Management Accounting Methods or Techniques - Case Study

Managerial
Accounting

ABSTRACT
Propose of this report is to analyse the importance of management accounting systems in
the multinational organization. Along with this, how manager effectively able to implement these
systems which provide various benefits and they develop strategy to achieve business goals &
objectives.

Table of Contents
ABSTRACT.....................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Identify management accounting methods or techniques from the case study........................1
2. Relevancy of management accounting system for contemporary organization......................3
3. Management accounting system in today's competition and uncertain business environment
......................................................................................................................................................5
4. Findings of both articles that useful for management accountants in Austrian company.......6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Managerial accounting is the process of analysing, identifying, measuring, interpreting
and communicating financial information to the manager. It further helps the manager to pursuit
business goals through developing managerial strategy which impact the operational functions of
the company (Benson and et.al., 2015). It includes financial information for the purpose
accounting which beneficial for internal as well as external users and for decision making
process. Better understanding of this report, it is based on two different articles which is about
implemented modern management accounting system in the organization. It helps the readers to
understand management accounting system (MAS) and various benefits in concern of current
organization that helps in maximising production or profit margin as well.
This report includes various topics such as management accounting techniques and
relevancy of management accounting system for the organization. Along with this, it includes
comparison of different article and its findings which required to analyse it's relevancy in the
competitive market.
MAIN BODY
1. Identify management accounting methods or techniques from the case study
Management accounting is the process of collecting financial information which helps
the organization to analyse their current situation as well as financial position. It further
beneficial for top management who can analyse all the information and develop strategy to
perform their task to achieve their business goals. By using management accounting, accountant
produce financial statement which further help the manager in decision making process as well
as developing strategy for future operational activities. Now, every multinational organization
manage their accounts
Total Quality of Management (TQM): It is continuous process which help the
organization to detect or reduce the error from the manufacturing units. This accounting
techniques mostly used in the supply chain management, to improve customer experience
through providing quality goods & services. By using this technique manager able to enhance
business operations and other activities which improve product quality that satisfy customers or
increase market share as well (Brewer, Garrison and Noreen, 2015). In order to reduce error or
defect from the manufacturing units they have to provide proper training to their staff members
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which improve their practical skills as well as performance. It context of multinational
organization, top management follow this technique to detect error and then develop strategy to
minimise its impact on business operations. With the help of Total Quality of Management
(TQM) every individual involved in the production process and they are accountable as well
regarding their actions. By using this technique organization able to get various benefits such as
customer satisfaction regarding product quality, participation of each staff members, systematic
approach, fact based decision etc.
Balance Score Card (BSC): It is also one of the management techniques which help the
business to improve their performance as well as productivity. It is a framework which helps in
implementing strategies which associated with the vision, mission or objective of the company.
It balances financial or performance measurements and relate with the business objectives &
goals. It is also called business performance management tool where manager of the company
ensure that implemented strategy helps in improving performance as well as productivity. This
technique used by the multinational organization where they develop strategic plans which helps
the business to get desired goals. This method used by the manager to compare and measure
performance through providing scores and it will be based on individual performance, strategies,
process or technology used to produce goods & services. This measurement help the manager to
develop their future strategies which required in the decision making process.
Just In Time (JIT): It is a inventory management system which help the manufacturing
business to manage their stock level for the production of goods. Nowadays multinational
organization adopt this strategy to increase their operational efficiency as well as effectiveness.
Along with this, it improve performance by reducing wastage in the manufacturing process
(Bushman, 2014). It helps in reducing inventory cost that directly minimise the selling price of
product which generate more demand and it automatically increase production of profitability.
Further it helps in achieving business goals & objectives. Those organization who does not
follow this techniques should face the challenges regarding shortage or goods in the production
period as well as wastage of inventory which maximise product cost and then selling cost as
well. In the current business model of every multinational organization follow this system to
enhance their inventory management in order to increase efficiency as well as effectiveness. It
provide various benefits such as minimising cost which automatically increase profit margin of
business.
