Factors contributing to the development of Management accounting practices

This report discusses the factors behind the introduction of management accounting practices, including competition, compliance, and control. It also assesses the usefulness of the balanced scorecard and explores the key performance indicators and critical success factors of Qantas Airlines.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
May 31
2019

MANAGEMENT ACCOUNTING 1
Table of Contents
Introduction................................................................................................................................2
Part A.........................................................................................................................................2
Factors contributing to the development of Management accounting practices....................2
Competition........................................................................................................................2
Compliance........................................................................................................................3
Control................................................................................................................................3
Usefulness of Balanced Scorecard.........................................................................................4
Part B..........................................................................................................................................5
Critical success factors...........................................................................................................5
Key performance indicators...................................................................................................6
Strategy Map..........................................................................................................................7
Balance scorecard of Qantas..................................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

MANAGEMENT ACCOUNTING 2
Introduction
Management accounting is said to be the procedure of preparing accounts as well as reports
that offer suitable and detailed financial data to the executives of the company to make long-
term and short-term decisions. It helps in identifying, evaluating, analysing, understanding,
and communicates required information for attaining the goals of the organization (Uyar,
2010). The intent of this report is to highlight the concept of management accounting and the
factors behind the introduction of management accounting. The report is also being framed to
assess the usefulness of the balanced scorecard. In addition to this, the report is also
discussing regarding the key performance indicators and critical success factors of Qantas
Airlines, with the help of which the strategic map and balanced scorecard will be prepared.
Part A
Factors behind the introduction of Management accounting practices
Competition
One of the common things that are present in the 21st century is competition. Every business
and industry is presently dealing with competition due to presence of competitors. The level
of competition may vary between the rivals depending on the industry in which they operate.
The increasing number of competition impacts the operations as well as productivity of the
business (Bloom, Propper, Seiler and Van Reenen, 2015). In order to effectively deal with the
competition at domestic level and international level businesses work to develop different
practices that could provide proper and precise information of the market. Competition is one
of the major contributing factors that results in the development of management accounting
practices. The main reason for the development of these practices is because it identifies,
evaluates, analyse, understands and communities the information to the executives to take

MANAGEMENT ACCOUNTING 3
proper decisions for the benefit of the organization. This helps business in preparing the
reports and accounts that offer timely and accurate financial as well as non-financial
information. The precise and accurate information are essential for the business to take
decision which is provided by the practices of management accounting. For example, the
introduction of Activity Based Costing is one if the management accounting practise that
recognizes and allocates the cost to the overhead activities and then allots those costs to
different items or goods of the company. This results in providing precise and exact
information in comparison to traditional costing methods.
Compliance
Practices of the Management accounting are also developed to meet the key requirement of
the internal management in order to enhance the decision, attain goals, application of the
resource, use of capacity, internal business processes, and customer value to attain the
corporate objectives in a best manner.
Control
Control is another factor that helps in developing the management accounting practices. As
these practices support business on recording, analysing, summarizing and assigning the cost
related to the procedure, after developing the diverse courses of action in order to control the
costs. The goal is to advice the management of the company related to how to optimize the
practices of the business and procedures depending on the cost competence and capability.
One of the management accounting practice is cost accounting, which offers the detailed
information of the cost that is required by the management in order to control the present
operations and future plans (Drury, 2013).

MANAGEMENT ACCOUNTING 4
Usefulness of Balanced Scorecard
A balanced scorecard is said to be the performance metric that is used by the management to
recognize and improve different internal processes of the business and their succeeding
external consequences. The balanced scorecard is utilized to assess and provide the opinion to
the business (Kaplan, Norton and Rugelsjoen, 2010). The balanced scorecard is very useful
for the businesses; some of the uses are presented below:
Strategic Planning – The balanced scorecard offer an influential outline for making and
communicating the strategies of the business. The business model is pictured in the Strategy
Map that assists organization executives about the case and cause and effect relationship
among varied strategic goals.
Improved Strategy Execution as well as Communication - With the help of one page
image strategy, business can simply communicate the strategy externally and internally. This
one page plan also provides the understanding of the strategy of the company and support in
engaging employees and other stakeholders to deliver the strategy (Niven, 2011).
Better project alignment - The balanced scorecard support businesses in mapping their
projects to varied strategic goals, which in result confirms that the projects are strictly
focused on offering strategic objectives.
Better Management Information - This approach of management accounting support
businesses in developing key performance indicators of the company for their strategic goals.
This confirms that businesses are evaluating the actual aspects. According to the research,
organizations with the framework of balance scorecard are inclined to report higher
information of the quality management and improved decision.
Performance reporting - The BCS can be used to monitor the design of the reports of the
performance and dashboards. This confirms that the management reporting concentrate in the

MANAGEMENT ACCOUNTING 5
most noteworthy strategic matters and support companies in monitoring the execution of their
policies (Bernard Marr & Co., 2019).
Better process alignment - A properly executed balanced scorecard support in aligning the
organizational procedure like risk management and budgeting with the strategic goals. This in
turn supports in presenting organization as the truly strategic concentrated business.
Part B
Critical success factors
Qantas is known as one of the large ASX listed company that is operating the business in the
domestic as well as in the international market. According to the annual report of the
company below given are the key critical success factors: -
Competent workforce: - Qantas Company is successful in the market because of its
personnel as it has been seen that diverse personnel who can manage the business in
competent environment. In the aviation industry, it is essential for the companies to recruit
and hire such a diverse workforce that are highly qualified and can manage the operations
effectively (Qantas, 2018). The employees of Qantas are equipped with effective
communication skills, ability to handle responsibility and deliver the delight experience to
customers.
Route system: - The route system of the Qantas airline is reason behind the success of the
company. The company is connected with more than 186 destinations in more than 40
countries that include Australia and many other destinations (Qantas, 2018).
Cost structure: - The cost structure of the company relatively valuable as it is the way
through which they can manage the competitive pricing or innovation creativity. Qantas is
preferable for the customers because they manage the cost and focuses on price.

