Assignment: Managerial Accounting in Business - Doc

Managerial
Accounting

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.................................................................................................................................5
4. Learning outcomes on the basis of research findings that will be useful for the management
accountant of Australia................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

ABSTRACT
Purpose of this report is to develop understanding of management accounting system in
the organization and how it helps in generating more demand & revenue. Along with this, how it
will improve individual as well as whole organization performance which help in increasing
efficiency as well as effectiveness.

INTRODUCTION
Managerial accounting also refer to the cost accounting where this process include the
identification, measurement, analysis & interpretation of data which helps the manager to
understand financial position of the company (Ahmed and Duellman, 2013). It is different from
the financial accounting because main objective is to provide correct information to the manager
to take effective decision in order to achieve their goals & objectives. For the better
understanding of this concept, this report based on two articles. It focuses on implementation of
modern management accounting system on multinational manufacturing company. These articles
and journals help the readers to understand that, is management accounting system (MAS)
beneficial for the current organization which maximise their production as well as profit margin.
This report include the discussion about various topics such as management accounting
techniques and relevancy of MAS to the organization. It also include the comparison of different
article findings and how it is relevant to the competitive market.
MAIN BODY
1. Different types of management accounting methods from the given case study
Management accounting is the process of collecting financial information and used in
effective manner which further helps the manager to develop effective decision in order to
achieve business goals. This accounting system includes various method and techniques which
helps evaluating organizational functions. Along with this, it helps in improving operational
activities which maximise productivity as well as profitability. There some technology which
followed by the organization in order to implement and get success to achieve desired outcomes.
Some of them discussed below:
 Total quality of management (TQM): It is the process of identifying, reducing,
removing manufacturing error as well as in supply chain management. It will enhance
customer experience and increase employees efficiency through providing effective
training. It help the manager to increase their product quality which satisfy customers as
well as improve their market share. Organization have to provide training to their
employees to increase their skills which improve their performance. It help the
multinational organization to identify error and then eliminate to increase their
operational performance. TQM try to hold each party who involved in the production
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process and they are accountable for the overall actions & quality of product and
services. This accounting method provide various benefits such as customer focused,
workers participation, integrated system, systematic approach, fact based decision etc.
 Activity based costing (ABC): It is one of the costing method which included overhead
and indirect cost related to the production. This methods help the manager to recognize
relationship between overhead activities, cost and manufactured products. Indirect cost
such as employees salary and management expenses that is very difficult to assign. ABC
method helps in removing mistake which occur at the time of implementing traditional
method (Brewer, Garrison and Noreen, 2015). According to given case study, ABC
techniques helps in determining cost for the product and allocation of resources. Activity
based costing will be calculated by using some simple steps such as identify all the
activities required to manufacture products and than divided into different cost pool.
Assign each cost pool driven on the basis of unit or hours and then calculate by dividing
with total overheads. It help the manager to develop their strategy accordingly and
improve operational efficiency as well as effectiveness.
 Just in time (JIT): It is an inventory management system which help the organization to
order raw material as per the requirement of production. This strategy used by many
multi national organization in order to enhance their inventory management where they
order quantify as per the requirement. If organisation order high quantity more than
production then remaining material will going to waste. On the other hand, they business
face the problem regarding shortage then it will impact the production which generate
huge financial loss for the company. Just-In-Time strategy helps in developing strategy
regarding requirement of raw material for the production. Now, every organization
follow this system to improve their inventory management (Butler and Ghosh, 2015). It is
beneficial for the organization because it helps in minimising cost which automatically
increase the profit margin of the business.
Above mention management accounting methods help in improving operational activities
and function. It further helps the manager to build strategy to achieve their business goals &
objectives.
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2. Relevancy of management accounting system with contemporary organization
In the current business environment, complexity of the operational functions will
increased where they implement different types of management accounting system. It help the
manager to develop strategy which further required at the time of decision making process.
Along with this, it help in competitive decision where it helps in building management plan,
control or evaluation of business strategies. Management accounting system is very important for
the organization because it provide inventory management, reduce cost to increase profit margin.
Below mention information represent the relevancy of management accounting system with
contemporary origination.
i) Evidence from Multi-national Manufacturing Company
As per the given case study, Company A follow the structure where head office control
all the divisions on strategic level and it helps in operational decision making process. Lower
managers are highly involved in operational activities & functions that required management
accounting system for operational decisions (Demerjian, Lev and McVay, 2012). Middle level
management used in different way where where they collect internal as well as external
information to develop tactical decision. High level management used to take strategic decision
which is beneficial for the organization and all divisions follow the strategy to complete their
task and achieve business goals & objectives.
In the operational level of Company A, management set KPI (Key Performance
Indicator) for each production level where organization face the production issue because they
have less time to manufacture products. KPI will be generated with the help of internal or
external benchmarking and it will depend upon the specific capabilities & supply chain
mechanism. Some of the scores use for the activity based management where manager
investigate the activities which drive the cost.
