Definition of Management Accounting – Which of the Matobers currently works as an accountant or is studying accounting-related knowledge? Surely you are no stranger to the names of numbers in various forms, be it in the form of salaries, taxes, income and so on.
Accounting is indeed suitable for Matobers who is interested in working in the financial sector. This includes managing finances, analyzing company earnings, interpreting company figures and most importantly, preparing financial reports.
For this reason, it can be said that accounting is not a field suitable for everyone. This is because it requires precision and patience in the process. Errors in financial calculations can have a negative impact on the company as a whole.
Even though the work is hard and the responsibilities are big, accountants, as people who are engaged in accounting, will also get recognition in return if they can carry out their duties properly according to the needs of the company.
This time, Matobers will discuss one of the important activities in the field of accounting, namely management accounting. We will jointly discuss matters such as the meaning of management accounting, what are the activities carried out in management accounting and management accounting methods.
Definition of Management Accounting
One simple definition of the notion of management accounting is the provision of information and decision-making related to finance and non-financial related decisions to managers in a company, agency or organization.
Managers or other people who hold important positions in the company will usually use information from management accounting findings in making decisions, assisting management and improving their performance in controlling the company.
In other words, management accounting helps people, especially those who have important positions both within the organization and within the company to make important decisions concerning the future of the company or organization.
The existence of accounting management is a way for companies to differentiate, check, describe and also provide data from accountants to their superiors to help achieve related company business goals.
The information gathered from this activity covers all areas of accounting with the aim of educating corporate administration regarding the business tasks that identify with the financial expenditures and decisions made by the organization. Accountants use plans to measure a company’s overall operational strategy.
That is the reason why a company really needs accountants who are shrewd in accounting management. It can be said that the fate of this company is quite dependent on the expertise of accountants in carrying out these activities.
An understanding of accounting management itself would certainly be better learned in the Accounting Department. However, if anyone from Matobers is interested in learning the basics of management accounting, they can try reading the book “Management Accounting”.
Tasks in Management Accounting
There is not much that can be explained regarding the meaning of management accounting, considering that the explanation above should be enough to define what accountants do when they carry out management accounting tasks.
In fact, what must be explained in more detail to Matobers is regarding the activities normally carried out by accountants in management accounting. Because, actually there are a lot of activities that they have to do for the company.
This is the reason why the accountant is quite a tough job and as has been said before, quite important in the company. This is because their activities or jobdesk in management accounting are quite a lot and very important for the continuity of the company.
As an illustration in determining how important this work is, we will discuss 5 activities in management accounting that are usually carried out by accountants. After this, maybe you can conclude whether or not the work of an accountant is important in a company.
1. Perform a Cost Analysis
Cost analysis is a systematic approach used to estimate what a company needs in a given period. This can be useful for determining which option provides the best approach to achieving benefits and making savings.
Some of the things that are analyzed in this task include transaction processes, company activities, and business requirements. So, if we draw the outline, doing a cost analysis has 2 uses that a company can get.
The first is to determine whether the decision, generally in the form of investment, that has been made by the company makes sense. Later, they will ascertain whether the benefits of the investment will outweigh the costs already incurred.
Then, secondly, this activity can provide a basic overview for comparing decisions that are usually investment in nature. This method is done by comparing the expected total costs of each option with the expected total benefits.
2. Doing Strategic Planning
As for what is meant by strategic planning is the process carried out by an organization or company in determining the strategy for a period and also making decisions in allocating its resources to achieve strategic goals.
This strategic planning can also extend to guiding strategy implementation.
Thus, there are a number of things that are done when organizations or companies carry out strategic planning so that they can achieve the desired goals.
Some of these activities include setting strategic goals which are the main goals, determining what actions are needed to achieve these goals, setting a timeline, and mobilizing all available resources so that the goals are achieved.
The implementation of strategic planning includes the process of formulating strategies and implementing strategies. Here, strategic planning itself has an analytical nature, so that the formation of the strategy itself requires an approach that is usually carried out through strategic thinking.
3. Capital Budgeting
In the financial section of a company, capital budgeting can be interpreted as a planning process used to determine whether the company’s long-term investment can be commensurate with the funding they make.
As for what is meant by this investment can be in the form of equipment for companies such as new machines, replacement of machine spare parts, new company locations, the latest products from, and research development projects which are usually carried out by the research and development department.
With this, they will consider whether the company’s debt, equity or savings can make them profit and increase company value by investing. It is the process of allocating resources for major capital, or investment, spending.
Some companies think that capital budgeting is not included in the core activities of a business. This is because these activities are not part of the revenue model for most types of companies or some divisions within the company.
4. Annual Budgeting
As the name implies, this activity is an activity in which someone determines the annual budget in a company. Even so, this budgeting process can be done even up to several times a year depending on company policy.
