Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.
Indian government recently announced outcome budget as a measure of good governance.While welcoming it i would like to state that Management accountants have a greater role to play in the governance of the country .I am confident the institute will properly take up the issue and request the government to augment the recruitment of ICAS cadre in each department of the ministry and state governments and local bodies.
Management accountant have the cutting edge in the budgeting mechanism as it is a primary tool of Cost and management accounting.
Finance minister in his speech stated that the government budgets are not reflection of performance and in his words:
"I must caution that outlays do not necessarily mean outcomes. The people of the country are concerned with the outcomes."
Converting outlays into outcomes is a complex process, which differs from Ministry to Ministry and programme to programme. Some of
the important steps in this conversion process are as follows:-
· Outcomes to be specifically defined in measurable and monitorable terms; intermediate outputs should also be defined wherever
required.
· Standardising unit cost of delivery.
· Benchmarking the standards/quality of outcomes and services.
· Capacity building for requisite efficiency at all levels, in terms of equipment, technology, knowledge and skills.
· Ensuring flow of right amount of money at the right time to the right level, with neither delay nor "parking" of funds.
· Effective monitoring and evaluation systems.
· Involvement of the community/target groups/recipients of the service , with easy access and feedback systems.
Efficient conversion of outlays into outcomes would, therefore, require making the delivery systems effective with appropriate structures
and processes, strengthening financial management systems, increasing use of information technology, and meaningful involvement of all the
Ministries, Para -statals, State Govern ments, Local Bodies, Panchayat Raj Institutions, Self Help Groups etc., in critical decision making and
implementation processes.
This only means his intention has been to employ Cost and management accounting techniques to obtain better results of the efficiency of governance.CMAs are possessing necessary skills in this area and the government should recognise this potential and deploy them all areas of governance.
Tuesday, May 30, 2006
Sunday, May 28, 2006
Role of management accountant as a skilled Negotiator.
Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.
The globalised business environment demand negotiation skills from professionals specially Accountants.Management Accountant with the skills of analysing business situation,business processes,as an individual who concentrates more time on analysing activity and provide business solutions over and above accounting the income and expenses and presenting financial position is in a better position to collect ,analyse and postulate the results to situations ,to vet the Cost-benefit and also carry the process of value addition to the favour of his business associate.It would be better for a management accountant to prove his ability as and when it arises in the corporate world.
The globalised business environment demand negotiation skills from professionals specially Accountants.Management Accountant with the skills of analysing business situation,business processes,as an individual who concentrates more time on analysing activity and provide business solutions over and above accounting the income and expenses and presenting financial position is in a better position to collect ,analyse and postulate the results to situations ,to vet the Cost-benefit and also carry the process of value addition to the favour of his business associate.It would be better for a management accountant to prove his ability as and when it arises in the corporate world.
Saturday, May 20, 2006
Critical tools with management accounting-please go through the new thread link for the purpose.
Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.
Critical Tools Section.
http://management-accounting.blogspot.com
Critical Tools Section.
http://management-accounting.blogspot.com
Enterprise risk management and role of management accountant
Management Accountant-an accountant of the future for Governance-Both Corporate world and government.
The underlying premise of enterprise risk management is that every entity exists to provide
value for its stakeholders. All entities face uncertainty, and the challenge for management is
to determine how much uncertainty to accept as it strives to grow stakeholder value.
Uncertainty presents both risk and opportunity, with the potential to erode or enhance value.
Enterprise risk management enables management to effectively deal with uncertainty and
associated risk and opportunity, enhancing the capacity to build value.
Value is maximized when management sets strategy and objectives to strike an optimal
balance between growth and return goals and related risks, and efficiently and effectively
deploys resources in pursuit of the entity’s objectives. Enterprise risk management
encompasses:
• Aligning risk appetite and strategy – Management considers the entity’s risk appetite
in evaluating strategic alternatives, setting related objectives, and developing
mechanisms to manage related risks.
• Enhancing risk response decisions – Enterprise risk management provides the rigor to
identify and select among alternative risk responses – risk avoidance, reduction,
sharing, and acceptance.
• Reducing operational surprises and losses – Entities gain enhanced capability to
identify potential events and establish responses, reducing surprises and associated
costs or losses.
• Identifying and managing multiple and cross-enterprise risks – Every enterprise faces
a myriad of risks affecting different parts of the organization, and enterprise risk
management facilitates effective response to the interrelated impacts, and integrated
responses to multiple risks.
• Seizing opportunities – By considering a full range of potential events, management is
positioned to identify and proactively realize opportunities.
• Improving deployment of capital – Obtaining robust risk information allows
management to effectively assess overall capital needs and enhance capital allocation.
These capabilities inherent in enterprise risk management help management achieve the
entity’s performance and profitability targets and prevent loss of resources. Enterprise risk
management helps ensure effective reporting and compliance with laws and regulations, and
helps avoid damage to the entity’s reputation and associated consequences. In sum, enterprise
risk management helps an entity get to where it wants to go and avoid pitfalls and surprises
along the way.
Events can have negative impact, positive impact, or both. Events with a negative impact
represent risks, which can prevent value creation or erode existing value. Events with
positive impact may offset negative impacts or represent opportunities. Opportunities are the
possibility that an event will occur and positively affect the achievement of objectives,
supporting value creation or preservation. Management channels opportunities back to its
strategy or objective-setting processes, formulating plans to seize the opportunities.
Enterprise risk management deals with risks and opportunities affecting value creation or
preservation, defined as follows:
Enterprise risk management is a process, effected by an entity’s board of directors,
management and other personnel, applied in strategy setting and across the
enterprise, designed to identify potential events that may affect the entity, and manage
risk to be within its risk appetite, to provide reasonable assurance regarding the
achievement of entity objectives.
The definition reflects certain fundamental concepts. Enterprise risk management is:
• A process, ongoing and flowing through an entity
• Effected by people at every level of an organization
• Applied in strategy setting
• Applied across the enterprise, at every level and unit, and includes taking an entitylevel
portfolio view of risk
• Designed to identify potential events that, if they occur, will affect the entity and to
manage risk within its risk appetite
• Able to provide reasonable assurance to an entity’s management and board of
directors
• Geared to achievement of objectives in one or more separate but overlapping
categories
This definition is purposefully broad. It captures key concepts fundamental to how
companies and other organizations manage risk, providing a basis for application across
organizations, industries, and sectors. It focuses directly on achievement of objectives
established by a particular entity and provides a basis for defining enterprise risk management
effectiveness.
Within the context of an entity’s established mission or vision, management establishes
strategic objectives, selects strategy, and sets aligned objectives cascading through the
enterprise. This enterprise risk management framework is geared to achieving an entity’s
objectives, set forth in four categories:
• Strategic – high-level goals, aligned with and supporting its mission
• Operations – effective and efficient use of its resources
• Reporting – reliability of reporting
• Compliance – compliance with applicable laws and regulations.
This categorization of entity objectives allows a focus on separate aspects of enterprise risk
management. These distinct but overlapping categories – a particular objective can fall into
more than one category – address different entity needs and may be the direct responsibility of
different executives. This categorization also allows distinctions between what can be
expected from each category of objectives. Another category, safeguarding of resources, used
by some entities, also is described.
Because objectives relating to reliability of reporting and compliance with laws and
regulations are within the entity’s control, enterprise risk management can be expected to
provide reasonable assurance of achieving those objectives. Achievement of strategic
objectives and operations objectives, however, is subject to external events not always within
the entity’s control; accordingly, for these objectives, enterprise risk management can provide
reasonable assurance that management, and the board in its oversight role, are made aware, in
a timely manner, of the extent to which the entity is moving toward achievement of the
objectives.
3
Enterprise risk management consists of eight interrelated components. These are derived
from the way management runs an enterprise and are integrated with the management
process. These components are:
• Internal Environment – The internal environment encompasses the tone of an
organization, and sets the basis for how risk is viewed and addressed by an entity’s
people, including risk management philosophy and risk appetite, integrity and ethical
values, and the environment in which they operate.
• Objective Setting – Objectives must exist before management can identify potential
events affecting their achievement. Enterprise risk management ensures that
Executive Summary
management has in place a process to set objectives and that the chosen objectives
support and align with the entity’s mission and are consistent with its risk appetite.
• Event Identification – Internal and external events affecting achievement of an entity’s
objectives must be identified, distinguishing between risks and opportunities.
Opportunities are channeled back to management’s strategy or objective-setting
processes.
• Risk Assessment – Risks are analyzed, considering likelihood and impact, as a basis
for determining how they should be managed. Risks are assessed on an inherent and a
residual basis.
• Risk Response – Management selects risk responses – avoiding, accepting, reducing,
or sharing risk – developing a set of actions to align risks with the entity’s risk
tolerances and risk appetite.
• Control Activities – Policies and procedures are established and implemented to help
ensure the risk responses are effectively carried out.
• Information and Communication – Relevant information is identified, captured, and
communicated in a form and timeframe that enable people to carry out their
responsibilities. Effective communication also occurs in a broader sense, flowing
down, across, and up the entity.
• Monitoring – The entirety of enterprise risk management is monitored and
modifications made as necessary. Monitoring is accomplished through ongoing
management activities, separate evaluations, or both.
Enterprise risk management is not strictly a serial process, where one component affects only
the next. It is a multidirectional, iterative process in which almost any component can and
does influence another.
Relationship of Objectives and Components
There is a direct relationship between objectives, which are what an entity strives to achieve,
and enterprise risk management components, which represent what is needed to achieve them.
The relationship is depicted in a three-dimensional matrix, in the form of a cube.
5
The four objectives categories – strategic,
operations, reporting, and compliance – are
represented by the vertical columns, the eight
components by horizontal rows, and an entity’s
units by the third dimension. This depiction
portrays the ability to focus on the entirety of an
entity’s enterprise risk management, or by
objectives category, component, entity unit, or
any subset thereof.
Effectiveness
Determining whether an entity’s enterprise risk
management is "effective" is a judgment resulting from an assessment of whether the eight
components are present and functioning effectively. Thus, the components are also criteria
for effective enterprise risk management. For the components to be present and functioning
properly there can be no material weaknesses, and risk needs to have been brought within the
entity’s risk appetite.
When enterprise risk management is determined to be effective in each of the four categories
of objectives, respectively, the board of directors and management have reasonable assurance
that they understand the extent to which the entity’s strategic and operations objectives are
being achieved, and that the entity’s reporting is reliable and applicable laws and regulations
are being complied with.
The eight components will not function identically in every entity. Application in small and
mid-size entities, for example, may be less formal and less structured. Nonetheless, small
entities still can have effective enterprise risk management, as long as each of the components
is present and functioning properly.
Limitations
While enterprise risk management provides important benefits, limitations exist. In addition
to factors discussed above, limitations result from the realities that human judgment in
decision making can be faulty, decisions on responding to risk and establishing controls need
to consider the relative costs and benefits, breakdowns can occur because of human failures
such as simple errors or mistakes, controls can be circumvented by collusion of two or more
people, and management has the ability to override enterprise risk management decisions.
These limitations preclude a board and management from having absolute assurance as to
achievement of the entity’s objectives.
Determining whether an entity’s enterprise risk
management is "effective" is a judgment resulting from an assessment of whether the eight
components are present and functioning effectively. Thus, the components are also criteria
for effective enterprise risk management. For the components to be present and functioning
properly there can be no material weaknesses, and risk needs to have been brought within the
entity’s risk appetite.
