firm Comparison:Inter-firm comparison is the technique which studies the performances, efficiencies, costs and profits of various concerns in an industry with the help of exchange of information in order to have a relative comparison.

ª ABC: Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each.

ª Differential Costing:Differential costs are the increase or decrease in total costs that result from producing additional or fewer units or from the adoption of an alternative course of action.

ª JIT: Just-in-time (JIT) is an inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs. This method requires producers to forecast demand accurately.

ª Opportunity Costing:It is the value of benefit sacrificed in favor of an alternative course of action.

ª Responsibility Accounting:The term responsibility accounting refers to an accounting system that collects, summarizes, and reports accounting data relating to the responsibilities of individual managers. A responsibility accounting system provides information to evaluate each manager on the revenue and expense items over which that manager has primary control (authority to influence).

ª Segment Reporting: Segment reporting is the reporting of the operating segments of a company in the disclosures accompanying its financial statements. Segment reporting is required for publicly-held entities, and is not required for privately held ones. Segment reporting is intended to give information to investors and creditors regarding the financial results and position of the most important operating units of a company, which they can use as the basis for decisions related to the company.

ª TQM: Total quality management is a managerial accounting concept where an organization strives to produce higher quality products with few defects being shipped to customers. Total quality management is a lean business practice often associated with continuous improvement and just-in-time inventory and just-in-time manufacturing.

ª TOC: The theory of constraints (TOC) is a management paradigm that views any manageable system as being limited in achieving more of its goals by a very small number of constraints. There is always at least one constraint, and TOC uses a focusing process to identify the constraint and restructure the rest of the organization around it.

ª MBE: Management by exception is the practice of examining the financial and operational results of a business, and only bringing issues to the attention of management if results represent substantial differences from the budgeted or expected amount. For example, the company controller may be required to notify management of those expenses that are the greater of $10,000 or 20% higher than expected.

ª Process Engineering:Engineering management combines the application of the practice of management to the practice of engineering. Engineering management is a career that brings together the technological problem-solving savvy of engineering and the organizational, administrative, and planning abilities of management in order to oversee the operational performance of complex engineering driven enterprises.

ª Kaizen Costing: Kaizen Costing, also referred as continuous improvement costing, is a mechanism for reducing and managing costs. Kaizen is the Japanese term for making continuous improvements in relatively small activities rather than major innovative improvement. The major difference between target and Kaizen costing is that target costing is applied during the design stage where as Kaizen costing is applied during the manufacturing stage of a product’s life.

ª Balanced Scorecard: The balanced scorecard is a management system aimed at translating an organization's strategic goals into a set of performance objectives that, in turn, are measured, monitored and changed if necessary to ensure that the organization's strategic goals are met.

An overview of Management Accounting

The field of Management Accounting, often referred to as Managerial Accounting or Corporate Accounting, includes the financial and accounting tasks required to operate a business. Managerial accountants work within companies and organizations to direct internal financial processes; monitor costs, sales, spending and budgets; conduct audits; identify past trends and predict future needs; and assist company leaders with financial decision.

Management accountants are often confused with financial accountants; while both provide valuable services to an organization, there are key differences between the two roles. Managerial accounting primarily involves completing tasks and producing reports that inform company leadership about financial decisions related to general company operations. Financial accounting’s central focus is informing external groups – such as banks, boards of directors, stockholders and tax agencies – about the company’s financial status.

Someone entering the managerial accounting field should be skilled in risk management, budget planning, strategic planning and financial data analysis. These accountants also have a detailed knowledge of generally accepted accounting principles (GAAP), strong communication skills and a forward thinking approach to their work.

Career Options for BBA Graduates

Both government as well as private sectors offers exciting career opportunities to BBA graduates. Due to availability of more job opportunities after pursuing BBA program, students prefer pursuing professional courses such as BBA over regular graduation programs after completing HSC. If you are a BBA graduate, you can seek employment from different companies that offer business management and sales positions. You can also work as a project planner, a production supervisor, and a business administrator. Usually, BBA graduates apply in companies that engage in the business of manufacturing, construction, retail, and finance.

Nature of jobs

The candidates that are successfully placed in these companies are placed in the financial accounting, marketing analysis, financial analysis as well as auditing aspects of the companies. The managerial aspects of these candidates are utilized to provide an excellent base to the fundamental needs of these companies. Thus there are many aspects within which a candidate after passing BBA can be placed. Thus in the end, the utilized aspects of these candidate are the very base of the success of these companies.

Careers in Management Accountancy

Management accountants find employment opportunities in a variety of work settings and industries. Professionals in this field are in demand in public and private companies, nonprofit organizations and government offices. Each company designates specific job titles and responsibilities based on their business model and needs.

The primary duties of a management accountant vary according to an organization’s size, compliance and reporting requirements, and total revenue. Review the following career profiles for expectations of management accounting positions representing entry-, mid- and senior-level employment.

