Managerial Accounting- Doc

Managerial Accounting

Table of Contents
INTRODUCTION................................................................................................................................3
Main body........................................................................................................................................3
(a): Discussion about Activity based costing (ABC)................................................................3
(b): Reason for the selection of both the journal articles......................................................5
(c): Similarities and variation in both the journals.................................................................8
(d): Research findings.............................................................................................................9
CONCLUSION..................................................................................................................................10
REFERENCES...................................................................................................................................12

INTRODUCTION
Managerial accounting is an integrated part of the management process and
accountants are significant strategic partners in strategic formulation within an organisation. It
is known as one of the effective process of identifying, measuring and evaluating the data in
pursuits of an organisation aims and objectives. Managers used to examine information of last
years to form strategies for future events and managerial accounting assist them to provide
right data to work effectively. For this project report, chosen topic is Activity based costing on
the basis of that two important journal article such as “accounting, auditing and accountability”
and “Management accounting research” is taken into account. “Nexia Australia Pty Ltd" is
selected for this project as, it is operating in an accountancy and consulting firm which is having
the skills and experience to deliver effective solution to their customers. This report consists of
explanation of the chosen topics, research question and difference in both the selected articles.
Apart from this, essential outcomes from the two analysis that will be useful for the
management of the company in near future is being covered under this report (Benson and et.
al., 2015).
Main body
(a): Discussion about Activity based costing (ABC)
In every business organisation, it has been found that most of the manager of financial
analyst uses various costing methods in order to manage and control their stock related issues.
Administration of an organisation can easily be able to measure growth and failure of the
business through evaluating various report that are prepared by Nexia Australia Pty Ltd (De
Waal, 2013).
ABC costing is considered as the particular types of cost accounting method. The inner
focus of management accounting similarity with the financial accounting, whose complete aim
is based on external sources. Activity based costing has two major elements, cost measure and
performance measures. ABC costing is used to measure the total cost and performance of
activities, resource and objects (Gitman, Juchau and Flanagan, 2015). Under this system an
activity can be said that any particular action or results that is a cost associated with cost driving
forces which is been used to mention as allocation based. The basic concepts of this ABC
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costing is that all the activities consume resources to produce an output. Expenses must be
separated and coordinated with the level of activity spent as resource while the production
process. Basically, the expenditure that are required to manufacture individual units of specific
services or product would be segregated from one another. In Nexia Australia Pty Ltd, ABC
costing is used to examine assigned cost to activities those are associated with the overheads.
After determining the similar costs that are assigned to the related product, production
managers used to record the total cost and expenses they are incurred during the production of
one unit (Maskell, Baggaley and Grasso, 2016).
It will assess the manager as well as the financial manager of Nexia Australia Pty Ltd to
make improvement in their costing procedure in many ways through increasing the total
number of cost that can be imposed on to bring together various overhead costs, creating new
bases for distribution of costs that are associated with activities, various nature of indirect
costs. ABC costing assist the accountants of Nexia Australia Pty Ltd through providing them
valuable data of each activity individually (ABC, 2017). It would facilitate their work to examine
various types of costs for every action that are taken within an organisation. The best part of
using the managerial accounting techniques is used to determine and improves that accuracy of
products and assist the manager to evaluate the ways in which resources are used within an
organisation (Saadi Halbouni and Kamal Hassan, 2012).
It will be more effective while forming valuable strategic decision in near future time for
managing their stock related issues. Before implementing this particular system, the Nexia
Australia Pty Ltd have to make sure that all the benefits and also the current running
technology in the market are needed to be analyse regarding the use of inventory
management. It may lead the accountant and financial officers towards formulating effectively
strategy that would be most cost reduction for the company. The rates of implementing activity
which are need for implementation of activity based costing was continuously enhanced in
Australia in past 1990, but it has started to decrease after 1994. The charted accountant used
to suggest the organisation to adopt this costing methods within an organisation. The manager
has to follow six basic steps while formulating activity based costing (ABC) within an
organisation. These steps are considered as initiation, adoption, acceptance, routinisation,
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adaption and integration of resources. It used to provide specific information of all those
activities that are exceeds the assigned costs to the cost of producing one units of products. It
can lead the managers to reduce waste with assessment of taking all the information which are
associated with the inventory. ABC identifies all the resource consumption more precisely. ABC
works in tandem with regulation of continuous improvement initiatives. An important benefit
for managers is that nonvalue-added activities can be readily related with the isolated and
considered as essential part of ABC costing. It holds the services and products which are
consumed activities and resources of an organisation. It is an effective tool which is used by
accountant in order to control the additional cost of labour and other overheads. The manager
can take maximum advantage of this costing method while formulating managerial report for
Nexia Australia Pty Ltd. Perhaps, it would assist in better accountability, evaluating various
reports and process as it would keep the data of cost individually as per the nature of the stock
kept by the company (Socea, 2012).
