Management Essay - The Purpose of Management Accountancy With Regards to Australian Law
The measurement of cost needs to be precise and as detailed as possible. It needs to account for resources as they are used per purpose, monetary matters and object cost. Australian tax laws require that you account for the full cost of any object, resource or fixed asset. You must also account for the direct cost of objects and its share of any indirect costs if they are applicable. The pervasive costs of the company include any services and goods for the most part, as well as any operating costs, including the costs of the accounting procedure itself.
You are required by Australian law to measure every cost of every activity within the company, and you are required to measure your inventory and any costs associated with sales and storage/maintenance. This information may be used in conjunction with prices and sales performance in order to analyse your business performance, which is later collated into economic performance reports about business sectors, which is produced by government officials.
A good management accounting system should be structured so that it collects costs and turnover by responsibility centres. Your responsibility centre should be headed by a manager who is held accountable for the accounting department's performance. Although it is not the law, it is prudent to have an accountancy management control process. This is where managers will take stock of planned and projected amounts and compare them to actual amounts. They are then to identify any significant variances and try to explain them. They are tasked with investigating the causes of these variances and to take appropriate action. Companies who seem to have unexpected variances will often be hit harder when they are audited by Australian officials. The company in question will need to show either where the variance occurred and why, or at least show a fair amount of due diligence in trying to stop the variance and account for the variance.