MANAGEMENT ACCOUNTING 6
Key performance indicators
Qantas performance indicators are -
The profit before tax of Qantas has increased in 2018 from $1,604M that was low in the year
2017 with $ 1,401M. In addition to this, the statutory profit as well as the return on the capital
investment as also showed the increased in 2018 from the past few years (Qantas, 2018).
(Source: Qantas, 2018)
Qantas revenue in the international market is presented below indicates the performance of
the company. There is increase in the revenue with $6,892M then the year 2017, that was
$6,413M, this reflects that the performance has been enhanced due to critical success factors
(Qantas, 2018).
(Source: Qantas, 2018)

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Further, this has been found that the long-term objectives of the company are to increase the
shareholders’ value and the performance of the company shows that they are able to offer
high return on investment.
Strategy Map
Considering the above analysis, below given is the strategy map for the Qantas company: -
Balance scorecard of Qantas
Balance scorecard is the strategy related to the performance management tool that is a semi-
structured report that helps the managers of the company to keep the track of the execution of
the activities. The below given is the balance scorecard of Qantas based on long term
objectives.
Perspectives Objectives Measures Target Initiatives
Financial
Perspective
 Increasing the
shareholder’s
Increase in  Increase in Contacting and
collaborating
Learning and Growth Perspective
Internal Business Perspective
Customer Perspective
Financial Perspective
Increasing the
Shareholder's
Value
Accomplishing
customer
expectations
Enhancing the
knowledge of
personnel
Recruit high
quality staff
Value added
services
Customer
Loyalty
Developing
High quality
services
Technology

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value
 Customer
Loyalty
investment Revenue
 Rise in
productivity
with different
investors (Coe
and Letza,
2014)
Customer
Perspective
 Accomplishing
customer
expectations
 Customer
loyalty
Positive
feedback by
customer
Increase in the
number of
customer
Monitoring of
number of
repeated
customers
Internal
Business
Perspective
 Enhancing the
knowledge of
personnel
 Value added
services
 Developing
High quality
services
Getting the
visitors
feedback for
high
engagement
from customers
(Kaplan, Norton
and Rugelsjoen,
2010)
 Providing
training to
employees.
 Increasing
the number
of routes
Weekly meeting
for updates
Learning and
Growth
 Recruit high
quality staff
 Technology
 Eligibility
of the
employees
for the
ability
 Skills and
 Update the
existing
technology
 Enhancing
the
technology
Effective
communication

MANAGEMENT ACCOUNTING 9
capabilities capabilities
Conclusion
The above report is discussing regarding the factors that contribute to the development of the
management accounting and the use of the balance scorecard. From the analysis it has been
identified that competition perform as the key factor for the introduction of management
accounting practices because it provide precise , and correct information to the management
of the company which is further used by them to take short-term and long-term decisions.
Besides this, the balanced scorecard is very useful tool as it provides a one page picture of the
complete strategy of the company. Moreover, it not just considers the financial aspects of the
company but it also incorporate non-financial aspects. Furthermore, the report has
highlighted that revenue is the key performance indicator of Qantas Airlines. In adition to this
the critical success factors of Qantas Airlines are competent workforce, root system, and cost
structure.
References
Bernard Marr & Co. (2019) 7 Benefits Of A Balanced Scorecard [Online]. Available from:
https://www.bernardmarr.com/default.asp?contentID=972 [Accessed on 31st May 2019]
Bloom, N., Propper, C., Seiler, S. and Van Reenen, J. (2015) The impact of competition on
management quality: evidence from public hospitals. The Review of Economic Studies, 82(2),
pp.457-489.
Coe, N. and Letza, S. (2014) Two decades of the balanced scorecard: A review of
developments. The Poznan University of Economics Review, 14(1), p.63.

MANAGEMENT ACCOUNTING 10
Drury, C.M. (2013) Management and cost accounting. Germany: Springer.
Kaplan, R.S., Norton, D.P. and Rugelsjoen, B. (2010) Managing alliances with the balanced
scorecard. Harvard business review, 88(1), pp.114-120.
Kaplan, R.S., Norton, D.P., and Rugelsjoen, B. (2010) Managing alliances with the balanced
scorecard. Harvard business review, 88(1), pp.114-120.
Niven, P.R. (2011) Balanced scorecard: Step-by-step for government and nonprofit agencies
1st ed. U.K: John Wiley & Sons.
Qantas (2018) Qantas annual report 2018 [Online]. Available from:
https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/
file/annual-reports/2018-Annual-Report-ASX.pdf [Accessed on 31st May 2019]
Uyar, A. (2010) Cost and management accounting practices: a survey of manufacturing
companies. Eurasian Journal of Business and Economics, 3(6), pp.113-125.