Advanced Management Accounting Report: Role, Benefits, and Techniques

This report provides a comprehensive overview of advanced management accounting, beginning with an introduction to its core concepts and its relationship to cost accounting. The literature review examines both previous and current research, highlighting key developments and identifying gaps in the existing body of knowledge. The report then delves into the strategic role and benefits of management accounting, emphasizing its contribution to competitive advantage, market share improvement, and disciplined business practices. Strategic management accounting techniques, including Kaizen Costing, are discussed in detail. The report concludes by summarizing the key findings, outlining the significance of advanced management accounting, and suggesting areas for further study. The report also emphasizes the importance of strategic planning, decision-making frameworks, and the alignment of accounting practices with overall business objectives. The report is designed to provide students with a thorough understanding of the subject, and is available on Desklib, a platform offering past papers and solved assignments.

Running head- Advanced management accounting
ADVANCED MANAGEMENT ACCOUNTING

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Advanced management accounting
Table of Contents
Part 1 Introduction...........................................................................................................................2
Part 2 Literature review...................................................................................................................3
Introduction..................................................................................................................................3
Evaluation of previous literature..................................................................................................3
Evaluation of current literature review........................................................................................4
Gap analysis.................................................................................................................................5
Part 3 Role and benefits of strategic management accounting........................................................5
Role of strategic management accounting...................................................................................5
Benefits of strategic accounting management:............................................................................6
Part 4 Strategic management accounting techniques.......................................................................7
Part 5 Summary...............................................................................................................................9

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Part 1 Introduction
Advanced management accounting is associated largely with cost accounting. It is mostly
said that management accounting begins from the point of the end of cost accounting. Cost
accounting is applicable when there is a requirement of measurement based on the performance
of business departments, concerning selling and purchase of goods and services. The
management accountant acts as an ‘information manager’ within the premise of business. The
accountant keeps the information in the record in order to assist management. The information
collected intends to organize and manage business operations that further help with decision-
making.
In order to fulfill the role, it is important to direct management in terms of precisely the
collection, significance, area, and requirement of the information. A significant part of advanced
management accounting is to help business manage the consequences and implications of a
strategic plan, project, mitigation or decision. Further, a lot of actions deal comes into facilitation
of future and predetermined systems. In such cases, budgetary control and standard costing are
taken into granted towards investigating actual performance. The information is strategically re-
arranged, evaluated in documenting change requirement and profit outcome. Both standard
costing and budget control actions using variances help in examining the result of actual
performance. Thereby, the risks and gaps between planned performances and actual performance
are discovered.
Managers in the contemporary period, sustaining the complex global situations, is currently
using management accounting information that not only helps to choose a strategy and make
relevant but ways to best to implement it. It is rightfully used in business to synchronize
decisions and objectives about organizing, building, packaging, manufacturing, producing and
marketing a product or service. The study explores advanced accounting management in 5 parts.
Part 1 introduces Strategic Management Accounting and areas that the study explores. Part 2
focuses on the literary review of advanced accounting management and practices from previous
and current study highlighting the gap between both. Part 3 identifies the role and benefits of
advanced and strategic accounting management. Part 4 details with the accounting techniques

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focusing on ‘Kaizen Costing’. Part 5 summarizes the learning outcome, outlining significance
and scope of the further study.
Part 2 Literature review
Introduction
The term advanced cost management is used mostly in maintaining the function of a business.
However, as per development in small-scale businesses in different countries, managers are
falling back on accounting management, today. There cannot be any uniform definition as it
branches onto different segments from financial data collection, accounting, decision-making,
and strategic planning to budget control procedures. The main aim of accounting management is
to provide management accurate and relevant information in the form of presented data such as
reports, fact sheets, cash flow, and spreadsheets.
Evaluation of previous literature
Managers are largely dependent on information accountant and management with which it is
helped to increase value for customers. Simultaneously, it paves the way to reduction of costs of
products and services. For example, within a business organization, managers make decisions
based on performance, market demand, amount and kind of substance, technological use, change
of planning and execution processes and product designs. But, the decision made by manager is
associated with information from cost management. Wherein, accounting systems investigate all
the activities surrounding selling and purchase, economic events and transitions, transactions and
budget control that allow sales representatives and production supervisors with current details of
product life-cycle (Van, 2016).

