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Section 2. Accounting
Khakhonova Natalia Nikolayevna Doctor of economic sciences, professor, Rostov State University of Economics E-mail: n_khakhonova@bk.ru
Organization of interconnection of accounting systems in the company management
Abstract: At nowadays, the Russian accounting is undergoing complex and important period — the reform of the system of accounting and reporting. The improvement of management of the activities of commercial organizations, including formation and the effective application of management accounting system moving from the stage of many years of discussion in the practical application stage. The article examines the historical aspects of allocation of management accounting from the accounting system, its objectives and main tasks, distributed in stages of the economic cycle.
Keywords: financial and management accounting, history of separation of financial and management accounting.
Accounting as an integrated system of property, capital and profit accounting was formed in the fifteenth century. Originally it was intended only for internal application, and operating management was realized by means of personal observation. In the period of origination and flourishing of manufactory the necessity of cost accounting and calculation of the product prime cost arose and it was the beginning of production accounting and, subsequently, management accounting. The expansion of joint-stock companies and stock markets promoted the necessity in public accounting reporting. Accounting intended for its preparation transformed into an independent direction — financial accounting. The final separation of financial and management accounting, in the opinion of the majority of experts, happened in the first half of the twentieth century. In the Western accounting subdivided into subsystems of financial and management accounting there is a clear distinction between the notions of 'accounting' and 'bookkeeping', which is a process of registration of economic operations and storage of accounting information. This mechanic and frequently repeated work is a part of accounting which includes generation of the information system meeting demands of users. Its main objective is analysis, interpretation and use of information. As it is seen from the given definition, the notion 'accounting' in the Western practice is much wider than in the Russian practice.
The system of accounting supplies information according to the needs of management at large, i. e. both needs of external and internal users. A lot of attention is paid to the use of the analytical potential of accounting as an information source, methods and technologies of information analysis for various purposes.
As for management accounting, its process was perfected, formalized and automated in the West 5060 years ago and at present it acts as an essential and independent part of accounting along with financial accounting. The interaction of two subsystems is realized due to similarity of objectives and orientation to investor needs in the form of relocation of information of management accounting into financial reporting. The example is the standards US GAAP FAS 131 'Disclosures about Segments of an Enterprise and Related Information' and IFRS 8 'Operating segments' according to which the information disclosed in the accounting financial reporting as per activity segments of a company should be prepared on the basis of the internal management reporting. However, management accounting is not under pressure of financial accounting, for IFRS were elaborated under the conditions of their separate existence and directed only to financial accounting reporting.
Thus, the separation of management and financial accounting in foreign countries was dictated by the needs of market players and extensive implementation of inter-
Organization of interconnection of accounting systems in the company management
national standards showed the tendency to their equal coexistence.
The history of separation of financial and management accounting in Russia has its own peculiarities conditioned by the influence of planned economy.
It is possible to single out two main approaches of the Russian experts to this issue. The first one coincides with the approach adopted in the Western accounting practice. Accountinginthis case is considered as an interconnection of subsystems of financial and management accounting. According to the second approach accounting is above all financial accounting, and management accounting is a system of internal management which includes not only purely accounting issues in our traditional interpretation but also analysis, planning, prognostication, control and modeling. But this different perception of financial and management accounting was influenced by the Soviet accounting school which in many ways shaped the thinking of Russian specialists in the field of accounting [1].
Presently the relations between financial and management accounting, their independent and separated existence is acknowledged only in the scientific aspect. In practice, only a few large (sometimes middle) companies can boast of a more or less organized system of management accounting. But as a base they attempt to use IFRS principally oriented to financial (public!) reporting of large (on the European scale) companies, which is often unreasonable and impossible. The Federal Law No. 402-03 dated 06.12.2011 does not provide for the mentioned subdivision, as a result management accounting as a part of accounting falls under the control of the state. The information base for every accounting is formed through application of corresponding methods to the already accomplished facts of economic activity. Thus, if the Law 'On accounting' does not provide for the subdivision of financial and management accounting, then it results in the integrity of their methods — primary observation, value measurement, current arrangement and final generalization. In fact they function fully only within financial accounting. For the purposes of management accounting, mathematical and statistic methods, methods of economic analysis and others are widely used, while the method adopted by the law is not acknowledged to be obligatory [2].