When enterprise risk management is determined to be effective in each of the four categories
of objectives, respectively, the board of directors and management have reasonable assurance
that they understand the extent to which the entity’s strategic and operations objectives are
being achieved, and that the entity’s reporting is reliable and applicable laws and regulations
are being complied with.
The eight components will not function identically in every entity. Application in small and
mid-size entities, for example, may be less formal and less structured. Nonetheless, small
entities still can have effective enterprise risk management, as long as each of the components
is present and functioning properly.
While enterprise risk management provides important benefits, limitations exist. In addition
to factors discussed above, limitations result from the realities that human judgment in
decision making can be faulty, decisions on responding to risk and establishing controls need
to consider the relative costs and benefits, breakdowns can occur because of human failures
such as simple errors or mistakes, controls can be circumvented by collusion of two or more
people, and management has the ability to override enterprise risk management decisions.
These limitations preclude a board and management from having absolute assurance as to
achievement of the entity’s objectives.
Internal control is an integral part of enterprise risk management. This enterprise risk
management framework encompasses internal control, forming a more robust
conceptualization and tool for management. Internal control is defined and described in
Internal Control – Integrated Framework. Because that framework has stood the test of time
and is the basis for existing rules, regulations, and laws, that document remains in place as the
definition of and framework for internal control. While only portions of the text of Internal
Control – Integrated Framework are reproduced in this framework, the entirety of that
framework is incorporated by reference into this one.
Roles.
(Compiled from net source).
The underlying premise of enterprise risk management is that every entity exists to provide
value for its stakeholders. All entities face uncertainty, and the challenge for management is
to determine how much uncertainty to accept as it strives to grow stakeholder value.
Uncertainty presents both risk and opportunity, with the potential to erode or enhance value.
Enterprise risk management enables management to effectively deal with uncertainty and
associated risk and opportunity, enhancing the capacity to build value.
Value is maximized when management sets strategy and objectives to strike an optimal
balance between growth and return goals and related risks, and efficiently and effectively
deploys resources in pursuit of the entity’s objectives. Enterprise risk management
encompasses:
• Aligning risk appetite and strategy – Management considers the entity’s risk appetite
in evaluating strategic alternatives, setting related objectives, and developing
mechanisms to manage related risks.
• Enhancing risk response decisions – Enterprise risk management provides the rigor to
identify and select among alternative risk responses – risk avoidance, reduction,
sharing, and acceptance.
• Reducing operational surprises and losses – Entities gain enhanced capability to
identify potential events and establish responses, reducing surprises and associated
costs or losses.
• Identifying and managing multiple and cross-enterprise risks – Every enterprise faces
a myriad of risks affecting different parts of the organization, and enterprise risk
management facilitates effective response to the interrelated impacts, and integrated
responses to multiple risks.
• Seizing opportunities – By considering a full range of potential events, management is
positioned to identify and proactively realize opportunities.
• Improving deployment of capital – Obtaining robust risk information allows
management to effectively assess overall capital needs and enhance capital allocation.
These capabilities inherent in enterprise risk management help management achieve the
entity’s performance and profitability targets and prevent loss of resources. Enterprise risk
management helps ensure effective reporting and compliance with laws and regulations, and
helps avoid damage to the entity’s reputation and associated consequences. In sum, enterprise
risk management helps an entity get to where it wants to go and avoid pitfalls and surprises
along the way.
Events can have negative impact, positive impact, or both. Events with a negative impact
represent risks, which can prevent value creation or erode existing value. Events with
positive impact may offset negative impacts or represent opportunities. Opportunities are the
possibility that an event will occur and positively affect the achievement of objectives,
supporting value creation or preservation. Management channels opportunities back to its
strategy or objective-setting processes, formulating plans to seize the opportunities.
Enterprise risk management deals with risks and opportunities affecting value creation or
preservation, defined as follows:
Enterprise risk management is a process, effected by an entity’s board of directors,
management and other personnel, applied in strategy setting and across the
enterprise, designed to identify potential events that may affect the entity, and manage
risk to be within its risk appetite, to provide reasonable assurance regarding the
achievement of entity objectives.
The definition reflects certain fundamental concepts. Enterprise risk management is:
• A process, ongoing and flowing through an entity
• Effected by people at every level of an organization
• Applied in strategy setting
• Applied across the enterprise, at every level and unit, and includes taking an entitylevel
portfolio view of risk
• Designed to identify potential events that, if they occur, will affect the entity and to
manage risk within its risk appetite
• Able to provide reasonable assurance to an entity’s management and board of
directors
• Geared to achievement of objectives in one or more separate but overlapping
categories
This definition is purposefully broad. It captures key concepts fundamental to how
companies and other organizations manage risk, providing a basis for application across
organizations, industries, and sectors. It focuses directly on achievement of objectives
established by a particular entity and provides a basis for defining enterprise risk management
effectiveness.
Within the context of an entity’s established mission or vision, management establishes
strategic objectives, selects strategy, and sets aligned objectives cascading through the
enterprise. This enterprise risk management framework is geared to achieving an entity’s
objectives, set forth in four categories:
• Strategic – high-level goals, aligned with and supporting its mission
• Operations – effective and efficient use of its resources
• Reporting – reliability of reporting
• Compliance – compliance with applicable laws and regulations.
This categorization of entity objectives allows a focus on separate aspects of enterprise risk
management. These distinct but overlapping categories – a particular objective can fall into
more than one category – address different entity needs and may be the direct responsibility of
different executives. This categorization also allows distinctions between what can be
expected from each category of objectives. Another category, safeguarding of resources, used
by some entities, also is described.
Because objectives relating to reliability of reporting and compliance with laws and
regulations are within the entity’s control, enterprise risk management can be expected to
provide reasonable assurance of achieving those objectives. Achievement of strategic
objectives and operations objectives, however, is subject to external events not always within
the entity’s control; accordingly, for these objectives, enterprise risk management can provide
reasonable assurance that management, and the board in its oversight role, are made aware, in
a timely manner, of the extent to which the entity is moving toward achievement of the
objectives.
3
Enterprise risk management consists of eight interrelated components. These are derived
from the way management runs an enterprise and are integrated with the management
process. These components are:
• Internal Environment – The internal environment encompasses the tone of an
organization, and sets the basis for how risk is viewed and addressed by an entity’s
people, including risk management philosophy and risk appetite, integrity and ethical
values, and the environment in which they operate.
• Objective Setting – Objectives must exist before management can identify potential
events affecting their achievement. Enterprise risk management ensures that
Executive Summary
management has in place a process to set objectives and that the chosen objectives
support and align with the entity’s mission and are consistent with its risk appetite.
• Event Identification – Internal and external events affecting achievement of an entity’s
objectives must be identified, distinguishing between risks and opportunities.
Opportunities are channeled back to management’s strategy or objective-setting
processes.
• Risk Assessment – Risks are analyzed, considering likelihood and impact, as a basis
for determining how they should be managed. Risks are assessed on an inherent and a
residual basis.
• Risk Response – Management selects risk responses – avoiding, accepting, reducing,
or sharing risk – developing a set of actions to align risks with the entity’s risk
tolerances and risk appetite.
• Control Activities – Policies and procedures are established and implemented to help
ensure the risk responses are effectively carried out.
• Information and Communication – Relevant information is identified, captured, and
communicated in a form and timeframe that enable people to carry out their
responsibilities. Effective communication also occurs in a broader sense, flowing
down, across, and up the entity.
• Monitoring – The entirety of enterprise risk management is monitored and
modifications made as necessary. Monitoring is accomplished through ongoing
management activities, separate evaluations, or both.
Enterprise risk management is not strictly a serial process, where one component affects only
the next. It is a multidirectional, iterative process in which almost any component can and
does influence another.
Relationship of Objectives and Components
There is a direct relationship between objectives, which are what an entity strives to achieve,
and enterprise risk management components, which represent what is needed to achieve them.
The relationship is depicted in a three-dimensional matrix, in the form of a cube.
5
The four objectives categories – strategic,
operations, reporting, and compliance – are
represented by the vertical columns, the eight
components by horizontal rows, and an entity’s
units by the third dimension. This depiction
portrays the ability to focus on the entirety of an
entity’s enterprise risk management, or by
objectives category, component, entity unit, or
any subset thereof.
Effectiveness
Determining whether an entity’s enterprise risk
management is "effective" is a judgment resulting from an assessment of whether the eight
components are present and functioning effectively. Thus, the components are also criteria
for effective enterprise risk management. For the components to be present and functioning
properly there can be no material weaknesses, and risk needs to have been brought within the
entity’s risk appetite.
When enterprise risk management is determined to be effective in each of the four categories
of objectives, respectively, the board of directors and management have reasonable assurance
that they understand the extent to which the entity’s strategic and operations objectives are
being achieved, and that the entity’s reporting is reliable and applicable laws and regulations
are being complied with.
The eight components will not function identically in every entity. Application in small and
mid-size entities, for example, may be less formal and less structured. Nonetheless, small
entities still can have effective enterprise risk management, as long as each of the components
is present and functioning properly.
Limitations
While enterprise risk management provides important benefits, limitations exist. In addition
to factors discussed above, limitations result from the realities that human judgment in
decision making can be faulty, decisions on responding to risk and establishing controls need
to consider the relative costs and benefits, breakdowns can occur because of human failures
such as simple errors or mistakes, controls can be circumvented by collusion of two or more
people, and management has the ability to override enterprise risk management decisions.
These limitations preclude a board and management from having absolute assurance as to
achievement of the entity’s objectives.
Determining whether an entity’s enterprise risk
management is "effective" is a judgment resulting from an assessment of whether the eight
components are present and functioning effectively. Thus, the components are also criteria
for effective enterprise risk management. For the components to be present and functioning
properly there can be no material weaknesses, and risk needs to have been brought within the
entity’s risk appetite.
When enterprise risk management is determined to be effective in each of the four categories
of objectives, respectively, the board of directors and management have reasonable assurance
that they understand the extent to which the entity’s strategic and operations objectives are
being achieved, and that the entity’s reporting is reliable and applicable laws and regulations
are being complied with.
The eight components will not function identically in every entity. Application in small and
mid-size entities, for example, may be less formal and less structured. Nonetheless, small
entities still can have effective enterprise risk management, as long as each of the components
is present and functioning properly.
While enterprise risk management provides important benefits, limitations exist. In addition
to factors discussed above, limitations result from the realities that human judgment in
decision making can be faulty, decisions on responding to risk and establishing controls need
to consider the relative costs and benefits, breakdowns can occur because of human failures
such as simple errors or mistakes, controls can be circumvented by collusion of two or more
people, and management has the ability to override enterprise risk management decisions.
These limitations preclude a board and management from having absolute assurance as to
achievement of the entity’s objectives.
Internal control is an integral part of enterprise risk management. This enterprise risk
management framework encompasses internal control, forming a more robust
conceptualization and tool for management. Internal control is defined and described in
Internal Control – Integrated Framework. Because that framework has stood the test of time
and is the basis for existing rules, regulations, and laws, that document remains in place as the
definition of and framework for internal control. While only portions of the text of Internal
Control – Integrated Framework are reproduced in this framework, the entirety of that
framework is incorporated by reference into this one.
Roles.
(Compiled from net source).
Friday, May 19, 2006
Role of management accountant-A gist
Management Accountant-an accountant of the future for Governance-Both Corporate world and the GovernmeRole of Management Accountants. In 21st Century.
