HI5017: Managerial Accounting Report - MAS Implementation Analysis

This report critically analyzes the role and implementation of management accounting systems (MAS) in contemporary organizations, drawing upon two journal articles. The report examines the relevance of MAS, including methods like Activity Based Costing (ABC), Total Quality Management (TQM), and Balanced Scorecard (BSC), in aiding managerial decision-making within real-life companies. The analysis compares and contrasts the findings of the two articles, highlighting differences in the practical application and effectiveness of MAS. The report identifies specific outcomes and lessons learned from each article, focusing on the challenges and successes of implementing these systems. The first article discusses the limitations of contemporary management accounting techniques, while the second article focuses on the implementation of ABC in an Australian firm and its associated barriers. The report concludes with a discussion on the relevance of MAS in today's uncertain business environments, emphasizing the importance of customized approaches and the factors that influence the effectiveness of these systems. The report also mentions how the implementation of the ABC model faces challenges and how communication plays a key role.

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student
Name of the University
Author’s Note

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Abstract
The main purpose of this report is the analysis of the role of management accounting
systems. This report involves in the analysis of two different articles on the
implementation of management accounting system in contemporary organizations.
The findings of the report states that there are differences between the results of
these two articles. In addition, this report shows the lessons that the Australian
management accountants can learn from these two articles.

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Table of Contents
Introduction...................................................................................................................3
1. Three Management Accounting Methods................................................................3
2. Relevance of MAS in Contemporary Organizations.................................................4
i) Evidence from the Case Companies.....................................................................4
ii) Compare and Contrast the Findings with the Second Article...............................5
3. Conclusions on the Relevance of MAS....................................................................6
4. Specific Outcomes or Lessons Learned from Each of the Two Articles..................6
Conclusion....................................................................................................................8
References...................................................................................................................9

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Introduction
Management accounting refers to a major part of accounting which aim to
identify, measure, analyse and interpret various accounting information used by the
organizational managers for the purpose of effective decisions-making (Kaplan and
Atkinson 2015). The present business era is witnessing major progress in the use of
management accounting that is making the organizational managers benefitted in
use correct use of accounting information for the purpose of effective decision-
making. This report aims at analysing as well as evaluating the purpose as well as
use of management accounting and for this reason, this report undertakes the
analysis of an article named “The Case of a Newly Implemented Modern
Management Accounting System in a Multinational Manufacturing Company”. This
report also involves in the analysis of another article that involves in the
implementation of management accounting system in a real life company.
1. Three Management Accounting Methods
Three management accounting methods are mentioned in the first article and
the discussion about them is shown below.
Activity Based Costing (ABC)
ABC is one of the most popular management accounting methods and this
spots overhead costs to the activities and then assign them to the cost objects
(Watts, Yapa and Dellaportas 2014). This is a widely used method to allocate
overhead costs to the cost departments that generate good or services for a
company. Cost activities are identified under this method, then they are grouped with
the processes into cost pool associated with single cost drivers. The last stage
involved in assigning these cost drivers to the overhead rates of the jobs and
products (Elhamma and Zhang 2013).
Total Quality Management (TQM)
TQM is another key method of management accounting which helps the
organizations in producing larger quantity of products in the presence of few defects.
The whole business organisation including higher management and lower managers
is included in this process. In the application of TQM, employees are encouraged by
the managements for the production of superior quality of products and spotting
wastes in the whole production process (Oakland 2014). This is one of the examples
of lean business practice which assist the organizations in continuously enhancing
the whole production process so that quality products can be delivered to the
customers.
Balanced Scorecard (BSC)
BSC is a majorly used management accounting method which assists the
organizational managers in monitoring as well as enhancing overall business
performance in four specific areas that are financial, customer, business processes
and learning and growth. As per the used assumption of this method, it is needed for
a business to well perform in these four areas for enhancing the overall business
performance. This method involves in the integration of management strategies with
traced information. BSC involves both the financial and non-financial measure of
business performance (Akkermans and Van Oorschot 2018).

