Management Accounting Report: General Motors Case Study Analysis

This report provides an analysis of General Motors' management accounting practices. It begins with an introduction to the company and its vision, followed by an examination of the changing role of management accountants in the context of technological advancements. The report then delves into ...Read More

RUNNING HEAD: MANAGEMENT ACCOUNTING
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Management Accounting
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Table of Contents
Introduction...............................................................................................................................................1
Section 1: Budgeting and Analysis.........................................................................................................1
Section 2: Costing Method......................................................................................................................2
Section 3: Segment reporting and Performance Measurement............................................................2
References.................................................................................................................................................4

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Introduction
General Motors was founded in1918 and merged with Chevrolet Motor Corporation of
Canada to build General Motors of Canada Ltd and this was wholly owned by McLaughlin and
GM. Sam. Currently company’s vision is to become the leader in offering transportation services
and products through continuous innovation. The operations and administration department role
have changed because of technological advancement. General Motors is focusing on
transforming the future as over the past 100 years, the company marketed the best fuel-efficient
model GMC, Cadillac and Buick and remains as one of the leading automakers in Canada. The
company headquarters is located at Oshawa, the residence of the General Motors of Canada and
hub of purchasing department, finance department, planning department, and aftersales activities.
In this information age, the company changed its techniques and included knowledge systems,
databases and automated processes (Motors, 2019). Earlier General Motor’s management
accounting system included three things in the structure in order to help the top executive to
attain the objective of “centralized control with decentralized responsibility”. For knowing the
changing role of management accountant in the current era a discussion on earlier budgeting and
reporting method is done considering the example of General Motors Canada. Furthermore,
recommendations are given for the best technological approach that can be used in management
accounting and the advantages and disadvantages of using that technological approach in the
organization.
Section 1: Budgeting and Analysis
The traditional ways of formulating budget and analysis were based on the past record
that was incremental budgeting; it was the most common method of budgeting that was used
earlier to make budgets. Another method of budgeting was activity-based budgeting this was
used by General Motors; it is an approach that finds the amount of input required to get the
desired output. The company made sales report and advanced flexible budget report to control
each division actual performance earlier on the basis of these methods. Due to technology
advancement, various options are available nowadays that reduces the burden of management
accountants. The development of technology pushed each and every company to compete at the
global level (Monterio, 2016). Management accountant can use software that is readily available
that is helpful in overcoming the problems of the traditional management accounting system that
was accurateness and on-time preparation. Companies like General Motor Canada should use the
software for budgeting and forecasting that made it simple for the management accountant to get
the payback period, net present value and more calculation easy and accurate. Sage 50cloud is
budgeting software that offers various features such as cash flows and budgeting and forecasting.
This use of the software will make it easy for General Motors to increase accuracy in formulating
a budget that has a big effect on profitability as an accurate budget will reduce financial
uncertainty. Using the software for budgeting and analysis will boost up the level of functionality
and this software will allow data to be reused and stored for the future purpose this makes it easy
to change and manage the budget for long term benefits (Avgerou & Walsham, 2017). In
General Motors the challenge of diversity management makes it difficult for the company to
operate in an effective manner as each individual perceive things differently, use of software
ensures the consistency in report no matter which employee prepare this budget it will connect

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with the organization employees in the same manner. But there are some drawbacks of using this
technology as it will be difficult for the General Motors to implement the software as it might
prove to be costlier for the organization and its installing and maintenance is a big task to handle
in order to implement this the organization need technical assistance and management accountant
has to accept this change in a positive way.
Section 2: Costing Method
Costing is ascertaining the cost of production from manufacturing to finished goods as
the cost of producing an item depends on various variables. In automotive manufacturing,
process costing is the method that is useful as the final product of a process is the raw material
for the other process like at General Motors for each process that is assembling, manufacturing,
coloring, and finishing here is different department and for each process, the cost is calculated.
This made it difficult for a management accountant to differentiate between fixed and variable
cost and to maintain consistency in following the standard of accounting. The company can use
robotic automation. According to global cost management survey most of the companies don’t
match their target or performance that they predict through cost accounting as it is not considered
as an effective approach in this changing environment in order to predict closer outcome a proper
way is needed for that company should opt for better forecasting system that includes use of
artificial intelligence and machine learning that feed the cost structure of the company in a
system and ascertain cost and this will lead to accuracy and profit optimization (Otley, 2016).
Using digital technology has changed the way costing is done, adopting this software and
techniques might be costly for the organization but it is a one-time investment that needs to be
done by the companies in order to take the advantage of technology and to transform their
business. The general motor should opt for the robotic automation and artificial intelligence for
cost as it will prove to be beneficial to reduce the error and to bring consistency in ascertaining
the cost of each process. The main drawback of using this technology is the reduction in manual
workforce and employees will not going to accept this change.
Section 3: Segment reporting and Performance Measurement
Segment reporting is disclosing the financial statement of each segment that generates at
least 10% of revenues, combine assets of 10% and 10%profit and loss. In relation to General
Motors globally, the company structure (Lin & Jiang, 2017). Company’s GM operating segment
now merged with GM South America. The automotive operation of the company meets the
demand of customer through its automotive has changed its automotive segment in effect from
2017 because of changes that they made in their organization segment: General Motors
International. Consolidating the financial statement of each segment and then ascertaining the
overall profitability of the organization is a lengthy process that requires specialized and
expertise in the field (GeneralMotors, 2017). The report of segments is the basis of decision
making and evaluating the performance of each segment. Earlier getting information or using
segment reporting requires more efforts as top-level executives have limited access to detailed
information. To overcome this problem technology plays a vital role as it makes the flow of
information electronically and easily accessible by the top authorities. Segment reporting is a
tool that is useful to give the information to stakeholders of the company about profitable
segments. In order to get the detailed information of each segment cloud computing software

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should be installed in the systems in General Motors that will be helpful for the directors or
stakeholders to make decisions regarding the further investment and strategic action (Griggs,
2019). This makes it easy to each segment to access their detailed report and to measure the
performance against the past years record as cloud computing helps in storing data and
information for the long duration and can be accessed by the authorities whenever required that
reduces the burden and responsibilities of management accountant to transfer the information or
publish it in hard copies now because of that software the segments can access the data on time
with reliability.

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References
Avgerou, C., & Walsham, G. (2017). Information technology in context: Studies from the
perspective of developing countries. New york: Routledge.
GeneralMotors. (2017). Annual Report. General motors.
Griggs, L. L. (2019, July 8). Advances in Technology may impact Segment Reporting . Retrieved
from https://www.morganlewis.com/blogs/financialreporting/2014/02/advances-in-
technology-may-impact-segment-reporting
Lin, L., & Jiang, X. (2017). Improving Internal Control Over segment reporting. Journal of
Accountancy, 26-32.
Monterio, B. J. (2016). Technology trends to watch: here are some of the latest technology trends
that could impact management accountants and their jobs. Strategic Finance, 86-88.
Motors, G. (2019, July 8). Abot us . Retrieved from https://www.gm.ca/en/home.html
Otley, D. (2016). The contingency theory of management accounting and control. Management
accounting research, 45-62.