MAS Executive Summary With the due passage of time management style has undergone a sea change and hence, the management accounting system changed for the better. The traditional accounting system is rarely seen in the current scenario and is replaced by the new management accounting system. Contemporary accounting system such as TQM, BSC, and JIT has assumed a place of special importance owing to the flexibility and being result-oriented. The current report is based upon the Management Accounting system and to conduct the study two articles about MAShasbeenundertaken.Thereportinitiateswiththeintroductionfollowedbythe application of MAS in the organization. In the end, the outcomes are discussed in the light of both the organization 2
MAS Contents Introduction...........................................................................................................................................................3 1. Management Accounting methods/ techniques used in the 1 article or study..................................................3 2. MAS Relevancy in contemporary organizations.................................................................................................4 i.Evidence from the case study.........................................................................................................................4 ii.Comparison with the second study................................................................................................................5 3. Relevancy of MAS in an uncertain business environment..................................................................................6 4. Specific outcomes...............................................................................................................................................6 Conclusion..............................................................................................................................................................8 References..............................................................................................................................................................9 3
MAS Introduction MAS is considered to be a very important tool which helps in supporting the business function and also evaluating the results of different business processes. In this report, we will come to know about the functions of MAS in the present scenario. The application of MAS has been discussed in this report for both the case studies that are provided. The traditional accounting approach has become obsolete and therefore does not provide the desired research. So, many other alternative approaches have been adopted which would help in the decision- making process of the business. The management accounting tools that have been used for preparing this report is considered to be very important support of information relating to the business activities. These tools are useful for the management not only for evaluating the results but also help in improving the performance of the company by modifying the production process. There are a large number of advantages because of the contemporary accounting system but this system requires a properimplementationforgettingthebestresults(Lynch,2011).ThisManagement Accounting system is considered to be very famous because it helps the management to take correct decisions and give them a comparative advantage which is required at present. This reportwillprovideusinformationaboutthedifferenttoolsthatareincludedinthe management accountingsystem andhowis it usefulinthecontemporary organization (Sunarni, 2013). 1. Management Accounting methods/ techniques used in the 1 article or study ·Activity-Based Costing (ABC) ABC technique helps an organization in analyzing costs apportioned to each manufacturing activity. With the help of the ABC technique, a manufacturing concern can identify the activities that consume a higher level of resources. Upon identification of such activities, the managementcantakenecessarydecisionstoreduceoreliminatetheoccurrenceof unnecessary costs that are absorbed by these activities (Lee et. al, 2015). ABC is also known asSICorselectiveinventorycontrol.Activity-basedcostingtechniqueallowsthe management of a manufacturing company to understand the behavior of all the activities and manufacturing processes. This makes the apportionment of costs easier as the management can assign costs to activities as per what is necessary. This will ultimately help in the elimination of unnecessary costs. With the help of the ABC technique, the management can analyze the costs consumed by each activity and hence, cut on unnecessary costs. This will ensure that the decision making of the management is appropriate and aligned towards the achievement of organizational goals. ·JIT – Just In Time This mechanism is used by manufacturing concerns for identifying the underlying obstacles (Hopper & Bui, 2016). Company A can use Just in Time mechanism to prevent unnecessary 4
