Table of Contents INTRODUCTION..............................................................................................................................1 MAIN BODY....................................................................................................................................1 a. Explanation of Activity based costing....................................................................................1 b. Explanation of purpose of both the selected journal articles................................................3 c. Similarities and differences in both the journals...................................................................6 d. Specific lesson and outcomes from these studies.................................................................7 CONCLUSION.................................................................................................................................8 REFERENCES...................................................................................................................................9
INTRODUCTION Managerial accounting refers to the process of analysing, observing, recording and controlling accounting information to attain organisational goals. Managers examine data of previous years to form strategies for upcoming years and managerial accounting help them, by providing accurate data. It facilitates the activities related to administration, operations and execution of a company. It direct the managers to form different documents and reports that help in decision making to reach predetermined objectives (Bensonand et. al., 2015). Management of an organisation can measure success or failure of the business by analysing different reports that are generated within the business enterprise. For this project report selected topic is Activity based costing and two selected journal articles for this topic are accounting auditing and accountability journal and journal of management accounting research. The organisation chosen for this project is Innovation Fibreglass Pty Ltd, which is a plastic products and component manufacturing company and based in Australia. This report covers explanation of selected topic which is activity based costing and the purpose of selected two journals under this topic, research questions set out to explore, similarities and differences in both the selected articles and outcomes from the two studies that will be useful for the Australian company's management accountants. MAIN BODY a. Explanation of Activity based costing Activity based costing:It is mainly used in manufacturing companies to observe different activities within an organisation and allot costs to the activities with available resources. In this system an activity can also be reasoned as any group action or outcome that is a cost driving force, which is used to mention to an allotment base (Braun, 2013). There are two different categories of Activity based costing that are transaction drivers and duration drivers. First one involves the computation of how many times an activity occurs, and another is used to measure the time that an activity takes to complete. In Innovation Fibreglass Pty Ltd Activity based costing is used to identified assigned costs to activities that are related to overheads and after identification same costs are allotted to the related products. It helps the 1
managers and accountants of the organisation to improve the costing process in different ways by expanding the number of cost excavations that can be used to bring together different overhead costs, creating new bases for distribution of costs to related activities, altering nature of various indirect costs. Activity based costing help the accountants ofInnovation Fibreglass Pty Ltd by providing them information of each activity separately. It facilitates their work to identify different costs for various activities. It improves the accuracy of products and help the managers to understand and evaluate the way in which resources are used within the organisation (De Waal, 2013). It assists them while forming strategic decisions for the organisation. Before implementing this system the organisations have to be aware of its benefits and also the current running technology in the market, because it may lead the accountants and managers toward best strategy that should be adopted for cost reduction. The rates of implementing Activity based costing was continuously increasing in Australia in year 1990 but it has fallen during 1994. The charted accountants suggested the organisations to adopt activity based costing. According to the market research of year 2009, it was adopted by 13% of the manufacturing companies that are based in Australia. Activity based costing help the organisation to increase the level of success by improving performance and organisational processes. It increase the level of employee satisfaction because it helps to assign costs to different overheads as well as direct or indirect activities of the organisation. InInnovation Fibreglass Pty Ltd it help the managers to record the appropriate informations in the books of accounting and assist the accountants while analysing reports to determine actual position of the company (Downen and Hyde, 2016). The managers have to follow six steps while implementing activity based costing within the organisations. These steps are initiation, adoption, adaption, acceptance, routinisation and integration. In initiation the the managers conduct a feasibility analysis of activity based costing. Adoption includes decision that are made to invest available resources of the company. Adaption is related to analysis of different activities of the organisation and cost driving force. Acceptance means top management make decision about the model. In routinisation the upper managers of the company provide judgement about the information system. The last step 2