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2. Relevance of MAS in Contemporary Organizations
i) Evidence from the Case Companies
According to the first article, the degree to which management accounting is
relevant in Company-A (case company) can be determined in two different parts.
First, the investigation of the assistance of management accounting to make
decisions; second, the degree to which it is needed to adopt the management
accounting system for satisfying the necessities of the key users (Watts, Yapa and
Dellaportas 2014).
It can be seen from the article that certain problems had to be faced by
Company-A for adopting the functions of management accounting that involves the
implementation of the techniques of contemporary management accounting (Watts,
Yapa and Dellaportas 2014). While the management of the firm was hopeful about
their ability to utilize the management accounting methods for their needs, but there
was a major failure of the implemented management accounting system in accepting
the expectation of the management. It was not possible for the management of the
company to use the management accounting techniques like BSC, TQM and ABC as
they were prescribed to be used. For instance, Company-A rejected ABC as an
effective technique of management accounting; and the company also utilized BSC
with caution as the technique was basically unreasonable. It can be seen that every
technique of management accounting had certain beneficial characteristics and
features, but majority portion of these features as well as characteristics were not
relevant for Company-A. The main reason behind considering the majority parts of
ABC and BSC as impractical because the manufacturing process of the company
was very simple. This implies that shifting in the contemporary business environment
was majorly responsible for making these major management accounting techniques
impractical (Drury 2013).
The elements of the above-discussion can be seen in case of the influence of
management accounting to make sound decisions; and this is due to the aspect that
the whole part of the management does not have reliance on the information that the
management accounting techniques provide. For the decisions relegated to
operation, reliance of the management of Company-A can be seen on the
management accounting information in order to make sound business decisions; but
for the technical decisions, the management of Company-A is partly dependent on
the information provided by the management accounting techniques. The
management of Company-A almost has no dependency on the information from the
management accounting techniques. Instead of information from management
accounting techniques, the company relies on the information on macro and micro
economic issues, international events, global movements and others (Hilton and
Platt 2013).
On the basis of the above analysis, it can be seen that the majority portions of
the contemporary management accounting techniques do not have any relevance in
the contemporary business organizations. For the overall functionality of the
company’s system, no suitability of the method of management accounting can be
found in the business environment of the contemporary business organizations. This
leads to the essentiality of these types of companies to develop their individual as
well as customized techniques of management accounting. The same elements are
also majorly relevant for the decision-making process of the contemporary business
organizations (Watts, Yapa and Dellaportas 2014).

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ii) Compare and Contrast the Findings with the Second Article
The name of the second article is “Implementation of the Activity-Based
Costing Model for a Farm: An Australian Case” which is involved in the analysis of a
management accounting system that is ABC implementation in an Australian firm
owned by a family named S Ltd. This article aims at understanding the ABC model
implementation in S Ltd while inspecting the problems in this implementation process
(Lu, Sridharan and Tse 2016).
According to this article, the processes of production in agricultural companies
are distinctive which creates key challenges for the agricultural companies in costing
the agricultural products which are the outcome of the whole production process (Lu,
Sridharan and Tse 2016). For tackling these problems, the ABC model has been
considered as a probable solution in the presence of key drawbacks of traditional
costing system. The way organizations operate is considered for the development of
each costing system (Fullerton, Kennedy and Widener 2014). While traditional
costing methods like process costing and job costing are less relevant for the model
organizations, effective consideration of operating activities can be seen in the ABC
model. There are two stage of cost allocation in ABC model. The allocation of the
costs to the activity pools can be seen in the first stage where ABC model allocates
the operating activities to the activity pools with individual cost objectives based on
the activity usage.
According to this article, in the presence of these unique features of the ABC
model, it becomes easy in handling the costing related problems in the production
processes of the agricultural companies (Lu, Sridharan and Tse 2016). These two
stages of the ABC model make it possible for the agricultural companies to stop
forced allocation of the overhead costs in production along with the ability of the
firms to use non-volume driven activity drivers enabling companies in the selection of
cost drivers reflecting the resource consumption pattern. Another major part of this
article is the consideration of the problems while implementing ABC model in the
companies. For developing the ABC model for S Ltd, the availability of data as well
as resource is the main technical issue faced by the company. In addition, there
could be negative effects on the companies when fully relying on the implemented
system’s cost information. Moreover, the business organization can face huge issue
to collect the required information for the development of ABC model in the absence
of any computerized system. Another major aspect that affects the ABC model
implementation is the level of communication (Fullerton, Kennedy and Widener
2013).
The above analysis indicates towards a major aspect that S Ltd has the option
of using ABC model as the answer of the cost associated problems in agricultural
business processes and the key benefits of ABC model make it possible for the firm.
Apart from this, it is mentioned in the article that there are certain barriers in the ABC
implementation that the firms are needed to consider such as communication level,
absence of required information in the absence of computerized system and others.
This is a major indicator of the fact that major advantages of a method of
management accounting have been shown in this article along with the barriers in
implementing this system that companies are needed to consider (Christ and Burritt
2013). As per the findings of the first article, majority portion of the features of
modern management accounting techniques are irrelevant for the contemporary
companies like ABC, TQM and BSC. This article also discusses about the key