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MAS use of inventories and smoothen out its manufacturing activities when there is a deficiency detected in the operations. Just in time mechanism was taken into use by organizations to improve its inventory turnover and reduce or eliminate the occurrence of unnecessary costs. With the help of Just in time mechanism organizations can prevent unnecessary costs from taking place. ·Balance Scorecard Balancedscorecard approachallows themanagement to track theperformanceof the employees. It is a very important tool of performance management where the activities of the employees can be tracked and accordingly regulated. It also helps in evaluating the activities which may arise from various actions (Surumm, 2017). The manufacturing company has implemented a balanced scorecard approach but the same was rejected as the scope of complexity in the company was hardly there. The approach will not add any utility to any manufacturing concern that has a very simple way of functioning. The technique does not offer any benefits to companies that are very simple in its approach. Hence, this is why the company rejected the balanced scorecard method over some time. 2. MASRelevancyin contemporary organizations i.Evidence from the case study The decisions made by the management of the organization seem flawless. The management has always ensured that the decisions that are being taken by them are completely in the best interest of the organization. The company’s management is responsible enough in fulfilling their responsibilities. The management is completely in sync with one other at all levels. The senior management of the company is charged with the responsibility of making strategic decisions and the lower level management is required to make operational decisions. The middle-level managers are charged with the responsibility of making tactical decisions. The level of involvement of lower-level management with the Management Accounting System (MAS)iswayhigherthantheseniorandmiddle-levelmanagement.Allthelevelsof management are highly inter-dependent on one other and therefore, they must work in completesyncsothatthereisminimalscopeformiscommunication(Watts,Yapa& Dellaportas,2014).Eachmanagerialdepartmentisimportantforthesurvivalofan organization and therefore, it must be ensured that is no scope for complexes. Operational Level Management Accounting System is largely used by the operational level or lower-level management for making operational decisions. At an operation level, various decisions are beingtakenconcerningpurchasesandproduction.Hence,theuseofManagement Accounting System techniques comes into foreplay. While making purchase-related orders, it becomes important for the management to evaluate minimum order quantities. Management Accounting System techniques allows the management to calculate MOQ for evaluating the purchase orders that need to be placed. Various operational decisions can be taken with the help of MAS techniques (Watts, Yapa & Dellaportas, 2014). The lower level management of the organization has used Benchmarking technique instead of ABC and ABM since these didn’t seem useful at all. 5
MAS The management at the middle level is responsible for making tactical decisions and this is why they are not always required to use MAS. The tactical decisions taken by the middle-level management is based on certain information that is received in numerous formats and not all MAS formats fit into the case (Peirson et. al, 2015). The relevance of MAS is lesser at the middle-levelmanagement.Middle-levelmanagementisresponsiblefortakingboth operational and strategic decisions. The managers at the middle level must take both internal andexternalinformationintoconsideration whilemaking tacticaldecisions. Middle-level management is highly concerned about the demand and supply of the products manufactured in the organization. This is why the relevance of MAS at this level is lower as compared to lower-level management (Watts, Yapa & Dellaportas, 2014). TherelevanceofMASisjustnegligibleatthetop-levelofmanagement.Thesenior management is concerned with making strategic decisions for which they highly rely on externalinformation.Thestrategicdecisionstakenbyseniormanagementisusedby investors, employees, creditors, suppliers, and directors. Senior management makes strategic decisions based on external information mainly. The use of MAS information is negligible at the top-level management since the strategic decisions taken at this level are based on external information like global trends, etc (Phua , Abernethy & Lillis, 2011) To conclude, it can be said that the utility of MAS information is highly dependent upon its implementation in an organization. ii.Comparison with the second study In the first study, the contemporary tools of management are given due emphasis such as ABC, Value chain, JIT, TQM, etc. the study provides a strong insight that the techniques have gained immense attention and popularity. Further, the application of the MAS in organization A has been described and that remains a composite of different tools such as ABC, Balance scorecard and JIT, etc. On the other hand, in the second case study, the study stress upon the link between the structureoftheMAS,managementstyleandtheimpactontheperformanceofthe organization. The relationship between the variables has been defined and studied within the domain of the public healthcare sector. In this study, the MAS vs. the traditional accounting system has been undertaken to provide a better depth of study. The collection of data for the study is done from the public hospitals and a comprehensive study has been done in this regard. The tool of the management accounting system that has been studied in the paper is that of balance scorecard whereas in the first case study different tools of MAS have been projected. This case study is more inclined towards the implementation of MAS together with theperformanceindicatorsthatreflecttheexternalenvironmentandisfuture-oriented. Thereby, the article stresses the fact that it is not only about the appropriate information but also concerns the design of the MAS. It is a vital factor that helps the organization to derive more value from the top to the bottom line. The article is different from the first article because, in this scenario, the MAS discussion is regarding the functionality of the overall organization. To this effect, the management style is an important consideration that plays a leading role. Therefore, the article does not have a major reliance or discussion on a particularmanagementaccountingsystemratherdiscussesmoreofstyleandthe implementation factor. The similarity that can be noted in both the article consists of enhancing the performances. As per the articles, it can be commented that the management is more concerned with the quality 6