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
integration include the consolidation of activity based costing in the management accounting system. It provides such information of such activities that exceeds the assigned costs by highlighting the inefficiencies in the accounting system, it may lead the managers to reduce waste with the help of such information. It separates the value adding and non value adding activities in order to reach the predetermined goals. It is very beneficial for the accountants while analysing the accounting books to get separate idea of each cost which is concerned with different activities. The growth in activity based costing supplied an approach for accountants to lay claim to their strategic relevance. The adoption of ABC in Australia was not able to fulfil the expectations (Gitman, Juchau and Flanagan, 2015). It is a tool which is used by accountants to control the extra costs of labour and other overheads. It is very advantageous for managers andaccountantswhilepreparingmanagerialreportsfortheorganisationithelpin accountability, analysis of different reports and accounting process as it may help to keep the information of cost separately according to their nature. b. Explanation of purpose of both the selected journal articles Purpose of accounting, auditing and accountability journal:The main purpose of this journal is to determine the use of activity based costing in accounting and accountability and how facilitates the work of an accountant while analysing the annual reports of an organisation. Activity based costing is mainly concerned with the allotment of costs to different segments of a production process, so that the cost of each activity can be recorded accurately and separately. Accounting is the process of recording informations in the books and activity based costing facilitate this work of accountants by providing them abstracted information of different costs that are involved in activities performed by the organisation. The process of accounting is and accountability are two tasks that are performed by an accountant and these both tasks are very tough to perform. Activity based costing help the accountants to perform these tasks easily by separating different cost and improving the process of an organisation. InInnovation Fibreglass Pty Ltd accountants using activity based costing to perform their duties in more effective way because it help them to identify the areas where modification is required, when these area are identified then accountants may take 3
action in form of improvements and increase the level of organisational performance. It also help the companies to easily attain predetermined goals, reducing complexness in the process of accounting (Accounting, auditing and accountability Journals. 2018). The purpose of this journal is to clearly identify the role of activity based costing in accounting, auditing and accountability. This journal is basically related to the use of these three elements in different organisations. In accounting, ABC is used to identify the function of different costs that are assigned to different activities or products from available resources within the organisation. This journal is mainly concerned with the identification of performance of a business and its market condition. The journal reflects that how an accountant can observe and analyse the actual condition of the company with the help of provided information. Activity based costing may help the accountant while analysing the reports because it is used by the organisation to control the costs and improve the present performance of different activities (Songini, Gnan and Malmi, 2013). Accounting, auditing and accountability journal's purpose is to provide the valuable content to accountants and their organisations, how they can manage their accounting informationineffectivemanner.Inaccountabilityactivitybasedcoatingmayhelpthe accountantsandotherexecutives oftheorganisationtoanalysetheperformanceand behaviour of individuals by identifying the costs that are allotted for the activities that are going to be performed by them. The intention of this journal is to easily determine the impact of activity based costing on accounting and accountability of an organisation. ABC help the accountants in decision making because it provides the accurate data which is more reliable. It helps to setappropriate selling prices for the products as the accurate and reliable data is available and it help to increase profits for the company. Accountants of Innovation Fibreglass Pty Ltd are also benefited by ABC as it may facilitate their work. The purpose of this journal is to observe that how accounting, auditing and accountability can help a company to grow faster by identifying growth opportunities. In Innovation Fibreglass Pty Ltd activity based costing has helped the accountants while examining the financial statements to form a report by providing valuable data abut every activity that was performed by employees of the organisation (Socea, 2012). 4
