Managerial Accounting

Managerial Accounting Individual Assignment

Abstract

Managerial accounting is the integrations of different internal systems by which any company can measure and evaluate their processes for the management of the company. The managerial accounting system of Company-A has been analyzed within this report from the given case study.

After proper analysis of managerial accounting systems, three effective methods or tools are identified and discussed in this report. Moreover, this report has proposed four outcomes by analyzing the two case studies.

Introduction

When it comes to business, it is crucial to know about product pricing and how much sales in required to be profitable or the amount of bonus can be given to the employees and this also termed as managerial accounting.

Managerial accounting is the combination of various internal systems by which an organization can measure as well as evaluate their processes for the management of the company. Managerial accounting and financial accounting are different things.

The results that come from the managerial accounting will produce several reports, which will be related to company’s internal stakeholders. The outcomes of managerial accounting will include periodic reports that are associated with the mangers and their supervisors of different departments.

This report will indentify the various types of techniques for managerial accounting that has been used in the given case study. In addition, there will be analysis of managerial accounting systems for determining any application towards the company. The outcomes or findings will be compared with other journal for the implementation within any real-time organization.

Different conclusions will also be drawn related to MAS for an uncertain business environment. Apart from this, this report will provide four outcomes from the two selected journal articles for the benefit of different Australian organization with uncertain business environments.

Discussion

Different types of Managerial Accounting Methods

There are several tools that are being used for management accounting in the currently, which can be categorised into different groups. The groups are majorly associated with Financial Accounting Information, Future Information and Mathematics.

For achieving the goals in an effective way, managerial accounting follows some useful techniques. These techniques are also useful for analyzing different events along with operational metrics for translating data to get useful information, which can be leveraged with the decision making ways of their management (Nguyen et al., 2017).

With these techniques, the management accounting aims to provide adequate information regarding the operations by performing an analysis of their own product lines, facilities, activities and many more. Following are managerial accounting methods that are mentioned in the case study for the newly applied managerial accounting system within a multinational company:

Total Quality Management or TQM

TQM is the continuous process that is used for detecting and reducing various issues or errors that happens during the production process of an organization. In other words, TQM is a ongoing error reduction techniques that is used for streamlining operations and processes, which are carried out in the manufacturing companies.

TQM is a method that has been used as a method of managerial accounting in the given case study for different multinational manufacturing organizations. Moreover, the outcomes of TQM will be a system, which contains some non value-added factors or elements that provides the outcome with a minimum error.

The outcomes are mainly calculated from the customer’s viewpoint. TQM aims in holding various parties those are involved in the manufacturing processes as well as are responsible for managing the quality of the final product (Butler and Ghosh, 2015). There are some steps followed by TQM, which are generally repeated for achieving a continuous improvements and the steps are discussed below:

  • Planning- In this step, it is determined that which issue will be addressed by collecting required information and figuring out the actual root cause of the issue.
  • Doing- This step is associated with deciding the process of fixing that root cause and then implementing the process after initiating a measurement system for the improvement tracking.
  • Checking- This step will do the examination before and after of the measurement that will be used in order to check that the cause has been eliminated or reduced to some extent (Warren et al., 2015).
  • Acting- This step is related to documentation as well as publicizing the outcomes of the cycle and then issuing the recommendation in regards of that particular issue that has to be addressed by next cycle.

Another name for the above steps is PDCA cycle and this is an ongoing process that is carried out for achieving various organizational goals. There may be some permanent as well as ad hoc committees for engaging within PDCA cycles, which will be depended on various situations and the commitment of management for improving the overall performance (Otley, 2016).

TQM can also be applied to the different industries or businesses but it is actually originated from the manufacturing organizations.

Standard costing

It is a practice for substituting any expected cost associated with the actual cost that is present within the accounting records. Afterwards, the differences are recorded for showing the actual differences within actual and expected costs.

Standard costing is an approach that represents an alternative for the cost layering techniques or systems like FIFO and LIFO techniques in which huge cost information are maintained in holding inventory items within stock.

