Managerial Accounting 7 Food example essay topic

Simply stated, the financial accountant is the number cruncher while the managerial accountant is the analyzer. However, it is not that simple. Most experts are fairly consistent with their definitions of what the financial accounting entails, however, defining managerial accounting appears to be opinion dependent. As the population of the occupation grows so does the defined responsibilities involved. The general consensus of financial accounting is that it reports past results using historical-cost accounting. Financial accounting is backward-looking and sacrifices decision relevancy for objectivity (Bromwich, 1988, p. 26).

According to Answers. com accounting is defined as 'the bookkeeping methods involved in making a financial record of business transactions and in the preparation of statements concerning the assets, liabilities, and operating results of a business. When I envision an accountant I cannot help but see the squirrel ly little FBI CPA in 'the Untouchables', the one that took down Capone on tax evasion. I see stereotyped, the short, bawling guy with the genius IQ, in glasses, 'crunching' numbers in the adding machine. The Financial accountant or CFO is the head of the finance department that runs all the reports, puts all the numbers in, takes care of the assets, liabilities, payroll, and taxes.

The managerial accountant goes one step beyond by using the historical data compiled to make decisions for the present and future direction of the company. Managerial accountants are becoming more and more beneficial to companies and their future. Managerial Accounting 3 Managerial accountants have many definitions, with several very constant characteristics. Professor Michael Bromwich (1988) states that management accounting is 'future-oriented, is dynamic, produces forward looking figures and is meant to be decision and control relevant, should not be too concerned with objectivity and is not generally subject to external regulations' (p. 26).

In a message from the chair, Larry White (2005) states that management accounting is about building quality decision-support, planning, and control processes over the value-creating operations inside organizations. He believes the without strong internal processes and management, there is nothing for the capital markets to value or auditors to check (p. 6). He further states that inside a company is the only place in the economy where sustainable value is created; therefore, it should be a priority focus of the financial professionals. The most recent and widely accepted definition of management accounting comes from the International Federation of Accountants and is fully supported by the CIMA.

IFAC defines management accounting as: 'The process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of information (both financial and operating) used by management to plan, evaluate, and control within an organization and to assure use of and accountability for Managerial Accounting 4 its resources' (Bromwich, 1988, p. 27). Management accounting is used by management to plan, evaluate, control and assure accountability. Bromwich criticizes the definition as it is mostly concerned with compiling and communicating information and believes strongly that management accounting needs to be dynamic and forward-looking. To place the differences in perspective, financial accounting is historical based, compiling information for mostly external users where managerial accounting is more internally driven and forms opinions based on the financial accounting facts.

Managerial accounting isn't about just compiling information but rather analyzing it and then using it in making decisions. And here is the difference. Decision making, managerial accounting is about utilizing the information AND making decisions based on the analysis of the data. They are part of the management team and take part in management decisions that affect the future of the company.

In a previous discussion, Bromwich was quotes as stating that 'management accounting... should not be too concerned with objectivity and is not generally subject to external regulation. ' Contrary to Bromwich beliefs is the Institute of Management Accountants Standards of Ethical Conduct, which states four behaviors for all management accountants. The IMA holds Management accountants to the Managerial Accounting 5 highest standards of ethical conduct. The four standards of ethical conduct are Competence, Confidentiality, Integrity, and Objectivity. 1. Competence.

Managerial accountants have a responsibility to maintain an appropriate level of professional competence, perform their duties in accordance with laws, regulations and technical standards, and prepare reports and recommendations after analysis of relevant and reliable information. In the restaurant business management is held accountable for the unit's inventory, food costs and labor costs. It is important that the data provided is accurate and reliable. Falsifying information to make the 'numbers' look good can be detrimental to the operations of the unit. 2. Confidentiality.

It is the manager's responsibility to refrain from disclosing confidential information, informing subordinates appropriately in regards to confidentiality and to monitor activities to ensure compliance. Confidentiality agreements are part of the manager's paperwork. Agreements pertaining to salary, 'secret recipes' and procedure were signed and were expected to never be topics of idle conversation. 3. Integrity. Managerial accountants have a responsibility to avoid conflicts of interest and advise all parties of potential conflict.

They must refrain from engaging in any activity that would prejudice their ability to carry out their duties ethically and refuse any gift, favor, or hospitality that would influence or appear to influence their actions (web). In additional, managerial accountants Managerial Accounting 6 must refrain from sabotaging the attainment of the organizations legitimate and ethical objectives recognize and communicate professional limitations that would preclude responsible judgment or successful performance of an activity. Lastly, managerial accountants must refrain from engaging in any activity that would be detrimental to the profession. Managerial accountants must communicate negative as well as positive information and professional judgments or opinions. During my many years in the restaurant business we went from a time that it was okay to give police officers a free meal to nothing free. The perception of the free meal can be misinterpreted as a 'pay off' or 'kick back' for extra protection.

This also applied to firemen, EMS crew, and any other service personnel. 4. Objectivity. The last standard of ethical conduct is objectivity. Managerial accountants must communicate information fairly and objectively, disclosing all relevant information that could possibly influence understanding of reports, comments, and recommendations presented. When the reports are looked at objectively and all quantitative information is reported, they will assist the managerial accountant with the analysis of the data in everyday duties.

The propose of objectivity is to provide an analysis of the information as it was reported. When food costs are over the ideal, it is important to find out why and it is important that the information is gathered prior to accusing someone of theft or waste. Many times we had to lock the freezer to control who went in and out and with what. Food costs can be higher than the ideal if someone was stealing Managerial Accounting 7 food or throwing it away without management approval. Although food is never just thrown away, it is accountable and should be placed it a separate container until it can be entered into the system correctly. Therefore, it is not just reading the numbers but analyzing the why and making decisions to improve or find the solution.

The managerial accountant cannot complete his / her job without the data that the financial accountant is responsible for. In some organizations this can be the same individual or for security and auditing reasons the financial accountant can be an external party. Which ever way it is incorporated, both need to be present in some form or another to work for the best interests of the company. With the occupation of managerial accountants im merging rapidly, it became necessary to have ethical standards in place to control the behavior and expectations of behavior in the best interests of the company. Managerial Accounting 8

Bibliography

Bromwich, M. (1988, September).
Managerial accounting Definition and scope- from a managerial view. Financial Management. 66 (8), 26-27. Retrieved on August 26, 2005 from web T.
and Bull, R. (200). The great debate. Management Accounting, 78 (5), p. 32-33. Retrieved on August 28, 2005, from Proquest database.
Regional Commerce and Growth Commission. Institute of Management Accountants. (2000, January 13).
Standards of ethical conduct. Retrieved August 28, 2005, from web L.
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Moving management accounting forward. Strategic Finance, 86 (12), 6-7. Retrieved August 28, 2005 from EBSCO database.