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difficulties of contemporary management accounting methods that make them
unsuitable for the companies. All these aspects indicate that the contemporary
management accounting method fail to provide the key users with the required
satisfaction. Therefore, it can be seen from the whole discussion of this part that both
the articles have dissimilar results of the findings (Lu, Sridharan and Tse 2016).
3. Conclusions on the Relevance of MAS
The methods of management accounting are crucial for the business
organizations since they assist them in providing the needed information for the
purpose of effective decision-making for the businesses. In today’s world, the
businesses are full of uncertainties because of the presence of massive changes in
the business environments. For this reason, the relevance of different methods of
management accounting has become a major concern for the businesses in the
presence of highly competitiveness as well as uncertainty (Schaltegger and Burritt
2017). In every case, the key expectation of the managements of the business
organizations from different methods of management accounting is that they would
provide them with the needed information of their businesses so that they can make
effective business decisions. The presence of many factors can be seen that are
affecting the ability of these systems in delivering the needed information; and these
factors can be seen in the second article like the level of communication, availability
of resources and information, presence of computerized systems and others (Kihn
and Ihantola, 2015). Within the contemporary business organizations, these are the
major barriers for the effectiveness of the management accounting methods. This
requires the contemporary business organizations to put emphasis on these barriers
for getting benefited from the management accounting techniques (Maas,
Schaltegger and Crutzen 2016).
According to the findings of the first article, majority parts of the management
accounting methods do not have any relevance in the business organizations that
operate within the business environment of highly competitiveness and uncertainty.
Since the article only takes one company, this is hard to accept the fact that these
management accounting systems do not have any relevance within the
organizations. Certain factors are needed to be taken into account for assessing the
significance of the management accounting system within the companies
(Contrafatto and Burns 2013). For instance, the contemporary business
organizations must ensure to eliminate high level of functionality from the methods of
management accounting in order to make them able in giving reliable information to
the management for the purpose of effective decision-making. In the presence of this
aspect, the firms will become able in correct benchmarking for the establishment of
effective performance indicators for measuring organizational performance.
Therefore, based on the above analysis, the major relevancy of the methods of
management accounting can be seen within the companies operating in highly
competitive and uncertain business environment, but these contemporary business
organizations would be needed to consider the obstacles in the implementation of
management accounting methods (Taipaleenmäki and Ikäheimo 2013).
4. Specific Outcomes or Lessons Learned from Each of the Two Articles
According to the findings of both of the articles, there are certain outcomes or
lessons that the Australian management accountants can consider in their
profession. These outcomes or lessons are shows below.