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Above mention management accounting techniques helps the manager to formulate their
strategy in order to achieve their business gaols & objectives. Multinational organization as well
as other small business also adopt these techniques to manage their operational functions as well
as other activities. It helps in improving production efficiency as well as effectiveness through
measuring some indicators which required to analyse. On the basis on these information or
analysis, manager develop strategy for future activities.
2. Relevancy of management accounting system for contemporary organization
In the contemporary business environment, complexity in the business operations will
increased due to change in the demand, taste and preference of customer regarding goods &
services. In the multinational business, manager develop strategy by using management
accounting system to improve operational functions which required for decision-making process
(Butler and Ghosh, 2015). In addition, it helps the manager in competitive decision where they
have to develop managerial strategy, control over each activity and evaluate for the further
improvement. By using management accounting system business able to enhance their internal
functions which improve efficiency and effectiveness. Bys using accounting systems such as
inventory management, cost accounting, price optimisation etc. Below mention discussion based
on the relevancy of management accounting system with contemporary organization.
Evidence from Multi-national Manufacturing Company:
According to the case study of “Newly implemented modern management accounting
system in a multinational manufacturing company” researcher understand the relevancy of
management accounting system which help the business at particular level of the business. In
this case study, head office control of Company A follow the structure where all the division
such as strategic level, operational level or business level helps the manager to develop strategy
for the decision making process. Lower managers highly involved in the operational as well as
function activities they need to analyse or understand management accounting system for
decisions making process (Kravet, 2014)(Mihăilă, 2014). In the middle level management,
manager collect internal as well as external information to build tactical decision. On the other
hand, high level management used to develop strategy for future which provide various benefits
and help in achieve business goals & objectives.
In the operation level, Company A use Key Performance Indicator (KPI) to measure
production level performance along with this, if any problem identify then it will be resolve with
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the help of it. KPI should analyse with the help of internal as well as external benchmarking and
it totally based on some skills and competencies. Manager also analyse those activity which
drive the cost or not. In the tactical level, manager produce strategy to face various tactical and it
is different from other levels. Basically it is based on the components of supply chain and change
in the customer demand (Nguyen and et.al., 2017). In the last strategic level, Company A focus
on developing strategy which is more than 1 year. Along with this, company focus on external
factors such as stakeholders of the business like customer, employees, suppliers, investors etc.
From top to bottom information required by top management in order to produce strategy which
helps in decision making process.
Company A follow various accounting techniques such as Just-In-Time, Total quality of
management (TQM) and Balance scorecard (BSC). It help the organization to increase their
operational efficiency as well as effectiveness or work. By using above techniques helps in
improving product quality which satisfy customer and increase demand which automatically
generate more production or profit margin.
Discussion about management accounting systems in company:
Second selected article based on the “ Implementation of Activity Based Costing (ABC)
model for farm”. It help the modern organizations to improve their operational activities and by
reading this report researcher wanted to know that, how accounting systems or management
control impact agricultural management. Along with this, they wanted to understand that how it
helps in improving production by using latest or least technology. Purpose of this study is to
measure that how Activity Based Costing beneficial in detecting error and. Basically, activity
based costing include overall product cost for example operational cost excluding direct material.
Activity based costing method based on every event, actions, task, project and specific goals
(Article on Implementation of the Activity-Based Costing, 2019). This costing method required in
supply chain management, product designing, operating machines etc. In the case study, S Ltd
company face various issues at the time of implementing activity based costing. Top
management found that business not able to achieve their business goals & objectives due to
technical issues. For effective decision, required information in low and resources found to be
influenced. In the S Ltd, sales volume required to measure activity based costing and it will not
available in future decision making process. S Ltd company face the issue such as lack of
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availability of data and this problems generate due to low investment in the area of technology
such as accounting system.
