Topic: Introduction to management accounting

The Management Accountant plays an important role in the modern business environment, and his/her activities may be categorized as providing information under the key headings of planning, control, and decision making.

You have just been appointed to a new role as Management Accountant in Akwaba Ltd, a large engineering company producing a wide range of parts for the automobile industry. This new role has been created following a majority decision of the Board of Directors based on the advice of the company’s auditors. However, the Managing Director comes from a marketing background and does not understand why the company needs another accountant as there is already a Financial Accountant employed on a full-time basis. She voted against the creation of the new position and considers the cost of your remuneration to be an unwelcome burden which will only serve to reduce the company’s reported profits. According to her, the equation Y = a – bx which management accountants always use is not relevant in the modern-day business environment.

You are aware of the strong opinion of the Managing Director, and as your first task, you decide to attempt to convince her of the importance of Management Accounting in the modern business environment and also suggest some ways that you can ensure your future role in Akwaba Ltd is financially viable.

Required:

Prepare a Memorandum to the Managing Director in which you address her concerns using the following guidelines:

i) Distinguish clearly between Financial Accounting and Management Accounting under any FOUR different headings. (6 marks)

ii) For each of the THREE key headings of planning, control, and decision making, outline one Management Accounting technique and how it would lead to stronger commercial success for the company. (6 marks)

iii) Identify any THREE qualitative (non-financial) issues that you should consider as a Management Accountant when providing information for decision making in Akwaba Ltd. (2 marks)