Management Accountants and Indian economy:
Management Accountants are Indispensable part of any Governance be it Business,Industry,service or Federal setup of Governments.The skills the Management accountants will acquire based on the revised curriculam and exposure Mindset will help Indian Economy in achieving its goals and stick to the road-map of Growth and social development.
The focus of management accountant is to maximize returns to the Stake-Holders,be it owners(managers/governors),Consumers,Lenders,and society at large.Management Accountant achieves this with twin tools in his hands one is Cost-minimisation(better read as Optimisation)and the other is Income maximization(Schematising Opportunities and selecting one or more than one on priority- yield(Government) criteria and Risk-return criteria(Business).
The financial Advisors and Budget officers in the Government of various states local bodies and in the centre are not Specialists and they are even posted from un-related Cadres.This is not to mean they are not in the learning Process some even deserve Certification of Merit from the ICWAI as recognition of their Management Accounting Skills(I hope the Council will consider this angle-even associate membership to a select group).
Indian Economy is regulated by Budget anticipating sources of revenues and prioritizing the expenditure schemes.The governance of the country at various levels is segmented into specialized ministries and departments.
Indian Economy also accounts its activity in Revenue-expenditure Statements Published Periodically.There are some departments which have adopted double entry system of Accounting. However Cost and Management Accounting in Government is submerged in the age-old techniques of the British-Raj often Neglected field.Here is were we have to start and CASB(USA)and public sector standards of IFAC and other related developments in developed worlds would be of guidance.
Project Accounting one of the Major thrust areas for Government(Social Cost-Benefit Analysis)is where management accountant can be of utmost important and The council should deploy research committee should come with concept paper on this aspect to be addressed to the government.
Management Accountant can play a vital role in establishing an egalitarian society by enabling better redistribution of wealth of nations with available techniques .He can be a better planner an objective Government Accountant and Analysts for Social-Cost-Benefit schemes.
Management accountant can thus be a piller for Governance of the country.
(Please see my brief note on Paradigm Income Study) .
Management accountants for business/Industry/Service sector.
Business:
The role of Management Accountant in business cannot be Over-emphasised whether large or small the business has to maintain records and keep accountants for the self of the proprietor/partners/requirement of statutes(Sec44AB of IT Act/VAT etc.).
As an accountant primarily the MA(read hence forth as management accountant)is in a better position to handle accounts of the Business and also help the proprietor in making sound decisions specially borrowing,stock maintenance etc)
MA should develop independent accounting firms and prove their worth by handling accounting assignments of the businesses.Businessmen of today are exposed to emerging trends of financial markets and would like to take opportunity to deploy surplus cash in markets and MA has a vital role as Portfolio manager to high-end and medium-end businessmen.
MA as Portfolio manager is always in a better position to manage funds.Since the prime concern of MA is Risk-return/Cost-benefit and priority-yield.
The MA with new skills acquired in Computerisation and being a functional specialist can help business in Synergising/shedding flabs/networking with external environment.
Industry:
The role of MA in Industry is well defined by statutes and practices however in various forms of Industry his role has got highlighted depending on compliance criteria.MA has to rise to the role of being a part of Corporate Governance in the industry and Various statutes have to enable his role for overall health of the industry.
MA at the shop-floor of a production facility is an Industrial Accountant with ability to engineer Cost of Product, Process and help in work-study,six-sigma,JIT and other industrial engineering techniques.
MA as an accountant has multi-dimensional role as a Book-Keeper/Cost-Analyst/Financial Planner and Tax Consultant adequate skills is inducted in the MA to handle in Dynamics of Industry.
MA as a Part of Corporate Governance.MA is an independent thinker and should keep himself abreast with latest developments in International/Internal environment as a primary analyst he is problem-solver as an expert in corporate laws he is an advisor on Compliance as a Cost-engineer he is an indispensable Guide for Shop-floor dynamics and as a financial analyst he is a true financial advisor.
The role of MA in service sector is evolving and much is needed for statutes to get amended and a step forward has already been made by making compulsory maintenance of Cost-records in utility companies.When we talk of services sector primarily they are classified to Industrial-support services like Power, Ports,Transport and shipping,Railways,Consulting firms,Insurance and Banks etc.There are also general utility companies available for everyone like telephone ,again personal banking and insurance,power,security,Defence etc.
All these service sector enterprise have their own definite goals and the services rendered involve cost and recovery aspects many service sectors in the form of infrastructure controlled by government which had its own system of monitoring cost and enjoyed monopoly status and budget support.But today the service sector dynamics has made businesses to think interms of Cost and price.
Most of the happening today is in the services sector and MA should develop skills in this area to prove for himself and the Profession.
MA in agricultural sector can be divided into to 1.Corporate farming.2.Medium-level Farmers with 100 acres to cultivate.3.Marginal Farmers.
With government considering Taxing of this groups there will be emerging need for compliance and the role of MA will evolve.MA already has a major role in setting minimum Support prices(agriculture price commission)Farm subsidy evaluation,Essential commodity production decision at national level.
In essence MA is an Accountant,Decision maker,Cost Engineer,Investment and Tax-planner,Auditor(statutory and tax),System(Functional) specialist,Government Accountant.Overall he is a part and parcel and Piller of Indian Economy
nt
Management Accountants and Indian economy:
Management Accountants are Indispensable part of any Governance be it Business,Industry,service or Federal setup of Governments.The skills the Management accountants will acquire based on the revised curriculam and exposure Mindset will help Indian Economy in achieving its goals and stick to the road-map of Growth and social development.
The focus of management accountant is to maximize returns to the Stake-Holders,be it owners(managers/governors),Consumers,Lenders,and society at large.Management Accountant achieves this with twin tools in his hands one is Cost-minimisation(better read as Optimisation)and the other is Income maximization(Schematising Opportunities and selecting one or more than one on priority- yield(Government) criteria and Risk-return criteria(Business).
The financial Advisors and Budget officers in the Government of various states local bodies and in the centre are not Specialists and they are even posted from un-related Cadres.This is not to mean they are not in the learning Process some even deserve Certification of Merit from the ICWAI as recognition of their Management Accounting Skills(I hope the Council will consider this angle-even associate membership to a select group).
Indian Economy is regulated by Budget anticipating sources of revenues and prioritizing the expenditure schemes.The governance of the country at various levels is segmented into specialized ministries and departments.
Indian Economy also accounts its activity in Revenue-expenditure Statements Published Periodically.There are some departments which have adopted double entry system of Accounting. However Cost and Management Accounting in Government is submerged in the age-old techniques of the British-Raj often Neglected field.Here is were we have to start and CASB(USA)and public sector standards of IFAC and other related developments in developed worlds would be of guidance.
Project Accounting one of the Major thrust areas for Government(Social Cost-Benefit Analysis)is where management accountant can be of utmost important and The council should deploy research committee should come with concept paper on this aspect to be addressed to the government.
Management Accountant can play a vital role in establishing an egalitarian society by enabling better redistribution of wealth of nations with available techniques .He can be a better planner an objective Government Accountant and Analysts for Social-Cost-Benefit schemes.
Management accountant can thus be a piller for Governance of the country.
(Please see my brief note on Paradigm Income Study) .
Management accountants for business/Industry/Service sector.
Business:
The role of Management Accountant in business cannot be Over-emphasised whether large or small the business has to maintain records and keep accountants for the self of the proprietor/partners/requirement of statutes(Sec44AB of IT Act/VAT etc.).
As an accountant primarily the MA(read hence forth as management accountant)is in a better position to handle accounts of the Business and also help the proprietor in making sound decisions specially borrowing,stock maintenance etc)
MA should develop independent accounting firms and prove their worth by handling accounting assignments of the businesses.Businessmen of today are exposed to emerging trends of financial markets and would like to take opportunity to deploy surplus cash in markets and MA has a vital role as Portfolio manager to high-end and medium-end businessmen.
MA as Portfolio manager is always in a better position to manage funds.Since the prime concern of MA is Risk-return/Cost-benefit and priority-yield.
The MA with new skills acquired in Computerisation and being a functional specialist can help business in Synergising/shedding flabs/networking with external environment.
Industry:
The role of MA in Industry is well defined by statutes and practices however in various forms of Industry his role has got highlighted depending on compliance criteria.MA has to rise to the role of being a part of Corporate Governance in the industry and Various statutes have to enable his role for overall health of the industry.
MA at the shop-floor of a production facility is an Industrial Accountant with ability to engineer Cost of Product, Process and help in work-study,six-sigma,JIT and other industrial engineering techniques.
MA as an accountant has multi-dimensional role as a Book-Keeper/Cost-Analyst/Financial Planner and Tax Consultant adequate skills is inducted in the MA to handle in Dynamics of Industry.
MA as a Part of Corporate Governance.MA is an independent thinker and should keep himself abreast with latest developments in International/Internal environment as a primary analyst he is problem-solver as an expert in corporate laws he is an advisor on Compliance as a Cost-engineer he is an indispensable Guide for Shop-floor dynamics and as a financial analyst he is a true financial advisor.
The role of MA in service sector is evolving and much is needed for statutes to get amended and a step forward has already been made by making compulsory maintenance of Cost-records in utility companies.When we talk of services sector primarily they are classified to Industrial-support services like Power, Ports,Transport and shipping,Railways,Consulting firms,Insurance and Banks etc.There are also general utility companies available for everyone like telephone ,again personal banking and insurance,power,security,Defence etc.
All these service sector enterprise have their own definite goals and the services rendered involve cost and recovery aspects many service sectors in the form of infrastructure controlled by government which had its own system of monitoring cost and enjoyed monopoly status and budget support.But today the service sector dynamics has made businesses to think interms of Cost and price.
Most of the happening today is in the services sector and MA should develop skills in this area to prove for himself and the Profession.
MA in agricultural sector can be divided into to 1.Corporate farming.2.Medium-level Farmers with 100 acres to cultivate.3.Marginal Farmers.
With government considering Taxing of this groups there will be emerging need for compliance and the role of MA will evolve.MA already has a major role in setting minimum Support prices(agriculture price commission)Farm subsidy evaluation,Essential commodity production decision at national level.
In essence MA is an Accountant,Decision maker,Cost Engineer,Investment and Tax-planner,Auditor(statutory and tax),System(Functional) specialist,Government Accountant.Overall he is a part and parcel and Piller of Indian Economy
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Thursday, May 18, 2006
Role Of Management Accountant in Project management and accounting.
Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.
A management accountant is an ideal individual to be a part of Project management team right from the stage of conception till it is delivered to user.
A project now is an activity undertaken to strengthen the existing value for future or create addition in capacity or completely contracted for value with a different end user.What ever it may be a project is to create value and in that each project has a gestation and its benefit starts after completion depending on the demand forecast.A management accoutant possess necessary skill to carry out capital budgeting decision,monitor projects on Cost and time Overrun aspect and ensure its revenue realisation starts in time.
Most of the tool that a management accoutant employs are relevant to project accounting and management.
Large projects would ideally prefer to have management accountant to study project feasibility,fund management,monitoring of project schedule,and after the project starts operation to establish and maintain Cost-management system.
A management accountant is an ideal individual to be a part of Project management team right from the stage of conception till it is delivered to user.
A project now is an activity undertaken to strengthen the existing value for future or create addition in capacity or completely contracted for value with a different end user.What ever it may be a project is to create value and in that each project has a gestation and its benefit starts after completion depending on the demand forecast.A management accoutant possess necessary skill to carry out capital budgeting decision,monitor projects on Cost and time Overrun aspect and ensure its revenue realisation starts in time.
