Essays on Management Accounting

MANAGEMENT ACCOUNTING

Management Accounting Introduction Setting the annual budget has been one of the mandatory activities in organizations at both tactical and operational levels. The annual budget outlines the projected revenues and costs for the firm in the coming year or the finite time period. Such budget is set to clarify the organizational direction to pursue by identifying the target revenues and variable costs associated with the business operations. It served as a successful budgeting process for several years, but today’s highly dynamic and continuously changing business landscape has made this system obsolete. In the 21st century, the annual budgeting ...

Introduction

It is the role of every employee and the management of a firm to ensure that the firm succeeds. To make sure that a firm succeeds, there are ways through which the firm can track its performance. These ways are performance management system and the balance scorecard process. CliftonLarsonAllen is an example of a firm in the United States that uses these two methods to track its performance.

Performance Management

Performance management is the process through which all employees and their staff join hands and work together to strategize, monitor and track the performance of every employee in the firm, the ...

When it comes to management of a company’s finances, it is essential to know that the information can cause a manager to be vulnerable to misinterpretation, manipulation and deliberate deception. The purpose of the fiscal documents is to assist the top managers to make a decision, but the decision has to undergo many ethical considerations to ensure that the decision benefits the company regarding sales and does not negatively affect its financial status in the market (Coombs, Hobbs & Jenkins, 2005). Matters of ethics when it comes to management of finances have not been the primary attention of many ...

Two distinct set of financial reports are used in managing a company, one made by Financial Accountants and the other by Managerial Accountants. These reports are aimed at the company’s external stakeholders such as investors and creditors and are prepared for each quarter and at the end of the financial year and. The format and content of these reports are laid down in laws such as the SOX (Sarbanes- Oxley) Act and in accounting regulations such as the GAAP (Generally Accepted Accounting Principles) and the IFRS (International Financial Reporting Standards). Financial reports become comparable across companies. Managerial accounting ...

Abstract

The paper involves the study of the implementation of management accounting in the business environment as a way for companies to attain competitive advantage. The aspect of the paper is of high importance because every business needs to succeed or be ahead of a competitor and the only way to achieve that is through use of the competitive advantage. Competitive advantage can be difficult to obtain especially if a firm does not implement Porter’s competitive resources to analyse and understand the market environment. The paper will also briefly describe the aspect of management accounting and the activities it ...

Introduction

Management accounting (MA) involves collection and dissemination of accounting information for purposes of decision making. Over the recent past, management accounting has experienced significant changes, an aspect that is explained by different scholars (Sven, 2007, p. 336). The topic has attracted different concerns from various stakeholders, linking recent changes to globalization and changes experienced in the organizational settings. The concept of MA is understood to have significant impacts on organizational management as it is used in making strategic decisions (Arroyo, 2015, p. 287). This paper evaluates various theories explaining factors influencing change in management accounting. To achieve study objective, ...

Both managerial and financial accountings have entirely different users. For instance, financial accounting helps organizations to present their financial status to various stakeholders like board of directors, investors and financial institutions. Financial accounting also presents the monetary details of an organization for a specific period in the past and helps the audience to understand how the company has performed during the above period. On the other hand, managerial accounting helps managers to take day to day business decisions. In other words, managerial accounting has nothing to do with the past performance of a business organization, but with the current ...

Introduction

Sierra Ltd. is an automotive parts’ manufacturer situated in Eastbourne, England. The company manufacturers several distinct products and follows the traditional cost management system. It uses machine hours as the basis of allocation of overheads to its product costs. This report provides an assessment of Sierra’s finance director’s proposal to adopt the Activity Based Costing system for allocating overhead costs more appropriately and to increase sales margins. The most important issues faced by Sierra Ltd. are the declining revenue and profits since the last five years, low projected net profits for 2016 and high product costs. Sierra ...

Compare and Contrast Financial and Managerial Accounting

Compare and Contrast Financial and Managerial Accounting

Introduction

In the current world, the environment in which companies operate has become more competitive, and this trend worsens by the day. As such, it has become imperative that firms focus more on advanced and sophisticated means of gathering accounting information for them to react as required towards market dynamics. In this consideration, it is important for these companies to employ proper accounting practices, which might either be financial, managerial or cost accounting (Hoffjan, Nevries, and Stienemann, n.d.). This paper will, however, focus on the first two. It will explore their similarities, differences ...

