Managerial Accounting - Sample Assignment

Managerial
Accounting.

ABSTRACT
The study summarises how various aspects of management accounting systems in
context of corporation and ways by which they assists in enhancing results and fiscal
performance. Also it explains how different systems affects personnels' performance and
aggregate performance of corporation which provide assistance in acceleration in efficiencies
and operational effectiveness.

Table of Contents
ABSTRACT ....................................................................................................................................3
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Different types of management accounting methods from the given case study:...................1
2. Relevancy of management accounting system with contemporary organization:...................3
3. Role of management accounting system in competitive market and uncertain business
environment.................................................................................................................................6
4. Learning outcomes based on research findings which will be helpful for Australian
management accountants:............................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Managerial accounting generally regarded as cost accounting, the whole process of it
covers identification, measurement, analysis & interpretation of data which helps the manager to
understand financial position of the company (Bennett and James, 2017). Managerial accounting
commonly regarded as cost accounting where this method includes recognizing, evaluating,
reviewing and communicating figures and facts that enables manager to know the corporation's
economic and financial status. It distinct from process and term "financial accounting" since
primary goal here is to provide manager with right data to make efficient decisions to attain their
targets & objectives. This study is mainly based upon two papers or articles to effectively
understand this topic. To better understand the concept of managerial accounting company A
have been selected from the given article that is a manufacturing company. Itconcentrates on
effective implementation or execution of modern or contemporary management accounting
system on manufacturing corporation operating in multiple nations. These journals/articles will
assist readers to completely understand about management accounting system (MAS) and to
what extent it is advantageous for corporation which trying to maximize their manufacturing
level and scope as well as it's net operating and profit margin.
The study covers explanation about key concepts like techniques associate with
management accounting and its major relevance in context of corporation. It also include the
comparison of different article findings and how it is relevant to the competitive market. A
proper comparison have been discussed with the support of article and the comparison company
is Reinforcing Steel Bar
MAIN BODY
1. Different types of management accounting methods from the given case study:
Management accounting is mechanism of gathering fiscal data and being used
appropriately, further assisting executives and managerial personnel to create efficient decision-
making to accomplish enterprise targets. This accounting system involves different methods and
methods that help evaluate the tasks of the corporation (Burritt and Tingey-Holyoak, 2012). In
addition, it enhances organizational operations that maximize productiveness, earnings and
profitability. There was some techniques or systems that the organisation pursued to enforce and
succeed in achieving required results. Some of these are discussed here, as follows:
1

 Just in time (JIT): This is a major management accounting system linked to inventory
that allows the enterprise to manage supply of raw material as per manufacturing and
sales requirement. This approach is mainly applied by multi-national corporations to
improve their structure of inventory management when ordering to quantify as required.
If corporation orders more than manufacturing in large quantities then remaining raw-
material will be wasted. On other side, they are facing shortage issue, then it will affect
the manufacturing that will cause the company enormous economic loss. Just-in-time
approach enables to establish raw material requirement strategy for processes of
manufacturing. Currently, to enhance their inventory management, each corporation is
following this system (Cazier, and et.al., 2015). It's also useful to organisation as it
enables to minimize costs that inevitably boost the corporation's profit margin.
 TQM: It is consider to be most effective system of management accounting that is used
in determining, removing, eliminating any kind of production issue or any problem
arising in supply chain management in order to get better results to increase profit
margin. This system also helps to increase or upgrade experience of customer as well as
increase the efficiency of staff member by giving crucial training at each level. Total
quality management also aid the management of company to improve the quality of
product that directly satisfy customer needs and raise market share. In present
competitive business world, companies are required to give essential training to their
entire workforce which assists to improve skills and ways of performing allotted task.
This directly help multi-national company in context to determine the issues in different
operation and make effective plans to remove these plans. With the assistance of TQM
manager are able to control and hold each and every member those are involved in
production process and develop the best quality product and services preserving detail
record of every business transaction (Maas, Schaltegger and Crutzen, 2016). This
management accounting system gives number of benefits like working on customer
perception, employee engagement, systematic methodology, facts based decision etc.
 Activity based costing (ABC): This is a methodology that support to assign or allocate
indirect cost that are relevant to different services and product. These techniques assist
managers acknowledge the connection among overhead operations, costs and goods
produced. Indirect costs including salaries for staff and manager costs that are very hard
2

