You don't need to be accountants with a degree in business to really understand accounting and cash flow reporting for government or the professional private sector - although much of the public tends to outsource services for this kind of work.
You will nevertheless find members of the public who find financial, tax, and management standards very interesting even if part of their job is not to use guiding principles for reporting or analysing costs.
There's also those whose job it is to audit and use their certified accountancy skills from the CPA to help write internal and external reports to keep accounts, checks, balances, and cash flow within a given system in check who would know generally to what degree data and costs need to be monitored.
These groups mentioned above will probably know what accounting is all about then.
You're also in good company with Superprof who is here to tell you all about the types of public and government reporting and internal services, or private professional services that deal with forensic accounting, tax, and industry standards which professional certified accountants will encounter in their varied work during the broad range of jobs they will have during their career.
Find an accounting tutor Melbourne here.
An Introduction to Management Accounting
The work of Management Accountants is somewhat forensic and deals with statements and management of records, as well as auditing and auditing of transactions as most accounting tends to. It has the more specific jobs however of informing an organization on income flow and cost information, as well as the best ways for auditing data entry to ensure clear cash flow, and how to best maximise tax systems.
This is all with a view to helping a business plan to what degree they need to work towards certain goals and set objectives that will help the business thrive, both in a financial and social sense.
The Chartered Institute of Management Accountants goes further to state the definition of what management accounting is if you're interested, but we give you this abridged version here simply for informational purposes.
Whilst the people at the top of the food chain of an organization have to be aware of the tax systems applying to a company and the types of statements and reporting as well as interpreting records to make executive decisions, it is actually the mid level management who are certified by the CPA (Certified Public Accountants Australia) whose jobs it is to interpret statements in depth and carry out auditing for businesses.
How Accounting Helps A Company Go Global
On top of the social and environmental considerations of expanding businesses, the financial income and expenditure from clients and operating costs is of the utmost importance.
A management accounting might not be so far reaching given the lack of executive status they generally have, but their skills are put to good use in the minutiae of single decision that can be explained using accounting principles.
As an example, imagine an automobile manufacturer needs to work out the cost of outfitting a new model of car.
The executives of the business would not be thinking about the small parts and counting the cost of these.
Those who work more directly with the products such as factory and floor managers would be more adept at understanding what parts are needed and once they can give an overall estimation of needs, the management accountants would put together a statement or statements to present to the executives.
It is then the job of the top brass management to approve these expenditures and assess their financial viability to the operation of the business.
It goes without saying that these costs need to remain reasonable and fit within projected budgets, which is the job of the entirety of the corporate finance division.
Sometimes the services required for such decisions are provided by external contractors which is often the case when businesses are being audited to check their international viability.
Given the proprietary nature of automobile manufacturing however, there would definitely be a dedicated internal team who would take care of and monitor ongoing issues.
When compared to public accountants, management accountants will also be more secretive in their data reporting, given that they will deal with information and decisions that are only for internal use within the organization.
When we think of a management accountant, the essential roles include:
forecasting for businesses based on financial data
risk analysis and opportunity seeking for future ventures
spotting trends and how to fix recurring issues
seeking funding on discrete operations
creation and maintenance of the financial systems of a company
ensuring budget compliance in the range of internal departments
Now that we understand how a financial officer uses accounting skills and principles, let's look at what financial accounting involves.
Finding a reputable accounting tutor is easy with Superprof's platform.
An Introduction to Financial Accounting
Financial accounting is a term generally used to refer to the process of recording, summarising, and reporting the financial data of a company.
Differently to management accountants, financial accountants report on all daily activities, but also provide external reporting to shareholders, tax authorities, and investors for example, and provide information to government.
The principles of accounting are more or less the same in Australia as in many other countries, and are overseen by the CPA as well as government, and are heavily scrutinised. There are also international accounting standards that have to be adhered to when operating in foreign markets, in addition to local laws.
Company financial accounting is otherwise known as financial reporting, and has 5 main tenets:
Assets: physical or intangible things that represent a company's value
liabilities: things a company may be at risk of having to pay
expenditures: any outgoings for operations or liabilities like tax or damages
equity: share and stakeholders in a company and financial reimbursement to relevant parties
revenues (or the bottom line): net profit by a company once all overheads and expenditures have been calculated
Shareholders have an inherent interest in company dealings and businesses will therefore heavily scrutinise their dealings and provide transparent reporting to ensure that funds are being applied correctly and as promised.
Find an accounting tutor Sydney here.
The Main Differences Between These Kinds of Accounting
The fundamental difference between the two accounting concepts is that management is used for internal, while financial for external reports.
Whilst managerial reports are not required by law, they are bound to periodically publish statements of dealings and financial health to shareholders and other parties with vested interest, and happen generally every 6 months to a year, as well as on an as-needed basis.
Financial reports are required in much more specific instalments and can occur, bi-annually, yearly, semi-annually, monthly, or even weekly! These generally also need to follow a stringent format in order to be easily compared to other similar such documents.
Management accounting's main purpose is also typically to report on the current status of accounts and balances within a business and assess how this can be harnessed to benefit the company in the future and make decisions around this.
Conversely, financial accounting looks at the past and compares it to the present in order to identify patterns and assess how social and economic factors may be impacting the difference today.
For instance, if a company is showing more sales and thus higher income than at the same time last year, they are at liberty to tell shareholders that they have made a profit, and vice versa when the bottom line is lower.
To come back to the format of the reports, financial accounting has very strict, government imposed methods for showing the data and information in such a way that is easy to interpret for all parties involved, including external ones, that can be easily compared to other financials statements.
The IFRS is the international accounting standard that applies generally when a business goes international, and is widely used as a main format for various kinds of organizations.
If you want to explore the comparison further, this insightful article can show more detailed information.
So, we hope the information in this article has given you some insight into the specialities that are the most common when it comes to professional accounting outside of the public sector. For those who are considering an accounting degree, keep these in mind when choosing your university pathway.
If you're already in the field, it's also worth considering whether you want to branch out into one of these. Consider:
Management accountants often get assigned to more projects since they have specialised knowledge of specific kinds of products and services, as well as how a small cog can be part of the bigger machine of a business. They may even be able to move around the institution and use varied means of reporting on the dealings.
In contrast, financial accountants will be confined to the same kinds of reporting, although the economic factors you will encounter will be more far reaching and social in scope, so the work will be closer to that of an economist.
Find a tutor on Superprof to walk you through these decisions in detail.
The platform that connects tutors and students