MANAGEMENT ACCOUNTING

Introduction Management and financial accounting provide platforms for an organization management to provide informed decision and policies. Organization management uses the budget as the accounting tool in formulation of policies and allocation of resources in different activities. Accounting encompasses the entire body of knowledge that deals with recording and keeping of all financial transactions. It entails identification, recording, classification, verification, and communication of financial information relating to the resources of the organization. On the other hand, financial accounting is a subset of accounting and is concerned with the use of financial data to measure economic performance of the organization. ...

Management Accounting Systems

Management Accounting Systems Support Start-up Business Growth Article “Management Accounting Systems Support Start-up Business Growth” that was written by Michael Lee and Spencer R. Cobia, describes the case of company Globe that had faced with strong business problems (mostly, profitability), and how three strategic instruments – Variance Analysis, Profit Planning, and Performance Measurement Systems – helped the company to solve its problems. This article is focused on the idea that control system is core success factor in any company. Moreover, in case of start-ups, the role of control is even higher. And, according to authors, that company will succeed on market, ...

Management Accounting Systems Support Start-up Business Growth

Management Accounting Systems Support Start-up Business Growth The article “Management Accounting Systems Support Start-up Business Growth” generalize situations that appears to start-up business when they are facing their first organizational crisis. According to statistics, only relatively low percentage of start-ups reach success – most part does not perform even a year. But authors – Michael Lee and Spencer R. Cobia, believe that there is some tools, which will help start-ups to solve all their organizational problems, and these strategic tools are: Variance Analysis, Profit Planning, and Performance Measurement Systems (PMS). For each of these three strategical tools authors of the article ...

Assignment 3-2: Strategy Formulation

Franklin University BSAD 495: Business Strategy Capstone Strategy Formulation Strategy formulation develops into a key construct within an organization as it facilitates the development of strategies geared towards promoting organizational growth as stipulated within the organization’s vision and mission statements (David et al., 2004). Strategy formulation develops from the existence of need within the businesses, which hinders potential development and growth. The strategy formulation process is initiated upon the identification of the problem and consequent development of several measures geared towards countering the existent problem. The study will integrate an analysis of several potential strategies, which may facilitate ...

MANAGEMENT ACCOUNTING

Standard Costs Used for Variance Analysis and Favourable/Unfavourable Terminologies with Suitable Examples 8

References 11

Management Accounting Differences between Management Accounting and Financial Accounting and the need for Investing in the latest Accounting Software Audience Served The basic difference between these two accounting fields is that the management accounting is concerned with providing information to internal stakeholders of an organisation such as the senior management, supervisors and employees. In contrast, financial accounting provides information about the financial health of the business to external stakeholders such as potential investors, shareholders (in case of a publicly traded company), tax authorities, lending institutions and ...

Marchant (2013) wrote the article Management Accounting in the 21st Century: A Profession for Which the Time Has Come, about the growing importance of management accountants in the new century. The author indicates that the twenty-first century has witnessed the emergence of an economy based on the information age, in which knowledge is a primary source of competitiveness. As the boundaries of traditional industries become a blur, there is a new level of demand for the skills of today`s accountants (Marchant, 2013). Marchant (2013) underline the importance of developing an analytical ability, by assembling a team of professionals ...

MANAGEMENT ACCOUNTING

Introduction Management and financial accounting provide platforms for an organization management to provide informed decision and policies. Organization management uses the budget as the accounting tool in formulation and allocation of resources in different organization activities. The managers are the custodian of the budgets under the management and financial accounting. Financial statement and records provide viable financial data that helps in organization management especially in decision-making. Therefore, the study focuses on the management and financial accounting and expounding on objectives of the budget in an organization. The study will also provide the need of using variance analysis in organization ...

The airline industry is considered to be highly competitive and therefore airline company managers will need to determine the relevance of their current ERP systems with regards to the applicability of the financial information it generates. This is because the same quantitative and qualitative information is used for both financial and management accounting. However, the main goal of a company is to generate better profitability for its owners while remaining sustainable. This is done by controlling costs while improving revenues through the use of budgets and the standardization of costs and results to variances, which are primarily under management ...

SYSTEMS DEVELOPMENT LIFECYCLE

Adler, P. S. (2012). Perspective—the sociological ambivalence of bureaucracy: from Weber via Gouldner to Marx. Organization Science, 23(1), 244-266. This authors presented a different view of the functional/bureaucratic organization. The author argues that reports suggesting that the bureaucratic form of organizational structures are dead are mere exaggerations. The author content that there is a need to continue debating about the effects and functions of the functional organization. The author disagrees with the long-held view of the functional organization as inspired by Max Weber, which views bureaucratic organizations as inefficient. While using evidence from research, the author challenged ...