MAS check and product pricing thereby leading to a difference in the profit. However, the concern that has been raised in both the articles consists of having a perfect management style so to havethebestresult.But,themajorchallengeslieintheperfectadaptationandthe implementation. 3. Relevancy of MAS in an uncertain business environment The relevance of MAS information is huge in any organization. MAS helps an organization in achieving its pre-determined goals. It is difficult for an organization to operate without MAS information. It is highly flexible which gives the users the leverage to use the same as and however they want. It will become easier for the management to achieve the pre-determined standards with the implementation of MAS if only the plans are properly formulated (Shield, 2015). MAS can save time that is invested in the manufacture and distribution of goods. The organizations can enhance their sales figures and earn more profits with the help of MAS. The rise in the number of the customer base is possible with the implementation of MAS. The quality of goods and services is also enhanced which makes the company more efficient in the eyes of its customers and investors. The senior management can also make effective decisions that can increase its revenues and level of productivity (Ronald & David, 2011). In the given case, the organization makes important decisions based after it has ascertained the cost of all the returns. There are always two options available with the organization and it becomes important for the management to evaluate which of the two is better concerning returns. With the implementation of MAS, it becomes easier for the management to evaluate the best out of the two options and maximize its returns (Smith,Binns & Tushman, 2010). 4. Specific outcomes Article – 1 (Manufacturing company) Outcome 1 The management of any manufacturing company must necessarily opt for performance evaluation measures. From the given case study, it can be understood that the management of the manufacturing companies must necessarily evaluate the performance of the strategies thattheyhaveimplemented.Themanagementmustnecessarilyadoptappropriate techniques for evaluating the efficiency and result of the strategies that are implemented by them. The activities of the organization must always be evaluated for its effectiveness. Performance evaluation helps in the evaluation of the activities that are performed by an organization. Performance management tools and techniques will also allow the management to enhance the financial well being of an organization. The management can construct effective strategies with the help of benchmarking, activity-based costing, etc. Using these strategiesamanufacturingconcerncanalsoincreaseitsproductivity(Watts,Yapa& Dellaportas, 2014). The senior management may use the information sourced from the performance evaluation program to construct appropriate decisions to make an organization perform better. To conclude, it can be said that performance evaluation techniques help a manufacturing concern to perform better and get rid of ineffectiveness in activities. Outcome 2 7
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MAS Not all levels of management are compatible with the tools and techniques of management accounting. The lower level of management is responsible for making decisions right from the initial phase of production. Therefore, the utility of management accounting techniques is greater at the lower-level management. The subordinate management is responsible for making decisions at the operational level. The utility of management accounting techniques is less in middle-level management as compared to lower-level management. The use of management accounting methods and techniques is hardly there for the management at the senior level. The management accounting methods and techniques are negligible at the top- level management as they generally make decisions based on the external information receivedby them. Thesenior management is chargedwiththeresponsibility of taking strategic decisions (Watts, Yapa & Dellaportas, 2014). These strategic decisions are taken based entirely on external information. This is why the relevance of MAS information at the senior level of management is negligible. Outcome from 2 article (Management Style and MAS) Outcome 1 The concept of management accounting system is considered to be very important because it has the organization to develop its planning and control system which is useful in providing information to the managers of the company (Gill & Rinsum, 2006). It has been observed by ourpresenceofcontingencyapproachhelpsinmaintainingtheperformanceofan organization which is highly dependent on the alignment of different components such as technology, control system, and management style. This approach teaches us about the effects of variables like management