to attribute. Activity based costing operates best in complicated settings where a lot of
devices and products are available and tangled procedures are not simple to figure out. In
contrast, in a simplified setting, where manufacturing procedures are shortened, it is less
useful. As per the case study provided, ABC methods motivate in assessing item price
and resource distribution. Costing based on activity will be measured using easy
measures such as identifying all the operations needed for manufacturing products and
dividing them into separate price pools. Further more, assigning every cost pool
according to the number of hours which is divided with the actual overheads of respective
manufacturing period. It helps managers to create their approach and enhance both
operational productivity and efficiency appropriately (Christ, 2014).
Methods of accounting management as discussed above, provide assistance to improve
operational tasks and production processes. It also enables managers create strategies to attain
their company's predetermined goals and targets.
2. Relevancy of management accounting system with contemporary organization:
In present business and trade era, complexness in relation to operational tasks has been
rapidly increased so most of the corporation relies on adoption of management accounting
systems. It allows managerial personnels to create approach and form strategies needed in
procedures related to decision-making. In addition, it enables in sustainable decision making
which helps in generating business strategy and effective management plan, controlling or
evaluating. For corporations, the management accounting system is quite vitally important since
it provides organised inventory procedures, lowers the costs to boost profitability. Following
points reflects the relevance and significance of management accounting system in context of
contemporary corporations (Fullerton, Kennedy and Widener, 2014).
(I). Evidence from Multi-national Manufacturing Company:
Company A, according to the provided case study, follows the framework in which the
headquarters controls all divisions or branches at strategic level as well as assists in the
mechanism of organizational policy-making and decisions. Lower managerial personnel are
extremely engaged in organizational operations and tasks requiring management accounting
system for momentous operating decisions. Managerial personnel at middle level engaged
differently where both inner and external data is collected to create framework for tactical
decisions. High-level management and leadership mainly engaged in making strategic decisions
3

that are useful to the corporation and that all divisions pursue the approach to fulfil their function
and attain company's targets and aims.
At operational level within Company A, managerial personnels determines KPI (Key-
Performance Indicator) with respect to each stage of production where corporation go through
different production and manufacturing issue since they usually don't have enough time to
conduct a thorough analysis of each aspect. By KPI a quick analysis is possible for managers.
Generally KPIs are determined based on internal or external benchmarks and dependent on
particular production efficiencies and other operational mechanism. Any variation signifies
considerable production areas (Hall, 2016).
Under tactical-decision making level, managerial personnels engaged to handle multiple
tactical issues since functional and strategic decisions vary from phase of tactical decision-
making. It took nearly 6 to 12 months for managers to use the accounting management system to
define data that becomes important components for strategic development. Also, such a level
compares their output to their own determined KPIs. These tactics are based on internal crucial
data and variations, particularly associated to the value chain, supplies and level of demand of
the customers.
Under strategic-level management, respective Company A emphasises upon framing
strategies which are generally exceeds in term above 1 year. To attract and provide better returns
to different interested parties like shareholders, employees, existing or potential customers,
community etc. managerial personnels are required to consider external variables that can affect
corporation's performance including production phase. External variables like international
trends or economic events, foreign policies, inflation, global economic crises etc. Information
associated with these factors requisite for senior managerial personnels for their strategic
decision-making procedure (Jacobs, 2012).
Company A implements multiple accounting management systems like costing based on
activity, just-in-time, total management quality and scorecard balance. Each such method helps
the corporation to provide details that is useful for development of managerial policies and
strategy in respect of every level of management in order to overcome enterprise issues and
boost productivity and efficiency. As ABC enables to allocate resources effectively, TQM
develop framework to enhance quality of outcomes and Just-in-time help to manage inventories
and optimises inventory costs within Company A.
4

