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1. Review the rights and responsibilities of Certified Management Accountants: What are some of the ethical responsibilities and obligations that management accountants have within an organization? Provide some examples. Are these responsibilities different than the obligations for financial accountants?

The Institute of Management Accountant has provided guidelines on the basis ethical principles. The ethical principles are based on honesty, objectivity, fairness and objectivity. These guidelines may be applied to professionals and non professionals’ accountants. According to IMA certain standards to be followed and they are:

• Competence

• Confidentiality

• Integrity

• Credibility

The competence means that the person who is looking after the managerial accounting functions should have the proper ability or qualification and experience to execute the responsibility as Management Accountant. The ideal person should be from professional qualification such as Chartered Management Accountant, Certified Public Accountant, Charted Accountant or MBA Finance.

The confidentiality means that the information should not be leaked and if any information is disclosed should be at the discretion of supervisor. It does not mean that the management accountant may manipulate the information on behalf of the company with the permission of supervisor.

The integrity includes the honesty and ethical behavior of the management accountant. The person should not act which may harm the company for personal benefit. The action and behavior of the management accountant should not break any law or standard set by federal or local or international body to perform the duties.

The creditability includes the ability of communicating the accounting information objectively to all stakeholders. The information should not be manipulated in a manner which may harm the interest of any of the stakeholders. It means that if the management accountant has the information or method which may provide benefit to the employer at the cost of customer or at the cost of fulfilling the social responsibility, it should not be done.

For example, if planning is to be done with the help of budgeting techniques, the Management Accountant should be knowing the use of technique and should not favor any of the stakeholder at the sacrifice of the benefits of all stakeholders, if the marketing department is forecasting for sale of 200000 units, but the production capacity is limited to only 150000 units, then the budget should be based on the number of units which is favorable to the whole organization, not only one department.

The financial accountant are responsible to provide true and fair view of the financial position of the company and responsible of external reporting, while the management accountant are not only responsible to perform this function, if given to them, but also responsible for planning and controlling the operation of the business and help the management in making business decisions. However, the management accountant cannot provide the services to general public unless and until the permission is given by concern authority of the state.

. List a few of the issues and considerations businesses should have when it comes to the selection of long-term investments and how those issues impact the various financial statements

Long term investment may include investment in fixed assets and investment in some other company stocks by buying shares.

When the investment in fixed assets are made, the following issues to be considered:

a. Cost of the investment.

b. Projected future cash flows

c. Depreciation Method.

The cost of a fixed asset includes the purchase price, the cost of transportation, the cost of installation and all other cost which is required to be made to make the fixed assets operational. All these cost and expenses should be shows in balance sheet under the heading of fixed assets. The expenses incurred may not be shown as expense in income statement.

The expected future cash flow is the difference of cash inflows and cash outflows arising due to the use of fixed assets. It will be shown under the heading of cash flows from operating activities in cash flow statement in future.

The usage of the fixed assets is to be recorded using one of the depreciation methods. The depreciation for the year is to be shown as depreciation expenses in the income statement and accumulated depreciation shows the depreciation from the date of purchase till now, to be deducted from cost of fixed assets in balance sheet.

When investment is made in shares of other company it may be shows by using any one of the following method:

a. Cost Method

b. Equity Method.

Under the cost method, the investment is shown on cost throughout the life of the investment and shown as fixed assets in balance sheet. Any income by way of dividend is shown is shown as dividend income in income statement.

Under the equity method, the investment account is shows at the adjusted value of claim over earnings and payment of dividends by the company. Initially, the investment is shown and at the year end the earnings are added and dividends are subtracted from the investment account to shows the carrying value of investment. The adjusted amount is shown in balance sheet. Any claim over the earnings of the company whose shares have been bought, is shown in income statement.

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