Most of the tool that a management accoutant employs are relevant to project accounting and management.
Large projects would ideally prefer to have management accountant to study project feasibility,fund management,monitoring of project schedule,and after the project starts operation to establish and maintain Cost-management system.
Wednesday, May 17, 2006
Role Of Management Accountant in Primary Sector-Producer companies and commercial agriculture business.
Management Accountant-an accountant of the future for Governance-Both Corporate world and the Governm
"Primary produce" means—
(i) produce of farmers, arising from agriculture (including animal husbandry,
horticulture, floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation,
bee raising and farming plantation products), or from any other primary activity or
service which promotes the interest of the farmers or consumers; or
(ii) produce of persons engaged in handloom, handicraft and other cottage industries;
(iii)any product resulting from any of the above activities, including by-products of
such products;
(iv)any product resulting from an ancillary activity that would assist or promote any
of the aforesaid activities or ‘anything ancillary thereto;
(v) any activity which is intended to increase the production of anything referred to in
sub-clauses (i) to (iv) or improve the quality thereof;
(j) "Producer" means any person engaged in any activity connected with or relatable
to any primary produce;
(k) "Producer Company" means a body corporate having objects or activities specified in
Rules under section 214 and registered as Producer Company under this Act;
(l) "Producer institution" means a Producer Company or any other institution having
only producer or producers or Producer Company or Producer Companies as its
member whether incorporated or not having any of the objects referred to in Rules
under section 214 and which agrees to make use of the services of the Producer
Company or Producer Companies as provided in its articles.
***************************************************
A management accountant is an ideal individual with critical tools to analyse and report on the strategic decisions of a producer.Since the producer is often under the influence of Nature(its vagaries)government(its patronising of a particular produce)Lending institution(funding produce)and market(studying demand pattern)Management accountant is a true agricultural accountant for he does not limit his area to collect data on receipts and payments.
The nature of business here demands trend forecasting,crop pattern suggestion based on nature based cost forecast,Produce or discard decision seasonally,Use of fertilizer and other material based on monsoon pattern where cost control can occur.
Costing of handloom products,sericulture etc is highly suggested since these companies operate on a thin margin.
Setting up internal control and periodical audit by management accountant will go a longway in energising these business in the longrun.
"Primary produce" means—
(i) produce of farmers, arising from agriculture (including animal husbandry,
horticulture, floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation,
bee raising and farming plantation products), or from any other primary activity or
service which promotes the interest of the farmers or consumers; or
(ii) produce of persons engaged in handloom, handicraft and other cottage industries;
(iii)any product resulting from any of the above activities, including by-products of
such products;
(iv)any product resulting from an ancillary activity that would assist or promote any
of the aforesaid activities or ‘anything ancillary thereto;
(v) any activity which is intended to increase the production of anything referred to in
sub-clauses (i) to (iv) or improve the quality thereof;
(j) "Producer" means any person engaged in any activity connected with or relatable
to any primary produce;
(k) "Producer Company" means a body corporate having objects or activities specified in
Rules under section 214 and registered as Producer Company under this Act;
(l) "Producer institution" means a Producer Company or any other institution having
only producer or producers or Producer Company or Producer Companies as its
member whether incorporated or not having any of the objects referred to in Rules
under section 214 and which agrees to make use of the services of the Producer
Company or Producer Companies as provided in its articles.
***************************************************
A management accountant is an ideal individual with critical tools to analyse and report on the strategic decisions of a producer.Since the producer is often under the influence of Nature(its vagaries)government(its patronising of a particular produce)Lending institution(funding produce)and market(studying demand pattern)Management accountant is a true agricultural accountant for he does not limit his area to collect data on receipts and payments.
The nature of business here demands trend forecasting,crop pattern suggestion based on nature based cost forecast,Produce or discard decision seasonally,Use of fertilizer and other material based on monsoon pattern where cost control can occur.
Costing of handloom products,sericulture etc is highly suggested since these companies operate on a thin margin.
Setting up internal control and periodical audit by management accountant will go a longway in energising these business in the longrun.
Management Accounting and Corporate Governance.
Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.
Role of Management Accountant in Corporate Governance.
Management accountant collects, classifies, generates information that helps management (The Board of Directors)to take vital and strategic decision which was not possible with the help of traditional Financial accountants.
Management Accountants are equipped with the tools that are required to steer an organization out of Bottlenecks.
Corporate Governance is the whole lot of activities carried out by persons who are vested with the power to define and steer the Path of the organization. It is the Stakeholders who have reposed confidence in the Governors(Directors) to take strategic decisions and also oversee the path of the Target they had designed(Mapped).
Factors that are common for Corporate Collapse:
1.Failure to ascertain information, Adequate enough ,Required to take a decision.
2.Failure of introspection and also to questioning the decisions taken.
3.Clear and Consistent Yardstick for measurement.
4.Weak Accounting and Management Accounting systems.-Risk-Return analysis Management Accountants role.
5.Inaccurate Cash-flow projections etc.
Though the list cannot be exhaustive it is clear that the collapse occurs mostly due to internal weakness rather than external causes.
Australian Stock exchange for instance has 10 point prescription for Corporate governance:
1.Recognise and Publish Board charter –Respective roles and responsibilities of the Board and the management.
2.Effective composition of the Board-Knowledge/Understanding/Independence.
3.Promote Ethics and responsibility in decision making.
4.Establish structure to independently certify financial reporting-CFO.Management Accountant Ideally.
5.Timely and balanced reporting of all material matters concerning the company.
6.Respect the rights of the shareholders and facilitate the exercise of the same.
7.Establish Risk oversight and management and internal control.-ERM a tool of Management Accounting.
8.Formally review and encourage board and management effectiveness.
9.Remuneration and responsibility matching.
10.Recognise legal and other obligation to stakeholders.
The Role of Strategic Audit in corporate Governance and management Accountants Role:
Audit of management strategies and initiatives is an important tool in the hand of Management Accountant.Management Accountant with his constant search for improvement in product,processes and income generation is in an ideal position to Review strategies and advice management .Management Accountant as a member of Audit committee can render valuable advice in decision making when alternatives come to the with proper risk-return analysis.Management Accountant has to establish proper systems and control of monitoring Costs and also study external environment that will add value to the business and sustain the business in the long-run.
Maintaining of Cost Records and auditing of the same on annual basis will help the nation in more-ways than one.Strategic Cost Accounting shall involve that part of Management Accounting that enables stakeholder realize optimum in a given situation by analyzing revenues with alternatives available for the product and suggesting a mix of receipts to sales and marketing department.A mix of good internal control(followed by Internal Audit),Financial Audit,Cost Audit, and management audit is a must with each focusing on core aspect of responsiveness to stakeholders.
To sum up management audit in Indian context will try to Unknot the conflicting interest of strategic decision suggest ways and means of Maximising revenue help constantly in providing information required to make strategic decisions.While doing so it will keep in mind the social responsibility,National commitments and environmental aspects in place.
Role of Management Accountant in Corporate Governance.
Management accountant collects, classifies, generates information that helps management (The Board of Directors)to take vital and strategic decision which was not possible with the help of traditional Financial accountants.
Management Accountants are equipped with the tools that are required to steer an organization out of Bottlenecks.
Corporate Governance is the whole lot of activities carried out by persons who are vested with the power to define and steer the Path of the organization. It is the Stakeholders who have reposed confidence in the Governors(Directors) to take strategic decisions and also oversee the path of the Target they had designed(Mapped).
Factors that are common for Corporate Collapse:
1.Failure to ascertain information, Adequate enough ,Required to take a decision.
2.Failure of introspection and also to questioning the decisions taken.
3.Clear and Consistent Yardstick for measurement.
4.Weak Accounting and Management Accounting systems.-Risk-Return analysis Management Accountants role.
5.Inaccurate Cash-flow projections etc.
Though the list cannot be exhaustive it is clear that the collapse occurs mostly due to internal weakness rather than external causes.
Australian Stock exchange for instance has 10 point prescription for Corporate governance:
1.Recognise and Publish Board charter –Respective roles and responsibilities of the Board and the management.
2.Effective composition of the Board-Knowledge/Understanding/Independence.
3.Promote Ethics and responsibility in decision making.
4.Establish structure to independently certify financial reporting-CFO.Management Accountant Ideally.
5.Timely and balanced reporting of all material matters concerning the company.
6.Respect the rights of the shareholders and facilitate the exercise of the same.
7.Establish Risk oversight and management and internal control.-ERM a tool of Management Accounting.
8.Formally review and encourage board and management effectiveness.
9.Remuneration and responsibility matching.
10.Recognise legal and other obligation to stakeholders.
The Role of Strategic Audit in corporate Governance and management Accountants Role:
Audit of management strategies and initiatives is an important tool in the hand of Management Accountant.Management Accountant with his constant search for improvement in product,processes and income generation is in an ideal position to Review strategies and advice management .Management Accountant as a member of Audit committee can render valuable advice in decision making when alternatives come to the with proper risk-return analysis.Management Accountant has to establish proper systems and control of monitoring Costs and also study external environment that will add value to the business and sustain the business in the long-run.
Maintaining of Cost Records and auditing of the same on annual basis will help the nation in more-ways than one.Strategic Cost Accounting shall involve that part of Management Accounting that enables stakeholder realize optimum in a given situation by analyzing revenues with alternatives available for the product and suggesting a mix of receipts to sales and marketing department.A mix of good internal control(followed by Internal Audit),Financial Audit,Cost Audit, and management audit is a must with each focusing on core aspect of responsiveness to stakeholders.
To sum up management audit in Indian context will try to Unknot the conflicting interest of strategic decision suggest ways and means of Maximising revenue help constantly in providing information required to make strategic decisions.While doing so it will keep in mind the social responsibility,National commitments and environmental aspects in place.
Standards on Cost Accounting issued in Canada-List
Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.
Role of Management Accountant in Corporate Governance.
Management accountant collects, classifies, generates information that helps management (The Board of Directors)to take vital and strategic decision which was not possible with the help of traditional Financial accounting.
Management Accountants are equipped with the tools that are required to steer an organization out of Bottlenecks.
Corporate Governance is the whole lot of activities carried out by persons who are vested with the power to define and steer the Path of the organization. It is the Stakeholders who have reposed confidence in the Governors(Directors) to take strategic decisions and also oversee the path of the Target they had designed(Mapped).
Factors that are common for Corporate Collapse:
1.Failure to ascertain information, Adequate enough ,Required to take a decision.
2.Failure of introspection and also to questioning the decisions taken.
3.Clear and Consistent Yardstick for measurement.
4.Weak Accounting and Management Accounting systems.-Risk-Return analysis Management Accountants role.
5.Inaccurate Cash-flow projections etc.
Though the list cannot be exhaustive it is clear that the collapse occurs mostly due to internal weakness rather than external causes.
Australian Stock exchange for instance has 10 point prescription for Corporate governance:
1.Recognise and Publish Board charter –Respective roles and responsibilities of the Board and the management.
2.Effective composition of the Board-Knowledge/Understanding/Independence.
3.Promote Ethics and responsibility in decision making.
4.Establish structure to independently certify financial reporting-CFO.Management Accountant Ideally.
5.Timely and balanced reporting of all material matters concerning the company.
