A Dissertation on the Role of Management Accounting in Business

This dissertation explores the critical role of management accounting in business operations. It begins with an introduction to the field, emphasizing the importance of cost control and efficient resource utilization in today's competitive environment. The research aims to evaluate management accounting's role, focusing on its functions, models, and impact on business activities, with specific research questions addressing its functions in the service sector, its role in effective decision-making, and its overall contribution to business functioning. The study includes a detailed literature review, research methodology outlining the research type, design, approach, philosophy, data collection, sampling, and analysis methods. The data analysis section utilizes thematic analysis of collected data. The dissertation is structured with an introduction, literature review, research methodology, data analysis, and conclusion, offering a comprehensive analysis of management accounting's significance and implications. The findings highlight the use of management accounting tools for cost control, and the dissertation addresses issues and challenges associated with these tools. Finally, the conclusion and recommendations section synthesizes the results and provides insights for future research and practice.

DISSERTATION

ACKNOLEDGEMET
I am thankful to all those friends and relatives that help a lot in completing research study. Apart
from this, I am also thankful to my teacher who give me proper guidance regarding preparing a
research report. Without support of friends and teachers it was not possible to complete this
dissertation. It is there guidance and efforts that help me in understanding and completing
research study in systematic way. Finally, again I extend thanks to all those who support me in
completing research study.

ABSTRACT
Management accounting is the one of the most important discipline that helps managers in
costing accounting. There are varied tools and techniques in the mentioned discipline that are
used to control and curtail cost at the workplace. In this report different aspects of management
accounting are discussed ranging from their framework to varied technique’s and there
application in business. Data in respect to people views on relevant aspects of management
accounting are collected from the people. Same are analyzed by using thematic analysis.
Analyzed results are clearly revealing that management accounting tools greatly helps managers
in cost control and curtailment. Hence, it is very important to use these tools regularly with full
caution as business decisions are made on the basis of output of same.

TABLE OF CONTENTS
CHAPETER 1: INTRODUCTION..................................................................................................6
Research aims and objectives.................................................................................................6
Research questions.................................................................................................................7
Research Rationale.................................................................................................................7
Significance of research.........................................................................................................8
Structure of report...................................................................................................................8
CHAPTER 2: LITERATURE REVIEW.......................................................................................10
CHAPTER 3:RESEARCH METHODOLOGY............................................................................19
3.1 Research introduction and overview..............................................................................19
3.2 Research type..................................................................................................................19
3.3 Research design..............................................................................................................20
3.4 Research approach..........................................................................................................21
3.5 Research philosophy.......................................................................................................21
3.6 Data collection................................................................................................................22
3.7 Sampling method............................................................................................................22
3.8 Data analysis...................................................................................................................23
3.9 Research limitation.........................................................................................................23
CHAPTER 4: DATA ANALYSIS................................................................................................26
CHAPTER 5: CONCLUSION......................................................................................................41
APPENDIX..................................................................................................................................................48
Figure 1 Framework of management accounting..........................................................................24
Figure 2 Role of management accounting in helping managers in formation of plan in respect to
cost control and curtailment...........................................................................................................25
Figure 3 Role of management accounting in controlling expenses...............................................26
Figure 4 Respondents response on relationship between management accounting and inventory
management...................................................................................................................................27
Figure 5 people opinion on the extent to which management accounting play an important role in
the control of indirect expenses.....................................................................................................28

Figure 6 People opinion on the role that management accounting play in solving problems
related to varied business activities in the firm.............................................................................29
Figure 7 Score keeping as part of management accounting and decisions related to different
business activities..........................................................................................................................30
Figure 8 People response on extent to which it is very difficult to set standards for the budget. .31
Figure 9 People response on difficulty faced by managers in setting parameters in the budget and
performance of control function of management..........................................................................32
Figure 10People response on methods that can be adopted to reduce difficulties that are faced by
managers in preparing a budget.....................................................................................................33
Figure 11 Role of management accounting in attracting attention of managers towards sever
issues..............................................................................................................................................35
Figure 12 People response on role that management accounting play in providing useful inputs
that can be used to form corporate strategy...................................................................................36
Figure 13 People response of role of management accounting in forecast of different things by
making use of its techniques..........................................................................................................37
Figure 14People comment on modern and traditional method of accounting...............................38

