Managerial Accounting Techniques in Multinational Companies

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Managerial Accounting
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Contents
Abstract................................................................................................................................ 3
Question 1............................................................................................................................4
Question 2............................................................................................................................5
2.1..................................................................................................................................... 5
2.2..................................................................................................................................... 6
Question 3............................................................................................................................8
Conclusion about the relevance of Management accounting system...............................8
Question 4............................................................................................................................9
Conclusion......................................................................................................................... 10
References......................................................................................................................... 11
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Abstract
In the current era of competition, the scope of modern accounting system is increased due
to the complexities and other problem in the tradition accounting system. In every business
the management accounting system is the only source of getting external information that
is necessary for the high-qualitydecision making. Selection of the first step toward the
success of any business. In the given case various modern technique were mentioned,
after considering any of those techniques, organisations took decision. The whole
assignment is related to improve the knowledge of management accounting system and
how it is beneficial for an organisation. In the whole assignment, solutions of all four
questions are given, first solution is related to what all modern techniques are using in the
case and second importance of the management was provided with the help of any other
selected journal article. Third solution is related to the conclusion whether the managerial
accounting is really beneficial or not and the last solution illustrates two-two outcomes from
both the articles.
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Question 1
Solution–Three explicit example of management accounting techniques given in the case
are as follows:
Balanced scorecard- Balanced scorecard technique is a management tool that shows the
performance of the organization in meeting the objectives, toward the shareholders,
employees, suppliers, customers, society etc. this technique measures how well the
organization is doing well in meeting objective towards all their stakeholders. So, the
overall focus of this technique is towards the customer, financial, innovative perspective
and process. For better understand let us take an Example of the balanced scorecard for
an insurance company-
First of all, form a team of 10n executive officers so to clarify objectives and strategy of the
company (Zahraee, 2016).
Second step conduct a meeting of all three levels so as to discuss the companies new
strategy with them and advance the performance matrix for every part of the company and
these strategy becomes the scorecard for every part of the company, and that would result
in the satisfying the stakeholders(Watts, et., al., 2014).
Third step is that the authorised person starts eliminating those programs which were not
contributing in achieving the organisations objectives.
And the last step is that the top authority will see the designed scorecard for all the levels
of the organization(Jones, and Dugdale 2012).
Activity based costing- Activity based costing is a management accounting technique in
which the cost of individual product is identified and then assigned that cost the specific
overhead. So, this technique finds the total cost required to producing a product. This
technique recognised the relationship between the costs, manufacturing products and
overhead activities(Gurkov, 2015). For example, XYZ company has a $80000 per year
electricity bill and labour hours are directly related with the electricity bill, total 4000 labour
hours worked, so in this example company yields $20 and Product PQR require 10 labour.
So, the overhead cost for the product is $200(i.e. $20*10).
Total Quality management technique- Total Quality management is a management
accounting technique which is mentioned in the provided journal article. This technique
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focuses on the overall progress of the organization, and satisfies customers needs by
keep updating all the techniques of the organisation.this technique is the advanced version
of how companies manage their quality of the products. Let us take an example of Total
Quality management in multinational company, that the company wants to maintain its
profit constraints, for this company combines a bunch of people to keep watch on the
graphs of the company, and the company upgrade their technology and now the company
is taking care of their clients and employees, so for this company distribute the
responsibilities among the authorised persons and like that company see on all the issues
and solve them immediately(Bisbe, and Sivabalan, 2017)
.
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Question 2
2.1
Solution
Yes, all the modern management accounting techniques are relevant for the multinational
companies because these techniques help the companies in decision making. This system
collects all the material information use that information for the performance evaluation of
various organizational means like financial, human resource and physical resource and
also check out whether the organisational strategies are following up or not. Management
accounting system doesn’t only work for the top management this is required at all the
levels whether the middle level or the operational level, as the strategies are made at all
the 3 level and also need to take some decisions so for taking the decisions information is
required and that is obtained from MAS(Zahraee, 2016).
Firstly, the modern management accounting techniques are used at the managerial level
or the top level, where the management is taking decisions by taking into consideration the
interest of the shareholder, and also the decisions are strategic/ tactic decisions that
means top management is require to make strategy for the middle management which
need to be followed by them. At the middle level the management accounting system is
useful to take decisions relating to the department, middle level allocate the duties to the
various department heads. Then these departments heads then took decision for the
operational level. Every organisation is fully depending on the operational level because
the success of the company depends on this level as the operation activities are
performing al the lower level and decisions related to that are crucial so, the management
accounting system is required at all the levels of the company(Watts, et., al., 2014).
Example given in the case- As per the case ‘A’ company is a great manufacturing
company and comes in the category of top ten companies, on the basis of market
capitalisation and the amount of gross sales(Bisbe, and Sivabalan, 2017). “A” Company
was spread globally with the operations going on in twenty-countries and selling their
products in more than hundred countries, all the decisions are taken at the headquarter of
the company or it can be said as that the company is maintaining a centralised
management control. As the company’s position is good so there are many rivals of the
company and there is cut throat competition so, company establish a strategic plan so
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remain in the top 10 companies. Company uses updated technology and do the production
activity effectively. The financial reporting system of the company is different because this
company is using management accounting techniques, so the reports are more
elaborated. For maintaining the operations efficiency company acquire implemented a
software along with the management accounting technique that is SAP R/3. After the
implementation was completed the paper work of the company is reduced and the
efficiency of the work enhanced, now the decisions are taken on the basis of the data
received from the software(Jones, and Dugdale 2012).
Now the supply chain management and the customer resource management and the
management accounting system are in one bundle. The implementation cost incurred to
the company are huge but this cost is one time and it helps in financial reporting and by
using one software helps the company to take decisions effectively.
