Analysis of Management Accounting and ABC System Adoption in Australia

This report explores the role of management accounting, particularly focusing on the Activity-Based Costing (ABC) system, within Australian organizations. It begins by outlining the importance of managerial accounting in areas such as cost estimation, decision-making, budgeting, and strategic management. The report then assesses the viability of an article discussing the role of management accountants in the 21st century, highlighting issues faced like the implementation of new technologies and the need for continuous training. Solutions to these challenges are proposed, emphasizing the importance of practical knowledge, analytical thinking, and aligning accounting data with organizational values. Furthermore, the report recommends adopting managerial accounting to enhance cost estimation, strategic actions, and resource utilization. The second part of the report elaborates on the extent to which the ABC system is adopted by Australian organizations, examining factors influencing its successful implementation and challenges hindering its adoption, such as time consumption. The report concludes by summarizing the benefits and considerations for using the ABC system in the Australian context.

Management
Accounting

ABSTRACT
The management accounting has wide role in the development of the organisation and is
widely used in many countries. It has indicates the responsibilities of the accountant in the
financial department for measuring the performance of the business. In the era of 21 century the
value of financial accountancy is rising. It helps in the process of the decision-making. ABC
system is the most important method utilize in the organisation to select the viable activities and
to divide them according to the functions or the prioritise.

Table of Contents
INTRODUCTION...........................................................................................................................4
PART A ..........................................................................................................................4
a) Importance of managerial accounting in the company ..........................................................4
b) Viability of the article ...........................................................................................................5
c) Nature of choosing the article ................................................................................................6
d) Issues is faced in this article ..................................................................................................6
e) Relevant solutions to the challenges faced in this article .......................................................6
f) Recommendation to the use of managerial accounting...........................................................7
PART B...........................................................................................................................................7
a) Elaborate the extent of ABC system adopted by the Australian organization........................7
b) Adoption of the ABC system in Australia............................................................................10
Conclusion.....................................................................................................................................10
REFERENCES..............................................................................................................................12
Online source: ......................................................................................................................13

INTRODUCTION
Managerial accounting is the process of planning, coordinating, leading and
monitoring the financial tasks of the company. This tools helps to run the businesses
operations in a smooth and coordinated manner. This helps in cost analysis, preparing
the budget and to predict the future conditions. In the first part there is the discussion of
the role of management accounting the organisation in the 21st century. The next there
is article has been taken from the website about the role of management accountant in
the 21st century and the issues faced by the accountant in the present case (Aboody,
Levi and Weiss, 2018). Ascertain the solutions to deal with the problem that is faced by
the financial persons in the new innovations or techniques. The next section is about the
follow up of the activity based costing in the organisation. This methods helps to
allocate the activity on the priority criteria. It helps to slow down the production cost.
The benefits or demerits of adopting or not using this technique in the Australia
company. In the last there is the overview of some real examples of Australia
organisation who has adopted the system or not.
PART A
a) Importance of managerial accounting in the company
Managerial accounting is the procedure of recording the transactions of the daily
nature. It comprises the recording of events, summarizing the monetary transactions,
analyses of records and interpreting the financial transactions to the users of the
company. The most vital function is to submit the financial reports to the owners and the
investors of the organisation. It is the method of the managing, and bring the reports
and estimate the financial information for taking the relevant decisions. It also helps to
collect the non financial information along with the monetary data. These information is
based on the facts or amount to drive the effective decision making (Ainsworth and
Deines, 2019).
 Cost estimation: It aids in recording the all information of the transactions and
the cost of any expenses to plan better for the future. It helps to improve the
revenue by analysing how much expenditure company will spend on the goods.
In this there is comparison of historical or present data gives the idea that

creditor is beneficial for the company or not. It helps to consider the several
factors like accuracy, quality, time and the reliability of the products.
 Assist in decision making: It aids the staff of the management to take the
viable decisions for the company by identifying the various alternatives and
choose the best option. It develop the ability of the manger to scrutinize the
whole process and supervise the functions of the financial managers. It is the
best method of the management accounting (Cengiz and et al., 2019). It is the
tool which provides the information for the decision-making. It supports the
company in making the policies and work on the daily operations of the
organisation.
 Making of budget: The standards of management accounting is used in the
preparation of the budget. It helps to differentiate the performance of standard
outcome with the actual results to find out the variations in the results of the
company. It is an forecasted statement of the cost and income that gives the idea
that how much money organisation will pay to face the expenses. It is the
standard tool of the financial accounting to know the current performance of the
company (Cook, Huston and et al., 2022). It ensures that the figures should not
exceed with the budgeted amount because it will spoil the strategy of the budget.
 Strategical management: It helps the management to law down the
comprehensive plan that requires more detailed study and investigation of the
events or transactions of the financial nature. It means to follow the accounting
regulation and the standards.
b) Viability of the article
The article is selected on the uses of management accounting and role of management
accountant in 21st century. This article is based on the managerial accounting and the
responsibilities of accountant in the 21st era. The development of new and advanced
technology in accounting and the implementation of new software and the challenges
faced by adoption of new innovations.