6.Respect the rights of the shareholders and facilitate the exercise of the same.
7.Establish Risk oversight and management and internal control.-ERM a tool of Management Accounting.
8.Formally review and encourage board and management effectiveness.
9.Remuneration and responsibility matching.
10.Recognise legal and other obligation to stakeholders.
The Role of Strategic Audit in corporate Governance and management Accountants Role:
Audit of management strategies and initiatives is an important tool in the hand of Management Accountant.Management Accountant with his constant search for improvement in product,processes and income generation is in an ideal position to Review strategies and advice management .Management Accountant as a member of Audit committee can render valuable advice in decision making when alternatives come to the with proper risk-return analysis.Management Accountant has to establish proper systems and control of monitoring Costs and also study external environment that will add value to the business and sustain the business in the long-run.
Maintaining of Cost Records and auditing of the same on annual basis will help the nation in more-ways than one.Strategic Cost Accounting shall involve that part of Management Accounting that enables stakeholder realize optimum in a given situation by analyzing revenues with alternatives available for the product and suggesting a mix of receipts to sales and marketing department.A mix of good internal control(followed by Internal Audit),Financial Audit,Cost Audit, and management audit is a must with each focusing on core aspect of responsiveness to stakeholders.
To sum up management audit in Indian context will try to Unknot the conflicting interest of strategic decision suggest ways and means of Maximising revenue help constantly in providing information required to make strategic decisions.While doing so it will keep in mind the social responsibility,National commitments and environmental aspects in place.
(Compiled text)
Role of Management Accountant in Corporate Governance.
Management accountant collects, classifies, generates information that helps management (The Board of Directors)to take vital and strategic decision which was not possible with the help of traditional Financial accounting.
Management Accountants are equipped with the tools that are required to steer an organization out of Bottlenecks.
Corporate Governance is the whole lot of activities carried out by persons who are vested with the power to define and steer the Path of the organization. It is the Stakeholders who have reposed confidence in the Governors(Directors) to take strategic decisions and also oversee the path of the Target they had designed(Mapped).
Factors that are common for Corporate Collapse:
1.Failure to ascertain information, Adequate enough ,Required to take a decision.
2.Failure of introspection and also to questioning the decisions taken.
3.Clear and Consistent Yardstick for measurement.
4.Weak Accounting and Management Accounting systems.-Risk-Return analysis Management Accountants role.
5.Inaccurate Cash-flow projections etc.
Though the list cannot be exhaustive it is clear that the collapse occurs mostly due to internal weakness rather than external causes.
Australian Stock exchange for instance has 10 point prescription for Corporate governance:
1.Recognise and Publish Board charter –Respective roles and responsibilities of the Board and the management.
2.Effective composition of the Board-Knowledge/Understanding/Independence.
3.Promote Ethics and responsibility in decision making.
4.Establish structure to independently certify financial reporting-CFO.Management Accountant Ideally.
5.Timely and balanced reporting of all material matters concerning the company.
6.Respect the rights of the shareholders and facilitate the exercise of the same.
7.Establish Risk oversight and management and internal control.-ERM a tool of Management Accounting.
8.Formally review and encourage board and management effectiveness.
9.Remuneration and responsibility matching.
10.Recognise legal and other obligation to stakeholders.
The Role of Strategic Audit in corporate Governance and management Accountants Role:
Audit of management strategies and initiatives is an important tool in the hand of Management Accountant.Management Accountant with his constant search for improvement in product,processes and income generation is in an ideal position to Review strategies and advice management .Management Accountant as a member of Audit committee can render valuable advice in decision making when alternatives come to the with proper risk-return analysis.Management Accountant has to establish proper systems and control of monitoring Costs and also study external environment that will add value to the business and sustain the business in the long-run.
Maintaining of Cost Records and auditing of the same on annual basis will help the nation in more-ways than one.Strategic Cost Accounting shall involve that part of Management Accounting that enables stakeholder realize optimum in a given situation by analyzing revenues with alternatives available for the product and suggesting a mix of receipts to sales and marketing department.A mix of good internal control(followed by Internal Audit),Financial Audit,Cost Audit, and management audit is a must with each focusing on core aspect of responsiveness to stakeholders.
To sum up management audit in Indian context will try to Unknot the conflicting interest of strategic decision suggest ways and means of Maximising revenue help constantly in providing information required to make strategic decisions.While doing so it will keep in mind the social responsibility,National commitments and environmental aspects in place.
(Compiled text)
Tuesday, May 16, 2006
Role Of Management Accountant in software Business.
Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.
In the ever changing technology the upbeat industry today is software.While hardware may grow arithmatically it is software business that grows geometrically.
Peculiarity of the industry is that it is an Information science.
It enables flow of information,storage of vast data,it helps organise data,it enables conversions of divergent mode of communication and data into a common storage mode and arrange for reconversion or user friendly versions.
The key to the success of the business is Speed,compatibility-universal application,delivery as a end-to-end solution(short life cycle and piracy are grave issues).
Constant and continuous innovation.
The problem in the industry is today more software are available as open source but how to recover cost then to sustain in the business and open source affect related business.
Costing of software should be primarily addressed from the angle of Life-cycle of the product,global applicability,and the time it will take to revise versions and also stand test to competitive position in the industry.Earlier examples to this type of industry with thumb rule pricing is probably entertainment business.It always pays to have a well established costing system in this industry.
Management accountant can play a key role in identifying cost and suggesting mode and method of recovery.
A schematic costing system will ensure right price for right product and avoid early recovery approach which is the thumb rule now and make the consumers ready to take these softwares and avoid opensource.
I think the software industry should understand the benefit of hiring a management accountant for this purpose.
In the ever changing technology the upbeat industry today is software.While hardware may grow arithmatically it is software business that grows geometrically.
Peculiarity of the industry is that it is an Information science.
It enables flow of information,storage of vast data,it helps organise data,it enables conversions of divergent mode of communication and data into a common storage mode and arrange for reconversion or user friendly versions.
The key to the success of the business is Speed,compatibility-universal application,delivery as a end-to-end solution(short life cycle and piracy are grave issues).
Constant and continuous innovation.
The problem in the industry is today more software are available as open source but how to recover cost then to sustain in the business and open source affect related business.
Costing of software should be primarily addressed from the angle of Life-cycle of the product,global applicability,and the time it will take to revise versions and also stand test to competitive position in the industry.Earlier examples to this type of industry with thumb rule pricing is probably entertainment business.It always pays to have a well established costing system in this industry.
Management accountant can play a key role in identifying cost and suggesting mode and method of recovery.
A schematic costing system will ensure right price for right product and avoid early recovery approach which is the thumb rule now and make the consumers ready to take these softwares and avoid opensource.
I think the software industry should understand the benefit of hiring a management accountant for this purpose.
Monday, May 15, 2006
Role Of Management Accountant in Insurance Business.
Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.
Insurance Industry in india until recently had been completely owned by government of India.
The nature of the Industry is that it acts on Uberrima fidae (utmost good faith)and tries to make good the loss of the one who insures risk.
Primarily Insurance was of two types one that covers Life risk and the other all risks other than life.
With liberalisation and transfering of insurance into private hands insurance business has delivered more innovative products like investment based risk cover.Primarily this is to generate funds for the industry but has mutual benefits.
An insurance product has the following cost components:
1.Cost of selling the product designed(one time cost and recurring resulting in discounted premium).
2.Cost of administration of the funds.
3.Cost of settling claims(survey and assessment).
4.Management and general administration.
The quantum of premium determination depends on the risk involved that is under cover ,probability of occurance ,of such risk, overboard and the costs above mentioned.
A management accountant is a business analyst primarily and an accountant at the bottomline so he is in the right position to help the insurance company to collect analyse and generate reports to the management on the Cost-benefit of an insurance product and a good Cost-management system will go a long way in guiding the sustenance of insurance business.
Insurance Industry in india until recently had been completely owned by government of India.
The nature of the Industry is that it acts on Uberrima fidae (utmost good faith)and tries to make good the loss of the one who insures risk.
Primarily Insurance was of two types one that covers Life risk and the other all risks other than life.
With liberalisation and transfering of insurance into private hands insurance business has delivered more innovative products like investment based risk cover.Primarily this is to generate funds for the industry but has mutual benefits.
An insurance product has the following cost components:
1.Cost of selling the product designed(one time cost and recurring resulting in discounted premium).
2.Cost of administration of the funds.
3.Cost of settling claims(survey and assessment).
4.Management and general administration.
The quantum of premium determination depends on the risk involved that is under cover ,probability of occurance ,of such risk, overboard and the costs above mentioned.
A management accountant is a business analyst primarily and an accountant at the bottomline so he is in the right position to help the insurance company to collect analyse and generate reports to the management on the Cost-benefit of an insurance product and a good Cost-management system will go a long way in guiding the sustenance of insurance business.
Sunday, May 14, 2006
Management Accountant as a Financial Planner.
Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.
With the development of Capital markets(Globally)and alsoRegulatory funds(pension fund etc)Mutual funds and merchant banking divisions and various other financial products the industry has been seriously in search for financial planners .
Here is where the role management accountants in this new dimension will prove quite helpful.Management accountant with his focus on value addition concentrates on Cost-benefit relation.
Portfolio management involves managing the cost of investment,analysing trends of movement of the portfolio-Risk return analysis,The frequency of re-parking at a given point in time to optimise return,Opportunities of covering risks(analysis of the same-say adopting hedging/futures etc),deciding on the quantum to be dislodged from the portfolio for reinvestment. So primarily these involves Cost-risk-return study and Management accountant possess the required skills to provide solutions to these situations more than any other brand of accountant or financial planners.
With the development of Capital markets(Globally)and alsoRegulatory funds(pension fund etc)Mutual funds and merchant banking divisions and various other financial products the industry has been seriously in search for financial planners .
Here is where the role management accountants in this new dimension will prove quite helpful.Management accountant with his focus on value addition concentrates on Cost-benefit relation.
Portfolio management involves managing the cost of investment,analysing trends of movement of the portfolio-Risk return analysis,The frequency of re-parking at a given point in time to optimise return,Opportunities of covering risks(analysis of the same-say adopting hedging/futures etc),deciding on the quantum to be dislodged from the portfolio for reinvestment. So primarily these involves Cost-risk-return study and Management accountant possess the required skills to provide solutions to these situations more than any other brand of accountant or financial planners.
Saturday, May 13, 2006
Economics of Money and Material.
Economics of Money and Material.
Management Accountant-an accountant of the future for Governance-Both Corporate world and the GovernmentGive and Take Economics-Can we Do away, with proper (Resource Mobilisation and Utilisation Mechanism.)Skewing of Money with Goods and Service
Monetary and Fiscal Policy Review.
Money policy=Supply of Money and Interest Rates.
Fiscal policy=Tax and Non-tax Revenue and currently disinvestment of assets.
Indian Economy
1.Population.2.Demographic Spread.3.Community Imbalance.4.Demand Gap.5.SupplyGap.6.Role of Government.7.TraditionalMoney and fiscal policy and Ramification8.New Approach.
Population.
•When we think of Money we have properties like -Medium,Measure,Standard,and Store.
•When we Think of Goods and Services we have Properties like –Consumption,Generation(Value addition),Destruction.
•When we Talk of Population we Have properties like- Purchasing Power,Disparity in Income and consumption Levels.
•All these Parameters are primary for giving directions to the economy.
Demographic Spread.