Standard costing is another technique that is used for managerial accounting for achieving certain organizational goals in an effective manner. The method of standard costing includes the development of standard or estimated costs for the overall activities of the manufacturing organization.

The actual cause of implementing the standard costs is the application numbers as they are very time consuming for collecting the actual costs and estimated costs are implemented as an approximation of the actual costs (Nielsen et al., 2015).

As the estimated or standard costs are different from the original costs, the variances are always calculated on a periodic basis by the cost accountant. The variances can be caused from various factors like the changes in the labour or material costing.

The standard costs can be periodically changed by the cost accountant for bringing them in a close alignment associated with their actual cost. Moreover, this variance analysis will be directed to the attention of management regarding the inefficiencies of manufacturing or higher costs of inputs.

In this regard, the management will take necessary action for mitigating the issues, fixing higher selling prices and many more factors.  As the statement of external finance of a manufacturing company should provide consideration to cost principle (historical), the standard costs of inventories and cost of the goods requires an adjustment for the variances (Collier, 2015).

If majority of the goods that have been manufactured are sold, then the variances will be a part of the material costs that are sold.

Activity based costing (ABC)

Activity based costing has been also used as a managerial accounting method in the given case study of Company A. ABC technique is used for tracing the overhead costs for the activities that are assigned for various objects.

This is another way for allocating indirect and overhead costs for the product costs or departments, which will generate the costs during the production process. The ABC technique is used by management accounting, focus towards identification of various activities and production techniques of processing methods.

These activities are then grouped together in association with same processes within a cost pool, which will relate the activity cost driver. The analysis of cost pools are done and then assigned to a rate of predetermined overhead, which will be assigned to each task as well as products. ABC is more accurate method of assigning different indirect costs.

Therefore, it is more challenging for the determination of the amount of electricity that the department uses with other method without any particular process of allocation (Quattrone, 2016). The ABC technique helps in allocating overhead expenses for the jobs as well as products that are based on the activity amount, which is required for producing the products in spite of estimating the amount by individual jobs.

Relevance of MAS for the contemporary organisations

It is true that managerial accounting systems is relevant to different contemporary organizations because it brings many profits along with it among the present manufacturing organisations. In the case study for Company-A, it is identified that this company is implementing managerial accounting system.

Among the other organisations, Company-A is the contemporary organization who is applying managerial accounting system in association with other methods like standard costing, total quality management (TQM), activity based costing (ABC), just in time (JIT) as well as value chain activity (VCA).

As the benefits that are drawn from  contemporary MA techniques are clear or transparent, the applications that are successful is still under research, which is controlling those advantages and can be drawn by some advanced technologies that are related to managerial accounting.

Majority of the businesses are in a challenge among the global competition along with dynamic conditions associated with macro-economies can act as the MA saviour at the time when industries will seek some other advantage every time.

The decision making method will be helped by the resulting information, which is derived from managerial accounting system (Mouritsen and Kreiner, 2016). Thus, there always an argument for providing a comparative advantage as the advantages will be from a competitive environment. The case study says that the installation of MAS and its degree will depend on individual firms.

Developing of efficient systems along with its management in order to manage the costs is becoming an essential job among several manufacturing companies and management accountants.

Majority of the role for management accountants is being played by Information technology. In order to support different corporate strategies, an emerging theme is implementing various modern technologies that are based on managerial accounting systems affecting the overall value chain of Company-A.

The paper has also investigated several applications as well as acquisitions of MAS on the basis of IT along with the different activities of Company-A. After identifying those functionalities, proper assessing of its relevance is carried out by the process of identifying several techniques at different levels of the company. Crucial decisions are taken daily by the company owner along with managers (Schneider, 2015).

The information that are gathered from daily operations of Company-A are utilized by management accounting systems in order produce reports through which an overall insight of performance can be analyzed for Company-A. The performance of business for the company is related to profit margin along with the labour utilization.