The state regulation of management accounting and management reporting contradicts their essential content and is not provided for by international standards. In the present form the accounting law comprises rare indirect evidences that companies have the right to
an individual approach when organizing and keeping accounting in the form of the possibility to elaborate forms of internal reporting independently.
The elaborated procedure of accounting is specified by internal regulatory acts (in particular, order on accounting policy). Such documents should not contradict the acts and methodological recommendations of the Ministry of Finance of Russia, and it limits the rights of companies to apply initiative and creative methods of internal accounting.
The construction of the system of management accounting and reporting and organization of its interconnection with the current accounting model cannot be realized without answering a number of simple questions, the answers to which lie in different planes: organizational, methodological, and technical planes.
The organizational aspect provides the answer to the questions: who, where and when shall fulfill the functions related to the activity of management accounting system support. The way it will be fulfilled is determined within the technical aspect of the interconnection organization.
Under the conditions of rapidly changing market environment, there is an increase in the flow of information which should be processed in order to make the only correct management decision. The spectrum of management tasks solved by managers of production sections widens. A necessity to distribute all authorities, including those in the part of management decision-making, arises. As a result, there is a necessity to change the organizational structure of a company.
Changing a company structure means forming a management accounting service securing the control over the 'profits-costs' correlation with the purpose of increasing the first ones and optimizing the second ones.
The necessary supplement to the suggested scheme is a distribution of functions of information collection for the management accounting service among all services of the financial economic block as well as a demand of responsibility sharing for undue or unreliable information.
Under these conditions the task of management accounting is diagnosis of problems which should be solved by a company. Today this task is one of the least elaborated constituent parts of the activity of management personnel.
Based on this, the main tasks solved with the help of management accounting and distributed according to the stages of the economic cycle may be defined in the following way.
At the stage of provision of production process with necessary material resources they are:
• procurement of production resources in terms of quantity and quality, strictly corresponding to the profile of the company activity;
• allocation of necessary materials in due time, in the corresponding place and in the quantity required for reproduction with optimal delivery and stocking (i.e establishment of methods of stock resources management);
• provision of the company management with the information, necessary for approval and optimization of material flows with other processes of the company.
At the stage of production ofgoods (works, services):
• operative presentation of the information about the volume and content of costs, activity volumes:
• according to the fields of activity;
• according to the types of service (products);
• according to territorial segments;
• according to costs centers;
• according to responsibility centers;
• according to profit centers, etc.
The stage of sale of goods (works, services):
• operative management of current results of the company activity;
• optimal pricing for goods (works, services).
In the course of implementation of the mentioned possibilities, the activity of the management accounting service can be subdivided into three sequential stages, each of which solves its specific tasks.
I — formation of a management solution of an accounting task, analysis and description of the current decision;
II — agreement of the decisions made with the system of information collection;
III— practical implementation of the decisions made [1].
It is important to support the process of management accounting from the organizational point of view through administrative measures. It is necessary to entrust managers officially with the responsibility for data collection and analysis and in this way to finish the formation of the system of management data collection, develop duty regulations for executors and approve document forms and rules of documents circulation, together with accounting and analytical forms it shapes the system of accounting data aggregation.
In spite of the fact that the construction of the management structure is related to a lot of preliminary work on differentiation of rights and regulation of responsibilities between line managers and project managers as well as between functional services, under modern conditions it creates prerequisites for more qualitative solutions ofboth global and operative management tasks [3]. Besides, it is necessary to take into consideration that the existing organizational structure of a company should be regularly analyzed and reconsidered with the account of the changes taking place in the external environment and economic activity of a company.
References:
1. Khakhonova N. N. Methodological aspects ofthe accounting-analytical provision ofcash management/N. N. Khak-honova, S. V. Ukolova. - Rostov-n/D: RSUE (RINH): AzovPechat', 2013. - 220 p.
2. Khakhonova N. N. Problems of reforming Russian accounting.//International Journal of Applied and fundamental Research. 2009. № 2. P. 37-40.
3. Khakhonova N. Convergence of domestic and international accounting systems//Proceeding of The 1st International conference on Eurasian scientific development. "East West" Association for Advanced Studies and Higher Education GmbH. 11 April 2014. Vienna. 2014. P.496; P. 430-434.