CHAPETER 1: INTRODUCTION
Management accounting is one of the most important domain of the business
management. Currently, most of company's whose size is medium or large are appointing cost
accountants who perform varied operations related to management accounting. There are number
of techniques of management accounting that helps firm in evaluating different things. In present
time period competition is increasing at fast pace among the firms irrespective of industry to
which they belong. Price is one of the most important factor on which firms are in front of each
other in the market. Hence, it is very important to utilize resources efficiently along with
maintaining stiff control on cost. Thus, it is clear that management accounting affects or is
related to different business activities (Managerial accounting purpose and roles, 2015). Due to
all these things the role and function of management accounting is the main area on which this
research study will focus. In this report critical issues related to management accounting will also
discuss in detail. Some techniques and there use in respect to varied business activities will be
discussed in the report. Management accounting is one of the most important analytic tool that is
used for deep analysis of the firm business operations. The importance of management
accounting can be understand from the fact that by using information relevant to MA planning is
prepared by the managers. By preparing sound plan resources are used in efficient and effective
way. Budgeting is another important thing by using which business firms are controlling there
expenditures and measuring business performance. So, there are multiple techniques of
management accounting that play a significant role in assisting firm in performing its business
operations in the best way. It is very important to understand some issues that are associated with
use of management accounting techniques. By identifying relevant issues and addressing them
the best use of methods can be made by the business managers (Herman, 2011). It can be said
that this report will not only throw a light on the importance of management accounting but will
to some extent draw attention on issues related with same. Thus, it can be said that present study
will help reader in understanding different aspect of management accounting.
Research aims and objectives
Research aims and objectives are the two main elements or factors that give proper
direction to the specific research study. On the basis of determined direction in which research
must be carried out study can be conducted in better way. The aim of the present study is “To

evaluate the role of management accounting in the functioning of the business activities”.
Research objectives to achieve aim are as follows:
 To critically evaluate the model that is followed to perform all operations related to the
management accounting in real business world.
 To evaluate the functions of management accounting in respect to varied business
activities
 To examine the role of management accounting in growth and success of business
activities
Research questions
Research questions are one of the most important tool that helps in structuring the
research analysis to achieve best results from the study. It is a tool that helps firm in doing deep
analysis of issue that in respect to research topic is currently faced by relevant people. Research
questions related to current research study are as follows:
 What are the different functions of management accounting in service sector units?
 What is the role of management accounting in making effective business decisions?
 How management accounting does helps in business functioning for different
organizations?
Research Rationale
Management accounting is one of the most important effective tool that is used to
measure performance of the business firm from different sides. By using management
accounting methods areas where improvement needs to be made can be identified. Business
firms face multiple problems like elevation in expenses and decline in profitability (Bennett,
Schaltegger and Zvezdov, 2011). All these issues can be handled by using management
accounting methods. It was necessary to conduct research on management accounting so that the
scope of its use and effectiveness can be identified. Apart from this it was also very important to
identify and analyze the development aspects in accounting aspects of businesses which will help
the companies in analyzing the critical issues regarding management accounting discipline.

Significance of research
There is great significance of present study because it helps in analyzing different aspects
of the management accounting. In the present study different roles of mentioned sort of
accounting will be discussed in literature review section. Along with this, functions of same will
also be discussed in the mentioned section of the report. Data collected will be analyzed and
same will help readers in understanding extent to which management accounting helps managers
in performing different functions of the management. There are some issues that are associated
with use of management accounting methods. Same will also be addressed in systematic way in
the report. Hence, it can be said this research study have lots of significance because in same
management accounting will be analyzed from different sides in systematic way.
Structure of report Introduction- Current research is carried out on the management accounting and its use
in respect to different activities of the business. Introduction is the first section of the
report in which in relation to management accounting brief discussion will be carried out
in respect to function and role of same in respect to varied business activities. Literature review- It is second part of the report and in this different aspects that are
related to management accounting are described. Different author’s state varied things in
relation to management accounting. Same are considered to prepare literature review
section of the report. Critical analysis will be made in this section of report by comparing
thoughts of different scholars in respect to specific aspect of the management accounting. Research methodology- This is one of the most important part of the research study and
in this section of the report information is provided about the way in which research will
be conducted (Zimmerman and Yahya-Zadeh, 2011). In this section of the report, various
things related to approach that will be followed for conducting relevant study are
discussed in detail. Along with this, sample size of respondents and technique that will be
employed in respect to data analysis are also decided and described in this section of the
report. Data analysis- As mentioned above that in research methodology section data analysis
method is determined. In this part of the report data that is collected for research are
analyzed by using appropriate method. Facts that are collected in the research can be
analyzed by using statistical tool or thematic analysis. Out of these methods thematic

analysis will be done in the research by analyzing data that is obtained by distributing
questionnaires among the respondents.
 Conclusion and Recommendations- After completing data analysis section of the report
conclusion and recommendation section of the report will be prepared. In order to prepare
relevant part results of analyzed data and literature overview will be considered.

