Documente Academic
Documente Profesional
Documente Cultură
BY
Cost
Determination
and Financial Information for
Control Management
Planning and
1 Control
Reduction of
Waste of
2 Resources in
Business Creation of Value
3 Processes through Effective
Resource Use
4
CUSTOMER BASED VIEW
Management Accounting at its current evolutionary stage addresses the needs of the
organizations operating in dynamic and competitive contexts. The new organizational
context implies:
• flat structures;
• use of cross-functional teams;
• management of value chains (remove division between firm, suppliers and customers);
• understanding one's core competencies and identity within relevant value chains, by
progressively becoming more virtual and agile;
• developing delegation, trust, devolution and subsidiary through simultaneously integrated
information systems and availability of localized information in real time at points of
need;
• less reliance on financial control, by creating (real time) localized control, based on non-
financial Performance Indicators;
• acceptance of ambiguity and paradox as realities to work with and through; and
• Cultural integration through shared and accepted visions, rather than accepting the forms
of cultural separation associated with traditional forms of employment or professional
specialization (IFAC, 1998, IFAC, 2000).
The purpose of management has been described as making people capable of joint
performance through common goals, common values, the right structure, and providing the
training and development they need to perform and to respond to change. The central
purpose, then, of the management process is to secure, as it faces change, the vitality and
endurance of an organization through the ongoing co-ordination of activities, efforts and
resources. Thus, the management process includes
• establishing organizational directions in terms of objectives and strategies;
• aligning organizational structures, processes and systems to support established
directions;
• securing the commitment at a requisite level of those contributing essential skills and
effort; and
• instituting controls that will guide an organization's progress towards the realization of its
strategies and objectives.
The pursuit and realization of organizational objectives and strategies requires the
mobilization or development of requisite capabilities through the effective deployment of
resources. Resources are deployed in structures, "control" mechanisms, and securing-
commitments to create the capabilities necessary for organizational success. Without
effective resource deployments, requisite capabilities are unlikely to be developed; and
resources are likely to be wasted in ineffective structures, controls, and commitments.
Management accounting refers to that part of the management process focused on the
effective use of resources in
• establishing strategy mixes that support organizational objectives;
• developing and maintaining the organizational capabilities necessary for strategy
realization; and
• negotiating the strategy and capability change necessary to secure ongoing organizational
success and survival.
Thus, that part of the management process concerned with effective resource use over time
can be referred to as the management accounting function or business process.
The management of the management accounting function will likely involve establishing
objectives and strategies for the function, structuring the work of the function, building the
capability of the function, resourcing the function appropriately, responding creatively to, or
proactively addressing new challenges bearing on the work of the function and assessing the
ongoing efficiency and effectiveness of the function (IFAC,1998).
Manufacturing 14 28
Services 20 40
Agricultural 4 8
Total 50 100
Source: Researcher’s Survey Findings, 1998
Table 2
6-10 years 11 22
Table 3
Percentages
Less than 500,000 naira Small scale 7 3
years.
Table 4
Employment Structure
101-500 22 44
501-1000 6 12
The factors identified by the companies that they take into consideration before production or
services are availability of raw materials, marketability, profitability, market demand and
maximization of shareholders wealth. 74 percent of the companies claimed that they have a
management accounting department while, 26 percent do not have. However, an average of 98
percent of the responding companies claimed to have a section in their organization that is
responsible for formulation of policies, directing, organizing, planning and controlling of
activities. Where there is no management accounting department, such activities are carried out
in the finance or accounts section. 12 percent of respondent companies have over fifty staff in
the management accounting department (MADEP), 30 percent have between 10 and 50 staff. 38
percent of the MADEP is headed by a chartered Accountant, 18 percent by master’s holders and
26 percent by first degree/higher diploma holder. 14 percent and 52 percent of respondent
companies have 6 to 10 and 1 to 5 departments respectively. In most of the questionnaires
analyzed, the head of management accounting division reports to the financial controller who in
turn reports to the managing director.
22 per cent of the responding companies have less than 100 staff, 44 per cent have between 101
and 500 staff, 12 per cent have between 501 and 1000 staff members, while 22 per cent have
more than 1000 employees.
4.2 Present Functions of Management Accountants
Companies were given six scales (0-5) to rank the roles of management accountants in
their organizations, giving 5 to the most important and 0 to the least unimportant.
