ACCM4500: Management Accounting Issues and Solutions Report Analysis

This report delves into the realm of management accounting, focusing on the challenges faced by organizations like Wesfarmers. It begins by defining management accounting and its crucial role in decision-making, budgeting, and financial planning. The report then identifies key issues, including a lack of emphasis on management accounting, insufficient application of Big Data, and a shortage of computer skills among accounting personnel. To address these issues, the report presents various management accounting tools and techniques, such as financial planning, financial statement analysis, cost accounting, and budgetary control. It also recommends the implementation of these tools to tackle the identified problems. The report emphasizes the importance of adapting to change and utilizing these techniques to ensure the long-term success of any organization.

Running head : AUDITING AND ASSURANCE IN AUSTRALIA
AUDITING AND ASSURANCE IN AUSTRALIA
Name of the Student
Name of the University
Author Note

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AUDITING AND ASSURANCE IN AUSTRALIA
To: The Board of Directors
From: Graduate
Date:
Subject: Management Accounting Issues
___________________________________________________________________________
The purpose of this Memorandum is to initiate professional development. The memorandum
is presented to analyse the management accounting problems regarding Wesfarmers, which
would require a solution. In the Memorandum, the management accounting issues are taken
into consideration that are raised by an article, that are inclusive of its strengths, weaknesses,
opportunities, threats, if any. Furthermore the management Tools and Techniques are also to
be considered, that are to be used to tackle with the issues that are raised by the articles.
Management Accounting
Management Accounting refers to the functioning of the getting hold of the internal cost for a
process of business, which would help an organisation or any individual in the procedure of
decision making that relate to the production, operation and the investments in markets. The
need for management accounting in various companies if for the purpose of the efficiency of
the budget, the operations costs incurred by them, and allocation of funds in accordance with
the production, sales and investments. Therefore, management Accounting plays a very
crucial role for the well being of a firm. The management accountant plays so huge role that
if there is any single miscalculation or underestimation of a business plan by the management
accountant, the future of the company might be in danger. The main role of a management
accountant is in the field of Budgeting. The budget acts as a guide to all the expenditures of a

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company. Wesfarmers decide up on a budget each year for the purpose for expense fixation
on each and every procedure which is in operation and the production cost followed by
further investment. Therefore, a management accountant here has to take reviews of the
historical data in the preparation of the budget.
Management Accounting Issues
Management accounting aims towards adaptation to the recent changes to be relevant and
competitive in the near future. There are certain issues that every organisation, including
Wesfarmers face are as follows:
Lack of emphasis on management accounting: Management Accounting is a field that is not
given utmost importance, due to which the management accounting operations are not carried
out properly. The decision makers of the enterprise lack attention and apply management
accounting. The emphasis is given more on financial accounting, which aims to focus on the
rendering information on the financial status, operation results and the cash flow of the
enterprises to external planning, operation management and forecasting of the decisions for
internal managers of the enterprises.
Insufficient practical application of Big Data: In every well known organisations the
mangers have to deal with Big and complicated data, which many of the management
accountant are not able to apply properly. This adds up to one of the biggest issues that are
faced by a company. There are managers which who are not potent enough to understand
what are the possible areas where the data are to be applied, because of which the
organisations end up losing their market share.
Accounting personnel lack computer skills: computer skill is one of the most eminent skill
that is needed in every organisation, be it a small and medium enterprise or a renowned

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enterprise. There are various management accountant, who lack proper skill in the computer,
which give rise to such issues in the top management.
Management Accounting Tools and Techniques
Various tools and techniques are used in the Management Accounting. They are as follows:
Financial Planning: Any business enterprise’ main objective is to maximise the profits, the
achievement of which is possible if the management go through proper financial planning.
Therefore, it is taken into consideration as one of the most important tool for management
accounting.
Financial Statement Analysis: the most significant components of financial statement analysis
are Statement of profit and loss, Balance Sheet and the Cash Flow Statement. The
management accountant takes a considerable amount of time to analyse those statements in
order to arrive at a position to give judgements.
Cost Accounting: the role of cost accounting is to present the cost data in product wise,
process wise, branch wise and so on, which are compared with the one, which is budgeted
beforehand. The comparison between the two costs enables the management to understand
the deviations.
Fund Flow Analysis: fund flow analysis helps to estimate the amount of fund that has been
moved from one period to another. It helps to understand the usefulness of the movement of
such fund.
Cash Flow Analysis: Cash flow Analysis is done to estimate the cash that has moved from
one period to another. It helps to analyse where has the cash been used, for what tenure and
so on. It helps to estimate the cash flow from the operating activities, cash flow from
investing activities and the cash flow from financing activities.

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Standard Costing: the standard costing provides a yard stick for the measurement of the
actual performance.
Marginal Costing: the usage of marginal costing technique is to fix the selling price, selection
of best sales mix, and best utilisation of the shortage of raw materials or resources, in order to
take, make or buy a decision. This is done on the basis of the fixed cost, variable cost and the
contribution.
Budgetary Control: the financial needs of the future are estimated with the help of the
budgetary control. It helps in controlling the financial performance of a business enterprise.
The business operations are directed in a desired direction.
Management Reporting: management report is prepared based on the contents of the profit
and loss account and the balance sheet. They disclose the merits and demerits of the operating
activities as well as the financial activities.
Statistical Techniques: Various statistical techniques are used for management accounting
namely the least square, regression, and the quality control, etc.
Recommendations as to how to tackle with such management issues
Be it Wesfarmers or any other organisation the issues relating to the management accounting
will always be present. The help of those management tools and techniques, which are
mentioned above, can only tackle such issues.

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