c) Nature of choosing the article
Yes, it is quite difficult to choose the article. It has search many websites, journals,
magazine and the article to find the accurate data. The article is selected from the year
July 2021.
d) Issues is faced in this article
The issues which has been observed in this article is that the implementation of
new innovations has slow down the job of accountants. The use of new software has
make the process faster at one time but reduces the job in the finance sector. It is
required for the company to provide the training to employees of using the software.
The finance staffs has to do transactions with the large data and deficient practical
knowledge or skills will hamper the growth of the organisation (Cotter-Reilly, 2020).
Accountant has to be updated with the latest amendments in the tax, laws and
compliances to adapt in to changing working environment. In today era there is
increasing competition in every sector majorly on the finance. The accountant face the
environmental factors like globalization, customer priority and the frequent alteration in
technology. There is more management accounting methods has developed such as
ABC system, ERP, SAP, inventory management, economic order quantity and bin
system has make the difficult task for accountant to adopt them.
e) Relevant solutions to the challenges faced in this article
The problems which is accumulated from the above part is necessary to consider
for improving the performance of the accountants in the company. The company should
give more focus on the management accounting and keep associated with the finance
department to attain the targets. There should be division of the roles and the
responsibilities of financial accounting. Company should be able to handle the big data
problem and use the cloud management tool or cloud services (Ghafourian Shagerdi
and et al., 2022). Accounting seminar should be conducted at daily intervals to regularly
review the experience of finance accounting and improves the skills of accounting
people. The training should be given about the software to gain the knowledge of
internal audit and the corporate finance to expand the domain. It helps to manager to
take the financial decisions and helps them to make financial experts in that field.
Manger should have the skills of analytical thinking and should behave in the

professional way. It is true that some new technologies in finance has easy the working
process of mangers and helps to take quick decisions. In the 21st century organisation
should have command on the practical knowledge rather than the theoretical learning.
The accounting data must match with the cultures, traditions, norms and the value
system of the company (Wright and Evans, 2021).
f) Recommendation to the use of managerial accounting
There is suggestion to company to adopt the managerial accounting in the
business organisation. It helps to compute the cost estimation of the company.
Managerial accounting is the internal part of the company. This accounting helps in
informing the strategic actions, and to develop the business tactics. It furnishes to make
the idea for the short, medium and the long term executions of the organisation. It aids
in controlling the expenses and proper utilisation of the resources (Kostyuchenko and et
al., 2018). It analyse the financial or the non monetary performance to management or
the shareholders. The management accounting is the portion of the administration to
know the criteria of the economic growth. The managerial transactions helps to prepare
the forecasted budget and set the key financial indicators and attain the team
objectives. The use of managerial accounting is used in every type of business to
encourage the financial literacy and abide the accounting standards. It is essential for
the organisation to change the complex data in to easy task that is used to take
strategic enterprise decision. It helps to cope up with the situation of the bottlenecks in
the company actions or executions. It delivers the direction to the business to complete
the projects with in time frame (Maroufkhani, Nourifard and Sarraf 2021).
PART B
a) Elaborate the extent of ABC system adopted by the Australian organization
ABC system stands for activity based costing method that contains the overhead
and cost of indirect. These are related with the goods and services. This costing
accounting method identifies the relationship among the activities of overhead, costs
and manufactured commodities. Indirect cost includes salaries of management and
office staffs and so on (Nita, 2018). It is basically utilized in the manufacturing sector. It
increase the dependability of cost data. This system of costing is utilized in target

costing, customer profitability analysis, product costing service pricing. It helps to get
better compass on costs and allow to the firm to form a suitable pricing strategy. The
assemblage indicate that Australian firms that have fully enforced ABC. It has been
observed that organization is using ABC system in most efficient way than the old cost
management methods.
Factors that have affected while adopting the system successfully by Australian
corporation.
Technical variables: This factor refers to the last researchers concentrated on these
technical elements like rectification of activities, find and opt out the cost drivers,
issues in collecting cost data. Technical sources or elements may not be capable
ton explain the factors affecting ABC success execution (Saragih and Ali, 2022).
The key issue during ABC execution stage is that the organization mainly focuses
on technologies for completed their task and work on time with full efficiency. They
provides the suggestion for the purpose of better implementation of the ABC
system. The non accounting or non technology factors involves top management
championship, adequate training program to their workers and employees for
achieving the benefits and objectives of the firm. The managerial accountant and
the owner of the company found that there is no particular and significant
relationship among the factors of technical and ABC success.
Organizational, contextual and behavioural variables: It refers to appreciating the
research gaps in recognizing the elements that may impact ABC success. They
have transferred their focuses from technical sources to another several variables
like organizational, behavioural, contextual, culture as well as management
structure. In their research they evaluated the impacts of organizational sources like
support of top management and providing the training to the employees of ABC
system and so on (Steinmeier and Stich, 2019).
Apart from behavioural, technical and organizational variable, there are several
researchers who indicated that the national culture's dimension could influence the level
of ABC success. In Australia, there are many firms or company that examines the
relationship between activity based costing system and national culture.
Factors that affect the firms of Australia by non adoption of ABC system