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Figure 1- Components of management
(Source- Van, 2016)
Individual managers are largely dependent on information within the accounting system. The
accountant is to report budget plan and details differently both monthly and yearly. For example,
sales order information provides the total amount of sales to the manager that help to determine
the commissions that have to be paid (Van, 2016). Managers use strategic accounting practice
and management for the following reasons:
(a) To manage every activity within the functional area of responsibility
(b) To harmonize every activity within the targeted framework fulfilling the objective of
business
Evaluation of current literature review
Cost management, therefore, creates a broad focus. It aims at the continuous reduction of costs
using planning and control of costs. All the factors in making budget control is usually
inextricably profit planning, resources, target, and revenue. It is done by facilitating revenues
and profits, wherein additional costs are deliberately incurred towards product modifications. It,
therefore, becomes an important part of management strategies identifying effective
implementation (Ismail, Isa & Mia, 2018). With proper information come new changes that help
in product development and broadening targeted performance. This is associated with customer

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satisfaction and quality and promotion of new- product development. Strategic accounting is
based on the skills of an account manager who is required to succeed in the skills as follows:
1. Communication skills
2. Team coordination and re-building
3. Analytical mind and risk-solving skill
Critical mind with accuracy
4. A proper understanding of accounting
5. Able to foresee a change
6. Conduct timely and coordinated business functions
6. Computer skills and use of technology
Cost management also helps to conduct an economic transaction that is based on entails
collecting, validating, identifying, and analyzing. For example, within cost management, the
budget is taking into consideration based on cost categories that include resources, labor charge,
materials, and shipping. The information is summarized so that total costs can be examined
based on month, quarter, or year. It is here when it is found of change of price between years.
Thereby the financial statements such as balance sheet, cash flow, income statement,
performance reports are presented in identifying the cost of operating within the business. It has
been described (Honggowati, Rahmawati, Aryani & Probohudono, 2017)that accounting
management refers to various approaches and activities that are undertaken by managers in
building short-run and long-run decisions
Gap analysis
The growing employ of information technology in the prospect has had helped management
accountants to make an easy flow of information. Besides, they are able to spend a lower
proportion of time using financial statement (Honggowati et al., 2017). It helps to prepare proper
financial analysis developing the growth of the business. The three different strands of
management accounting are that has been missed in the previous literature review in comparison
to the current study are-

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 Extension from internal activities within business management accounting
 To investigate external information regarding the current market and competitors
 Understanding from the relationship that exists between the strategic position and
demanded an emphasis on management accounting
 Develop ways to gain viable improvement throughout exploiting connections within the
value chain.
While previous literature review focuses on the strategic role of management accounting that
helps in identifying, formulating and supporting the targeted demands of business using
strategies: current literature review conducts area of developments using an integrated
framework of accounting, enhancing performance and productivity.
Part 3 Role and benefits of strategic management accounting
Role of strategic management accounting
The strategic management is referred to as an effective process conducting activities of
management using strategic techniques fulfilling the vision of the business. It accompanies in
developing long-term strategies. Certainly, the role of strategic management accounting becomes
processes and resource allocation that is performed by an accountant manager to achieve
business goals. Strategic management plays an important role in fulfilling the needs of business’
long-term success using clear, strategic and well-defined plans (Rikhardsson & Yigitbasioglu,
2018). Using various information collected from different functional areas, it puts into action to
achieve its goals assessing employee performance, product/service value and business activities.
Managers have been dependent on building cost accounting so much so that they are able to
develop cost leadership strategies. The strategies are based on economic forecasts that help
business to improve and enhance its market share within a complex and competitive
marketplace. Management Accounting is different from Financial Accounting. It is dependent on
various factors that are kept into consideration such as product quality and demand,
organizational objectives, allocation of costs, sales, inventories and profit (Chiwamit, Modell &
Scapens, 2017). Accounting management is held responsible for allowing managers to generate