The managers of Company-A are benefitted by the insight that is produced by the MAS that is helping in producing various data driven inputs in order to make effective decisions towards improving the business performance daily. In this context, the calculations are being leveraged by the small organisations in order to improve decision making for higher profits and benefits in this competitive market situation.

Some other evidences are also there in the given case study related to Company-A, which verifies the relevance of MAS with various contemporary organizations.

An example can be taken from the case study that the managerial accounting system has helped Company-A, a multinational manufacturing organisation in order to forecast the future and this has helped for decision making and providing accurate answers to several questions related to the business performance.

Among the several questions, one important question cans be included that if Company-A can invest in the equipments or the organisation can invest in other sectors that can help in diversifying their trade (Quattrone, 2016).

In addition, managerial accounting systems also help in the process of decision making at the time of purchasing any other company. Various serious questions related to the overall performance of the Company-A can be answered by MAS.

Apart from this, another example of the relevance of MAS with contemporary organisation is cash flow forecasting by the management accounting system that are affecting the present business of Company-A, which is much essential for a company.

By the prediction of cash flows helps in answering the questions for determining the cost amount that can be experienced by the company in near future.

Management account system also help to develop the overall budget as well as the trend charts by which the managers can implement them in order to make decisions for allocating the money along with other resources for generating the revenue, which was pre-determined by Company-A.

From second journal, the authors have investigated the scope for managerial account that has been changed by the implementation of some descriptive analytics by the management accountants and with a minimum perspective analysis.

The paper has proposed a framework of MADA or Managerial Accounting Data Analytics that is based on the scorecard theory in terms of business intelligence of the organisations dealing with huge amount of data. The study has been carried out for the IT Company called NextGen.

With the implementation of MADA, the management accountants are helped to utilize the comprehensive business analytics for carrying out a performance management and then providing information based on crucial decisions regarding improving the business performance (Appelbaum et al., 2017).

The paper discussed the effect of business intelligence on MAS in context of enterprise systems as well as the perspective business intelligence by the application of MADA framework in association with the methodology of balanced scorecard.

MAS for uncertain business environment

As managerial accounting systems are used in majority of the company other than manufacturing companies. From this competitive business and uncertain business environment several conclusions are found with the implementation of managerial accounting systems in different organisations.

Therefore, the efficiency and productivity can be minimized by any inefficiency present in the entire system, which will generate a negative environment within that company.  MAS acts the subset of both type of data, which are financial and non financial data generating for various types of users including the supervisors and managers of the organisation.

In accordance of different possibilities of the organization, the managerial accounting system is used for assessing as well as controlling along with judgement making for the historic or previous performance of the organization.

In this scenario, the mangers have to make the development of overall environment design, application along with maintaining them for efficient working of members and employees of the organisation by which they can achieve various organizational goals in an efficient manner (Taticchi et al., 2015).

And this process is one of the key parts, which is associated with management accounting system. Apart from this, there are some relations, which will be dynamic among the individuals along with the organisations related to each other for influencing their every change within the activities that are performed on a daily basis reducing their complexities.

For generating various accounting and financial information, the factors that are discussed are usually considered by the application of some standards related to accounting. Managerial accounting system plays an important part in the information generation process in association with the system of decision support.

After the MAS is applied in the organisation, effective duties can be played by the managers individually by analyzing the given data along with their personal experiences, which are being reflected by their financial statements (Steiss, 2019).

The development of the managerial accounting systems can be with the aim of helping in decision making techniques of the company’s management and growing on a long term basis by expanding their productions of various complex systems.

Moreover, there are some other responsibilities of MAS for preparing some information in order to help the management for the planning some functionalities, controlling along with the rational management for achieving different organisational goals of the company. Managerial accounting system cannot be included in any protocol, which will have some particular set of rules.

However, MAS can help the company and their people such as managers as well as directors within their decision making method due to its reliability or indicating some organisational plans as well as policies.