When planning an annual budget, a company can include things like sales and revenue volume, the number of human resources that are affiliated to a company, company expenses, company assets and liabilities and company cash flow.
A company’s annual budget can reveal the company’s expenses each year. With this, each division of the company can provide appropriate proposals on how to meet their needs without exceeding the budget that will be issued.
In addition, company budgets can also show whether or not there is a surplus in revenue, so they provide resources for future use. They can also indicate a deficit, where expenses exceed income.
5. Estimating Sales and Revenue
Sales forecasting is an activity in which financial people use past sales figures to predict the future sales performance of a company in both the short and long term so that they can better plan the company’s finances.
While revenue forecast can be defined as an estimate of the future financial results for a company or project. Usually, this activity is applied in capital budgeting and also in evaluating the company’s performance in a period.
Even though both of them have different goals in the process, both sales estimates and income estimates from a company have continuity and are also related to one another so that they cannot be separated.
Financial workers in companies need the income figures they achieve in a period to be able to determine sales performance predictions in the company. This revenue figure can later also be used to determine the allocation needed to increase sales.
In addition to the tasks mentioned above, there are a number of other tasks in accounting management. It takes a lot of experience and learning time to understand the tasks in these activities.
If you still don’t have experience in a field, including accounting management, someone can deepen their knowledge in a related field before practicing directly when they work. When talking about management accounting, this can also be done by reading books, such as the book “Management Accounting, Strategic and Practical” .
Management Accounting Method
In carrying out management accounting activities, of course, accountants cannot arbitrarily determine what related variables need to be analyzed and reviewed to determine important information for their superiors in a company.
For this reason, various methods have been created in management accounting so that accountants can determine what can be used as benchmarks in these activities. It should be noted that like some of the activities in management accounting that we have studied above, management accounting methods also have several variations.
With this, an accountant can determine which management accounting method is suitable for their company. This time, we will discuss the 3 most commonly used management accounting methods. Check out the explanation below.
1. Grenzplankostenrechnung (GPK)
Grenzplankostenrechnung or more commonly abbreviated as GPK is a costing methodology that originated in Germany. This method was developed in the late 1940s and 1950s and was designed to provide consistent and accurate results regarding how managerial costs are calculated and assigned to products or services.
The purpose of this GPK method is to provide useful, useful and certain, accurate information and analysis for accountants and can benefit a number of internal workers such as quality controllers, project managers and also factory managers.
The existence of this GPK is considered better by a number of companies compared to a number of other traditional costing systems which usually focus more on analyzing company income from an external reporting perspective in accordance with financial standards.
2. Cost Accounting
Contrary to the GPK that we previously discussed, cost accounting uses a ratio called “efficiency”. This method compares the labor and materials actually used to produce the product with those of the same product under normal conditions.
Unfortunately, because this method was invented in the early 20th century, the cost accounting method is very outdated and not suitable for modern working conditions. Standard cost accounting can harm managers, workers and companies in a number of ways.
For example, a policy decision to increase inventory could jeopardize the performance evaluation of a manufacturing manager. Increasing inventory requires increasing production, which means that processes must operate at a higher level. When something goes wrong, the process takes longer and uses more than standard working time.
3. Resource Consumption Accounting
The final method that will be discussed in this article is resource consumption accounting. This method is considered a relatively new management accounting approach based largely on the GPK method we discussed earlier.
At least, there are three core elements that distinguish this management accounting method from several other methods. The three elements are a view of resources, quantity-based modeling and lastly, the behavior of the company’s costs.
The existence of resource consumption accounting theory is considered to describe a management accounting approach that is dynamic, integrated, and comprehensive and capable of providing decision support information for managers for company optimization.
We discussed earlier that apart from the three methods that we have studied above, there are several other methods in management accounting. Each company has their own preferred methodology according to the needs and capabilities of the company.
Studying management accounting methods used by companies can be a benchmark for determining which method is suitable for a company. The book “Management Accounting: Implementation in Indonesian Cases” can be used as a reference for studying various management accounting methods used in several Indonesian companies as well as a reference in case studies.
Conclusion
With this, the article that discusses sundries related to management accounting ends . The hope is that this article can open up Matobers’ insights regarding the world of accounting as a whole regardless of whether or not you need the information discussed above.
Who knows, there are some of the Matobers who are actually challenged to get into the world of accounting after seeing this explanation of management accounting. Because as discussed in the initial paragraph, the recognition that accountants get for their work is enormous.
Matobers can find some examples of salaries from experienced accountants in their field. Companies do not hesitate to issue high salaries for these accountants because they have an important role in managing the company’s finances.
For that reason, if there are still Matobers here who are still hesitant to enter the world of accounting because of the high level of difficulty, you don’t need to worry. As long as you do your job properly and correctly, you can get the recognition you deserve.