In the tactical decision making level, manager involved various tactical to resolve
problem because operational and strategic decisions are different from tactical decision making
process. It required almost 6 to 12 months of time frame where manager use management
accounting system to identify information which become key sources to develop strategy. This
level also compare their performance with own KPIs. These tactical based on the external
information and variances, specially related to the supply chain and customer demand.
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In the strategic level management, Company A focus on developing strategy which is
more than 1 year. In order to satisfy their stakeholders such as employees, customers,
community, shareholders etc. manager have to focus on external significance which can impact
the organization as well as whole production (Di Vaio and Varriale, 2018). External factors such
as global trends or events, micro or macro economic factor etc. These information required by
the senior manager for strategic decision making process.
Company A implement various management accounting system such as Activity based
costing, Just-In-Time, Total quality of management and Balance scorecard. Each methods help
the organization to provide information which is beneficial for each level of management to
develop strategy in order to resolve their problems in the business and increase operational
efficiency. Company A adopt these systems where they allocate resources with the help of ABC,
systematic bench marking, utilise some resources by using just in time and implement TQM for
the quality product.
ii) Discussion about management accounting systems in company
Choose article focus on activity based costing system which helps the modern
organization to improve their operational activities. Basically, research wanted to know that how
management accounting system or management control impact the agricultural management .
While they researcher about how accounting system help in improving production by using latest
technology (Article on Implementation of the Activity-Based Costing, 2019). Main objective of
this study is to identify that how Activity Based Costing helps in identifying issues which
relevant to the production and it cover overall cost such as operational cost except direct material
(Ibarrondo-Dávila, López-Alonso and Rubio-Gámez, 2015). Activity based costing method
based on any events, unit of task, project and specific goals. It is required for production,
designing of product, supply chain management and operating machine. These activities
consumer resources and generate and provide cost of each activity which will done for the
production of goods & services.
S Ltd face the issue at the time of developing activity based costing. Company found
technical issues where availability of data is limited and resources were found to be influential.
For example: sales volume used to allocate activity costing and measure volume which not
rapidly available. Basically S Ltd face the issue regarding lack of availability of data and it will
generate because of lack of investment in accounting system.
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Owner of S Ltd did not have computerised accounting system where they manage their
day to day transaction records. So it become difficulty for the organization to collect information
and develop their further strategies for the effective decisions which helps in achieving their
business goals & objectives. Along with this, another issues is the communication among the
operators and developers. Due to low use of technology or accounting system impact the
business where manager have to follow relevant management accounting system which reduce
the gap between accountant or manager. Because, communication is the best way to share
information and it helps in identifying problems which they face. So management need to
develop inventory management, costing system and activity based costing. It provide overall
overview regarding optimum utilization of resources (Needles and Crosson, 2013). Along with
this, regular review of performance will improve employees efficiency as well as effectiveness
that improve operational activities.
In the S Ltd, accountant have less knowledge regarding agriculture industry and farms
also have little bit awareness regarding accounting system. Researcher of S Ltd able to collect
information in 2 months where owner of the company fully support. Implementation of activity
based costing system interacted with the help of developers of costing model and operators of
workplace. These people required effective information in order to determine situation and take
necessary actions. Along with this, they also ensure that flow of information would be effective
for the development.
This study face some limitation where they have to record each activity and transaction
that occur at the time of production. Along with this, S Ltd has to follow accounting system in
order to maintain proper records. As well as they have to hire knowledgable who have awareness
regarding particular filed. Large size organization who already established information system
while, S Ltd does not have resources allocation management and it impact the business as well
as whole production too. This study unable to implement activity based costing method for
future performance.
3. Role of management accounting system in competitive market and uncertain business
environment
Management accounting system can be defined as the measure which is used by top level
executives of business entities for the purpose of analysing actual and accurate position of the
company. With the help of it different organisations are acquiring various benefits as it helps to
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conduct all the operational and executional activities in appropriate manner. Different types of
management accounting system in current era play vital role in their competitive and uncertain
business environment. All the benefits of it are as follows:
 Increment in customer value: In current era for all the business entities it is very
important to increase customer value so that revenues could be increased. Management
accounting system are used by companies to keep track record of all the business
activities which is beneficial to make changes in the policies so that customer
engagement could be increased (Satoglu and Sahin, 2013). With the help of them top
level executives analyse requirement of changes for the company and then make
modifications accordingly. It helps to increase customer value by offering them such
services that they are willing to acquire.
 Improvements in efficiency and reduction of time in business processes: With the
help of management accounting system efficiency of a company to keep track record of
information could be improved. It helps to keep data of all the operations which have
been executed and going to be operated in future. With the help of it time which is
involved in different processes such as salary distribution, performance analysing,
keeping record of goods could be reduced. Different types of management accounting
systems such as inventory management system is used by companies to decrease the time
which could be spent by employees in checking the stock manually.
 Electronic business: In all the business entities management accounting system such as
activity based costing, batch costing etc. are used which are used to keeping details of
different activities which are performed by companies online or offline. In case of
electronic business these management accounting system provide various benefits to the
organisation by helping them to execute all the operations in appropriate manner
(Shabtay, 2012). With the help of them different communication and information
technologies are used by enterprises which are beneficial for them to keep record of all
the transactions.
