Holmes Institute HI5017 Managerial Accounting Assignment Report

This report provides a detailed overview of managerial accounting systems, discussing their purpose, uses, and relevance in contemporary organizations. The report explores various types of management accounting systems, including traditional, lean, throughput, transfer pricing, and job costing systems, highlighting their applications and benefits. It also examines the importance of these systems in a competitive business environment, emphasizing their role in decision-making, planning, efficiency, and analysis. Furthermore, the report analyzes the practical use of management accounting systems by contemporary companies, with a specific focus on the case of Westpac, and discusses the needs of innovation and new improved technology to increase the productivity, reduction of the cost, improving the quality. The report includes a detailed discussion on the benefits of management accounting system in Australian Company.

Running Head: MANAGERIAL ACCOUNTING
Managerial accounting
Name of the Student:
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Abstract
In this report it is discussed about the management accounting system with its objective
and uses in a company. Then different types of management accounting system has
been discussed with the relevance of it in contemporary organization. Then it is
discussed about the needs of this system in the competitive business environment. And
at last advantage of this system in Australian company has been discussed.

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Table of Contents
Introduction........................................................................................................................3
Purpose..............................................................................................................................3
Uses...................................................................................................................................5
Question 1..........................................................................................................................6
Question 2..........................................................................................................................7
Question 3........................................................................................................................10
Question 4........................................................................................................................12
Conclusion.......................................................................................................................14
Reference list...................................................................................................................16

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Introduction
Today’s business uses accounting tools to analyze its business activities. Among
the types of accounting system the widely used is the management accounting system
which present the analysis of business activities to the internal management to help in
decision making. It is an application that includes the methods and concept of choosing
the best alternative business action which will evaluate and interpret the business
performance. It uses financial information to create a report for internal use only and
help in decision making by identifying the way to run the company more efficiently
(Ahmed and Duellman 2013). It go through all department of a business to analyze the
financial data. It helps in decision making that will affect the organization future, forecast
future sale, preparing budget, profit planning, cost of operation, research and
development. With all this information management can evaluate the expected return on
investment and determine the best financing method to apply. An effective accounting
system ensures that every accounting activity is working efficiently and according to the
plan. In case of any error it take corrective action to maintain the efficiency of the
management accounting system. In this competitive environment understanding the
system, advancing of technology and putting effort on research and development can
increase the chance of gaining benefit for a company (Aldehayyat and Maan 2013).
Purpose
Management accounting system provide information that can be used for decisions
making. Manufacturing industry use this system to help in costing and manufacturing

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process and hospital uses this system to support billing system. Some of the objective
of managerial accounting system are as follows:
 Decision – It is the main objective of managerial accounting system to provide
information to the managers so that they can make decisions. Its objective is to
collect valuable data that can be used by the management for business
decisions. All firm vary from each other so this system are flexible as they can be
adjusted according to the company requirements (Appelbaum et al., 2017).
 Planning – Higher authority uses this system for budget making and planning
function. Then the budgeted figure is compared with the actual figure to get the
actual revenue and expenses. This system is also programmed to face the
complex scenarios and adjust according to it. Few company makes pre planned
programing in this system which helps them to focusing on specific cost and
possibility.
 Efficiency – Managerial accounting system works efficiently and effectively to
achieve the goal of the company. In some industry this system are customized to
help in speeding up the processes. It saves lots of time by saving data’s
previously used (Bobryshev et al., 2015).
 Analyzing – This system centralized the data and create an organized structured
information to help the managers to get the information easily to save time. It
also consist of details of inventory which can be used by the company at any
time. It generates reports like trend and special reports in a quarterly or yearly
basis to help the management in decisions makings. This system are easy to use
and requires less training time.

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 Motivating – This system not only give direction but also motivate the employees
by serving as a mediator between the higher authority and employees to help
them solving problems.
 Reports – This system develop plans and goal in the form of report which consist
of conclusion reached, recommendations and solution for the problems (Braun
2013.
Uses
 Productivity – Managerial accounting system uses employees output by
collecting and evaluating the data relative to hours or payroll and track the
production to record it in the system.
 Sales trend – This system can give the sale trend by evaluating the detail of
products sale and sales figure. Then sales figure is used to make demographic
presentation of a market product for a specific period and place. It also provide
tools to target the market and production number.
 Financial planning – This system helps to make bills for the business by
understanding the availability of money and cash for a particular period. It can
also strategies the use of borrowed money and when to take make investment.
This process saves time for the mangers (Brewer, Garrison and Noreen 2015).
 Record keeping – It helps to keep record of the business transaction, can
measures financial changes, analyzing the effect of future financial transaction
and interprets the financial report in a user friendly format.

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 Planning and control – This system is programmed to plan and control by
collecting cash, controlling stocks, controlling expenses, monitoring performance
and also monitor gross margin.
Question 1
Management accounting system is programmed to keep track of cost associated with
the production of goods and services in a company. There are few types of
management accounting system that helps the company to track their cost are as
follows:
 Traditional management accounting system – It track the cost by using process
costing where it will determine the cost allocated by the company relating to the
direct material, direct labor and overhead (Butler and Ghosh 2015). This process
is used by large entity where all cost are traceable. It allocate cost based on the
number of process that a product go through. Since a good go through a number
of processes it is difficult for an individual to keep track of it so this system is
used to solve the problem.
 Lean accounting system – It is more hi-tech techniques of managerial accounting
system where it not only focus on cost but also focus on reducing the waste to
minimize cost. This system provide instant decision making information by
assessing the values and profitability. Any waste which can reduce the cost is
eliminated from the system (Demski 2013).
 Throughput accounting system – This system is not used in costing process now
a days. Rather it is used to identify the companies’ production system by