•Space of a Polity is varied from surplus to deficit and the populace also is spread across the land in a pattern from plenty to scarcity.
•Money is also spread ununiformly from plenty to scarcity.Money theory that so long as money is issued for production of wealth there is no inflation is an ideal .Economics of Imperfection partends theory and falsify economic principles.
•Goods and services are also impacted by erratic distribution.
Community Imbalance.
•Population also impacted apart from demography the community of plenty and community of Pauperity.
•Money also do not circulate and is cornered and linear equation of multiplier effect cannot be established where Hoard money is sometimes equal to circulated money.
•Goods and services are subject to artificial scarcity often and linear model of demand- supply is only ideal.
Demand Gap.
•Resource Mobilisation is a technique of filling the Demand Gap.
•Economies of deficit are often economies of surpluses.This imperfection is because of lack of identification and allocation.
Supply Gap.
•Resource deliverance is opposite to Mobilisation where Resource available wait for consumption.
•Matching of surplus with deficit is often not attempted.
Role Of Government.
•Government has Greater Role to play in resource assessment .
•Money theory that supply of money is equated with production of goods and services should be scrupulously employed and National Investment fund should be augmented with printing of notes and focused towards building additional capacity for production of goods and services.
•Money not in circulation is a waste since it circumvents multiplier theory and egalitarian distribution theory such moneys should be identified in terms of percentage.
•Taxes should not be the means of generating resources but a means of ensuring egalitarian distribution of circulating money by withdrawing the creamy portion from the haves and recirculating among the havenots.
Traditional money and fiscal policy Ramification.
•Money policy concentrates on readjusting inflation and interest rates.
•Fiscal Policy on public funding measures.
•These are good at macro economics in Ideal situation of perfect economy.
•New thrust areas should not on money and finance which is limitless for the economy but spread and idleness identification and hidden surplus in a deficit state.
New Approach.
•Resource Mobilisation should be on identification of net-surplus resources and channelising it to National investment.
•Identification of Non-performing money and estimating deviation and augmenting money supply to build resources.
•Taxes should be for identification and withdrawal of anticipated creamy money which will not perform linearly and redirecting it for performance.
•Thank you.
Resource Consumption Accounting
Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.
Unravelling Cost-Quantum Relation .
Cost Accounting-Ultimate Tool For Business.
•The underlying subtle fact is that everything converges to cost.
•“Consumption-Cost “is a linear equation
•Resources are the base for activity-Which in-turn involves cost.
•Cost is related to some parameter and that is consumption=per unit/per process.
Cost is not stand alone.
•In that it is not incurred without an objective/purpose.If so it can be charity but they do have a purpose though not for profit.
•Cost is for the means or the resources,to an end which may be profit making /discharging social responsibility/Charity for Gods sake to cleanse from sins.
Cost is for consumption as profit is out of such consumption.
•Profit is earned out of resources spent @ a cost.
•Tracking consumption will reduce cost.
•Channelising resources is cost control.
•Consumption monitoring and cost tracking are simultaneous and not in sequence they may overlap each gearing the other.
Cost Accountant has greater role to play.
•If cost is any indicative of performance to a company then resource consumption is indication of cost involvement .Cost accountant cannot be a meek spectator of cost books alone he should be a production planner and ineffect a cost engineer.
Cost Accountant-is a Cost Engineer.
Unravelling Cost-Quantum Relation .
Cost Accounting-Ultimate Tool For Business.
•The underlying subtle fact is that everything converges to cost.
•“Consumption-Cost “is a linear equation
•Resources are the base for activity-Which in-turn involves cost.
•Cost is related to some parameter and that is consumption=per unit/per process.
Cost is not stand alone.
•In that it is not incurred without an objective/purpose.If so it can be charity but they do have a purpose though not for profit.
•Cost is for the means or the resources,to an end which may be profit making /discharging social responsibility/Charity for Gods sake to cleanse from sins.
Cost is for consumption as profit is out of such consumption.
•Profit is earned out of resources spent @ a cost.
•Tracking consumption will reduce cost.
•Channelising resources is cost control.
•Consumption monitoring and cost tracking are simultaneous and not in sequence they may overlap each gearing the other.
Cost Accountant has greater role to play.
•If cost is any indicative of performance to a company then resource consumption is indication of cost involvement .Cost accountant cannot be a meek spectator of cost books alone he should be a production planner and ineffect a cost engineer.
Cost Accountant-is a Cost Engineer.
Maintenance of Cost records and periodical Audit-Relevance in Globalised environment.
Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.
There has been a strong debate around as to whether Cost records and Audit of the same has relevance in India in the liberalised economy.This has stemed from the fact that Cost Audit has already been seen in isolation.
The GOI feels that it has the exclusive right on Cost Audit,The Industry feels that the exercise is unnecessary and subserve its interest,Though industry agrees to have a proper Cost Management system in place they are averse of Auditing for obvious reasons.However Cost records and scrutiny of the same have evolved over the years and its utility has got stabilised.
The vision of the government has been that Cost Audit is relevant for Administrative controls on the industry functioning and that is the reason still Cost audit is ordered for products not for business.Industry is apprehensive that its production and process secrets will be leaked in the name of Cost Audit.
Industry however recognises the importance of a well established cost management system .
Basically any economy can be classified as Planned(Plan Driven) economy and an Free economy(where the market force drives the economic growth).They are loosely categorised as communist and capitalist economy.India has adopted middle path and accepted Mixed economy where private enterprise had a controlled growth.
While financial accounting records the transaction as Revenue,expenditure,Deferred/Capital spending, it is Cost accounting that identifies the importance analysing Cost and driving its efficiency to the last mile.It is cost accounting that recovers and studies the efficiency aspect of value addition.
The focus is shifted from cash profits ,to how such cash profits are earned and whether there is scope for improvement(Cost Engineering).
Globalisation of the economy means removing controls(Tarriff barriers) on movement of goods and services.Now this in essence means the most efficient producer across the world will rule over the product or services whether by operating from a single location(where transportation logistics come into play)or multi locational(Strategic placement of production and service facility).Efficiency is triggered by Cost control and reduction(Cost engineering),for this, records have to be generated and system put in place to identify, classify,and analyse costs to trigger efficiency of produce and service.In this sense no Government in the globalised economic activity can afford to neglect Cost Data ,so also no Industrialist will like to be left in the lurch ,with only financial data which do not talk about efficiency parameters.The policies and decisions of the global corporates are impacted with many issues, but the focus had been only on foriegn currency differentials while Cost of production and services took to the back burner, with protectionism, but with liberalisation of the economy and the concept of patronising all as against some, will compel the industry to rethink on Cost issues.
Liberalisation also means government is trying to drag itself out of business and business controls this being the case a question may arise why should the government still hang on to controlling Cost Auditors and their report.Answer is partly government should relook the entire issue and allow appointment of Cost auditor directly by the AGM and the auditor shall furnish the report of cost audit to the management of the Company .The government may instead call for classified reports or sections of such report from the management instead of the current practice of cost auditor furnishing the report to the government.This will allow lot of innovation in the functioning of Cost auditor,build confidence in the management and improve corporate governance.
Practically Liberalisation has brought us to an earlier situation where every industry is now being monitored ny the government through pricing authority.So in essence Mixed economy is retained and globalised while pure capitalist economy have witnessed change as a shift to mixed economic status and communist have breathed fresh air of capitalism it is India that has been stable for 50 years and its vision is not defeated.
The concept of stake holder,Corporate social responsibilty and triple bottomline all points to the narrowness in approach of financial statements.While Monopolies commision had been re-named as competition commision to suit the global needs and consumers awareness have resulted in many enactments,Cost as a prime value driver(Use,Esteem,Exchange,Cost) cannot be ignored.
Since any economic activity in a democratic setup is for and on behalf of all the citizens the myopic vision of restricting the performance indicators to owners will hardly sell for long.Every citizen have been defined as equal sharing unit in the geographical boundaries of a democratic set up reposed by adult franchise and they have all the right to know the value drivers of the entire economic activity.It is the responsibility of the representatives of the people in the legislature to ensure this happens.
Cost Management Group-Governance in Government
Management Accountant-an accountant of the future for Governance-Both Corporate world and the Government.
•Recognition of Cost of Governance.
•Segregation of Planning and Cost management.
•Importance of Cost to Govern citizens
•CBA in Government.
•Cost based governance.
•Cost-Benefit analysis should form the basis of Government decisions primarily and not emotional factors though cost can be overrun with valid reasons to be recorded in writing.
•Cost of running Government Machinery.(Executive/Legislature and Judiciary-Tapering right down to Panchayat)
•Cost of social schemes Vis-Vis Benefits that accrue.
•Revenue Accretion Tax and Non-Tax and related cost involved.
•Cost of national Development expenditure.
•Cost of Defence.
•Cost of policies that are legislated.(Impact cost for the economy.
•Relative cost of international policy impact.
•Direct and indirect cost of Governance
•Right to govern is not absolute in democracy.It is related with many factors prime among them is cost.
•Cost of governance is passed on to citizens.
•Responsibility to avoid Wastes.
•Planning exercise should be segregated from cost visualisation.
•Focus on cost management through budgeting and varience analyses.
•Planning Failures to be analysed on time and cost overruns.
•Non-Starters to be critically reviewed to segregate plan mismatch with cost
•Every thing is @ a cost ignoring cost means Neglecting economic progress.
•Recognition of Cost of Governance.
•Segregation of Planning and Cost management.
•Importance of Cost to Govern citizens
•CBA in Government.
•Cost based governance.
•Cost-Benefit analysis should form the basis of Government decisions primarily and not emotional factors though cost can be overrun with valid reasons to be recorded in writing.
•Cost of running Government Machinery.(Executive/Legislature and Judiciary-Tapering right down to Panchayat)
•Cost of social schemes Vis-Vis Benefits that accrue.
•Revenue Accretion Tax and Non-Tax and related cost involved.
•Cost of national Development expenditure.
•Cost of Defence.
•Cost of policies that are legislated.(Impact cost for the economy.
•Relative cost of international policy impact.
•Direct and indirect cost of Governance
•Right to govern is not absolute in democracy.It is related with many factors prime among them is cost.
•Cost of governance is passed on to citizens.
•Responsibility to avoid Wastes.
•Planning exercise should be segregated from cost visualisation.
•Focus on cost management through budgeting and varience analyses.
•Planning Failures to be analysed on time and cost overruns.
•Non-Starters to be critically reviewed to segregate plan mismatch with cost
•Every thing is @ a cost ignoring cost means Neglecting economic progress.
Role Of Management Accountant in Tax Audit-Ideal individual for Auditing Accounts for direct tax collection.
Financial accounts has a singular goal of drawing profits out of all incomes by way of charging all expenses. Its classification is simply whether an item is a capital/revenue/deferred revenue .That is the crux of the financial statements is to match Income with expenditure to arrive at surplus or deficit.
Cost accounting is based on classification of expenditure into Direct/indirect its concern is not profit-centric since it believes that such simplistic assumption misleads the efficiency of segments/sub segments of the organization .The financial accounts can get the owners caught napping by building castles without foundation. Cost accounting is truly a test of efficiency of the going concern and the dimensions of cost accounting are ever evolving.Efficiency of the business reflects in the national performance indicators.