(b): Reason for the selection of both the journal articles
Purpose of using Management Accounting Research
This article mainly focuses on the management accounting research and activity based
costing which is mainly based on the actor-network theory. Purpose of this research paper to
understand the accounting system given by the actor-network theory and what is the relation
with Bruno Latour's existing work which motivates for the management accounting research
and activity based research and what was the thing which motivates the researchers about
accounting research and activity based costing and also describes that how actor-network
theory has different accounting tools, methods, concepts from the other accounting research
and activity based costing. It consists of historical studies and case studies and it gives new
insights in the management accounting research and activity based costing. This article consists
of accounting theories in different- different decades and what is the changes in present
scenario and also in the case of activity based costing theories (Boyns, Edwards and Nikitin,
2013). This journal can be more useful to increase the overall knowledge of accounting and
their various components such as reports and systems which are prepared by the company at
the end of the financial period of time. Activity based costing help the managers to make
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strategic decisions by analysing the actual performance of the company and fields of of
organisation where improvement is required.
Management accounting research aims to serve to new ways in the field of
management accounting. Activity based costing is related to the management accounting. It is
also an accounting method through which organizations can know the cost of its overhead
activities and also help to know the cost of inventory. It helps to know the cost of products
which are manufactured and overhead activities and this is help in overall cost calculation of a
product and it also helpful to know the impact on the profit. Purpose of management
accounting is to analyse and evaluate the accounting report and financial data's and purpose of
activity based costing is to analyse the overall cost of product (Management accounting journal,
2012).
Activity based costing is mostly used in manufacturing industries to know the cost of
product forms its overall activities and it is the most common tool for the cost calculation for
the manufacturing industry because profit of a company is depending on the cost of a product
so it’s necessary to know the accurate cost of a product. Management accounting is the process
of preparing accounting and management report which helps to know the financial information
time to time so management can take decision according to the information which are available
in the accounts of the company (Narayanaswamy, 2017). Management accounting helps in
generating accounting reports for the different departments of accounts so that management
can analyse the accounting reports and according to that they can take decision where as in the
activity based costing different batches are made according to the type of cost. Management
accounts and activity based costing both of are the tools of accounts which are used in
accounting purpose but both of these have some different purpose.
Purpose of Accounting, Auditing and accountability in ABC
Main reason for doing this particular study is that, in previous year the way of
doing management accounting in South Africa has been changed. To understand the process of
their management accounting system and rationale for these changes processes, research has
done. This paper talks about environmental changes in Australian economy due to changes in
government policy and global competition. The process of financial accounting is more
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accountable for all the two tasks that are performed by an accountant and these are very hard
to be managed by the company sometimes. Activity based costing used to provide various vital
information about the overall stocks that are kept by the company at the end of the accounting
period. The basic objective of this particular journal is to clearly examine the vital role of activity
that are based on various accounting, auditing and accountability aspects of the inventories
which are stored by the company within an organisation.
The finding of research indicates changes in management accounting systems. These
changes are increased use of contemporary management accounting practices notably activity-
based cost allocation systems and the balanced scorecard approach to performance measures.
As these are major changes which came. As people are considering Activity Based Costing these
days, as it makes easy to know cost of production. As it segregate cost of product in different
heads. As ABC analyses individual activities of a process and then assigns costs to products in
accordant with the activities and resources consumed throughout the process, such as
producing, selling, promoting and distributing the product. ABC provides more detailed
measures of costs and remedies the misallocation of overhead costs of traditional product
costing techniques. ABC helps manager in decision making as ABC provides the reliable and
accurate information about costing of product and resources used in products. So these kind of
information helps manager allot to take decisions (Accounting and auditing, 2012).
ABC helps in Accounting and Auditing
As ABC, advantage does not limit to cost accounting it also useful in accounting
and auditing. As it divides the cost in different heads and at the time of accounting, one can
easily record the expenses of different heads. Basically it provides exact data to record and
maintain in accounts. As it helps in knowing the correct profits during the time of accounts. As
there is business who records high expense, reason is that their expenses are not categorised
accordingly. And companies are recording cumulative expenses, but when it gets segregated
then accountant come to know that some expenses are extra which could be cut down.
Similarly, as it helps in auditing also, as it provides the three different level of cost like costing to
a level inventory, b level inventory and c level inventory. So during the time of auditing auditors
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checks t that, the weightage given to activity is correct or not. And auditors check of is there
any discrepancies happened while weightage given to all three activities.
(c): Similarities and variation in both the journals
Similarities:
Basis Accounting, Auditing and
Accountability
Management accounting article
Recording
of
information
As it has been said that accounting is
basically associated with the recording
of various data which is posted into the
books of accounts, while auditing is the
process by which accountant used to
analyse the journal information.
