ROLE OF MANAGEMENT ACCOUNTANT

7 Roles of Management Accountant

The following points will highlight the seven roles of management accountant in decision-making process of the organisation. The seven roles are: 1. Stewardship Accounting 2. Long-term and Short-term Planning 3. Developing Management Information System (MIS) 4. Maintaining Optimum Capital Structure 5. Participating in Management Process 6. Control and 7. Decision-making.

 1. Stewardship Accounting:

Management accountant designs the frame-work of cost and financial accounts and prepares reports for routine financial and operational decision-making.

 2. Long-term and Short-Term Planning:

Management accountant plays an important role in forecasting future business and economic events for making future plans i.e., long-term plans, strategic management accounting, formulating corporate strategy, market study etc.

3. Developing Management Information System (MIS):

The routine reports as well as reports for long-term decision-making are forwarded to managerial personnel at all levels to take corrective action at the right time.The management accountant also uses these reports for taking important decisions.

 4. Maintaining Optimum Capital Structure:

Management accountant has a major role to play in raising of funds and their application. He has to decide about maintaining a proper mix between debt and equity. Raising of funds through debt is cheaper because of tax benefits.

However, it is risky as because interest on debt has to be paid whether the firm earns adequate profits or not. Management accountant has, therefore, to maintain an optimum capital structure and give due consideration to various cost of capital theories, leverage and possibility of trading on equity.

 5. Participating in Management Process:

The management accountant occupies a pivotal position in the organisation. He performs a staff function and also has line authority over the accountant and other employees in his office. He educates executives on the need for control information and on the ways of using it. He shifts relevant information from the irrelevant and reports the same in a clear form to the management and sometime to interested external parties.

 6. Control:

The management accountant analyses accounts and prepares reports e.g., standard costs, budgets, variance analysis and interpretation, cash and fund flow analysis, management of liquidity, performance evaluation and responsibility ac­counting etc. for control.

7. Decision-Making:

Management accountant provides necessary information to management in taking short-term decision e.g., optimum product mix, make-or-buy, lease or buy, pricing of product, discontinuing a product etc. and long-term decisions e.g., capital budgeting, investment appraisal, project financing etc.

However, the job of management accountant is limited to provision of required information in a comprehensive as well as reliable form to the management for decision-making purposes. But the actual decision-making responsibility lies with the management. In other words, neither the management accountant nor the internal accounting reports can make the decisions for the management