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2.2
Solution
Findings from the first Journal article
In the first journal article various management accounting techniques are illustrated like
Balanced-scorecard technique, Total Quality Management, Activity Based costing
technique etc and how these techniques are used in the multinational manufacturing
companies and what all are the difficulties comes in implementing these techniques. In the
article this is also mentioned that which technique is best for the company and the
technique that is widely used in all over the world. In the competitive world selection of
appropriate technique is most important and hence these industries are ready to access
high technology. With the increment in the information technology investment is pushed as
the advantage that provides the influence for achieving a stronger and more flexible
process which is able to deal with insistent change and improve the performance of the
organizations(Zahraee, 2016).
In the journal article various benefits and problems of management accounting techniques
are described so in the case whenmodern management accounting tools of cost
management accounting that are
Activity based costing technique are used for allocatingthe resources to the activities and
then these activities are allocated to the specific costs object. Activity Based Costing helps
in bringing various benefits in the accounting system by eliminating misrepresentations
from outdated cost accounting technique and now this system provides more accurate
information that leads in enhanced decision making. As per the data of fortune-500
companies, approx.51% of the fortune 500 companies are using the Activity Based costing
techniques and the benefits of this technique are this technique help in allocating the cost
to the particular activity but this technique is costly to implement and difficult to
understand(Watts, et., al., 2014). And there are other modern techniques that are using
the manufacturing companies like Total Quality management (which focus on the quality of
the product so that customers get satisfied and ultimately business get profit out of that but
there is a problem in this technique that this technique does not consider the cost of the
product), Balanced score card technique etc, so the overall findings that comes from the
case is that when the companies were using the traditional method of reporting they faced
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certain problems, but the financial reports that are made modern accounting system are
globally acceptable and also seen significant benefits such as helps in decision making at
various stage that is either at the strategic level(use the information and rely on the
external data and take the decision which affects the overall business) or middle level
(decisions are related to the whole department) or at operational level(decisions are
related to meet key performance indicators and also decisions are related to the particular
task(Jones, and Dugdale 2012). These modern accounting systems also helps in taking
tactical decisions that is based on the modifications as well as peripheral information,
specially in the business of supply chain management and consumers demand. In the
modern accounting all the techniques are joined with the technology, therefore many
software’s are built in the market like SAP R/3. In this software techniques like TQM, ABC,
JIT, and BSC can be handled. After implementing the system, the chances of error were
reduced so helps in taking better decisions and ultimately helps in the growth of the
business(Bisbe, and Sivabalan, 2017).
Findings from the second case study
Second journal article is related to the implementation of specific management accounting
system, i.e. Balanced scorecard in the company. The case illustrates how this technique of
management accounting system is useful for the company in achieving their target
objective (Gurkov, 2015).
As per the finding from the case it is clear that the use of balances scorecard shows the
strong positive and clear link between the performance of the SPS and the use of
balanced scorecard. The performance of the company enhanced after implementing the
balanced scorecard because after the implementation of this technique company is able to
frame proper strategies as per the four perspectives of the balances score card and this is
also noted that the improvement in the degree of strategic alignment of resources has led
to a proper allocation of the resources results in the strengthening the cause-effect
relationship between them, hence implementation of the Balanced scorecard result in the
improvement of the port efficiency proper allocation of the resources(Watts, et., al., 2014).
Upto some extent there are few similarities between these two-journal article. Both the
articles are regarding the implementation of themanagement accounting techniques but
the first article is related to all the management accounting technique and how this is
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beneficial after merging this with the information technology software whereas in the
second article only one technique is used and the benefits of the balanced scorecard are
mentioned. In both the articles when the company used the management accounting
system technique their financial reporting system enhanced as well as the objective of the
companies are also achieved as well as the company’s growth(Zahraee, 2016).
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Question 3
Solution
Conclusion about the relevance of Management accounting system
In the world of increased competition, the relevance of the management accounting
system is increased, every company wants to earn more profits and also show their
shareholders that the company had some unique identity so that more investors attract
toward the company. As the competition in the market increased only those company are
successful which uses up to date technologies, satisfies their customer, maintains proper
supply chain, proper care of all the stakeholders of the company(Zahraee, 2016). For all
companies require proper function of the departments and require some different
technologies so management accounting techniques comes which helps in proper
functioning of all the departments and increase the productivity of the companies. By using
the management accounting techniques companies can do proper financial reporting and
helps in increase the productivity of the resources(Watts, et., al., 2014). There are various
management accounting techniques and as per the companies requirement companies
select the appropriate technique like if a company is engage in manufacturing then activity
based costing technique is best for them, in case if a company is engage in the providing
the services to the clients then in that case balanced scorecard is best technique for them
because this techniques contain four perspectives and accordingly companies allocate the
duties to different departments. Management accounting does not only beneficial for the
top management but it has benefits at all the levels of the company, at the top level these
techniques helps planning and forecasting for the company and on that companies take
decisions, whereas at the middle level management companies use these techniques for
the preparation of the final accounts of the companies and also the middle level the
manager distribute the work to the operational level team leader and so on(Jones, and
Dugdale 2012). Even at the ground level or operation level also these techniques are
useful for example identify the cost and allocate that cost to the particular overhead. So
that total cost comes in producing a particular product can be identifies and hence prepare
budget according to that also prepare the strategy to minimise the cost and maximize the
profits of the company. So, the relevance of the management accounting increased with
the increment in the level of competitions, and also management accounting system is
relevant at every stage of the business and even at every department(Bisbe, and
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Sivabalan, 2017). So, management accounting system is very important for the
businesses.
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