Evaluation of Managerial Accounting Systems: HI5017 Report

This report examines the role and relevance of managerial accounting systems within contemporary organizations. It begins with an abstract and table of contents, followed by an introduction that highlights the importance of managerial accounting for informed decision-making. The discussion section delves into various management accounting methods, types, and techniques, including Activity Based Costing, World-Class Manufacturing, and SAP R/3. The report then explores the relevancy of these systems to contemporary organizations, supported by case company evidence, which includes the implementation and modification of these systems. It analyzes the impact of these systems on operational performance and strategic decisions. The report further discusses the relevance of management accounting systems in a changing business environment, highlighting the need for flexibility and adaptability. The findings from the articles used are presented, followed by conclusions summarizing the key lessons learned. Finally, the report provides a comprehensive reference list.

Running Head: MANAGERIAL ACCOUNTING
MANAGERIAL ACCOUNTING
Name of the Student
Name of the University
Author Note

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Abstract
The managers of the organization require more essential as well as general
understanding of the work of the management as well as gaining of the
understanding from the theories, literatures and the other sources.
Managementaccounting in this respect is consideredtheuseful resources of the
accounting, which extensively helps the organization for incorporating accounting
data and financial and the non-financial information. However, inefficiencies of
traditional approach of management have created various issues that have resulted
into creating problem in organization. Therefore, under this assignment, discussion
will be done on the management accounting information role as well as the
provisions of the accounting information of the case companies.

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Table of Contents
Introduction...............................................................................................................................3
Discussion................................................................................................................................4
Management Accounting Methods Types and Techniques.........................................4
Relevancy of Management Accounting System to Contemporary Organization......6
Case Company Evidences.............................................................................................7
Other Case Company Evidence of Management Accounting System...................7
Management Accounting System Relevancy in Changing Business Environment. .9
Article Findings..................................................................................................................11
Conclusion..............................................................................................................................13
Reference...............................................................................................................................14

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Introduction
Management accounting system shows important role in organization as it
helps in the preparation of reports and accounts of the management that provides
timely as well as accurate financial as well as the statistical information to managers
for making the short-term as well as the long-term decisions. Further, the system of
the management accounting is consists of internal system, which is used by the
organization for measuring as well as evaluating their processes for management of
organization. The profession of management accounting is consists of partnering in
decision-making processes of management, devising the performance and planning
management system as well as providing the expertise in the financial reporting as
well as the control for assisting the management in the formulation as well as
implementations of the strategy of the organizations (Cooper 2017).
The report of management accounting includes details of available cash,
generations of recent sales revenue, organizations current state of accounts
receivables and payables and so on. Hence, in case of any inefficiencies as well as
weaknesses in system, there would be reduction of the productivity and the
efficiency, which would be creating various problems in the organization. Moreover,
the management accounting system is the vital subset of the financial as well as the
non-financial information system, which helps in providing various types of the
information for the users, most importantly organizational managers (Maskell,
Baggaley and Grasso 2017).
Therefore, under this assignment, discussion will be done on evaluation of the
role of the management accounting system as well as provisions of information of
the accounting. In this respect, identification of the three examples of different

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management accounting methods from case will be discussed. Moreover, discussion
will be relevancy of the Managementaccounting system to the contemporary
organization. Further, discussion will be on reference of the MAS in the current
uncertain and competitive businessenvironment. Lastly, conclusions will be
givenbasedlesson learned from the articles used.
Discussion
Management Accounting Methods Types and Techniques
The changing and uncertain environment of the business has increasingly
questioned the relevance of management accounting by business unit managers. It
is with the myriad of conventional system of the management accounting as well as
the abilities for modifying or specifying the alterations, the provisions and the type of
the system of the contemporary management accounting is the significant decisions
for the various firms. In addition, selection of the unsuitable system results into the
detrimental effect on the strategic or the operational functioning as well as
positioning of firm. The onset of the globalized competition as well as readily access
to the high technology has changed the way organizations are operating. In modern
business organization, various contemporary management accounting systems
options are available to company such as the value chain analysis, total quality
management, activity based costing and so on (Goetsch and Davis 2014). Following
are certain instances of the types of themanagement accounting system used in the
case study:
Activity Based Costing- The first management accounting method identified
in case study is activity based costing method. The techniques of ABC helps
in assisting the company for achievingeffectiveness of accounting practices in