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constraining the insufficient level of material, labor and production capacity of the
company. It put pressure on increasing the production which will reduce the cost
of production.
 Transfer pricing – It is a part of management accounting system under which the
company will decide the cost of the goods as it move through different
departments. Each department will add some portion of cost to the good as it
pass from it and at the end it will add up to form the cost of the product. Mainly
the variable and opportunity cost are added to the goods by every department
and it shows benefit in this system (Di Vaio and Varriale 2018).
 Job costing system – It is a system of allocating the manufacturing cost to the
products which is applied if good processed are different from other products. It
helps to quote price which will permit reasonable income by determining the
accuracy of the system.
 Price optimization system – This system consist of a mathematical analysis
which determines the consumer reaction on various price of goods and services.
It determines the price which a company should put to maximize profit by fulfilling
its goals.
Question 2
I. Management accounting system are relevant to contemporary organization
because its main functions are as follows:
 Forecasting and planning – MAS important function is to provide necessary
information by forecasting long-term and short-term business plans (Hilton and
Platt 2013). This system uses statistical data for trend study, budgeting, costing

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and fund flow statement. These is one of the important management system tool
for business planning.
 Organizing – This helps the management in organizing the human and non-
human resources by analyzing different functions and responsibilities. It organize
the accounting functions of the business in modern line (Horngren et al., 2013).
 Coordinating – This system increases the efficiency of the organization and
maximizing the profit by providing different tools of coordination like financial
reporting, financial analysis and budgeting. With the help of cost and financial
accounts management prepares budget and standard costing analysis to help
the management.
 Controlling – This system helps the management in controlling the performance
of the organization by applying different methods like budgetary control, standard
costing, cost reduction techniques, cash flow statement and fund flow statement.
 Financial analysis and interpretation – This system also analyze the data and
present it to the management along with the required comments. It provide
suggestions to make the top authority to understand the decisions without any
difficulty (Kaplan and Atkinson 2015).
 Communication – This system provide various report which is to be
communicated to the employees, superiors to exercise effective control which will
enable the management to take decisions. It also communicate to the outside
world with the progress report of the business.

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 Special studies – This system tries to maximize the profit by conducting various
costs studies on a regular basis. It determines the needs of long and short term
capital along with their return and profit of the concern (Khalil and Simon 2014).
 Protecting business assets – This system plays and important role in
safeguarding the business assets. It maintains a fund which will be available for
repairs, maintenance and replacement of the fixed assets to increase the
production capacity without hampering the regular activity of the business.
 Tax policies – It also provide tax policies and procedures to make the tax report
available for various authority. It also maintain provision for taxation to make
quarterly payment of tax required by the income tax act in time to avoid penalty
and interest.
 Miscellaneous function – This system also supplies useful information like
accounting information, price determination and strategic decisions to different
authorities for decisions making or replacement (Kravet 2014).
II. Management accounting system adopted by the company Westpac reveals the
challenging results. It is found to be acquired a range of contemporary
management accounting techniques where the company uses the management
accounting system that can fulfill their needs. Westpac expectation to this system
is too high but it is not supplying the expected decision making information.
System’s like ABC, JIT and TQM are present in the system are not properly
utilized but BSC system are utilized by Westpac. Some elements of BSC system
are considered to be impractical. Majority of the system are not properly
implemented. New management system can function well in ideal environment

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but due to changing environment it is difficult for the Westpac to perform. Related
to the decision making process Westpac rely on the management accounting
system. Company also rely on external sources which contribute to the important
decision makings.
Question 3
In today’s competitive and uncertain business environment management accounting
system is required to satisfy all of the wants. It is required for more innovation and new
improved technology to increase the productivity, reduction of the cost, improving the
quality, determining the accurate product cost which will satisfy the needs of all planning
and decision making for the business (Mihăilă 2014). So in today’s management
accounting system which focus on the following are as follows:
 Activity based costing and management – The development for activity based
costing and management raised due to the demand for accurate and relevant
accounting information. It improves the accuracy of cost activities which result in
reduction of cost of the products for final consumers. It analyze the process to
determine the activities which are performed and how well they are performed.
Main activity of this is to perform necessary activities to eliminate unnecessary
costs and increase efficiency which will create customer value. This system
approach management to focus on the activities with the objective of customer
satisfaction and resulting profit (Narayanaswamy 2017).
 Increasing customer value – It brought a change in the way of business operation
by creating value for the customers. Now business are not profit centric firm it is

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customer centric. Firms create competitive advantage by creating better
customer value by lowering the price of the product other than of competitors.
Increasing customer value means increasing customer satisfaction and
decreasing customer sacrifice. Increasing customer value directly creates
competitive advantage by different strategy. It plays a critical role in the process
of strategic cost management. Strategic cost management uses cost data to
develop strategies which will create competitive advantage by focusing on
customer value (Nitzl and Chin 2017).
 Cost function perspective – This management function system has cross function
perspective which understand business function from marketing to customer to
distribution. Increasing customer value is will also increase the inter-related
business decisions that can affect others. This function helps to see in broad
vision which increase the manager’s quality of service by reducing the service
time and increasing efficiency. It function in the business to provide useful
information for analysis.
 Total quality management – Continuous improvement in the manufacturing
process increase the quality of the manufacturing which is the key to survival in
this competitive environment. Total quality management ensures zero defect
products with better quality. Measuring cost of quality is the key feature of
management accounting system which is able to provide both operational and
financial information about quality, defects, cost for quality and quality trend
report (Weygandt, Kimmel and Kieso 2015).