(II). Discussion about management accounting systems in company:
Selected article mainly focus towards activity based costing system that assists modern
organizations to enhance their entire framework of operational activities and functions in context
of Reinforcing Steel Bar (RSB) Manufacturer (Chen & Wang 2016). Essentially, the research's
aim is to analyse how different management accounting system and related controls affects
growth and performance. The primary aim of the whole research is to determine how Activity
Based Costing makes it easier to identify production problems and covers total costs, including
operating costs with the exception of direct materials. To enhance process effectiveness and
accountability, Activity based costing is used by managers as it classifies core activities and
assign cost to these recognised activities and also recognise any any variations in process costs
and productivity level.
Here based on study it has been analysed that RSB Ltd is facing issue regarding time-
frame of developing activity-based costing. Corporation traced technical issues which include
accessibility of information and allocation of costs. For instance: information regarding sales
volume is required to allocate costs under activity costing but exact data about sale-volume is
not easily accessible. So basically RSB Ltd is facing problem related to lack of accessibility of
information and it is mainly caused due to improper implementation of systems of management
accounting.
In RSB Ltd, managers and owners have not adopted computerized system of accounting
to record and organise fiscal events and transaction on daily basis. The organisation therefore
finds it hard to gather data and create approaches for efficient choices that help to achieve their
company targets. Because of ignorance of importance and use of technology and computerised
procedures of accounting system, it leads to excessive time in recording and analysis which
ultimately delays decision-making. Also there is an issue of communication gape between
management and company's accountants which creates difference in ethical approaches and
disagreements related to decisions. Here effective and fluent communication is required to solve
problems related to implementation of any system of management-accounting. So it can support
management in developing various mechanism like costing system, inventory management,
activity based costing etc. It also allow organisation to assess usage of resources and
optimisation of resources utilisation. Also regular evaluation and review regarding organisational
performance can increase level of employees' efficiencies and overall operational effectiveness.
5

Accountants have less understanding of manufacturing processes and other technical
matters are also little aware of the scheme of accounting. RSB Ltd researchers can gather data
within 3 months, where the company's proprietor supports them in their entirety. Implementing a
costing system centralised on operation, with the assistance of the costing model designers and
the office managers. These individuals needed efficient data to determine the scenario and adopt
the activities they needed. In addition, they also guarantee that information flow for growth is
efficient.
3. Role of management accounting system in competitive market and uncertain business
environment
Management accounting system could be described as the metric used by companies '
top-level managers to analyse the business's real and accurate financial status. Various
organizations are gaining multiple advantages with the assistance of it, because it enables to
carry out all the organizational and implementing operations in a suitable way. In volatile and
unstable enterprise environment, different kinds of management accounting systems play a
crucial role in the present age. Following are the role of systems, as discussed below:
 Increment in customer value: In the present age, it is quite significant for all corporate
entities to finance product quality in order to increase revenue. Corporations use
management accounting system to maintain track of all company operations that are
useful for making policy modifications in order to improve customer relationships. With
the help of them top level executives analyse requirement of changes for the company
and then make modifications accordingly (Malina, 2018). It helps to increase customer
value by offering them such services that they are willing to acquire. Top-level managers
analyse change in requirements for the business with the assistance of them and then
create adjustments accordingly. It helps to strengthen the customer relationship by
providing them with facilities they are willing to obtain.
 Increment in efficiency and optimise time of business processes: Different systems
improves different areas of operations within a company, which ultimately leads to
enhancement of effectivenesses. Further, adoption of these systems provide smoothness
in different business processes that ultimately results in reduction in overall time-frame of
different organisational processes. For instance, inventory management system help in
6

optimising overall inventory processes which minimise the overall time required for
inventory management (Lavia López and Hiebl, 2014).
 E-business: With change in technology, organisations are required to shift business to e-
platform and to provide online services to customers. Here in this context management
accounting systems are in practical life adopted by corporations as in form of
computerised systems. For all different systems, there are several ERP and other
computer software are available. Also these systems are implemented by managerial
personnels according to E-business modes (Messner, 2016).
From above discussed points it is clear that for all corporation it is significant to adopt
management accounting systems to achieve definite survival and sustainability in performance
within competitive market. These supports execution of operational tasks in systematically and
in effective manner.
4. Learning outcomes based on research findings which will be helpful for Australian
management accountants:
As discussed in first case-study, researcher emphasised on effective adaption and
implementation of management accounting system. Applying different system, management can
gather all relevant facts and information which are necessarily required and assists in farming
organisational strategies for near future. Company's managerial personnels are needed such
information and facts to develop future action plans and in processes devoted to decision making
within organisation. Company A's managerial personnels followed different systems to raise
company's functional performance and results. Corporation mainly framed TQM, JIT etc. under
strategic-level layer of management, where Company A concentrate on formulation of strategy
for term above 1 year. Here significance of consideration of external factors can not be ignored
as it help to fulfil the requirement and needs of different internal and external stakeholders. So
extraction of external variables is necessary as such information is used by top-managerial
personnels during strategic and business decision-making procedures (Modell, 2014).
Specially in for manufacturing corporation operating their business at international these
system are required to enhance the quality of reporting tasks and in making global business
strategies. In order to implement these different systems, an Australian company should develop
a structure to integrate systems within company's all other organisational processes. However, it
also needed a number of training and preparation to enable staff to do their job well. Companies
7