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and collect data based on them in order to make effective decision-making aligned with business
targets. The business relies on accounting activities in order to pursue change through planning,
controlling and performance measurement with assurance and accuracy.
Figure 2- Role of accounting management
(Source- Kalkhouran, Rasid, Sofian & Nedaei, 2015)
Strategic management help to create a discipline or framework that allow the senior management
team to conduct business on a larger picture. Strategic planning helps in building stronger
strategic management by connoting to planning, evaluation, requirements, risks and
maintenance-fulfilling organization's strategy (Kalkhouran, Rasid, Sofian & Nedaei, 2015).
Benefits of strategic accounting management:
1. Competitive advantage- Businesses uses accounting management in order to create a
distinct competitive advantage that will help in getting over with risks in terms of
competitors. It helps to analyze the business industry within which it works. With the
help of accounting, information based on particular geographical location it acts as profit
that provides the opportunity to expand its operations by analyzing the strength and
weakness of its competitors (Kalkhouran et al., 2015). It further allows identifying the
potentiality of new business markets. It helps to strengthen and support businesses’ key
competencies.

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2. Improve market share – business depends on accounting information to prepare cost
leadership strategies and to enhance strong economic forecasts. Both the actions help
business to improve its market share within the geography it works. It acts as an
advantage as it provides more profits for the business as it intends to expand its
operations. It helps to connect with SMEs that are emerging within the sector building in
smart market share.
3. Disciplined business- it is said that accounting management through strategic
implementation builds disciplined and organized performance. It bridges the gap
concerning risk and weakness, strengthens performance, and rewards for employees.
With its strategic planning and monitoring, business rationally grows aligned with its
financial feasibilities.
4. Framework for Decision-Making- Strategies are an integral part of building a framework
that can be sued by every manager to be used in daily operational decisions. It
investigates into the making of decisions ensuring that all are moving to business'
targeted direction. It is neither realistic nor practical to assume that every decision made
by the owner or Board of directors will be meeting targeted profit. Herein, strategic
accounting plays an important role by creating a plan examining the purpose and values
of an organization (Pan & Cao, 2016). It takes into consideration, profit, market demand,
sets objectives, threats and opportunities, in leveraging core strengths. It sets in a
framework aligned to these factors within boundaries of decisions that are being made.
The cumulative effects of decisions are aligned with the success of an organization.
Within the established framework, it becomes easier for the manager and directors to
make their decisions better that will support the organization's success.
Manager of a business unit complies with strategic management processes that are designed
towards long-term benefits. In following the advantages of the strategic accounting system, it
allows managers to find crisis within the business and foster prior changes (Pan & Cao, 2016).
The benefit outlines that a business unit or organization is provided a framework of objectives
and measures of success with the establishment of critical and strategic measures. It, therefore,
allows bringing in productivity, customer satisfaction, and profit.

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Part 4 Strategic management accounting techniques
With the advent of globalization and technological innovation, business is required to run
with a faster pace to meet customer demands. Besides, the competitive world market makes it
more difficult thereby information needs to be accurate and function-able ensuring proper flow
and productivity. The early detection of loopholes and risks will reduce the occurrence of
problems and bring in earlier solutions and targeted action (Rikhardsson & Yigitbasioglu, 2018).
From academic studies and review, it is gathered that in traditional management accounting the
techniques were quite different from what it is being used now. In fact, cost accounting
encountered continuous criticism as it used to provide information necessary for management,
performance while neglecting many significant documents and data (Rikhardsson &
Yigitbasioglu, 2018. It became difficult to generate reports with accuracy, as mostly it was
handwritten. It is claimed by researchers that it is interesting to conduct research study within the
field of management accounting (Chiwamit, Modell & Scapens, 2017). It has become strategic
by creating a link between accounting and management of contemporary organizations.