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the cost management for allocatingresources to the activities. The benefits
raised by this technique remove any type of distortion from system of
traditional cost accounting. This technique provides accurate cost information
for making better strategic decisions and efficiencies in the operational
performance. The method of ABC helps in giving mixed results. The
technique of ABC isimplemented by most of the firm but only 18 percent of
firm has retained this system. The less number of organization
implementingthissystemindicates certain impression of the limitations or
issues in having the technique, which includes high costs as well as
troublesome for implementing it. The major issue that is found in this
technique is selection of drivers as well as defining relevant activities in much
accurate manner. Further, in understanding of the categories, results
interpretations and allocation of the resources with the ABC method, various
difficulties are faced by concerned people in the organization (Latan et al.
2018).
World- Class Manufacturing- The second example used in the case study is
of world-class manufacturing. This technique cannot be the better option
alone rather it has to be used by the other management accounting system.
The firms have the opportunities for refining the prices as well as
measurementsystemswithin time limit with the help of availability of different
options of the management accounting systems. It helps in creating different
requirement for identifying the vital areas of the concerns as well as interest
for the adoption of techniques of management accounting (Goetsch and Davis
2014).

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SAP R/3- The third and the last techniques that are used in case study is the
implementations of SAP R/3. This particular system of accounting is referred
as organizational wide informational system, which is specifically designed to
coordinate all resources, information as well as activities for completing all the
processes of business, for instance billing, human resourcesmanagement,
fulfillment of order as well as planning of production. SAP R/3 provides the
multi-faceted system, customer services management, supply chain
management as well as management accounting system. The company, for
implementing this technique has taken the total duration of three years and it
has costed around $250 million. Earlier to implementations of the
homogeneous techniques of management, the functions such as customer
services system, supply chain system as well as other systems were
performed separately. The major reason for this is the company’s desires for
providing single homogenous system as base and foundation of major
business functions and new business acquisitions unit (Goetsch and Davis
2014).
Relevancy of Management Accounting System to Contemporary Organization
The traditional approaches of management accounting system are the most
valuable accounting topic. The contemporary business organization faces great
amount of flexibility, adaptability and continuous learning that is inside as well as
across the boundaries of the organizations. The traditional management accounting
approach is backed by the numerous limitations. It is because of the limitations, their
form as well as nature of the possible changes is open for debate. However, with the
modern approach of management accounting system, relevancy of informational

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needs of management is fulfilled (Muda et al. 2018). Following discussion shows
application of management accounting techniques in different different case studies.
i)
Case Company Evidences
The author Daniel Watts in his article has stated the extents of the relevance
of new techniques implementation of management accounting are dependent on the
usefulness of information investigations. In the case study, company’s managers
were asked to make decisions at every organizational level. The extent of the system
functionality has required adaptations of system for meeting important users’ needs.
The article has revealed that there requires implementations of the system at each
managements level in different ways and degrees. It means that all the levels such
as lower, middle and top level managementshould be indulged in management
accounting system functions. Although, the major focus is on the operational and the
tactical level of the decision-making. In the case study, the implementation of the
functionality has helped in functionality that encompasses the different business
functions. The choice of the system determines the system relevance. The case
study has highlighted the approach of implementing the wide ranges of the
techniques with the help of hedging,when confronted with situation of taking the
decision in relating to management accounting system. This ensures generalization
of the processes as well as utilizing the techniques at the time when it is required
(Watts, Yapa and Dellaportas 2014).
ii)

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Other Case Company Evidence of Management Accounting System
The second article that has been chosenfor the evidences of uses of the
management accounting system is the modification of activity based costing in the
Universal postal service area. This case study of the Montenegro Post has raised the
concerns regarding improvement in their current system of management accounting
with the help of modification of existing as well as traditional method of ABC. The
author of this article, Momcilo Kujacic, has stated that modifications of traditional and
existing ABC method would be improving the quality of the cost accounting of the
universal operators of postal. Author stated that estimation of cost is the important
tool, which helps in providing guidelines as well as decision bases to decision maker.
In this article, three areas of the problems were identified in the previous system of
cost estimation of Montenegro Post.This includes only few skilled employees were
able for performing cost estimation because of users system requirement,
management was not able for estimating transactioncost by themselves that
increased time of the service processes and they were not able for performing
sensitivity analysis on estimations of cost. Moreover, the author has emphasis on the
possibility for modifying the concept of traditional ABC techniques. The author stated
that traditional ABC technique is unable for cost accounting in the postal sector. The
postal operator has no classic product that prices as well as cost can be determined
easily. Hence, with the modification of the ABC method would be able for improving
the cost accounting quality of universal postal operator (Kujacic et al. 2015).
In the comparison of both the case studies, the insights that can be developed
from both is the fact that the first case study are much more prone towards change
according to the change in the environment. The case company is much more prone
towards changes and according to the changing environment, they are moving

