Evaluating Management Accounting Systems

The report summarizes that management accounting plays a vital role in managing functions and determining statistical and financial information for managers to make decisions regarding long- and short-term goals of the company. IKEA and Starbucks utilize management accounting systems to respond to financial problems, with IKEA adopting benchmarking and Starbucks using key performance index techniques.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
P5. Evaluating the management accounting systems adopted to respond financial problems.. .1
CONCLUSION................................................................................................................................2
REFERENCES................................................................................................................................3

INTRODUCTION
Management accounting is the process that consist of decision making regarding the operations
and functions of management. It is also called as managerial and cost accounting. It analyzes the
cost of business and operations for preparing the financial report within the organization, account
and maintaining records that aid the managers in choosing the effective strategy for achievement
of the business goals. The present study is based on IKEA, a leading global furnishing retailer
and Starbucks, the largest producers in tea agriculture. Further, the report explains about the
management accounting systems and the comparison between the systems of both the firms to
solve the financial problems is assessed.
P5. Evaluating the management accounting systems adopted to respond financial problems.
There are various management accounting systems that the organization adopts for resolving the
financial problems such as good financial governance, Key performance index, Bench-marking
and Variance analysis.
Good financial governance- The aim of such project is to strengthen the system of public
finance as per the principles of good financial governance, to specify accountability, efficiency
and transparency (Hwang, Lin,. and Shin, 2018). This program facilitate support to the
stakeholders and government in all the areas relating to public finance.
Key performance index- This system helps the organization to monitor and measure the
performance of the enterprise. It evaluates the organizational success and the functioning of the
particular activity like products, projects and programs within which the firm engages. This
indicator facilitates quantifiable measurements in terms of the enterprise performance.
Bench-marking- This system is used for making comparison between the performance metrics
and the processes of the business in industry to conduct and adopt best practices against the
competitors or other companies (Drangmeister. and et.al., 2019). It assists in planning, delivery
and section of the projects. For setting goals and measuring productivity, Bench-marking act as a
strategic tool.
Variance analysis- It is the study of investigation in context of deviations present in the actual
behavior as compared to the budgeted and planned behavior. It helps the company in assessing
the gap and to take corrective action for fulfilling the gap (Latan, and et.al, 2018). The primary
purpose of applying this technique is to exercise control and reduction on the cost so that
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optimum utilization of resources can be reached by the enterprise which in turn results in higher
profits and less wastage.
Inventory management system- It refers to the system of maintaining optimum amount of
inventory item. According to this, the firm strives for attaining an optimal inventory with taking
into account the management of all orders, handling cost, shipping, carrying cost and other
associated costs.
Cost accounting system- It is the system of accounting information that keeps the report, record
and measures in relation to the costs of the enterprise (Holopainen, Niskanen, and Rissanen,
2019). The purpose of cost accounting is ascertainment of cost and using it in the decision
making and evaluation of performance process.
Price optimizing system- It is the mathematical analysis tool that is used the company to
determine the response of the customers on the different prices charged to its products and
services. It is used to set the prices in accordance of meeting the objective of profit
maximization.
IKEA Starbucks
IKEA adopts Bench-marking for managing its
system which enables the firm in evaluating
and assessing the best practices that are
adopted by its competitors to gain the
competitive advantage over the other
companies such as Amazon, Tesco, Walmart
etc.
Key performance index technique is used by
the Starbucks that act as the performance
metrics facilitating comparison of the
performance in meeting their strategic and
operational goals (Cooper, Ezzamel, and
Robson, 2019). It reflects a success of the
performance of the firm in the near future.
CONCLUSION
The above report summarizes that management accounting plays a vital role in managing the
functions and to determine the information regarding the statistical and financial information so
that managers can make decisions in relation to the long and short term goals of the company.
IKEA and Starbucks make use of management accounting systems to respond to the financial
problems so that growing success can be achieved in long run.
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REFERENCES
Books and journals
Cooper, D. J., Ezzamel, M. and Robson, K., 2019. The Multiplicity of Performance Management
Systems: Heterogeneity in Multinational Corporations and Management Sense‐
Making. Contemporary Accounting Research. 36(1). pp.451-485.
Drangmeister, W. and et.al., 2019. Methods and systems for efficient delivery of accounting and
corporate planning services. U.S. Patent Application 16/018,070.
Holopainen, R. M., Niskanen, M. and Rissanen, S., 2019. Management Accounting and
Profitability in Private Healthcare SMEs. International Journal of Public and Private
Perspectives on Healthcare, Culture, and the Environment (IJPPPHCE). 3(1). pp.28-44.
Hwang, Y., Lin, H. and Shin, D., 2018. Knowledge system commitment and knowledge sharing
intention: The role of personal information management motivation. International Journal
of Information Management. 39. pp.220-227.
Latan, H. and et.al, 2018. Effects of environmental strategy, environmental uncertainty and top
management's commitment on corporate environmental performance: The role of
environmental management accounting. Journal of cleaner production. 180. pp.297-306.
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