will see a distinction in their results through the application and phase before implementation of
different systems. This also enhances the efficiency of individuals that provide financial
advantages because employees also increase their efficiency or abilities. Another understanding
aspect of first article seems to be that the multinational company's management accounting
system provides general market growth.
From second article, it has been articulated that in present dynamic business-
environment, adoption of technological changes along with systems of management accounting
systems is important. As this combination is important to ensure survival of corporation in
current commerce and business era. However still there are many businesses exist which are not
completely shifted to different technological changes. The S Ltd is still confronted with
technical problems in terms of ABC's execution. In addition, the organisation also faces issues
with the absence of data available and this happens because of the non-use of main accounting
systems. S Ltd did not use computerized accounts to track their operations on a daily basis. It
enables the manager to gather data from a given location that saves both money and effort
(Nielsen, Mitchell and Nørreklit, 2015). After confronting multiple problems, the business
organization, since individuals do not have necessary understanding to comprehend accounting
and keep documents correctly, is deciding to embrace management accounting systems. It is
therefore helpful for the manager to get the chance to function in this organisation. S Ltd has to
operate very difficult to handle its information and keep the manager's adequate records. Because
these data are necessary to create potential policy and contribute to the achievement of enterprise
aims.
CONCLUSION
It has been founded from above study that the management accounting systems are really
valuable for corporations since it allows to sustain descriptive financial informations and
statistics related to operations to enhance performance. Both journals concentrate primarily on
adaption of such accounting systems as they are fundamental aspects to achieve corporate goals.
It contributes in enhancement of entire production capacity and profitableness within business
entity. Thus managerial personnels of corporation put their efforts towards proper
implementation of these systems and increase the staff efficiencies as per determines objectives
and missions. Just-in-time method for managing stock levels to avoid circumstances like wasting
or shortages of raw materials, for instance. In addition, total management quality ensures that its
8

clients are able to deliver quality products and services and meet all their needs and wishes. It
also increases demand that increases output or profitability of company automatically.
9

REFERENCES
Books and Journals:
Bennett, M. and James, P., 2017. The Green bottom line: environmental accounting for
management: current practice and future trends. Routledge.
Burritt, R. L. and Tingey-Holyoak, J., 2012. Forging cleaner production: the importance of
academic-practitioner links for successful sustainability embedded carbon accounting.
Journal of Cleaner Production. 36. pp.39-47.
Cazier, R., Rego, S., Tian, X. and Wilson, R., 2015. The impact of increased disclosure
requirements and the standardization of accounting practices on earnings management
through the reserve for income taxes. Review of Accounting Studies. 20(1). pp.436-469.
Christ, K. L., 2014. Water management accounting and the wine supply chain: Empirical
evidence from Australia. The British Accounting Review. 46(4). pp.379-396.
Fullerton, R. R., Kennedy, F. A. and Widener, S. K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting
practices. Journal of Operations Management. 32(7-8). pp.414-428.
Hall, M., 2016. Realising the richness of psychology theory in contingency-based management
accounting research. Management Accounting Research. 31. pp.63-74.
Jacobs, K., 2012. Making sense of social practice: theoretical pluralism in public sector
accounting research. Financial Accountability & Management. 28(1). pp.1-25.
Lavia López, O. and Hiebl, M. R., 2014. Management accounting in small and medium-sized
enterprises: current knowledge and avenues for further research. Journal of
Management Accounting Research. 27(1). pp.81-119.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment,
management accounting, control, and reporting. Journal of Cleaner Production. 136.
pp.237-248.
Malina, M. A. ed., 2018. Advances in management accounting. Emerald Publishing Limited.
Messner, M., 2016. Does industry matter? How industry context shapes management accounting
practice. Management Accounting Research. 31. pp.103-111.
Modell, S., 2014. The societal relevance of management accounting: an introduction to the
special issue. Accounting and Business Research. 44(2). pp.83-103.
Nielsen, L. B., Mitchell, F. and Nørreklit, H., 2015. March. Management accounting and
decision making: Two case studies of outsourcing. In Accounting Forum (Vol. 39. No.
1. pp. 64-82). Elsevier.
Chen, W.T. & Wang, C.W. 2016, "APPLICATION OF ACTIVITY-BASED COSTING ON
REINFORCING STEEL BAR MANUFACTURER", International Journal of
Organizational Innovation (Online). vol. 9. no. 1. pp. 228-243.
10