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towards adopting technology in their system of business. The techniques of the
management accounting used in first stage are consists of advanced technology and
is latest, for instance world-class management and SAP. However, in case of second
case study, the author is not prone towards technology are just upgrading the
technique that they are using that is from ABC method to modified ABC
technique.Hence, from just updating ABC would be temporary solution, as ABC in
current scenario is not competitive and suitable for the fast changing business
environment. Moreover, in comparison to the first case study, where at each levels
management needs to apply management accounting system as per their needs, the
second case, managers are unware about the estimation of cost and application of
techniques of management accounting. Further, in second case, only few employees
are skilled compare to the first case, where all employees are trained in relation to
applied technique of management accounting (Nielsen, Mitchell and Nørreklit 2015).
Management Accounting System Relevancy in Changing Business
Environment
The increasing globalization and competition and given rise for accessing the
higher technology. This has forced the companies for changing their way of
operations. The investment in information technology could be seen as the
advantageous approach as it help in providing leverage to achieve the stronger as
well as more flexible process of production for dealing with the persistent changes as
well as improvement in the performance of the organization. The information
technology in helps in automatizing the various functions of control with the system
that is user friendly as well as capable for adapting to the lower level or the line
management. It is with the rapid development of the technology of high-end,
instantaneous and efficient communication as well as increased level of competition;

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various organizations are being forced for seeking the comparative advantages for
remaining viable (Chiarini and Vagnoni 2015). The system of management
accounting as well as the resulting information are used for assisting management in
their processes of the decision-making is argued for providing the comparative
advantages in the competition as well as dynamic environment. Maintaining as well
as designing of the effective systems of the cost management has now become the
important task for the organizations as well as their management accountants. The
central as well as emerging theme arises from the discussion regarding focus of how
the firms utilizes the innovative systems of the accounting that is technology-based
all across the value chain for supporting the strategy of corporate (Otley 2016).
Some researchers have claimed that the traditional based management
accounting is not having the ability for operate in the current changing environment.
It has become now obsolete and it cannot provide the information, which could be
helpful in competing in the current changing and intense competition. Hence, there is
great requirement of modification of traditional techniques of management
accounting in order for meeting changing informational needs of managers as well
as other executives in the fast changing environment (Maskell, Baggaley and Grasso
2017). There is greater requirement of relevant, faster as well as effective set of
information to improve the business processes as well as organizational
performances. Hence, with help of contemporary management accounting
techniques, performance of business operations can be improved. There is belief
that universal approach of management accounting cannot be applied in all the
situations and in all the organizations. The application of specific system of
accounting is dependent upon the particular system of organization (Mokhtar, Jusoh
and Zulkifli 2016).

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Each of the business organization is having their own set of the goals as well
as objectives. Hence, it is impossible to develop the rules, which are uniform and
comprehensive to all organization. Generally, the contemporary firms are
encountered with the conflicts phenomenon between different constituents’ parts of
the system such as differences in ideologies, ideas, norms and so on. These
dynamic natures of the organization are subject to change. The organizational
problems can be solved in difficult as well as complex situations with the help of
planning of the management as well as reassurances of information. Therefore,
conventional accounting system helps the firm to provide useful information to work
effectively in the uncertain environment of business (Monroy, Nasiri and Peláez
2014).
The transformation of business has shifted the focus towards technological
advancement as well as globalization in transformation of business in fast growing
and changing environment. It helps in exerting greater impacts on costs, controls
and structures. Therefore, organizations keep revising as well as updating the
technology to enhance capabilities in order to compete with competitors (Braun et al.
2014). The technique of management accounting in current scenario requires using
of computer for integrating the processes of manufacturing. The modern
management accounting system provides the information, which helps the
organization to survive in competitive environment with the having useful information
for planning, monitoring, controlling for taking decisions. This information could be
used for improving the performance of the organization (LaviaLópez and Hiebl
2014).