When we talk interms of Tax collection we talk in terms of allowances and disallowances of items occurring in the financial statements .The allowances and disallowances are to be framed scrupulously keeping in mind development and the impact of its spread .A well established cost data will reflect on the betterment of tax collection. Infact the tax authorities are concerned with actual cost under the particular head and also in some cases whether such heads of expenditure are fanciful decorator or factual. This only shows that tax authorities are at varience with financial accounting and its policies of classification of expenditure.A Management accountant is in a better position to interpret on Closing stock valuation which is an important component of profit valuation. A Management accountant again is in a better position to interpret Asset valuation its position in depreciation etc for linear method of valuation is not the goal of Tax authorities. A cost accountant is again in a better position to check the various allowances(investment) are being properly granted.
Tax revenue goes to the exchequer to finance development needs(socio-economic) of the economy.A tax payer is under obligation to pay for the rights he enjoyed to earn the revenue.The concept of egalitarianism is linked in levying taxes as well.
Basically the concept of cost is hidden in tax laws for allowance and disallowances of income and expenditure and this is where Taxman have to avail the services of Management accountant .
Cost accounting is based on classification of expenditure into Direct/indirect its concern is not profit-centric since it believes that such simplistic assumption misleads the efficiency of segments/sub segments of the organization .The financial accounts can get the owners caught napping by building castles without foundation. Cost accounting is truly a test of efficiency of the going concern and the dimensions of cost accounting are ever evolving.Efficiency of the business reflects in the national performance indicators.
When we talk interms of Tax collection we talk in terms of allowances and disallowances of items occurring in the financial statements .The allowances and disallowances are to be framed scrupulously keeping in mind development and the impact of its spread .A well established cost data will reflect on the betterment of tax collection. Infact the tax authorities are concerned with actual cost under the particular head and also in some cases whether such heads of expenditure are fanciful decorator or factual. This only shows that tax authorities are at varience with financial accounting and its policies of classification of expenditure.A Management accountant is in a better position to interpret on Closing stock valuation which is an important component of profit valuation. A Management accountant again is in a better position to interpret Asset valuation its position in depreciation etc for linear method of valuation is not the goal of Tax authorities. A cost accountant is again in a better position to check the various allowances(investment) are being properly granted.
Tax revenue goes to the exchequer to finance development needs(socio-economic) of the economy.A tax payer is under obligation to pay for the rights he enjoyed to earn the revenue.The concept of egalitarianism is linked in levying taxes as well.
Basically the concept of cost is hidden in tax laws for allowance and disallowances of income and expenditure and this is where Taxman have to avail the services of Management accountant .
Role Of Management Accountant in Banking Industry.
A management Accountant is vital individual for any organisation in that he is person who focusses attention on Value generation be it Cost or exchange.
Unlike a general financial accountant who has focus of recording transactions and presenting statements of finance a Management Accountant involves himself in Processes that drives value .So a management accountant though retains necessarily Accountant brand as he possesses the skills of a general financial accountant additionally delivers that extra bit needed by the management to take decisions on vital internal and external parameters that drives value.He thus speaks what an accountant or the barren documents do not do ,he also speaks what a floor team(technical) does and what it ought to ,to earn the Optimum value.
In this back drop letus see what a management accountant has in store for Banking Industry.
A Banking Industry is basically the financial Backbone of the economy and its prime structure Begins with Central Bank,The lead Banks,Commerical Banks,Private Banks,Focussed financial institutions,Capital markets,Non-Banking financial intermediaries,and others.
The definition of a bank is Accepting for the purpose of lending and investment.Be it treasury operations,Forex,project financing,Social banking,the bank is expected to abide by that conventional definition.
A bank always is in hunt for money and this it gets through various routes Deposits,Call money,Recoveries out of credit,International funding channels etc.
A bank is also in the hunt for borrowers of its idle funds.
In essence banks operate on differential revenues(Lending rate- Deposit rates).
Both these involve risks and matching risk to return is the bottom line strength of a Management Accountant.
The dynamics in Banking Industry needs constant monitoring and advise of the Portfolio risks.
Funds can be directly linked to projects but sometimes not.
Unsecured credits have been heavy risk area and usually high return zone.
Though Banking industry is heavily controlled in favour of depositors often the inbuilt cost of services or never revealed and probably not studied in a structure manner that sometimes banks are caught napping and at other times the depositors bear the burden.
Financial Accounting miserably fails in such type of analysis and hence the stakeholders are put to loss often.
Effective Cost management system will protect the interest of all concerned.
Banks now have come up with various products and services which needs costing and constant review.
NPA of the banks are better controlled with good cost-management system in place.
Depositors are often cheated in portfolio mismatch and they have to bear the loss of cross subsidisation.
Fixation of interest rate shall also take into consideration the cost data of each particualr banks once the cost management system is strengthened.
Unlike a general financial accountant who has focus of recording transactions and presenting statements of finance a Management Accountant involves himself in Processes that drives value .So a management accountant though retains necessarily Accountant brand as he possesses the skills of a general financial accountant additionally delivers that extra bit needed by the management to take decisions on vital internal and external parameters that drives value.He thus speaks what an accountant or the barren documents do not do ,he also speaks what a floor team(technical) does and what it ought to ,to earn the Optimum value.
In this back drop letus see what a management accountant has in store for Banking Industry.
A Banking Industry is basically the financial Backbone of the economy and its prime structure Begins with Central Bank,The lead Banks,Commerical Banks,Private Banks,Focussed financial institutions,Capital markets,Non-Banking financial intermediaries,and others.
The definition of a bank is Accepting for the purpose of lending and investment.Be it treasury operations,Forex,project financing,Social banking,the bank is expected to abide by that conventional definition.
A bank always is in hunt for money and this it gets through various routes Deposits,Call money,Recoveries out of credit,International funding channels etc.
A bank is also in the hunt for borrowers of its idle funds.
In essence banks operate on differential revenues(Lending rate- Deposit rates).
Both these involve risks and matching risk to return is the bottom line strength of a Management Accountant.
The dynamics in Banking Industry needs constant monitoring and advise of the Portfolio risks.
Funds can be directly linked to projects but sometimes not.
Unsecured credits have been heavy risk area and usually high return zone.
Though Banking industry is heavily controlled in favour of depositors often the inbuilt cost of services or never revealed and probably not studied in a structure manner that sometimes banks are caught napping and at other times the depositors bear the burden.
Financial Accounting miserably fails in such type of analysis and hence the stakeholders are put to loss often.
Effective Cost management system will protect the interest of all concerned.
Banks now have come up with various products and services which needs costing and constant review.
NPA of the banks are better controlled with good cost-management system in place.
Depositors are often cheated in portfolio mismatch and they have to bear the loss of cross subsidisation.
Fixation of interest rate shall also take into consideration the cost data of each particualr banks once the cost management system is strengthened.
Role Of Management Accountant in Internal Audit.
Internal Audit is basically Scrutiny and review of Functions and Controls of the organisation by Studying and checking the System and process flow through procedures established and reassuring the management and stakeholders that there is adequate Internal controls by way of checks and balances and the process flow is sufficient to deliver optimum value to the Investments.
Enterprise risks are related to the decisions of the management to earn value.
Enterprise risks control is achieved by well established CFT(cross functional team)who constantly identify ,review and monitor Potential threats in process and policies.A management Accountant is vital individual and possess the necessary skill to lead an Internal Audit team and certify the management report on Internal audit.
As against a general financial accountant whose skill is preoccupied in booking revenue and expenditure and preparation of financial statements a qualified Management Accoutant is ideal in assessing the Document flow/Process or service flow/Synergise with reengineering of these flows with technical team and generate a periodical report for the management on the internal controls .
Internal Audit by a management accountant should begin with :
1.Identification of activity centres.
2.Identification of Flow/Path that generate intermediate value to final value for stake holders.
3.Identifying the network and critical path in the flow.
4.Segregating Process/service flow from documents flow.
5.Matching of documents and process/service.
6.Identifying Human interference and system energised activities.
7.Identifying Potential risks and costs involved.
8.Identifying and establishing Controls through checks and balances.
9.Periodical assessment and suggestion for re-engineering of process/service or documents strengtheningor systems or human vigilance.
10.Internal audit also extends to the area of system development cycle and system audit is a subset of internal audit.
11.Internal audit also attacks efficiency area where a management accountant already is dosed in the Cost accountant and efficiency auditor.As an internal auditor he will play a complimentary role for Value addition to stake holders.
Ideally Organisation should be confident in appointing a Qualified Management Accountant for Internal Audit as he possess necessary skills in the area.
Enterprise risks are related to the decisions of the management to earn value.
Enterprise risks control is achieved by well established CFT(cross functional team)who constantly identify ,review and monitor Potential threats in process and policies.A management Accountant is vital individual and possess the necessary skill to lead an Internal Audit team and certify the management report on Internal audit.
As against a general financial accountant whose skill is preoccupied in booking revenue and expenditure and preparation of financial statements a qualified Management Accoutant is ideal in assessing the Document flow/Process or service flow/Synergise with reengineering of these flows with technical team and generate a periodical report for the management on the internal controls .
Internal Audit by a management accountant should begin with :
1.Identification of activity centres.
2.Identification of Flow/Path that generate intermediate value to final value for stake holders.
3.Identifying the network and critical path in the flow.
4.Segregating Process/service flow from documents flow.
5.Matching of documents and process/service.
6.Identifying Human interference and system energised activities.
7.Identifying Potential risks and costs involved.
8.Identifying and establishing Controls through checks and balances.
9.Periodical assessment and suggestion for re-engineering of process/service or documents strengtheningor systems or human vigilance.
10.Internal audit also extends to the area of system development cycle and system audit is a subset of internal audit.
11.Internal audit also attacks efficiency area where a management accountant already is dosed in the Cost accountant and efficiency auditor.As an internal auditor he will play a complimentary role for Value addition to stake holders.
Ideally Organisation should be confident in appointing a Qualified Management Accountant for Internal Audit as he possess necessary skills in the area.
Friday, May 12, 2006
Money Theory
Money Theory
Medium, measure, standard and store.Money in circulation has multiplier effect.Money printed is presumed to be money in deficit by virtue of non-circulation/improper-circulation/Hiding and genuine demand forgrowth.
Inflation will not result(too much money chasing too little goodsand services)if all monies are generating genuine growth in otherwords money is growth driven whether in circulation or underprinting. Objective assessment of requirement for saving and growthis utmost important for retaining value of money.
Money Vs Money
Demand for one money over the other arises out of contemporaryPolity as well as emerging globalization.People normally prefer one money over the other for reasons ofsuperiority, acceptability, availability, and the value it commandsacross Borders.
Monies vs Goods
Goods and services are driven by money and sometime monies for valueand relative superiority of one money over the other determines thebest value for the goods.Preference over monies has to balance between availability,acceptability,optimal value for goods and services.
Deciding Global Money.
This has been the subject matter of debate, political rivalry foratleast 100 years now from gold standard, to basket of currencies,to free float,to now choice of international currencies(euro-dollar)and now again to prefer Gold for Dollar.
Future of Rupee:
Rupee like any Currency has two facets 1.Internal. 2.International.
Internal:
Money in the economy should generate growth not only forproducing goods and services but also in empowering thepeople.Growth Big and Beyond without limits of money should be Buzzfor the Economist.Lateral growth of money preferred over vertical.Weneed more entrepreneur,more consumers(not population withoutpropensity to consume),More money above all.
International:
Rupee slide is linked to rupees dependence to anothermoney which again is dependent on Rupees inability or deficiency tocommand required goods and services internally vis-vis producingcompeting goods and services for exchange internationally.