Various customers expects high salary and many shareholders are also willing or more share in terms of further productions with the help of adding more features with a minimum price.

If the overall factors are managed in an effective manner then it is expected that the business will get its success and for getting this effective manner there are some tools that can be used by managerial accounting system (Wieder and Ossimitz, 2015).

The tools for improving business performance will include total quality management (TQM), just in time (JIT), standard costing, ABC along with some recent tools such as sis sigma and ERP.

The competitive environment for organisations in the recent times implements the cost management and an ongoing improvement process for meeting the success factors by taking accurate decisions towards the improvement of the business.

Lessons learned from both the articles and case studies

After the evaluation of two case studies or journal articles, some of the results has been determined and are provided below:

Outcome one: Company-A was not in a position for the introduction of contemporary MAS and Company-A faced several financial reporting and MAS helped the organisation to own strategic acquisition path as well as divestment. The idea of incorporating all business departments within a single system is a positive move.

Outcome two: Corporate IS (Information systems) like ERP solutions provided the management accountants in expanding the power of data storage along with improved computational power in enhancing the business performance of NextGen. With the help of MADA or Managerial Accounting Data Analytics framework gives the capability to measure the performance and providing decision related data.

Outcome three: With the help of MADA, the implementation of three business analytics types like predictive, descriptive as well as perspective will incorporate within the perspective of performance management like financial, internal process, customer along with effective learning.

Outcome four:  Due to the high competitive market condition of the global manufacturers, Company-A is fitted among the paradigm that will be benefitted with the application of some innovative methods that are associated with management accounting. I have also learned that the simplicity as well as strength of Company-A is depended on the managerial accounting system, which is not reflected by any other organisation.

Conclusion

The managerial accounting system of Company-A is analyzed in this report in accordance with the given case study. After proper analysis of managerial accounting systems, three effective methods or tools are identified and discussed in this report.

The three methods includes total quality management, standard costing and activity based costing. In addition to this, the relevance of management accounting system to the contemporary organisations has also been discussed within this report. From both the journals, findings have been incorporated in this report along with four outcomes are also mentioned in this report.

References

Appelbaum, D., Kogan, A., Vasarhelyi, M. and Yan, Z. (2017). Impact of business analytics and enterprise systems on managerial accounting. International Journal of Accounting Information Systems, 25, pp.29-44

Butler, S.A. and Ghosh, D., 2015. Individual differences in managerial accounting judgments and decision making. The British Accounting Review47(1), pp.33-45.

Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.

Mouritsen, J. and Kreiner, K., 2016. Accounting, decisions and promises. Accounting, Organizations and Society49, pp.21-31.

Nguyen, T.T., Mia, L., Winata, L. and Chong, V.K., 2017. Effect of transformational-leadership style and management control system on managerial performance. Journal of Business Research70, pp.202-213.

Nielsen, L.B., Mitchell, F. and Nørreklit, H., 2015, March. Management accounting and decision making: Two case studies of outsourcing. In Accounting Forum (Vol. 39, No. 1, pp. 66-82). Taylor & Francis.

Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014. Management accounting research31, pp.45-62.

Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser?. Management Accounting Research31, pp.118-122.

Schneider, A., 2015. Reflexivity in sustainability accounting and management: Transcending the economic focus of corporate sustainability. Journal of Business Ethics127(3), pp.525-536.

Steiss, A.W., 2019. Strategic management for public and nonprofit organizations. Routledge.

Taticchi, P., Garengo, P., Nudurupati, S.S., Tonelli, F. and Pasqualino, R., 2015. A review of decision-support tools and performance measurement and sustainable supply chain management. International Journal of Production Research53(21), pp.6473-6494.

Warren Jr, J.D., Moffitt, K.C. and Byrnes, P., 2015. How Big Data will change accounting. Accounting Horizons29(2), pp.397-407.

Wieder, B. and Ossimitz, M.L., 2015. The impact of Business Intelligence on the quality of decision making–a mediation model. Procedia Computer Science64, pp.1163-1171..

 

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