³ Budget Analyst

Budget analyst positions are found at a wide range of companies and organizations, as well as at all levels of government. They often report to accounting or finance managers. Job titles with similar responsibilities include cost estimators, budget accountants and management analyst.

› Education Requirements

A bachelor’s or master’s degree in accounting, finance, economics, statistics or a related field is expected. Three or more years of relevant experience is typical of accountants entering a financial analyst position.

³ Financial Analyst

Financial analysts work in a wide range of industries from international businesses and insurance companies to credit institutions and nonprofit organizations. They often report to a senior accountant or financial manager. Risk analysts, staff accountants and portfolio managers have similar roles and responsibilities.

› Education Requirements

CMA: The Certified Management Accountant credential, offered through the Institute of Management Accountants, includes work experience, an exam and continuing education.

CFA: The Chartered Financial Analyst credential is another option for accountants who will be working primarily on tasks related to investment analysis and portfolio management.

³ Accounting Manager

Accounting managers work in a range of settings, from retail and healthcare to education and nonprofits. This role usually reports to a senior-level position, such as a finance director or a corporate controller. Job titles with responsibilities similar to those of an accounting manager include: accounting supervisor, accounting manager and senior accountant.

› Education Requirements

CPA: The Certified Public Accountant license, granted through State Boards of Accountancy, may be preferred or required for some management-level positions. The process includes required education and prior experience as determined by each state, and an exam.

CMA: The Certified Management Accountant credential is earned through a combination of work experience, an exam and continuing education. This certification is offered by the Institute of Management Accountants.

³ Controller

Controller positions are found in business settings, nonprofit organizations and government agencies. The range of responsibilities varies based on the size of the company and its accounting office. The duties and expectations are similar to those found in other positions, such as finance manager, director of accounting, corporate controller and comptroller.

› Education Requirements

CPA: The Certified Public Accountant license is expected at this level. The process includes an examination, as well as documentation of required education and prior experience as determined by each state.

CMA: The Certified Management Accountant credential is earned through the Institute of Management Accountants. The process includes work experience, an exam and continuing education.

³ Chief Financial Officer

CFOs are top-level executives found in small and large companies, with varying responsibilities based on the size of the staff and budget, as well as the nature of the organization’s programs, products and services. Similar roles and job titles include treasurer, director of finance and vice president of finance.

› Education Requirements

CPA: The Certified Public Accountant license is expected at this level. The process includes an examination, as well as documentation of required education and prior experience as determined by each state.

CMA: The Certified Management Accountant credential is earned through the Institute of Management Accountants. The process includes work experience, an exam and continuing education.

³ Internal Auditor

Internal auditors ensure that various procedures, such as controls over cash and other assets, are working as they should. Internal auditors are often called on to investigate budget variances and are typically the first to look for — and identify — poor work quality, waste materials, fraud, theft, and deliberate acts of industrial sabotage.

Unlike external auditors, the internal auditors work for the very company that they audit. Therefore, they typically report to executives at a very high level in the organization (such as the treasurer).

³ Fixed Assets Accountant

A fixed-assets accountant is responsible for keeping records related to a company’s property, plant, and equipment. These folks inspect the property, the plant, and the equipment to verify the accuracy of the books. Furthermore, they oversee the computation of depreciation, as reported in financial statements and tax filings.

³Cash-management accountant

The cash-management accountant is responsible for cash-related financial operations, including making transfers between accounts, monitoring deposits and payments, reconciling cash balances, creating and following cash forecasts, and abiding by the company’s system of internal controls. Salaries for cash-management accountants are generally in the same range as those for financial analysts.

³Corporate Treasure

The coveted position of treasurer is the career summit that management accountants aspire to. Treasurers take responsibility for all financial activities within a corporation, including managing liquidity risk, managing cash, issuing debt, hedging foreign exchange and interest rate risk, securitizing, overseeing pension investments, and managing capital structure.

The corporate treasurer typically sits on the corporation’s board of directors and chairs its finance committee but is usually not involved in day-to-day operations.

Findings of the Study and Conclusion


Following are a few tips for BBA students preparing for the changing role of the management accountant.

? Expertise in systems design;

? Expertise in change management;

? Ability to relate strategy to cost management; and

? Increased expertise in functional areas

? Develop competence in systems analysis and computer technology;

? Develop facilitation skills, such as persuasion and communication skills;

? Acquire broad business knowledge in strategy, operations, human resources, marketing, finance and economics.

? Develop analytical skills;

? Learn to the future;

? Develop a willingness to embrace change and assume risk;

? Complete an internship in business and/or public accounting; and, of course,

? Master accounting and tax issues.


Now is the time to begin preparing for an exciting and rapidly evolving management accounting career. The era calls for professionals with an appropriate balance between technical skills and breadth of knowledge. This balanced preparation can be accomplished only through a carefully structured educational program and continuing professional development. Those who are prepared to meet the challenges of a management accounting career will be valued members of their organizations.

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