Solution:
Produce competing goods and services for exchange to stabilize rupee.
Path:
Generate Money and Generate value for Money
Medium, measure, standard and store.Money in circulation has multiplier effect.Money printed is presumed to be money in deficit by virtue of non-circulation/improper-circulation/Hiding and genuine demand forgrowth.
Inflation will not result(too much money chasing too little goodsand services)if all monies are generating genuine growth in otherwords money is growth driven whether in circulation or underprinting. Objective assessment of requirement for saving and growthis utmost important for retaining value of money.
Money Vs Money
Demand for one money over the other arises out of contemporaryPolity as well as emerging globalization.People normally prefer one money over the other for reasons ofsuperiority, acceptability, availability, and the value it commandsacross Borders.
Monies vs Goods
Goods and services are driven by money and sometime monies for valueand relative superiority of one money over the other determines thebest value for the goods.Preference over monies has to balance between availability,acceptability,optimal value for goods and services.
Deciding Global Money.
This has been the subject matter of debate, political rivalry foratleast 100 years now from gold standard, to basket of currencies,to free float,to now choice of international currencies(euro-dollar)and now again to prefer Gold for Dollar.
Future of Rupee:
Rupee like any Currency has two facets 1.Internal. 2.International.
Internal:
Money in the economy should generate growth not only forproducing goods and services but also in empowering thepeople.Growth Big and Beyond without limits of money should be Buzzfor the Economist.Lateral growth of money preferred over vertical.Weneed more entrepreneur,more consumers(not population withoutpropensity to consume),More money above all.
International:
Rupee slide is linked to rupees dependence to anothermoney which again is dependent on Rupees inability or deficiency tocommand required goods and services internally vis-vis producingcompeting goods and services for exchange internationally.
Solution:
Produce competing goods and services for exchange to stabilize rupee.
Path:
Generate Money and Generate value for Money
Income Accounting-A New Dimension to 'Cost and Management Accountant'
Income Accounting-Inseparable to Cost accounting.A paradigm study.
Cost Accounting is Related to Study of Cost parameters to arrive at optimisation of revenue .There is dimension to the efficiency .
Income accounting is related to study of external factors that will fetch maximum revenues out of available opportunities.There is dimension again to earnings efficacy.
§ Income Accounting is a process of analysing and arriving at a choice of Maximising revenues from Opportunities.
§ While Cost Accounting Addresses Cost Minimisation issues.Management accounting Reposes Faith on effective reporting of management concerns on Opportunities and impact of management decisions.Financial management concerns with Risk-Return to optimise revenue.Financial Accounting Concerns matching of Revenues with Expenses.Income accounting is a system of Assessing “What if” and “Why Not” of opportunities of earnings.
Revenue Realisation is Impacted by market sentiments.
Differential pricing due to segmentation.
Opportunities of Globalisation.
Overall strength of the market that is addressed-Recovery aspect.
Market sentiments-Maxim “Right product,Right Time,Right Place”-Cost triggered Product mix issues.
Segmentation of market-Production related Sales decision as well as market expansion aim.
Emerging Global opportunities-Revenue of currency differentials.
Strength of revenue realisation in the market.
Did Cost Accounting Miss it?
Yes-Its focus had all along been Cost engineering in the process it neglected Income analysis.
Profit centre identification and segmentation of revenue to match with cost collection is one aspect and talking of Maximising through income-mix is another.
No-Cost accounting consisting of methods of accounting and its technique are sufficient to be extended to income-concept analysis.
Current Practices:
Off Balance-sheet approach:A decision to earn is often left to top management(The Board).Financial analysis comprising of IRR/NPV for capital investment decision.”Stabilised revenue” or “mean recovery” approach on the premise of Perfect competition-Seller sets the price and thus impacts Income ,approach is adopted.
Revenues do not reflect volatility of earning and opportunity availed to earn them.It is just a mere consolidation of receipts from area-wise/customer-wise/product-wise/Preference to sell –wise.
Do Income need break-down analysis and reflection in Integrated Cost-management system.Answer is yes!
Recognise Revenues as improvables.
Match revenues with cost.
Create Profit centres.
Use activity Based Cost-revenue matching.
Study Revenues from maximising perspective in coordination with sales department.
Revenues –Matrix.
Matching revenue with Cost-Cost accounting is identification classification and allocation of cost to product and processes as to arrive at true picture of Profit when matched with activity.The process is not complete without identification of cost centres,Profit centres and Activity centres where inflow and out flow can be matched.While Cost is broken-down to product and processes .Income should also be broken down into Opportunities and activity centres that are linked to profit centres should now be linked to new concept of Opportunity(for maximisation of revenue)centres cost should be prorated to find and concentrate on the best available opportunity –Eliminating bottlenecks to opportunity of earning higher revenues.
Matching of Opportunity centre with Cost.
§ An Opportunity centre is one from where the revenue is actually realised.
§ It could be with reference to a product a single product/similar product/Market/Customer/Place.
§ A single product is an Opportunity when it fetches revenues differently when focussed.
§ A similar product is one when it earns incremental revenue to the one normally produced.
§ A market in relation to product is one that generates incremental revenue when focussed.
§ A customer or group similarly enjoys incremental revenue status.
§ So is a place in relation to Product and resultant revenue
Constraints to Opportunity
§ Time of delivery and advantage to competitors.
§ Barriers of space-Political/inaccessible.
§ Perishable product itself.
§ Taxation.
§ Cost of transportation and logistics.
§ Cost of customer and market retention.
§ Threat of loosing next best and stable opportunities.
§ Loss of buffer in the long run(MRP and its related benefits).
Methods of Income accounting
§ Like methods of Costing-Job costing/process costing/contract-costing/lifecycle costing methods of Income depiction involves “single product many opportunities analysis”’Similar product best opportunity analysis”’Differential pricing for markets and customer analysis”.The accountal of these will be segmented with cost spread on the basis of actual sales realisation in case of each opportunities instead of “mean spread”earlier adopted and “activity spread method” currently used.
Techniques of Income accounting
§ The techniques of costing like marginal costing/Budgeting/Standard costing can be employed for revenue generation as well where standards of revenue can be fixed for a product based on expectation of yield and related cost incurred and realisation can be compared to ascertain whether the product continuance is justified.
§ Similarly Marginal revenue is the minimum required for sustenance of the product or that revenue required to continue with the opportunity in segmented condition
Conclusion
§ Income Accounting enables realistic assessment of Product sustainability.
§ It dispels the Notion that revenues are of a fixed pattern and probes into a possible improvement in maximising revenues.
§ It accepts the fact that revenues follow a complex structure as cost do.
§ It tries to classify revenues into opportunities and matches with related cost.
§ It is global in application for product and services where competition is matured
Cost Accounting is Related to Study of Cost parameters to arrive at optimisation of revenue .There is dimension to the efficiency .
Income accounting is related to study of external factors that will fetch maximum revenues out of available opportunities.There is dimension again to earnings efficacy.
§ Income Accounting is a process of analysing and arriving at a choice of Maximising revenues from Opportunities.
§ While Cost Accounting Addresses Cost Minimisation issues.Management accounting Reposes Faith on effective reporting of management concerns on Opportunities and impact of management decisions.Financial management concerns with Risk-Return to optimise revenue.Financial Accounting Concerns matching of Revenues with Expenses.Income accounting is a system of Assessing “What if” and “Why Not” of opportunities of earnings.
Revenue Realisation is Impacted by market sentiments.
Differential pricing due to segmentation.
Opportunities of Globalisation.
Overall strength of the market that is addressed-Recovery aspect.
Market sentiments-Maxim “Right product,Right Time,Right Place”-Cost triggered Product mix issues.
Segmentation of market-Production related Sales decision as well as market expansion aim.
Emerging Global opportunities-Revenue of currency differentials.
Strength of revenue realisation in the market.
Did Cost Accounting Miss it?
Yes-Its focus had all along been Cost engineering in the process it neglected Income analysis.
Profit centre identification and segmentation of revenue to match with cost collection is one aspect and talking of Maximising through income-mix is another.
No-Cost accounting consisting of methods of accounting and its technique are sufficient to be extended to income-concept analysis.
Current Practices:
Off Balance-sheet approach:A decision to earn is often left to top management(The Board).Financial analysis comprising of IRR/NPV for capital investment decision.”Stabilised revenue” or “mean recovery” approach on the premise of Perfect competition-Seller sets the price and thus impacts Income ,approach is adopted.
Revenues do not reflect volatility of earning and opportunity availed to earn them.It is just a mere consolidation of receipts from area-wise/customer-wise/product-wise/Preference to sell –wise.
Do Income need break-down analysis and reflection in Integrated Cost-management system.Answer is yes!
Recognise Revenues as improvables.
Match revenues with cost.
Create Profit centres.
Use activity Based Cost-revenue matching.
Study Revenues from maximising perspective in coordination with sales department.
Revenues –Matrix.
Matching revenue with Cost-Cost accounting is identification classification and allocation of cost to product and processes as to arrive at true picture of Profit when matched with activity.The process is not complete without identification of cost centres,Profit centres and Activity centres where inflow and out flow can be matched.While Cost is broken-down to product and processes .Income should also be broken down into Opportunities and activity centres that are linked to profit centres should now be linked to new concept of Opportunity(for maximisation of revenue)centres cost should be prorated to find and concentrate on the best available opportunity –Eliminating bottlenecks to opportunity of earning higher revenues.
Matching of Opportunity centre with Cost.
§ An Opportunity centre is one from where the revenue is actually realised.
§ It could be with reference to a product a single product/similar product/Market/Customer/Place.
§ A single product is an Opportunity when it fetches revenues differently when focussed.
§ A similar product is one when it earns incremental revenue to the one normally produced.
§ A market in relation to product is one that generates incremental revenue when focussed.
§ A customer or group similarly enjoys incremental revenue status.
§ So is a place in relation to Product and resultant revenue
Constraints to Opportunity
§ Time of delivery and advantage to competitors.
§ Barriers of space-Political/inaccessible.
§ Perishable product itself.
§ Taxation.
§ Cost of transportation and logistics.
§ Cost of customer and market retention.
§ Threat of loosing next best and stable opportunities.
§ Loss of buffer in the long run(MRP and its related benefits).
Methods of Income accounting
§ Like methods of Costing-Job costing/process costing/contract-costing/lifecycle costing methods of Income depiction involves “single product many opportunities analysis”’Similar product best opportunity analysis”’Differential pricing for markets and customer analysis”.The accountal of these will be segmented with cost spread on the basis of actual sales realisation in case of each opportunities instead of “mean spread”earlier adopted and “activity spread method” currently used.
Techniques of Income accounting
§ The techniques of costing like marginal costing/Budgeting/Standard costing can be employed for revenue generation as well where standards of revenue can be fixed for a product based on expectation of yield and related cost incurred and realisation can be compared to ascertain whether the product continuance is justified.
§ Similarly Marginal revenue is the minimum required for sustenance of the product or that revenue required to continue with the opportunity in segmented condition
Conclusion
§ Income Accounting enables realistic assessment of Product sustainability.
§ It dispels the Notion that revenues are of a fixed pattern and probes into a possible improvement in maximising revenues.
§ It accepts the fact that revenues follow a complex structure as cost do.
§ It tries to classify revenues into opportunities and matches with related cost.
§ It is global in application for product and services where competition is matured
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