CHAPTER 2: LITERATURE REVIEW
Framework refers to the supporting structure of a system. In management accounting
there are number of employees that works at different level. A huge structure is placed in the
business firms and under same different process of management accounting are performed. It is
very important for the business firms to make sure that there framework related to management
accounting is flexible and is allowing employees to perform their operations very smoothly.
According to Bowen, Call and Rajgopal, (2010) management accounting basically contain a
specific procedure that is followed for creating and computing a cost. Apart from this, it is also
used to compute and gather data related to product quantity and time-based information in
relation to number of units produced in the firm and resources employed to produce same at the
workplace. There are different stages in the framework that are followed for gathering and
computing relevant data. There are specific number of employees of the firm that play an
important role in the organization in respect to collecting and processing relevant data. In the
large size framework it is internal audit department which is responsible to make sure that
control parameters that are determined in respect to varied business activities are strictly
followed by the firm. Under this framework there are experts like cost accountants that are
responsible to process relevant facts and figures that are made available by the junior accountant.
Cost accountant by using accounting tools and techniques generate meaningful tables that are
used to make business decisions.
As per views of Li and et.al., (2012) it is tax department experts in the framework that
also play a very important role in helping cost accountant in determining control parameters. Tax
department play a very significant role in ensuring that firm is following all relevant rules and
regulations related to tax. Employees that operate in the tax department take participation in
planning, control, and evaluation of processes and identify that if expenses will be made within
specific limit than what can be tax amount. It can be said that current framework that is used in
the business firms are focusing on segregation each and every work from each other. Moreover,
each task in framework is allotted to individual person.
Englund and Gerdin, (2011) claims that it is very important to make sure that framework
that is in the organization is very sound. This is because framework is nothing but a series of
steps that are usually followed in relation to management accounting at the workplace. In some

firms clear process for performance of each and every step in framework is not determined.
Hence, firm failed to achieve maximum benefit of framework that in respect to management
accounting at the workplace. Hence, it is very important for the firms to make sure that they not
only developed a framework but it is also effective and there are no issues in respect to same at
the workplace. Management accounting helps in preparing a plan regarding cost control and
curtailment.
Cost is the word today on which each and every firm of the world is focusing. This is
because competition between the firms is increasing. They cannot increase sales price every time
to increase their margin on sales. Hence, it is very important for the firm to maintain stiff control
on cost. Thus, it becomes very important to make sure that adequate data related to cost is
gathered and arranged in systematic way to evaluate cost of product. According to Richardson,
(2012) management accounting helps in preparing a plan that can be used in respect to cost
control and curtailment. This is because in management accounting each and every type of cost
is computed and by using same varied calculations are done. Techniques of management
accounting evaluate costs in different ways and give overview of cost of production and
expenses that are incurred by the firm in its business. Business managers on the basis of output
of calculations comes to know about costing of product and use same to craft business strategy to
control and curtail cost.
Contrary to this Malmi, (2010) state that mere preparation of accounts by using
management accounting concepts is not sufficient because by using same firm performance can
be measured. But it does not reflect that what sort of strategy in respect to cost control must be
formulated by the firm and in which direction. Hence, it can be said that merely by preparing and
analyzing accounts no one can prepare accurate cost control tactic. In this regard, managers
needs to evaluate lots of things. Like they need to evaluate probable changes that may occur in
the business environment and extent to which it may affect the cost of production. They also
need to evaluate their future production and sales related policy. By using same they can estimate
cost. Merely by evaluating a figure of management accounts managers can prepare a cost control
and curtailment strategy but they cannot justify that tactics on ground of probable changes that
may take place in the business environment. Hence, it can be said that use of management
accounting for preparing cost control and curtailment strategy is not sufficient.

Variance analysis is the one of most important technique of the management accounting
that is used to identify whether expenses made by the firm are greater or less than the determined
standard. In case expenses are more than standard value then it means that firm failed to give
good performance in its business. Arroyo, (2012) claims that management accounting play a
very important role in controlling expenses. This is because in variance analysis method standard
value of all expenses is determined by the cost accountant. By comparing actual and standard
value of expenses performance of the firm is measured. Thus, management accounting play a
very important role in controlling expense at the workplace. There is entire system that is placed
in the organization to maintain check on elevation in expenses. If this regard in some companies
for three month budget is prepared and value of all expenses is determined. Beyond determined
value expenses must not incurred. At end of each month or week evaluation is done and on that
basis tactics for upcoming time period is prepared. By doing so firm successfully maintain strong
control on its expenses.
As per views of Hopwood, Unerman and Fries, (2010) there is no doubt that management
accounting play a very important role in controlling expenses but no one can take guarantee that
it will be equal effective in controlling expenses. This is because variance analysis is prepared by
comparing actual expenses with standard value of expenses. In case if firm will determine wrong
amount as standard as variance analysis will product wrong results. It can be said that business
decisions if will be made on the basis of results then wrong business decisions will be made by
the managers. Thus, it is very important to consider number of factors while determining
standard value of expenses. In this regard, managers can evaluate pastime variance analysis
results and along with this detail study of likely changes that can happen in business environment
can also be done. By evaluating past and present better decisions can be made by the managers in
respect to determination of standard value of the expenses.
According to Caglio and Ditillo, (2012) by making use of management accounting
information decisions related to the inventory management are taken by the managers. This is
because on the basis of information provided by the accounts related to management accounting
managers come to know about the inventory that they purchase in earlier months. They also get
an information about the amount of inventory that remain unused at end of the month. Hence, on
the basis of entire information managers can determine that what quantity of raw material firm
must purchases in specific time period in order to meet its needs. Thus, by placing order for