Management Accounting as a Systematic Process - Essay Example

Accounting does not communicate reality, it constructs reality Contents Contents 2 Introduction 3 Discussion 3 Conclusion 8 References 9 IntroductionAccounting is all about comprehensive and systematic records of financial situation related with any business. Accounting process generally analyzes and evaluates all the financial transactions related with a business operation. Accounting is a process which cultivates and analyzes financial position of company and its cash flows over certain period of time. In the organizational context accounting is instrumental for the companies to maintain financial stability. The whole process of accounting is being handled by the accountants of the companies. Accounting is a systematic process and it is being used as the basic platform for the organizational sustainability. This platform helps the organizations to take their long term business decisions. It has been observed that there is a long term debate between the global fraternities related with the functionality of accounting. Many experts have described accounting as the communicating tool for the organizations to showcase their business reality. On the other hand many people have stated that accounting itself constructs reality. This debate is a burning issue for the organizations across the world. Accounting is nothing but an information science used for the purpose of classifying financial data. Here in this essay the title statement will be critically analyzed on the basis of various favorable and unfavorable arguments. The essay will also include the framework of Burchell et al into this essay. The essay will follow a step by step approach which will analyze the topic in detailed fashion. The essay will follow a suitable structure. With the help of this essay an attempt will be made to end the debate related with the title topic. Discussion Accounting is a process through which organizational reality can be communicated. Organization does accounting for the purpose of communicating realities towards the all stakeholders related with the organizations. Every organization has internal and external stakeholders. It is important for internal and external stakeholders to know the organization reality in detailed fashion. To get the detailed information there is no substitute of accounting. It indicates that accounting does communicate reality to the stakeholders. Financial communication is the most important factor on the basis of which investment related decisions are being made. Investors invest their moneys on the basis of proper information. That information is being communicated with the help of accounting. (Source: Burchell, Clubb, Hopwood, Hughes and Nahapiet, 1980) According to the framework of Burchell, if uncertainties of objectives are low and uncertainty of cause and effect is also low then the accounting process is being used as the answer machines. Under this context organizational realities are being communicated with the help of accounting. The modern day organizations are changing significantly and the role of the accounting are also changing (Bion, 1968). When an accounting system is playing the role of answer machines at that point of time, it is communicating organizational reality. It means the accounting system is communicating all the accounting related information to concerned persons. When accounting system communicates reality then with the help of these machines, investment appraisal, credit control systems and stock control are being communicated towards the associated people. It means accounting does communicate reality. The above frame work is indicating that when uncertainty of objective is low and uncertainty of cause and effect is low then it creates simple accounting problems (Keele Management School, 2012). Credit control, investment appraisal and stock control are significantly important matter for the purpose of communicating organizational reality. The above grid is clearly reinforcing that accounting also communicate reality. It means the title statement is not at all true for all the purposes When uncertainty of objectives is high and uncertainty of cause and effect is low then accounting acts as the ammunition machines. Under this context, accounting constructs reality for organizations and its stakeholders. Accounting constructs reality. Accounting is not an isolated process it has to follow some rules and regulations. It means accounting builds all the financial realities for the organizations and stakeholders (Broadbent and Laughlin, 1997). When accounting is being used as the purpose of ammunition machines at that point of time it promotes particular interests for the organizations. When accounting is being used as the purpose of ammunition machines it has great significance for the reality construction. As far as the organizational reality construction is concerned there is no substitute of proper accounting. Organizational accounting does follow some standardized accounting rules and regulation. All those rules and regulations help the accounting system to come up with transparent and real picture related with the organizations. Accounting can shape the organizational financial data in an easily comprehendible way (Drury, 2008). It means there is no scope of doubt that accounting is also being used for the purpose of reality construction. In the modern business world unethical accounting practices is a very common issue. There are lots of examples of unethical accounting practices are presents in front of the global fraternity. It has been observed that organizations try to cover their unethical accounting practices with the help of unethical manipulation of real financial data. In this context also, reality construction is highly required. That reality construction can be achieved with the help of accounting only. Reality construction required proper shaping of financial data. That proper shaping of financial data can be achieved with the help of accounting. When accounting is being used as the ammunition machines then it can easily analyze the problematic issues related with the organizational accounting. It means accounting is highly responsible for the purpose of reality construction. Accounting as ammunition machines can provide required solutions to the accounting problems. Providing accounting solutions to the problem is a seriously important factor as a far as the accounting system is concerned. That means in the context of reality construction there is high scope of accounting. Accounting is not at all neutral it has political nature. That political nature is highly suitable for the purpose of reality construction. Accounting is a process which follows step by step approaches. Any kind of reality construction required step by step approach. That means accounting process provides suitable approach for the purpose of reality construction. In the modern organizational context accounting has become little bit unorthodox in