the solution of this assignment total 3000 words 1000 words per 1Q Document Preview: Strategic Management Accounting APC309 Individual assignmentGeneral Information Weighting – 100% of the marks for...

Accounting for Managers 1
Accounting for Managers
Accounting for Managers 2
Executive Summary:
In today’s economic environment, Management accounting is very important area of concern for
every organization. Management accounting serves many purposes of an organization which
includes setting up prices to beat the competitors and earn required return on the funds invested,
managing and utilizing resources efficiently and effectively, to establish appropriate standards
for managers and employees, providing supply chain management system etc.
Role of a senior management accountant is very crucial for the success of an organization; senior
management accountant helps an organization in taking strategic decisions. Among four
directors of Jessup ltd no one possesses skill’s that management accountants have, therefore they
are planning to hire a management accountant who would help them in making strategic
decisions.
In order to take strategic decisions an organization has to segregate its relevant and irrelevant
revenue and expenses. In order to determine whether a particular item is relevant or irrelevant
management accountant uses its knowledge of the basic concepts of management accounting.
Only relevant items shall be considered while taking any decision.
Jessup ltd is a growing organization in the field of advertising and public relation. In order to
sustain its pace of growing company has to adopt new techniques of management accounting
such as activity based costing. Activity based costing helps organization to trace the expenses by
the activities being performed. Use of activity based costing would help Jessup ltd to segregate
the expenses between two different services i.e. advertising and public relation. Segregation of
expenses would help Jessup to make better decisions and this will provide competitive advantage
over its investors.
Accounting for Managers 3
Solution 1:
1. Role of strategic management accountant in Jessup
According to Chartered Institute of Management Accounts (CIMA), management accounting can
be defined as an integral part of management that is concerned with identification and
interpretation of information which can be used for formulating strategies, decision making
activities, optimal utilization of resources, disclosures to various stakeholders etc.
In general management accounting helps in interpreting financial information to aid in business
decision making. They differ from financial accounting as they are more concerned with analysis
and reporting of company’s financial position which will be used internally by the company’s
management for taking various business decisions. While the primary function of financial
accounting is to show the financial position of the company which can be used by the internal
and external parties of the organization. Following are the key roles of the management
accountant:
 Financial reporting: During the beginning of the financial year, the management
accountants record the financial transactions of the company as of when it occurs. This
helps the company and its executives in understanding the financial health of the
company which aids in making informed decision
 Budgeting: Management accountants prepare and formulate budget for each and every
department of an organization. Post which they combine these departmental wise budget
into a company budget. This budget then helps the accounting department in monitoring
the progress and ensure that expenses are tracked on a regular basis to ensure that cost
overruns can be avoided
Accounting for Managers 4
 Forecasting: In order to determine the future income, the management accountants
conduct market analysis to determine the current situation prevailing in the industry and
economy, and the position of the company vis-a-vis this economic cycle. This
information helps the business manager and company in formulating a successful
business strategy. This analysis conducted by the management accountant also includes
the analysis of the competitors and market share of the company
 Internal controls: Management accountants help in formulating various internal controls
that can help in maintaining the consistency and integrity of financial statements. Once
the financial statements are prepared, the management accountants sign them off to
confirm their accuracy and fair representation of company’s position
 Management support: Management accountants also help the company in monitoring the
profitability position of a company’s investment. This can be either in the form of
analysing the effectiveness of a sales campaign or reviewing the effectiveness of opening
up of new sales offices. This helps the management in establishing the true return
potential of their investments
Given the current situation of Jessup Ltd. a management accountant will be very handy in
helping its management to take informed and well calculated decisions. Following are the key
activities which can be performed by a management accountant at Jessup Ltd which will be
beneficial for the firm both in the short and long run:
 Cost control mechanism: Various costs and expenditures can be broken down into sub-
functions and processes which could lead to operational control
Accounting for Managers 5
 Development of standards: Standards pertaining to the performance of the company can
be developed, and then the actual can be compared against these standards to analyse the
variance or the areas of concern
 Identification of unprofitable activities: Management accountancy can also help an
organization in indentifying those activities which do not add any value to an
organization and are unprofitable. Based on these inputs the management can take a
decision whether to hold on to activities or discard them permanently
 Optimal utilization of resources: It will also aid in the optimal utilization of resources so
that productivity and returns on each resource employed can be increased
 It can also help in formulating various internal control systems which will help the
organization in perform in accordance with the laid rules, and will ensure consistency
 Through the budgeting function, Jessup will be able to ensure that it does not end up
spending more than what has been budgeted for a specific activity. This will ensure that...