Roles of financial accountants and management accountants
Accounting is said to be the language of any business as it helps in providing necessary information relating to the significant aspects of the business to the mangers and other parties that are associated with the business organisation. Management accounting and financial accounting are the two major categories of accounting. Both the types of accounting functions are performed by the accountants at the respective areas. The roles of management and financial accountant have been discussed in this report.
Accountants plays important role in the organisational growth and success. Management accountants provides information that carters the need of managers to undertake several managerial activities to formulate the strategies and policies for the business and financial accountants provides the information relating to the financial aspects of the business.
Financial accountants helps in delivering the information about the financial performance and situation of the company to the stakeholders of the business. Therefore, financial accounting generally deals with quantitative data of the organisation and primarily provides the monetary information to the intended users i.e. the stakeholders of the organisation. The internal stakeholders like employees and other operational managers needs the financial information to understand the performance of the company in which they are employed so as to achieve the goals and objectives of the business. The external stakeholders like investors, shareholders etc. uses the financial information to take sound economic decisions. Whereas, the management accountant deals with quantitative and qualitative data. Hence, management accountant provides monetary as well as non-monetary information to the management of the business organisation (Sunarni, 2013).
The main users of the information provided by the management accountants are the top, middle and lower level managers. As top managers uses such information to formulate various plans, budgets, strategies to achieve the organisational growth and success and middle and line level managers uses managerial information to carry out the necessary business activities.
Similarities between the role of management and financial accountant:
- Both the roles requires an accountant to hold the accounting education expertise to as to serve the basic purpose of accounting, i.e. provision of necessary information to the needed parities of the business by collecting, analysing and processing the relevant data and thereby reporting the processed information through various management and financial reports.
- Both management as well as financial accountant provides the accounting information to the users so as to support their decision making process regarding several business aspects. Therefore, both the accountants holds an important position in the organisational structure of the entity.
Differences in the roles of management accountant and financial accountants:
- The management accountant generally performs their roles and functions to fulfil the information needs of internal parties of the organisation such as top and lower level managers. Whereas, the financial accountants performs their functions to fulfil the information requirements of mainly the external parties associated with the entity such as creditors, investors, suppliers, business community or the regulatory bodies.
- The financial accountants have to prepare a single report to be delivered to the various stakeholders of the organisation. However, management accounts have to prepare different reports to provide the relevant information to the different divisions or departments or levels of business management.
Conclusion:
From the above examination of roles of management and financial accountants, it can be concluded that financial accountant has major role than the management accountant as financial accounting is done in order to comply with the legal and regulatory requirements. To prepare financial reports is compulsory for the companies but preparation of management reports in not legally required in any framework. Therefore Madeline must accept the role of financial accountant.
Ethical dilemma is the situation when a person has to opt for one option at the cost of ignoring other, where both the options are correct in the moral sense but both are conflicting. In the present case, the cadet accountant has been asked by the manager to prepare the financial statements before leaving for the study leaves. The preparation of such financial statements is found to be complicated by the accountant as he do not have sufficient experience but since it is the instruction from his supervisor, the accountant need to work on that. However, if the accountant tries to complete the work within the limited available time he is afraid of poor quality of the work.
Ethical dilemma faced by a cadet accountant
From the above facts, it can be identified that the cadet accountant is facing the situation called ethical dilemma. Langenderfer and Rockness model suggests a systematic approach to resolve the ethical dilemma that arises in the decision making. Therefore, the said model can be applied in the current case. This model sets out 5 steps to solve the matters involving ethical dilemma. They are:
- Determination of facts:
Firstly, the accountant is required to identify what are the opinion conflicts and also the facts like who and what will be impacted if the choice of a particular decision is made.
- Identify stakeholders and the ethical issue:
It must be taken into consideration the interests of the stakeholders associated with this particular case of ethical dilemma. The consideration must be stretched beyond the accounting issues to the stakeholder’s interests.
- Specifying the alternatives:
He must then develop the list of all the possible courses of actions that can be undertaken in the given situation. Accountant must determine whether the courses of actions are legally correct, fair, beneficial etc.
- Comparing the possible alternatives and assessing their consequences:
It involves assessing all the possible alternative range of actions and their consequences that may affect the stakeholder’s interests.
- Making the final decision:
This is the final step and involves the selection of best alternative action that is capable of balancing the action’s consequences against the accountant’s primary values by eliminating the unethical options ((Langenderfer & Rockness, 2006).
A)
In the first case, since Mick and Bill are good friends and are intended to combine their individual businesses of tyre manufacturing, they can opt for partnership form of business structure. The basic features of partnership form of business structure are as follows:
The income and losses of the business along with the control over the business will be shared among the partners.
Partnership firm does not have any tax obligations on the overall profits earned by it. However, the individual partners will have to pay tax on their respective profit shares.
The partnership firm has its own TFN to file its annual returns.
B)
Since the finance lectures who are planning to come together to form a business of provision of financial advice but are concerned about the legal liabilities of their business, they must opt for the company form of business structure rather than going for partnership firm. As in case of company the liabilities of the owners gets limited whereas in case of partnership firm the liabilities of the partners is unlimited. Features of company form are as below:
Company is a separate legal entity.
It must get GST registration if its turnover is $75000 or higher.
It is compulsorily required to file the annual tax returns.
It owns the control over the money earned by the business and the individual owners of the company doesn’t possess any control over that.
- C)
Audrey must opt for Sole trader form of business structure .Since, Audrey is working in a full time job and does not want her job to be affected while engaging herself for the other local clothing businesses. With sole trading as the business structure she will be the sole owner and manager of her business and will be able to control her business independently. Features of this business form are:
Taxes to be paid in the same manner as are paid by individuals.
Solely responsible for any legal implication of the business.
GST registration if its turnover is $75000 or higher.
D)
In this case Tom has a family of 6 members with his wife and four children. Since the business is being run from long years but the business is finding difficultly to expand the operations due to sole trade form of business structure. Therefore, it can opt for company form of business structure to gain new clients for its business.
The company should get listed on the Australian stock exchange to widen its customer base.
References:
Langenderfer, H. Q., & Rockness, J. W. (2006). Integrating ethics into the accounting curriculum. Accounting Ethics: Theories of Accounting Ethics and their Dissemination, 2(1), 346.
Sunarni, C. W. (2013). Management accounting practices and the role of management accountant: Evidence from manufacturing companies throughout Yogyakarta, Indonesia. Review of Integrative Business and Economics Research, 2(2), 616.
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