Citizen Inc.

Summary of the business Citizen Inc. is a fully incorporated business and is headquartered in Kentucky. The company was founded in April 2016 and is set to begin operations in July this year. It is registered to produce t-shirts, including branded t-shirts. The company will use screen printing to produce long-lasting t-shirts. The company currently has four employees. These include designers and a marketer. The target market includes high school and university students. It will also use a website for online sales. I have contributed $5,000 to start up the business. Market research indicates positive prospects in the ...

Business Accounting Assignment 1: Business Report on Accounting Practices and Financial Standing of Crafty Limited

Introduction Final Accounts are prepared at the accounting cycle in order to determine the financial state of a business during a designated period. Preparation of final accounts include Manufacturing and Trading account statements, Profit and Loss Account sheets and the Balance Sheet. In order to calculate the amount of profit or loss a business entity has generated within a specified period, the Trading, Profit and Loss Account is prepared; since the Balance Sheet provides a snapshot of the assets and liabilities of a business, its interpretation reveals how financially viable the business is currently; while the most important function ...

Career options in accounting

Accountants have various career paths that they can choose. The main options are public, industry and government accounting. In public accounting, the CPAs work for various firms ranging from small and local firms to large and international corporations. In the firms, the accountants work in areas such as tax, audit and management consulting. In industry and business, the accountants work for varied size firms in areas including, financial analysis, management accounting, financial accounting as well as reporting. With that, the accountants can offer services in specialized fields such as business valuation, financial forensics, IT consulting and financial planning. Also, ...

What many business majors fail to realize is that Algebra is absolutely crucial to their progression throughout their professional degree program. The reason that algebra is so vital to their business career strategy is that Algebra is utilized in many ways in the business world depending on which sector that you decide to work in for the long term. Where the knowledge of Algebra comes in is when you are tasked with the objective of solving equations in everyday problems that utilize Algebra. When we look Algebra in high school, we learned a great deal about how Algebra could ...

Computing for the overhead costs per unit revealed that the ABC system resulted in a more accurate application of overhead costs for the three products. The existing overhead system uses the direct labour hour as its basis for the overhead rate, which was at $20. The overhead costs per unit was seen to be lower for the Dance, Run and Walk product line when compared to the ABC system. The advantage of the existing overhead system is that it is easy to compute since it is based on a standardized labour hour or machine hour rate. However when the ...

Introduction

Managers are constantly making decisions that affect the operations and the bottom lines of the business. Such decisions could include the stocks in which to invest, when to introduce a new product into the market, how to optimize the profits of a firm, how to assign employees to various tasks, and when to venture into new markets. Managers require information to make correct and timely decisions. Managerial accounting and financial accounting are potent sources of the information that managers require when making decisions. Managerial accounting entails the identification, measurement, and communication of the economic information that is needed by ...

This analysis considers the cost behavior of the various cost items in order to determine the cost and profit at various levels of activity. Fixed costs are costs that do not vary with changes in output. Variable costs are costs that change with changes in output. Semi-variable costs are costs that are partly variable and partly fixed. Stepped fixed costs are costs that remain at a particular level of activity but step-up to a new level when activity level exceeds a particular point (Drury, 2012). In this case, the cost items are classified into either fixed costs, variable costs, ...

Reflection Paper about ACCA and CMA

The ACCA, which stands for the Association of Chartered Certified Accountants, is one of the international bodies for the professional accountants based in the United Kingdom. It was established in the year 1904 by eight individuals. During its initial years, ACCA was known as the London Association of Accountants. Its name changed to ACCA in 1984. The core values of this accounting body have been accountability, integrity, innovation, diversity, and opportunity. Regarding membership, ACCA supports 455,000 students and 178,000 members in 181 countries (ACCA, 2015). Consequently, this demonstrates that ACCA is popular, especially in the Commonwealth nations. ...

The accounting profession utilizes Christian ethics that are fundamental in worldwide integration and the use of biblical concepts in direct relation to the accounting profession. Integration of the biblical ethical standards guides is similar to some accounting principles that are widely used for the completion of accounting tasks. Chartered accountants can derive morality from a Christian point of view that is guided by biblical research. The aim of this paper is to relate the concepts of management accounting in the accounting field to Christian ethics and the worldwide view. The Bible has numerous ethical annotations and quotes that were ...

