Management Accounting as a term lost its relevance.

MANAGEMENT ACCOUNTING AS A CONCEPT EVOLVED FROM THE UNDERLYING PRINCIPLE THAT MERE RECORDING OF TRANSACTION AND PRODUCING PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OVER A PERIOD WOULD NOT HELP BUSINESS PERFORM CONTINUALLY.

Management thus needs accounting that supports decision making at operational and strategic level.Business runs on resources and processes to create value.Resources involve incurring of cost and processes create value for sustenance and growth.

The term management accounting is out of parlance of IFAC(the umbrella organisation)way back i 2002 and they had travelled forward by dispensing this term and literature associated(FMAC and IMAS).The soul of management accounting is not traced but derived from measurement of resources and associated cost to derive beneficial value to the organisation.When we look at this parlance it points clearly that the soul rest in cost accounting with its two analytical dimension namely financial management and cost management.

There is aversion to view management accounting as an assurance function and also to view cost accounting as historical.In fact there was a great debate in India that management accounting is not a function at all.

At the best management accounting is a futuristic dimension of cost accounting, but it would restrict management accounting scope as a current context accounting.Future cannot begin without travelling in the past and uncertainities of the future more often gets revealed in the past data.

Why should one be averse of management accounting as an assurance reporting.Decisions through strategies heavily depend on data that is delivering the necessary confidence level be it for government as a stakeholder or others.

With IFAC moving away from FMAC and IMAS- Governance has replaced the concept of management accounting, specially the triple bottomline-ESG.Governance talks about three thing -accountability, transperancy and ethics.Management accounting if it is not a function has lost its relevance in the field of accounting since it has to draw inspiration every moment from the cost accounting.Management Accounting is also not just elite accounting since one cannot , in reality build castles in air specially when one runs business.

If the deliverables of management accounting is decision support parameters to support futuristic effort of management then it fulfills the criteria of Accountability and thus one part of governance.

Hence management accounting is a misnomer and it should have actually been "management accountability" when it started evolving from cost accounting(through its to dimensions namely financial management and cost management).

Since management accounting is yet to stabilise its term as a function and gradually got replaced by governance(accounting for sustainability) management accounting should be honorably buried as a term and cost accounting should care take its new avatar A4S.Accounting for governance!!!

Cost and Management Accounting for local bodies.

Local Bodies in India can be classified as those independent democratic institution that exist in India within the federal framework of our constitution.These bodies have elected representatives like in Municipalities/Municipal corporations/Zilla parishads etc.
Their function is take up the work delegated by the respective legislature.Many local bodies primarily discharge the function like maintaining cleanliness and sanitation,pre-primary and primary education,Primary health care,local road & infrastructure developments,directing business development,other social welfare schemes(managing public distribution system) directed towards Nation building.
From the above it will be noted the function of local bodies are wide and varied and local bodies can be huge like Municipal corporation of greater mumbai which has budget equalling and surpassing some states and small as even panchayats.
Funds generated for execution of objectives of local bodies are from different sources like Levy by local bodies themselves ,being empowered to do so in many cases,Budgetary allocation by the state government and in some cases scheme based infusion by central government and international aid agencies,The money received can be in the form of soft loans,grants or revenue sharing schemes.
While the local bodies are required to keep accounts of the expenditure the method differs and there is no uniformity currently among local bodies.
Basically each local body is an accountable unit(societal development motive) with social-cost benefit parameters.
A local body thus expends on small projects,social welfare schemes,maintenance of cleanliness sanitation,education and health.
While financial accounting is yet to be streamlined where ICWAI can help such bodies in coordination with the respective state governments by forming a "Local bodies uniform Accounting committees" there is much left to be done on Management accounting in Governance.
ICWAI would do well in formulating management accounting guidelines for local bodies which are the bottomline of the economy.
Each activity of the local bodies undertake has to be analysed for cost-social benefit and suggestion for re-engineering the activity should be addressed on an yearly basis.Here the question is not of sustenance of business or profit motive but Societal sustenance,Growth of nation(also called nation building-egalitarian society).
Costs incurred interms of activity towards wages,material and overhead should be analysed and improvement in the service should be made.Most local bodies are today complacent towards cost and efficiency.A definitive cost model can be developed and local bodies encouraged on analysing its efficiency.
C&AG needs to convinced on the Cost-Model accounting in Local bodies and appointment of ICAS officer inevery state government to be the chief to monitor implementation of Cost-model accounting rules and An audit of the same can be designed by Cost-Accountant.
Here is a simple example of Cost-model accounting of and activity:Primary Health care centre.
Sources of funds are basically from state government towards Salary and establishment expenses of PHC,either medicine are directly supplied or funds are allocated by the state or independently generated by local body through levy of taxes,equipment and infrastructure or either donated granted by the state or procured by the local bodies,PHC levies either nominal fees or discriminatory charges depending on the social strata,there are controllable expenses,re-engineerable expenses and fixed expenses for maintaining quality that needs to be collected and analysed,Stores control is important;Like wise every other activity can designed cost sheet prepared.

Critical tools with the management Accountant.

A management Accountant is a dynamic individual and is a true path finder for the growth and sustenance.He acquires his knowledge and necessary skills from the theory and the environment in which he functions.His scope is limitless as he is not bound by any formatted detailes rather what he does gets formatted ,thus he leads by examples.
For this a Management accountant has to update his skills constantly and should possess inquisitive mind or train his own to meet the circumstances.
Here we will see a brief of the conventional management accounting tools:
Methods and techniques of Costing:
Identification,collection and classification of costs.
Identification of Activity and Cost centres.
Activity based Budget.(Flexible budget etc).
Fixing of standards for cost engineering(Standards Costing).
Marginal costing(Pricing decisions).
Cost-benefit analysis(Project selection).
Capital Budgeting techniques.
Accounting for cost-Job costing/Process costing/Batch costing/Contract costing etc.

Management Accounting

In this section we will discuss on Dynamics of Management Accounting and the impact it has on the global economy.
The Quote from Rg Ved has the following meaning:
Everyone should live together , communicate constructively.
all should unite their thoughts ,synthesis, avoid differences.
like the learned who concentrate on acquiring knowledge &wisdom& involve in devotion.
involve in performance of duty applying wisdom acquired through knowledge with devotion.