Majority of the respondent companies gave a rank of 5 (most important) to provision of
information required by management, formulation of policies, planning and controlling of
activities, disclosure to employees and decisions or taking of alternative course of actions while,
most respondents ranked disclosure to those external to the entity and safeguarding of assets as
an unimportant roles for management accountants. However, less than 4 percent ranked the six
functions as least unimportant and between 4 and 8 per cent ranked the first three functions
above as unimportant (see table 5).
The responses on why management accountants participate in management is also similar to the
above. Majority of the respondents ranked as very important management accountants’
participation in management to ensure that there is effective formulation of plans to reach
objectives, formulation of short term operating plans and obtaining and controlling finances
(treasury management). Majority of the respondent also ranked effective recording of actual
transactions, corrective actions/financial control and reviewing and reporting on system of
operations as strongly important reasons for management accountant's involvement in
management (see table 6).
Table 6: Management Accounting & the Management Process
Role Unimportant Important Strongly Total
Important
(%)
Management accountants participation
in management to ensure there is effective:
formulation of plans to reach objectives 5 28 67 100
formulation of short term operating plans 5 35 65 100
Recording of transactions 18 31 51 100
Corrective actions/financial control 17 24 59 100
Treasury management 15 31 54 100
Reviewing & Reporting on system 20 24 56 100
of operations
4.7.3 Waste Reduction through process Analysis and Cost Management Techniques
Management Accounting practice in Nigeria also involves evaluation of performance on the
basis of performance relative to others in the organization, ability to reduce cost and financial
performance.
5.2 Conclusion
The results of the study shows that management accounting practice in Nigeria has fully passed
the second phase for most companies, and has only evolved into the third and forth phase for
few companies. However, in majority of the case studied, management accounting practice is
just evolving into the third phase.
Management Accountants are more involved in producing information aimed at assisting
management in the formulation of policies, directing, organizing, planning and controlling of
activities
The body of thought and practice encompassed by management accounting has changed and
evolved in Nigeria and it will continue to do so.
However, the third and forth phase of management accounting process is described by reference
to leading edge practice of large corporate firms internationally.
Each stage is a combination of the old reshaped to fit with the new in addressing a new set of
conditions in the management environment.
Footnotes
1). The exchange rate is 100 naira to 1 US dollar and 160 naira to 1 UK pounds.
References
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Ekpeyong D.B and Nyong M.O (1992) : “Small and Medium-Scale Enterprises in Nigeria: Their
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Appendix
MANAGEMENT ACCOUNTING
SECTION A
5. What Factor do you take into account before going into production/activities?
7. Do you have a section in your organisation that is responsible for producing information
1. If yes to 7 above, how many staff are in that department, and what is the qualification of
SECTION B
Please rank 0 – 5 in each of the following functions, giving 5 to the most important and 0 to the
least unimportant function in your organization: Least unimportant ;0 Important ;3
Unimportant ;1 Strongly Important :4
Ambivalent ;2 Very strongly important ;5
2. Could you please rank the following factors as functions of the Management Accounting
in your Organization?
a. Provision of information required by Management/formulation of policies
b. Planning and Controlling of activities
c. Decisions/taking of alternative action
d. Disclosure to those external to the entity
e. Disclosure to Employee
f. Safeguarding assets
to be excessive?
e. Financial performance
f. Dismal performance
If yes, when?
5. What effect will financial liberalization have on your management accounting system,
please specify.
6. What effect will economic integration and globalization have on your Management
Accounting system?
7. What is the expected rate of return on investment of your company? Please specify
8. What was the turnover and profit of your company for the past 5 years………?
1. How does your Management accounting systems help to create value for the owner of the
* ATTACHMENT
The Author, Mrs. Janet Olatundun Adelegan holds her first degree in Accounting and a masters of
Business Administration from Obafemi Awolowo University, Ile-Ife. Nigeria. She also holds
second masters in Economics from University of Ibadan. Ibadan. Nigeria. She is a Chartered
Accountant and an associate member of The Institute of Chartered Accountants of Nigeria (ICAN).
Presently, she is a Lecturer of Accounting and Business Finance in the Department of Economics,
University of Ibadan. Ibadan. Nigeria, formerly at the Department of Management and Accounting,
Obafemi Awolowo University, Ile-Ife. Nigeria. She has been involved in teaching and research in
two foremost Nigerian University since 1992. She is a Research Fellow at the Centre for
Econometrics and Allied Research [CEAR] at the University of Ibadan, Nigeria and Centre for
Industrial Research and Documentation [CIRD} at Obafemi Awolowo University, Ile-Ife, Nigeria.