Accountability is most commonly
governing process of data (Figge and
Hahn, 2013). All the data are equally
taken into account for the purpose of
attaining overall aims of an Nexia
Australia Pty Ltd.
In this particular accounting the data is
been recorded, managed, analysed and
measured by the accountant in respect
to attain organisational goals. By the
help of all the data collected by the
company can accountable for providing
accurate and timely financial as well as
statistical data to manager in order to
make short-term decision making
(Simkin, Norman and Rose, 2014).
Use of
activity
based
costing
In the accounting process, it would
recognize the overall relationship
among costs, overhead activities and
production. It will assign indirect costs
to a product that is less randomly than
traditional methods. It will help in
analysing the overall performance of an
organisation (Otley, 2016).
ABC costing is taken into account tin
order to analyse the reliable cost of
every activity which is been performed
within an organisation, it will be
assessable for the production manager
to get common ideas of actual data
which are incurred during the time of
production process. On the basis of
that, Nexia Australia Pty Ltd can easily
be able to analyse the inefficiencies in
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the manufacturing units of the
company.
Differences:
Basis Accounting, Auditing and
Accountability
Management accounting
Objective The primary aim of using this
accounting is to determine relevancy of
the transaction, objective of auditing is
to determine the recorded information
is correct or not and to select that is
there any misrepresentation of the
information mentioned in the financial
statement of the company. The basic
goal is to examine the data entered in
the double bookkeeping records.
The main purpose of using this
management accounting is to deliver
reliable information as internal
stakeholders of the company to
increase the overall investment and
that can assist the manager to evaluate
the business situation and for planning
as per the situation that is provided
under the company statement.
Compulsion It is basically associated with the
company and their essential rules and
regulation for the companies to
conduct accounting, auditing and
accountability within the organisation
in order to provide the information to
outside parties such as legal bodies and
other financial institutions.
Under this there is no any compulsion
on the overall companies for the
management accounting, it is done by
the managers in order to analyse and
examine the issues within an Nexia
Australia Pty Ltd that can affect overall
Profitability and efficiency of the
company.
(d): Research findings
As per the above mentioned two journal articles, it has been found that there are various
important aspects which will be analyse in order to take future decision within an organisation.
It will be effectively essential to reach at certain goals by taking into account all the matters
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those are based on ABC costing. Some crucial outcomes which are collected from those article
are discussed below:
Accounting, auditing and accountability journals:
Accounting changes used to be promoted by external stimuli, but once the modification
is prompted the relevant outcomes of the changes that are explained by the dynamic of intra
organisational conditions (Accounting, auditing and accountability, 2012). There are certain
outcomes which are collected from the research work. Some of them are discussed below:
Performance evaluation: Most of the critical situation, managers used to analyse the
performance of the company the help of ABC costing. It is basically reliable for making
categorization of inventories into three parts such as A, B and C as per the durability position.
The auditors of the company only overlook the opening and closing records of the stock that
are kept by the Nexia Australia Pty Ltd at the end of the financial year (Miller and Power, 2013).
Analysing the actual cost of overheads: By the help of this accounting system which is very
crucial for the accountant because it would be assign to the cost of overheads and then related
with the production process. It will be useful to assign cost to the overheads and then to the
associated products. It will be reliable while analysing financial statements of the company
through evaluating cost of production.
Management accounting journals:
Proper utilisation of resources: With the help accountants for optimum utilisation of
resources as it would be delivering transparent data related with the cost of inventories and
overheads of an organization.
Planning tools: In case of management accounting, there are various planning tools which
will be vital for the company to take necessary decision in near future. ABC costing can help to
control business risks by using forecasting and contingency tools within an Nexia Australia Pty
Ltd.
CONCLUSION
From the above project report, it has been concluded that managerial accounting is more
effectively useful for the company in order to record all the essential accounting data into the
financial statements. ABC costing tools is more crucial for the companies to determine accurate
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information about the cost associated with various activities within an organisation. Both the
articles are equally helpful for the company to analyse the impacts of ABC on the overall
performance of the company and to take beneficial decision in near future time.
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REFERENCES
Books and journals:
Online
Accounting, auditing and accountability, 2012. [Online]. Available through:
<https://www.emeraldinsight.com/doi/abs/10.1108/09513571211191743>.
ABC, 2017. [Online]. Available through: <https://books.google.co.in/books?
id=83xbATY6ix8C&printsec=frontcover#v=onepage&q&f=false>.
Management accounting journal, 2012. [Online]. Available through: <
https://search.proquest.com/business/docview/848012395/56FEDB47C8BA4712PQ/8?
accounting=30552>.
Accounting and auditing, 2012. [Online]. Available through:
<https://search.proquest.com/business/docview/211254587/9B4D9E61FDED4512PQ/
100?accountid=30552>.
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