style and Management Accounting system (MAS) on the performance of a company. There are studies which have provided with some confusion as well as contradictory conclusions. For instance, it has been found that budgetary participation affects the performance of a company strongly and positively if certain opposite leadership styles are adopted. These leadership styles can include participation and supervision. Outcome 2 In the scenario of growing technology, it is not possible to carry out all activities with just theoretical and manual concepts. In my opinion, the company should start upgrading its technology as time passes by. The contemporary management system that is discussed here is the Balance scorecard. These tools are more practical and theoretical. we have found that in the recent past the practical methods which are adopted by the company has proved to be more useful and should be used more accurately for taking appropriate decisions. We have observed that the companies engaged in using a combination of theoretical as well as practical techniques and have also used the technology extensively. So, the companies would be able to compete well in this modern environment. There is various information that needs to be collected and calculations have to be done (Gill & Rinsum, 2006) for manufacturing a product.Therearenumerousstepsthatacompanyhastofollowstartingfromthe procurementofrawmaterialsandfinishingitbydeliveringthefinishedgoodstothe customers. At every step, the Management Accounting method has to be used. Based on my research, a company should always engage in using practical Management Accounting tools. 8
MAS Conclusion The entire report has been prepared based on the case studies suggest that every company should adopt a Management Accounting system because it is highly beneficial. A company should use its Management Accounting tools wisely because a wrong tool can lead to certain negative outcomes. So, the company should adopt any method or tool after a proper study. We also came to know that it helps in reducing the cost and maximizing profits for the company. This result can be obtained only when the company properly implements these tools. The top-level management should focus on developing strategies for achieving goals while the mid or lower level of management should try to execute the business operations efficiently.Abetterimplementationwouldalwaysprovidethebestresults.Asperthe discussion of both the articles it can be commented that the success of the management accountingsystemresidesontheimplementationandperfectmanagementstyle.The different level of management plays a vital role in the implementation of MAS and it needs to ensure that proper implementation will fetch the best results. 9
MAS References Gill, D.N & Rinsum, M 2006, The Effect of Management Style and Management Accounting SystemDesignonPerformance,vol.4,no.1,pp.33-44, https://search.proquest.com/docview/200912680?accountid=30552 Hopper, T. & Bui, B., 2016, ‘Has management accounting research been critical?’,. Management Accounting Research, vol. 31, no. 1, pp. 10-30, http://sro.sussex.ac.uk/id/eprint/57230/5/hasmgtacbeencriticalfinalversionsubmittedjuly2015.p df Lee, J., Park, M., Lee, H.S., Lee, K.P & Hyun, H 2015, Application of Activity-Based costing (ABC) for Modular Building Construction Indirect Costs Calculation at the Manufacturing Stage.Korean Journal of Construction Engineering and Management,vol. 16, no. 4, pp. 139- 145, doi:10.6106/KJCEM.2015.16.4.139 Lynch, S.G 2011,The Problem with Traditional Budgeting, viewed 23 September 2019 https://finance.toolbox.com/blogs/stephenglynch/building-a-better-budget-part-2-the-problem- with-traditional-budgeting-020911 Peirson, G, Brown, R., Easton, S,Howard, P. and Pinder, S 2015,Business Finance, 12th ed.North Ryde: McGraw-Hill Australia. Phua, Y. S., Abernethy, M. A. & Lillis, A. M2011, ‘Controls as exit barriers in multiperiod outsourcingarrangements’,TheAccountingReview,vol.86,no.1,pp.1795–1834, https://www.jstor.org/stable/23045588 Ronald, W.H and David, P.E 2011,Managerial Accounting: creating value in Global business Environment, 9th edition. McGraw Hill International Edition Shield, M., 2015,Established Management Accounting Knowledge, Journal of Management Accounting Research, vol. 27, no.1, pp. 123-132, doi: 10.2308/jmar-51057 Smith, W.K., Binns, A & Tushman, M.L 2010, ‘Complex business models: Managingstrategic paradoxessimultaneously’,Longrangeplanningvol.43,pp.448-461doi: 10.1016/j.lrp.2009.12.003 Sunarni, C.W 2013, Management Accounting Practices and the Role of Management Accountant: Evidence from Manufacturing Companies throughout Yogyakarta, Indonesia, Review of Integrative Business and Economics Research, vol. 2, no. 2, pp. 616-626, https://sibresearch.org/uploads/3/4/0/9/34097180/riber_b13-243_616-626.pdf Surumm, L.T 2017,What Is the Meaning of Managerial Accounting System?,viewed 26 September 2019,https://smallbusiness.chron.com/meaning-managerial-accounting-system- 75599.html Uyar, A 2010, ‘Cost and Management Accounting Practices: A Survey of Manufacturing Companies’,EurasianJournalofBusinessandEconomicsvol.3,no.6,pp.113-125, 10
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MAS https://www.researchgate.net/publication/265819855_Cost_and_Management_Accounting_P ractices_A_Survey_of_Manufacturing_Companies Watts, D, Yapa, P.W.S, and Dellaportas, S 2014, ‘The Case of a Newly Implemented Modern ManagementAccountingSysteminaMultinationalManufacturingCompany,Australian accounting,BusinessandFinancejournal’,vol.8,no.2,pp.121-137, doi:10.14453/aabfj.v8i2.9 11