In today's competitive world, S Ltd did not centralised their data they have separate
functional department but information still separate. Company manage their daily transactional
information which further helps in producing financial report of manager develop business
strategy accordingly (Noval and Stahl, , 2017). Due to lack of centralized data, manager have to
collect all the information on single place and then analyse and formulate strategy to improve
operational activities. Another issue S Ltd face that communication among the operations or
developer and it will be generate due to less use of technology or accounting system. It impact
the business which reduce production as well as profitability. So manager need to ensure that,
they have to follow accounting system as per the requirement.
Inventory management system required to manage raw material in the production
because over or under inventory can cause the situation of shortage or wastage of stock. It also
helps in reducing gap between accountant or manager because financial information collect by
the accountant and further decisions will be taken by managers. By using various management
system will provide overall overview regarding utilization of resources. In addition, regular
review will provide better or effective analysis of individual as well as operational performance.
3. Management accounting system in today's competition and uncertain business environment
Management accounting system used by the top management authority in order to
measure actual performance or position of the business. With the help of various accounting
systems, organization able to acquire various benefits which further helps in performing
operational as well as executive activities. In today's competitive market, management
accounting system play essential role in the uncertain business environment. Benefits will be
discussed below:
 Increment in customer value: In the current situation of market, organizational majorly
focus on building customer value which generate revenues. Organization use
management accounting system to keep track their inventory level which beneficial for
the manager in the decision making process. It also helps in changing policies which
impact on customer engagement and improve their relation in the work place. It help the
top level management to analyse the requirement of changes in the business and then
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done some changes accordingly. So basically, by using different accounting system helps
in generating customer value through offering few services which they willing to acquire.
 Electronic business: In the business environment, management accounting system used
to track different activities such as activity based costing, batch costing etc. It include all
the activities which perform online as well as offline (Otley, 2016). In context of
electronic business, management accounting system provide various benefits which help
the organisation to execute operations in effective manner. Along with this, different
ways of communication and information technologies used by the organizations which
provide beneficial to keep records of daily basis transactions.
 Improve efficiency and reduce time in business process: Management accounting
system helps in increasing efficiency of operations. Such as inventory management
system helps in tracking inventory level which improve records. It further helps to keep
data secure and it will be executed in the future for effective or desired outcomes.
Accounting system helps in recording various information such as salary distribution,
performance analysing, records of purchasing goods etc. Inventory management system
is used by organizations to reduce time to spent by employees to physically checking the
stock.
From the above discussion, it has be analysed that every organization does not matter
either it is small or big. Because management accounting system helps in improving business
operations and internal activities (Shi, Zhang and Guo, 2014). These systems provide various
benefits or information which helps the managers to develop strategies for future and use these
information for decision making process.
4. Findings of both articles that useful for management accountants in Austrian company
According to first case study “Newly implemented modern management accounting
system in a multinational manufacturing company” based on the management accounting system
which used by the multinational organization in order to improve business operations and
activities which provide various benefits. It helps in collecting information which primary used
in developing strategy and secondary for decision making process. Manager of Company A
required all the relevant information and it will possible through implementing accounting
system in their business. Currently business follow various management accounting system such
total quality of management (TQM), just-in-time (JIT) or balance scorecard (BSC). These
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systems used to improve operational as well as individual performance. It helps the manager to
get desired result which satisfy their stakeholders and desire of customers. Basically it is used by
large organization in order to complete task in efficient manner (Weygandt, Kimmel and Kieso,
2015). It further helps the manager or top management to achieve their business goals &
objectives. Along with this, it helps in improving organizational performance and individual
performance of each employee. In order to get effective or desired outcomes, manager need to
provide training & development to improve their skills and other competencies. After
implementing various techniques, manager analyse the difference in the performance of
company. Improvement in the individual performance will provide monetary benefits which is
beneficial for the whole organization. So manager need to ensure that every individual get proper
training which make them capable to achieve business goals & objectives. It is very good new
for management accountant because in the next few years demand of accounting systems in the
organization will be increasing. These system required by multinational organization for
effective market growth. Due to this reason, demand of management accountant will increased in
the market. For the effective implementation organization required specialised person along with
specific skills & competencies in order to perform their task in well manner.