The accounting profession utilizes Christian ethics that are fundamental in worldwide integration and the use of biblical concepts in direct relation to the accounting profession. Integration of the biblical ethical standards guides is similar to some accounting principles that are widely used for the completion of accounting tasks. Chartered accountants can derive morality from a Christian point of view that is guided by biblical research. The aim of this paper is to relate the concepts of management accounting in the accounting field to Christian ethics and the worldwide view. The Bible has numerous ethical annotations and quotes that were ...

Abstract

A balanced scorecard refers to the management system and strategic planning tool used broadly in industry, government and nonprofit organizations across the globe. Its application seeks to better align operations to the specific strategy and vision of an organization, to improve both external and internal communications and to monitor an organization’s performance alongside those strategic objectives. The scorecard was first was introduced back in the early 1990s by Norton and Kaplan of Harvard School. More than half of the key companies in the US, Asia and Europe currently employ the scorecard approach, with its use on the rise ...

Introduction

This paper explores the costing and pricing methods applicable to firms in the tourism and travel sector using Allegiant Travel Company as an example. Allegiant Travel Company is an American company providing leisure travel products and services to under-served cities in the US. It provides air transport, air transport-related products, travel protection products, hotel rooms and other third party travel products. The paper also analyses the financial statements to assess its financial state.

Costing methods

Several costing methods can be applied in the tourism industry depending on the nature of the assignment and the operations of the organization. Applicable costing methods ...

Management Accounting

QUESTION ONE The big challenge facing Siemens is how to adapt to their new proposed strategy and practices to respond to various challenges while ensuring financial success as well as increasing the value of their shareholders. The roles played by a management accountant are critical as they can assist in developing Siemens. Their role development aids in bringing change. The traditional role of an accountant is to organize, summarize, and present financial information to the management for decision making. However, being a management account, the interpreted information is supposed to be used in the development of strategies and plans ...

Abstract

A balanced scorecard refers to the management system and strategic planning tool used broadly in industry and business, government, as well as nonprofit organizations across the globe. Its application seeks to align operations to strategy and vision of an organization, improve external and internal communications, as well as monitor an organization’s performance alongside the strategic objectives. The scorecard was first was introduced back in early 1990s by Norton and Kaplan of Harvard School. Currently, over, half of the key companies in US, Asia and Europe apply the scorecard approach, with its use increasing in those regions and in ...

MANAGEMENT ACCOUNTING – COST CLASSIFICATION, VARIANCE ANALYSIS AND BUDGET PREPARATION

Executive Summary 4 1. Management Accounting, its Importance and Comparison to Financial Accounting 5

Management Accounting versus Financial Accounting 5

2. Different Classifications of Costs (Types, Behaviour, Function and Relevance) with Examples 6 a. Cost Classification by Behaviour 6

Semi-Variable Costs 7 Variable Costs 7 b. Cost Classification by Function 7 c. Cost Classification by Relevance 8 3. Variance Analysis Commonly Derived Variances, Problems and Limitations 9 a. Commonly Derived Variances 9

Material Cost Variance 10

Labour Cost Variance 10 Overhead Variance 10 Controllable Variance 10 b. Problems and Limitations of Variance Analysis 11 4. Different Operational Budgets and their Advantages 11 a. Master Budget 11 b. Operating Budget ...

What is management accounting? What are the sources of data? How are the data used to make management decisions?

According to the official definition by CIMA (Chartered Institute of Management Accountants) management accounting “is the application of the principles of accounting and financial management to increase, protect, preserve and increase value for the stakeholders of for-profit and not-for-profit enterprises in the public and private sectors.” The main difference between financial and management accounting lies in the time frame and the level of details provided. Financial accounting reports information on the monthly and annual level, which may not be enough for some of the daily operations. In this case management accounting comes into place, providing a broader spectrum of information ...

Introduction

The 1950’s were a remarkable period in the business world. The world at large was on a recovery path after two devastating world wars which had changed the focus of business towards the provision of military goods than on providing quality value to customers. Production was mainly concentrated on few organizations and was characterized mainly by bureaucratic methods of organizational management. It was during this period that there was increased pressure to develop internal methods of cost evaluation that would aid in the decision making process of managers. It was necessary to have in place relevant accounting information that was ...

Integration of ABM and ABC in Dow Chemicals Limited

The Dow chemical, an international chemical company, applied activity based costing in order to enable the global business to report the contribution margins according to the geographical area, specific products and customers. The management believed that the system would assist in better decision making in the use and the deployment of its resources. In the traditional accounting system, the costs were assigned to areas such as sales and purchases. However the method was inappropriate as it resulted to fluctuating cash flows since the main focus of costs was on prime costs. It did not provide the manager with accurate ...