There are two different questions that are set out for the accountants and auditors of Innovation Fibreglass Pty Ltd. First one is that, do the organisation have used activity based costing, if yes than how it helped to achieve predetermine organisational goals? Second question that should be asked is that do activity based costing can be used in auditing process or not? Purpose of Journal of management accounting research:The main purpose of this journal is to identify that activity based costing may or may not facilitate the process of recording, analysing and controlling the accounting information. In management accounting reports various information is recorded that directs the managers to make decisions. In Innovation Fibreglass Pty Ltd activity based costing is used and help the managers to record the accurate information of cost of each department which is recorded in management accounting reports such as inventory management report, job cost reports etc. This journal may help to enhance the knowledge of management accounting and its different components like its systems, reports etc. Activity based costing help the managers to make strategic decisions by analysing the actual performance of the company and fields of of organisation where improvement is required. Managers of the organisation can record the accurate information with the help of ABC because it may help to record the separate cost of different activities. It is a system which is mainly used to allot costs to the products according to theirrequirementsandifthecostexceedsthemanagersmaycontrolitontime,by implementing ABC. It provides the accurate and transparent data to the managers that will lead while making different policies for the company to achieve higher level of success and improve the level of existing performance (Journals of Management Accounting. 2018). The purpose of this journal is to identify those elements that may help in management accounting and its elements. Budgetary control is also a part of management accounting in which managers control the extra costs of different department's activities to save monetary resources of the company. In budgetary control there is an important role of activity based costing because it may provide reliable data which can be used to determine future expenses and consequences that may occur. Managers can make different activities in advanceto face such type of consequences. 5
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
In Innovation Fibreglass Pty Ltd activity based costing is used by the management to get the accurate data that will help them in decision making and policy formation. It help the managers to examine exact cost information of different products that are manufactured by the company. Activity based costing compile the overhead cost for each activity which is performed by the organisation. It is more beneficial than tradition cost accounting system because that methods was not able to provide the reliable and valuable data but ABC have succeeded in this prospect and can provide the actual and more relevant data to the managers (Sajady, Dastgir and Nejad, 2012). Management accounting is a tool which help the internal stakeholders to get the information of organisation's performance, its position and financial status in the market. In ABC some costs are difficult to allot like chief executives salary, and this journal may help the managers to dissolve this difficulty by providing solution. The purpose of this journal is to help the managers to focus on those activities that can generate more profits. This may help to increase the profitability which may help to enhance the level of performance. It also help to eliminate possibility of waste and inefficiencies by observing those fields of the organisations where transformation is required (Saadi Halbouni and Kamal Hassan, 2012). Journal of Management accounting research aids the managers toward the solutions to the managerial problems as it can provide the detailed information of management accounting and solutions to the problems that are faced by a manager while recording the informations in different reports. A company also have to face different financial problems like late payments by clients, sudden expenses and this journal may help the managers to identify tools and techniques that may help to overcome the same in a short period. Activity based costing may also help to resolve these problems, because it provides the transparent data to the managers that will help them to identify the problem in advance and plan to resolve the same in less time (Kanellou and Spathis, 2013). There are two questions that may be asked to the managers of the organisation. First one is that do activity based costing facilitate the work of managers? Second is that is it important for the companies to generate management accounting reports? 6
Purpose of both the journals is to provide valuable information to the managers and accountants that may help them to find solutions for their problems. c. Similarities and differences in both the journals Similarities: BasisAccounting, Auditing and Accountability Management accounting Recording of information Accounting is related with the recording of different data which is recorded in the books and auditing is the process of analysingthesameinformation. Accountability refers to the governing processofthatinformation.Allthe three elements help the organisation to reach predetermined objectives. Inmanagementaccountingthe informationisrecorded,controlled, measuredandanalysedbythe managersinorderstoachieve organisational goals. Useof activity based costing Activitybasedcostingisusedin accountingandaccountabilityto identify transparent data that may help to analyse the actual performance of the company and to observe the cost that is assigned to different activities of the organisation. Activity based costing is used to analyse accurate cost of each activity which is performed by the organisation, it will help the managers to get the idea of actualinformationofbusinessand identify the areas where improvement is required and also help to reduce the waste by analysing inefficiencies in the manufacturing process of the company. Differences: BasisAccounting, Auditing and Accountability Management accounting ObjectiveThe main objective of accounting is to find relevancy of transaction, objective Objective of management accounting is to provide accurate information to the 7