1. Time consuming: If the organization of the Australia does not adopt the ABC
system then they would faced many issues because the old traditional methods
are time consuming. They take a lot of time to doing any work or achieve the
target and also they have suffered the issue regarding efficiency and proper work
management (Susanne Schwager and CSCA, 2020). The ABC system is less
time consuming. With the help of this system the organization can complete the
work on time in appropriate manner. They can attain the target and objectives
easily. This system has flexibility to do the work timely.
2. Inadequate allocation of overhead: It is difficult to distribute the overheads and
indirect expenditures in systematic manner for the organization. Indirect
expenses includes office expenses, salaries, audit, rent, legal fees and so on.
They does not affect directly to the firm. So they can cause of incurring the high
cost of production. If the firm utilize the ABC system then they will not suffer from
the high cost of commodities. This method is very useful or helpful to allocate the
overhead and control the over expenditures that carry high cost or extra cost.
3. Quality issue: Traditional method can occur the problem regarding quality of the
product. The old method does not contain new technologies. Due to this, the
company has to face the heavy loss because quality of product matters a lot in
any organization. The ABC system focuses on quality enhancement by using
technologies. They utilize and focus on the six sigma. The consumer mainly
focuses on the quality of the product and helps in enhance the profit of the
business enterprise ( Zhang, Dai and Vasarhelyi, 2018).
4. Performance administration system: It tracks the action or performance of the
workers in an appropriate manner which is measurable and consistent. This
system based on the set of the technologies and methodologies to assure the
person across the company. It is the most affected factor that impact on the firm.
The old method does not use it but the ABC method is specially utilize the
performance administration system that are utilized by most individual resource
departments in digital or modern business. This performance management
system helps to monitor and evaluate the employees efficiency and aids in taking
the decision effectively.

Present the example that are based on the real case as a proof or evidence.
The Australian coca-cola and Australian vintage limited has utilized the ABC
costing method in the form of conventional goods costing method utilized to exaggerate
the cost of the simple commodities that is prepared in large amounts or quantities and
minimize the cost of turbulent goods those are made in less quantities. For the purpose
of overcoming from this goods complexity and varieties, these companies have adopted
the activity based costing system. As it utilizes the consumption and interact mechanism
to appoint the cost of activity and it is more straight reflection of the commodities and
consumer profitability. In this illustration, adopting or implementing the ABC system is
well-defined competitive benefits as it generate better decisions and create a strong link
among operational and strategy that has benefited both the companies coca-cola as
well as Australian vintage Ltd.
b) Adoption of the ABC system in Australia
In Australia, there are many companies that follows the Activity based costing
system but there are also number of organization that uses the traditional method still.
Those companies that have implemented the ABC system they are earning higher
profitability and create their image in the customer mind. They are getting done their
work on time in systematic way. They evaluate the employees performance and give
them proper training on time who needs the most. It found very simple and easy method
that can understand by everyone. It is benefit for the companies that use this technology
for distributing the ordinary business resources. This process utilizes the unitary cost,
marginal cost. This procedure focuses on the quality that is very important for the
business enterprise. But the companies that are not using that process and still focusing
on traditional method. They have deprived of modern technologies and software. So
they are unable to achieve the objective in effective manner on time and unable to get
the profitability as much as required.
Conclusion
As per the above presented research, the report has explained the use of
management accounting. There has been elaborated the role of the managerial
accountant and also the advantages or benefits and challenges that have faced by the

accountant of the business firm. In this report, the challenges are also improved with the
help of utilization of technologies, software and providing them appropriate training.
There has been examined the suggestion and recommendation to implementing the
managerial accounting system for taking the effective decision, measuring the financial
performance, converting the complex data in simple form and so on. In second part,
there discussed about the ABC system utilization in Australia by the organization and
the advantages or factor that can affect the business enterprise while adopting this
system. This system is modern techniques that helps to business growth and achieve
the targets, aims and objectives in systematic manner on time. If the Australian
company will not adopt this method then they will have to suffer from heavy losses.

REFERENCES
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