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Management Accounting Notes

The top 2 links are very ideal. Indrawn did send a reply to her email so reflect back on to that If possible. Walk Page “Traditional standard costing must comply with generally accepted accounting principles (GAP US) and actually aligns itself more with answering financial accounting requirements rather than providing solutions for management accountants. Traditional approaches limit themselves by defining cost behavior only In terms of production or sales volume” “Variance analysis Is a systematic approach to the comparison of the actual and budgeted costs of the raw materials and labor used during a production period.

While some form of variance analysis is still used by most manufacturing firms, it nowadays tends to be used In conjunction with Innovative techniques such as life cycle cost analysis and activity-based costing, which are designed with specific aspects of the modern business environment in mind. Life-cycle costing recognizes that managers’ ability to influence the cost of manufacturing a product is at its greatest when the product is still at the design stage of Its product life-cycle (I. E. Before the design has been finalized and production commenced), since small changes to the product design may lead to significant savings in the cost of manufacturing

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the products. ” The traditional method (also known as the conventional method) assigns or allocates the factory’s indirect costs to the Items manufactured on the basis of volume such as the number of units produced, the direct labor hours, or the production machine hours. We will use machine hours in our discussion. Http://blob. Accounting’s. Com/additional- many firms needed to raise funds from increasingly widespread and detached suppliers of capital.

To tap these vast reservoirs of outside capital, firms’ managers had to supply differentially reports. And because outside suppliers of capital relied on audited financial statements, independent accountants had a keen interest in establishing well defined procedures for corporate financial reporting. The inventory costing procedure adopted by public accountants after the turn of the century had a profound effect on management accounting The inventory costing procedure adopted by public accountants after the turn of the century had a profound effect on management accounting.

As a consequence, for many decades, management accountants increasingly focused their efforts on insuring that financial accounting requirements were met and financial reports were released on time. Customers are part of the decentralized structure! (illustrate) OBSESS Re-SST course work 2013 Task Write an essay (maximum 2,000 words) on the following statement: ‘Traditional methods of planning and control hold companies back, restrict staff creativity and prevent them from responding to customers. Marks will be awarded for the following: Content Research both primary and secondary Style, structure and clarity of argument Originality Conclusion and recommendations Traditional VS. Modern (Financial vs. Management) The traditional methods of planning and controlling can, who most of us can call, are “financial accounting”. Financial accounting is “concerned with providing information to shareholders, creditors and others who are outside an organization”. To simplify, it is for people “external” of the business.

So this is ideal for “Owners, Lenders, Tax Authorities” and “Regulators”. The modern method of planning and controlling is Management accounting, which is “concerned with providing information to managers”. When referring to managers, then they are people who are “inside an organization who direct and control its operations”. So these are people “internal” to the business, and their other duties on top of planning and controlling are “directing, motivating” and “evaluating performances”. We can already identify the organizational structure of these two methods.

If an organization was to bring a high emphasis on financial accounting, and only on financial accounting, then the organizational structure is likely to be centralized – which is allocating decisions to the people who are ranked higher up and centrally to the hierarchy. This disallows creativity to certain staff, which can be a high percentage, because a centralized organization provides a “lack of authority down the hierarchy’ which can lack motivation. This does not mean that it will guarantee failure, because businesses today still apply this and are very successful [List a or many advantages from here onwards].

But when it comes down to accounting then understanding information from the bottom of the structure (such as objectives) within the organization can be tricky. [Add more? ] On the other hand, management “must accomplish objectives by working through people”. An organization that has high emphasis on management accounting and at least have the “mandatory’ financial accounting can be towards he decentralized structure – which is spreading out the decision-making process to include lower level managers in the hierarchy.

Unlike the centralized, it delegates authority which provides more freedom and in response, gives the staff “creativity’. So rather than information Just going from top to bottom (top-down), information gets processed from bottom-up as well. Despite customers not being part of the business, they too can be included in the hierarchy to show how they can be responded to. As shown below: It is like saying that the customers are working for the business too, except that they do not do all the labor, admit etc.

Their key role is to provide feedback, of which the person higher than the customer can shape customer needs to their objectives, of which it keeps leveling up to the workers who then compare it with their objectives, until the top. Some organizations may strictly have a bottom up approach of which this layout can be ideal because it shapes the customers’ needs. But for management accounting, it is the best method to potentially cut costs too.

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