of auditing is to find that the recorded information is correct or not and to find that is there any misrepresentation of theinformationrecorded.Aimof accountability is to examine the data entered in the books. internal stakeholders of the company to enhance the investments and help the managers to analyse the business conditions and for strategies according to the situation. CompulsionIt is compulsory for the organisations and there are various regulations for the companies to conduct accounting, auditing and accountability within the organisation in order to provide the information to the external parties like government and others. Thereisnocompulsiononthe companiesformanagement accounting, it is done by the managers to analyse the actual position of the company and to identify the problems within the organisation that may affect profitability and productivity. d. Specific lesson and outcomes from these studies Outcome from accounting, auditing and accountability journal: Performance evaluation:Activity based costing can help the accountants and auditors to evaluate the actual performance of the company which can provide relevant data which is transaparent (Maskell, Baggaley and Grasso, 2016). Actual cost of overheads:Activity based costing is a system which is very beneficial for the accountants because it helps to assign cost to the overheads and than to the related products. It will help accountants while analysing financial statements of the company by providing separate information of cost of each product. Outcome fromJournal of management accounting research: Optimum utilisation of resources:Activity based costing can help accountants for optimum utilisation of resources as it can provide transparent information of cost of inventory and overheads of the organisation. (Needles, Powers and Crosson, 2013). Planning tools:In management accounting different planning tools are used to estimate possible future consequences that may occur. Hence, it is suggested to the accountants that 8
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
they should use planning tools like forecasting, contingency and scenario tool in management accounting. These tools may help to be prepare for possible risk or uncertainty. CONCLUSION Fromtheaboveprojectreportithasbeenanalysedthataccounting,auditing, accountability and management accounting all of them are very important because it may help the managers and accountants to determine the actual information of the business and also provide the valuable data of a business. Activity based costing is a tool which is used by various companies to observe accurate information of cost involved in different activities of the company. 9
REFERENCES Books and 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. Braun, K. W., 2013. Custom fabric ventures: An instructional resource in job costing for the introductory managerial accounting course.Journal of Accounting Education.31(4). pp.400-429. De Waal, A., 2013.Strategic Performance Management: A managerial and behavioral approach. Macmillan International Higher Education. Downen, T. and Hyde, B., 2016. Flipping the managerial accounting principles course: Effects on studentperformance,evaluation,andattendance.InAdvancesinAccounting Education: Teaching and Curriculum Innovations(pp. 61-87). Emerald Group Publishing Limited. Gitman, L. J., Juchau, R. and Flanagan, J., 2015.Principles of managerial finance. Pearson Higher Education AU. Kanellou, A. and Spathis, C., 2013. Accounting benefits and satisfaction in an ERP environment. International Journal of Accounting Information Systems.14(3). pp.209-234. Maskell, B. H., Baggaley, B. and Grasso, L., 2016.Practical lean accounting: a proven system for measuring and managing the lean enterprise. Productivity Press. Needles, B. E., Powers, M. and Crosson, S.V., 2013.Principles of accounting. Cengage Learning. Saadi Halbouni, S. and Kamal Hassan, M., 2012. The domination of financial accounting on managerialaccountinginformation:AnempiricalinvestigationintheUAE. International Journal of Commerce and Management.22(4). pp.306-327. Sajady, H., Dastgir, M. and Nejad, H. H., 2012. Evaluation of the effectiveness of accounting information systems.International Journal of Information Science and Management (IJISM).6(2). pp.49-59. Socea, A. D., 2012. Managerial decision-making and financial accounting information.Procedia- Social and Behavioral Sciences.58.pp.47-55. Songini, L., Gnan, L. and Malmi, T., 2013. The role and impact of accounting in family business. Journal of Family Business Strategy.4(2). pp.71-83. Online Accounting,auditingandaccountabilityJournals.2018.[Online].AvailableThrough: <https://search.proquest.com/business/docview/1826443266/55B8A7B7D57A4E05PQ /14?accountid=30552> JournalsofManagementAccounting.2018.[Online].Availablethrough <https://search.proquest.com/business/docview/200861229/2B08C6913FC4CF0PQ/1? accountid=30552> 10