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(Self-made)
Strategic Management Accounting is associated with the following techniques that are used in
the contemporary period in building sustainable competitive advantage:
 Strategic Cost Analysis
 Target Costing
 Cost management
 Re-engineering of Business Process
 Kaizen Costing
 Action/activity-based management
 Balanced scorecard
 Life cycle costing
ManagementaccountingpracticeExternalOrienttationEmphasis-strategicpositioningcompetitieadvantgemarketshareInternalOrientationEmphasis-CostreductioncostmanagementandcontrolperformanceevaluationproductmanagementStrategicamnagementaccounting

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Kaizen Costing
Kaizen costing has been defined by Yasuhiro Monden as the process that helps to maintain cost
levels for particular products that are manufactured using methodical efforts. It achieves the way
through which the desired cost level can be reduced (Clinton & England, 2016). The word kaizen
is a Japanese term that is used to describe continuous improvement (Nielsen, Mitchell &
Nørreklit, 2015). Within the area of business, it is referred cost reduction process. As per
Monden, there are two categories of kaizen costing that are described below:
1. Product based kaizen costing- in this costing method, the activities are carried out based
on exigencies of each sale, purchase, and dealing. Product model is derived in
understanding costing activities using value analysis.
2. An organization based on Kaizen costing- in this costing, the organization is focused on
understanding how far the cost of product help in reaching out market satisfaction. It
states whether the cost stands parallel to customer requirements. It also takes into
consideration the life-cycle of the product and its goal in reaching organizational
productivity.
Figure 3- Kaizen costing procedure
(Source- Cleary, 2015)

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Kaizen costing is applied both on the organization and on products. In the case of products, it is
managed to perform within the production phase (Mårtensson, Höglund, Holmgren & Svärdsten,
2016). It prioritizes the products demand and data under development phase to which the target
cost is applied. When the target managed by the accountant is set, the product is updated to
display past improvements. It further helps to examine expected improvements towards
organizational improvements. Adopting Kaizen sets a few changes within the method of setting
standards that help to achieve motifs of business (Cleary, 2015). It can then be said that the
costing technique is based on "cost reduction" over "cost control".
Part 5 Summary
The purpose of the study has been threefold. Firstly, it aims to confer preceding definitions of
strategic management accounting (SMA). It helped in understanding its significance, purposes,
and scope. Secondly, it explores the management accountant's contribution to the strategic
decision-making. Thirdly, it identifies the process and strategies involved in building strong
decisions and productivity of the business. The literature review gives us a broader picture
regarding academic reviews stating that there is a consensus in the definition of SMA. But there
are certain elements in SMA such as the development of management accounting, internal
participation and orientation, an external orientation, strategic direction, future development of
activities, accounting techniques and information collection. It is studied that managerial
functions within the accounting department involve using information gathered from different
operational areas. In the paper, the role of management accounting, its benefits, management
accountant is explored. Further, how its activities can develop management in future within
business discipline. The paper contributes to the exploration of general management literature
by simplifying the requirements and importance of management accounting in the domain of
decision-making. The scope remains to examine empirical evidence on the effectiveness and
value of strategic management accounting for complex events.
The information collected intends to organize and manage business operations that further help
with decision-making. Earlier, the information was hand-written, wherein there were chances of
loss and wrong information. With the gradual development of innovation, things have become
organized and strategic; databases and software are used in making reports inexactitude. For

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example, when a distribution manager intends to experiment the sales within a particular
geographic region, the accounting management strategically produces data regarding sales
procedure, customer-requested delivery dates, amount-payable and timely deliveries. This is
done with the use of data warehouse where detailed bits of information are stored, analyzed and
calculated based on accuracy and relevance. For example, sales order database stores
information concerning the product, buying and selling amount, quantity ordered, delivery
details and feedback. The accurate flow of information will not only help in making the required
decisions for change and productivity but, to reduce emerging problems within complex business
situations.

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