nature. Accounting as ammunition machines is also significantly unorthodox in nature. If uncertainty of objectives is low and uncertainty of cause and effect is high then accounting acts as the learning machines. This kind of accounting system is generally being used for the purpose of reality construction. Sensitivity analysis and artificial intelligence are highly required for the purpose of significant data analysis. It provides various kinds of required information to the stakeholders. This usage of accounting is highly required for reality construction. Learning machines provides ad hoc analysis to the organizations. It means this kind of accounting system can construct reality for the organizations. Constructing reality is significantly important for the modern day business organizations. That important factor can be achieved with the help of accounting. Human judgment is highly error porn in nature. In the modern day organization scope of error is very low. Investors and management of the organization often give significant focuses towards the reality construction. Under this situation organizations cannot effort any kind of human error. That scope of human error can be easily mitigated with the help of accounting as learning machines. When accounting is being used as a learning machine then it plays more orthodox kind of role for the organizations. There are some basic operational compulsions are present related with organizations, those compulsion can be addressed with the help of orthodox accounting role. Accounting is not only an organizational phenomenon; broad institutional and societal pressures are highly present related with the accounting. It means reality construction related with the organizational financial reality is need of the hour. That need of the hour can be addressed with the help of accounting. All the above factors are indicating that accounting doe’s constructs reality for sure. Accounting can construct organizational reality related with the wage and price control. That thing can be highly productive for the organizations. Accounting is highly important for the purpose of economic management and taxation. All these reality construction can be achieved with the help of learning machines. It has been observed that, capital market has high focus towards reality construction from the organizations. This increasing trend of demand can be met with the help of accounting. In case of high uncertainty of objectives and high uncertainty of cause and effect, accounting can be used as rationalization machines. This is can be used for the purpose of reality communication. This kind of usage of accounting always provides enough legitimacy and rationality to the whole accounting process. As there is high degree of legitimacy and reality are associated with the process, the process can easily communicate organizational reality to the stakeholders. When accounting is being used as a rationalization machine, then it always communicates lots of quantitative figures. Quantitative figures generally communicate organizational reality. Accounting provides institutional accountability. To maintain institutional accountability there is there is no substitute of accounting. Usage of accounting as rational machine very often provides all the required communication. All these communication helps the modern day organizations to communicate their financial reality. Accounting can be used for the purpose of organizational resource allocation. Rational usage of accounting can communicate financial reality to the management of the organizations. On the basis of those communications, managements generally prepare their budgets. It means accounting has definite usage for the purpose of reality communication. The modern day business world is getting highly competitive in nature. Within this context of cut throat competitions organizational decision making is highly dependent upon relevant information. Without relevant information decision making cannot be successful at all. Relevant information can be achieved with the help of proper communication or reality communication. That reality communication is achievable with the help of accounting only. Accounting is an integral part of the organizational communication. With the help of accounting only organizations can communicate their financial realities to the stakeholders. Conclusion All the above discussions are clearly indicating that accounting is a very vast process and the process is not at all limited within reality construction only. Apart from reality construction accounting does communicate reality as well. During the course of this study framework of Burchell has been used significantly. It has been observed that there are four types of machines are there into the framework. Two machines of framework i.e. answer machines and rationalization machines are being used for the purpose of reality communication. On the other hand rest of the two machines i.e. learning and ammunition machines are being used for the purpose reality construction. All the analysis in the essay has categorically indicated that accounting can be used for the purpose of both reality communication and construction. In the above essay answer machines and rationalization machines have categorically argued against the topic title but rest of the two machines have significantly supported the topic title. The essay has critically analyzed the topic title. During the course of the study framework of Burchell has been used significantly in an extensive fashion. The above essay has considered modern changing business trends also. It has critically evaluated the topic. With the help of this essay one thing can be easily concluded that, accounting has significant scopes for the purposes of both reality communication and construction of reality. Reality communication and construction are significantly interrelated with each other. With the help of accounting organizations across the world can achieve both the things. The essay has successfully analyzed all the factors related with accounting. During the course of this essay one thing has been observed that modern day organizations are looking for both reality communication and reality construction. These two things can be achieved with the help of one process only i.e. accounting. References Burchell, S., Clubb, C., Hopwood, A., Hughes, J. and Nahapiet, J., 1980. ‘The roles of accounting in organizations and society’, Accounting, Organizations and Society. Vol. 5 (1). pp. 5-27. Bion, W.R., 1968. Experiences in groups. London: Tavistock. Keele Management School. 2012. SIX TOP TIPS FOR READING ACADEMIC ARTICLES. Journal of Keele management school. Vol. 1(1). pp. 56-59. Broadbent, J. and Laughlin, R., 1997. Resisting the ``new public managementAbsorption and absorbing groups in schools and GP practices in the UK. Department of Accounting, Finance and Management. Vol. 11(4). pp. 34-39. Drury, C. 2008. Management of cost accounting 7e. ISBN 9781844805662. Lecture notes. Read More