As per second case study “Implementation of Activity Based Costing (ABC) model for
farm” is based on the implementation of activity based costing in business. There are various
organization who still does not adopt advanced technology to manage their records for further
decision making process. In context of S Ltd, company have separate department and all the
records were maintain in effective manner. But, due to lack of centralised information will
impact the organization and it required huge time to gather information and represent in useful
manner. In addition, S Ltd company also face some smother issues such as lack of availability of
data because non centralisation of information in the organization. Company does not maintain
their electronic records they still manually record daily transaction or activities performed by the
individuals in the business operations (Wolf and et.al., 2015). Store huge data with the help of
technology will save time as well as efforts of employees. Management accounting system helps
analysing problems and formulate strategies for future benefits. Along with this, company need
to hire technical persons because it required some specific skills & competencies to perform their
task and achieve business goals & objectives. S Ltd should hire management accountant to their
daily transaction which further helps in preparing financial statement for their stakeholders. On
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the basis of financial report, manager develop strategy and perform accordingly. It help the
organization to analyse future opportunities and minimise the risk.
CONCLUSION
From the above discussion it has been concluded that managerial accounting required by
every business in order to increase market growth and operational efficiency. In the given case
study, it has been observed that management accounting system is very important as well as
beneficial for the organization. It improve operational activities and performance of individuals
that further beneficial in decision making process or developing strategy as well. By using TQM,
company able to understand performance and improve quality through detecting those activities
which is not generating revenue. Company majorly focus on those activities which generate
revenue.
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REFERENCES
Books & Journals
Benson, K. and et.al., 2015. A review of accounting research in the Asia Pacific
region. Australian Journal of Management. 40(1). pp.36-88.
Brewer, P .C., Garrison, R. H. and Noreen, E. W., 2015. Introduction to managerial accounting.
McGraw-Hill Education.
Bushman, R. M., 2014. Thoughts on financial accounting and the banking industry. Journal of
Accounting and Economics. 58(2-3). pp.384-395.
Butler, S. A. and Ghosh, D., 2015. Individual differences in managerial accounting judgments
and decision making. The British Accounting Review. 47(1). pp.33-45.
Kravet, T. D., 2014. Accounting conservatism and managerial risk-taking: Corporate
acquisitions. Journal of Accounting and Economics. 57(2-3). pp.218-240.
Mihăilă, M., 2014. Managerial accounting and decision making, in energy industry. Procedia-
Social and Behavioral Sciences. 109. pp.1199-1202.
Nguyen, T. T. and et.al., 2017. Effect of transformational-leadership style and management
control system on managerial performance. Journal of Business Research. 70. pp.202-
213.
Noval, L. J. and Stahl, G. K., 2017. Accounting for proscriptive and prescriptive morality in the
workplace: The double-edged sword effect of mood on managerial ethical decision
making. Journal of Business Ethics. 142(3). pp.589-602.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research. 31. pp.45-62.
Shi, L., Zhang, H. and Guo, J., 2014. International accounting.
Weygandt, J. J., Kimmel, P. D. and Kieso, D. E., 2015. Managerial accounting. Wiley..
Wolf, S. and et.al., 2015. Controllers as business partners in managerial decision-making:
Attitude, subjective norm, and internal improvements. Journal of Accounting &
Organizational Change. 11(1). pp.24-46.
Online
Article on Implementation of the Activity-Based Costing. 2019. [Online] Available through:
<https://search.proquest.com/business/docview/1861776380/fulltextPDF/
3DBC884CE24F4BF5PQ/1?accountid=30552>
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