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Lessons of the First Article
 As per the findings of the first article, organizational managers of the
contemporary business organizations have a choice of wide range of the
methods of management accounting and this makes it possible for them to
select the appropriate management accounting technique as per their
business operations (Watts, Yapa and Dellaportas 2014). In the presence of
this aspect, this article provides a crucial lesson that the choice of
inappropriate as well as unbefitting methods of management accounting can
lead to negative impact on the operational and strategic functions; and the
Australian management accountants are needed to take into consideration
this aspect at the time of the selection of the methods of management
accounting (Hiebl 2014). For instance, there was functionality in the
management accounting system of Company-A in order to cover the business
functions, but the users may not be able in gaining the needed information
from these systems. For this reason, the firms are required to be careful in the
selection of the methods of management accounting.
 According to the first article, the management of Company-A took the decision
of rolling back the implemented management accounting system after
realizing the system’s complexity for handling (Watts, Yapa and Dellaportas
2014). This leads to a major lesson of the first article that it is significant to
determine the level of complexity in the installed management accounting
system. The lesson that can be derived from this is the rationalization of the
management accounting system in the presence of the aspect that the lack of
satisfaction of the end users is a key obstacle to effectively implement the
management accounting methods. The management accounting methods
that do not have wide information capabilities can become effective when the
users can easily understand them to obtain the needed information (Morales
and Lambert 2013). Therefore, the recommendation to the Australian
management accountants is that they need to ensure the elimination of high
functionality and complexity from the methods of management accounting as
these systems are helpful in benchmarking the performance of the businesses
with the assistance of effective performance indicators.
Lessons of the Second Article
 As per this article, S Ltd has the option of adopting ABC model for eliminating
the issues related to cost the agricultural products (Lu, Sridharan and Tse
2016). As per one of the most crucial outcomes of the article, the
contemporary businesses must take into account the behavioural and
technical factors while implementing any method of management accounting.
Therefore, the suggestion for the Australian management accountants is that
they must ensure the inspection of the aspect that whether the behavioural
and technical factors work as influencers in the implementation process of the
methods of management accounting. The name of certain behavioural and
technical issues are mentioned in this article for the implementation of
management accounting system like extent of communication, accessibility of
the needs resources and data, lack of computerized accounting systems,
dependability of the information related to costs and others. It is possible to
successfully implement any management accounting system while taking into
consideration these aspects (Cooper, Ezzamel and Qu 2017).

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 As per the findings of this article, companies operating within the agricultural
industry have to face certain challenges to calculate the product costs in
different stage of production such as soiling, sowing, watering, planting and
many others (Lu, Sridharan and Tse 2016). The presence of other problems
can also be seen in the companies within this industry. The article states that
these companies can overcome these issues through the implementation of
ABC model. Therefore, the lesson that can be obtained from this article is that
the methods of management accounting like ABC model can be utilized in
difficult costing system where major complexities can present. The Australian
management accountants can consider this as a key positive as they can
implement the same in order to ensure the development of the overall
management accounting profession. There are two stages in the ABC model
that contributes towards the allocation of the overall cost of production for the
purpose of production cost calculation. It is suggested to the management
accountants of Australia to consider this as a major outcome or lesson for
effectively implement in their profession (Bouten and Hoozée 2013).
Conclusion
It can be seen that the above analysis involves in the discussion of various
management accounting methods within the modern business organizations. The
above discussion demonstrates that the modern business organizations can choose
from a large variety of management accounting methods like BSC, ABC, TQM and
others, but they are needed to assess whether the adopted management accounting
system is relevant for their business operations or not since this is a major issue.
There can be major negative impact on the business organizations in case the
managers fail to implement the relevant method of management accounting. This
aspect can be seen in case of Company-A as the management of the company had
to roll-back the implemented system of management accounting as it was
inappropriate for the business operation of the firm. The above analysis shows the
dissimilarity between the findings of the two articles because of the fact that the first
article largely emphasizes on the irrelevance of modern management accounting
methods in the modern companies operating in uncertain and competitive business
environment and the second article shows the success of management accounting
methods to overcome cost related issues while taking into consideration of the
necessary obstacles. This indicates towards the necessity of considering the barriers
of management accounting implementation for making it a success.

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