From all the above discussion it has been analysed that for all the business entities it is
very important to use management accounting system to survive and sustain in competitive
market. All of them can help to execute all the operations in systematic manner.
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4. Learning outcomes on the basis of research findings that will be useful for the management
accountant of Australia
According to the first case study, researcher majorly focus on management accounting
system and its implementation on multinational manufacturing organization. With the help of
accounting system, organization able to collect information which essentially required and helps
in developing strategy for the future (Talib, Rahman and Qureshi, 2012). Manager of the
company required these information in order to build plans and use this information at the time
of decision making process. In the Company A, manager adopt various accounting system in
order to enhance their operational performance as well as outcomes. Company follow Just-In-
Time (JIT), Total quality of management (TQM), Balance scorecard (BSC) and Activity based
costing method (ABC). These accounting system required by every large organization in order to
complete task in effective manner and it helps in achieving business goals & objectives. For the
implementation of these systems on Australian company will enhance organizational
performance. But it also required various learnings and training to the employees which make
them capable to perform well and achieve their task. Business will find the difference in their
performance through post or pre implementation of management accounting system and it will
increase productivity as well as profitability. Along with this, it helps in improving individual
performance which provide monetary benefits because staff member's performance or skills also
increased. Another learning outcome of first article is that, management accounting system
required by the multinational company and it provide overall market growth. Because of that,
demand of management accountant will increased in the market because every organization
follow this system and it required specialised person who have knowledge of this filed (Wang,
Chen and Chen, 2012). It is useful information for the management accountant that in the next
few years demand will be increased and they get high pay of this.
In the second article, it has been concluded that in the current business environment there
are still lots of business exist where they does not adopt technology to record their daily
transactional activities. In the S Ltd, company still face the technical issues regarding
implementation of ABC. Along with this, organization face issue regarding lack of availability of
information and it occur due to non use of centralised system of accounting. S Ltd did not use
computerised accounting to record their day to day activities. It helps the manager to collect
information from single place which save time as well as efforts. After facing various problem,
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organization decide to adopt management accounting system because people does not have
enough knowledge to understand accounting and maintain records in proper way (Warren,
Reeve and Duchac, 2013). So it is the useful information for the management accountant to get
opportunity to work in this organization. S Ltd has to work really hard to manage their data and
maintain proper records for the manager. Because these information required to develop strategy
for the future and it helps in achieving business goals & objectives.
CONCLUSION
From the above discussion, it has been concluded that management accounting system is
very important for the organization because it helps in maintaining overall information from
operation to distribution of product. Both articles majorly focus on accounting systems because it
is important for the business. It helps in increasing overall production as well as profitability of
the entity. So manager of the company ensure that they will provide proper training regarding its
implementation and make their employees efficient who can achieve business goals &
objectives. Just-In-Time approach used to manage inventory level in order to prevent some
situations for example: wastage or shortage of raw material. Along with this, Total quality of
manager ensure to provide quality product & services to their customers and satisfy their need or
desires. It further increase demand which automatically increase production or profitability.
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REFERENCES
Books & Journals
Ahmed, A. S. and Duellman, S., 2013. Managerial overconfidence and accounting
conservatism. Journal of Accounting Research. 51(1). pp.1-30.
Brewer, P. C., Garrison, R. H. and Noreen, E. W., 2015. Introduction to managerial accounting.
McGraw-Hill Education.
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.
Demerjian, P., Lev, B. and McVay, S., 2012. Quantifying managerial ability: A new measure
and validity tests. Management science. 58(7). pp.1229-1248.
Di Vaio, A. and Varriale, L., 2018. Management innovation for environmental sustainability in
seaports: Managerial accounting instruments and training for competitive green ports
beyond the regulations. Sustainability. 10(3). p.783.
Ibarrondo-Dávila, M. P., López-Alonso, M. and Rubio-Gámez, M. C., 2015. Managerial
accounting for safety management. The case of a Spanish construction company. Safety
science. 79. pp.116-125.
Needles, B. and Crosson, S., 2013. Managerial accounting. Cengage Learning.
Satoglu, S. I. and Sahin, I. E., 2013. Design of a just-in-time periodic material supply system for
the assembly lines and an application in electronics industry. The International Journal
of Advanced Manufacturing Technology. 65(1-4). pp.319-332.
Shabtay, D., 2012. The just-in-time scheduling problem in a flow-shop scheduling
system. European Journal of Operational Research. 216(3). pp.521-532.
Talib, F., Rahman, Z. and Qureshi, M. N., 2012. Total quality management in service sector: a
literature review. Talib, F., Rahman, Z. and Qureshi, MN (2012),“Total quality
management in service sector: a literature review”, International Journal of Business
Innovation and Research. 6(3). pp.259-301.
Wang, C. H., Chen, K. Y. and Chen, S. C., 2012. Total quality management, market orientation
and hotel performance: The moderating effects of external environmental
factors. International Journal of Hospitality Management. 31(1). pp.119-129.
Warren, C., Reeve, J. M. and Duchac, J., 2013. Financial & managerial accounting. Cengage
learning.
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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