Management accounting is the application of professional knowledge and skill in the preparation of accounting information in such a way as to control the operations of an undertaking.
It is the presentation of accounting information in such a way as to assist management in the creation of policy for the day-to-day operation of an undertaking as it provides information needed by managers to determine how resources should be obtained and used.
It includes the methods and concepts necessary for effective planning in order to be able to choose from alternative business decisions.
This term paper is concerned with how management accounting discipline has been used in the law firm of Messrs Majanja Luseno Advocates, where the writer is an Associate Advocate, towards achievement of the Firm’s objectives.
2.0History of the Firm
Majanja Luseno Advocates was founded in the year 2008 and is one of the fastest growing law firms in Nairobi with two partners, four associate advocates, six legal assistants and five support staff.
The Firm provides an array of legal services to a wide client base that includes The Government of Kenya, corporate organizations, banks and financial institutions, foreign investors, insurance companies, embassies, children’s homes and aid organisations.
The Firm’s business is divided into two departments these being Litigation and Conveyancing (of which the writer is the head of department).
The Conveyancing department deals with commercial transactions, privatisation, capital markets, financing, property transactions, company law and intellectual property.
The Litigation department on the other hand deals with criminal and commercial litigation, arbitration, debt recovery, insurance, telecommunication and media law, divorce law, children’s law and constitutional law.
This medium size but renowned Firm has even had its Partners lend expertise as assisting counsel for The Commission of Inquiry into the Post Election violence, they sit on the Disciplinary Committee for Advocates and have for the past two years been named top lawyers by the international association known as Chambers Global.
3. Functions of Management Accounting in the Firm
i. Forecasting and Planning - The Firm’s management has to plan its short-term and long-term activities and perform the task of forecasting using tools and techniques like budgetary control, standard costing, marginal costing e.t.c.
ii. Classification of Data - Raw accounting data for instance, can be properly classified under legal service, territory, customer and period.
Similarly income figures for different segments of the business may be compiled and classified separately and the data modified as required by the management.
iii.Control - Control is one of the basic functions of management. Standard costing, budgetary control and other cost management techniques are used to make effective control possible.
Reporting of actual activities against planned activities results in timely interventions of variances and corrective measures. With enhanced planning, organization and coordination, better control by the Firm’s management is automatically exercised.
iv. Co-ordination - Each department in the Firm has specific targets to be achieved within a specified time. These targets can be achieved only if there is effective co-ordination between the departments.
Management accounting techniques are used to reconcile costing and financial results and preparing budgets and setting standard for each department.
v.Communication - Effective communication is a prime necessity of managing the success of the business. Management accounting reports are prepared and submitted from top to bottom.
Management accounting techniques are thus useful to management for internal communication as well as external communication. Reporting to the partners, creditors, customers and...