Conceptualizing Management Accounting Change - Essay Example

Finance and Accounting: Case Study Finance and Accounting: Case Study Introduction The proposal to the board of Electronic Circuits Ltd intendeds to identify substantial techniques and mechanisms to overcome numerous challenges affecting its accounting and financial operations. The proposal will outline the substantial need and benefits in relation to the establishment of a new management accounting group. The benefits are essential in linking to a comparison between how this new group would improve the approach to management accounting. In addition, the proposal identifies the strengths of the new management accounting group in comparison to the inherent weaknesses in the existing practices. Secondly, the proposal focuses on demonstration of the scale, as well as scope of the new group and the influence of the new management accounting practices. The demonstration could benefit the company in the attainment of its set goals and targets by end of the fiscal period. Literature Review Management accounting refers to the act of combining accounting, finance, and management with the intention of exploiting competitive advantage techniques, which are essential to driving the organization towards the achievement of success. From this approach, management accounting relates to the process of developing management reports, as well as accounts with the ability and potentiality to offer accurate and timely financial and statistical information. The outcomes of management accounting are essential for the managers to make day-to-day, as well as short-term decisions. Management accounting tends to have the ability and ideal platforms for generation of monthly and weekly reports in accordance with the demands and expectations of the internal audiences. There are numerous research exercises, which have focused on the assessment of the concept of management accounting. For instance, Goretzki, Strauss, and Weber (2013, p. 41-63) focused on theorizing the influence of a new actor of the firm can drive the institutionalization of the new role for management accountants. According to the findings of the study, it is possible to understand institutionalisation of a new role for management accountants. Their role is a product of purposive actions by diverse actors in support of specific institutional management within the organization pursuing competitive advantage in the market and industry of interest. In addition, Weißenberger and Angelkort (2011, pp. 160-180) focused on the assessment of integrating financial and management accounting. This is through evaluation of the influence of a consistent financial language in relation to the effectiveness and efficiency of controllership. From this research article, it is critical to note that business entities tend to benefit from utilization of consistency in financial reporting. That is an important property in the realization of the goals and targets of management accounting. Moreover, Modell (2010, pp. 124-129) focused on assessment of mechanisms to bridge the paradigm divide in relation to management accounting research. This is through assessment of the role of mixed methods approaches to management accounting. Mixed method approaches have potentiality of enabling researchers to bridge the divide between the economics-based, functionalist mainstream, and the subsequent alternative paradigm under the influence of critical perspectives and interpretive mechanisms. These research approaches are essential to the development and integration of the appropriate platform for understanding the role and contribution of management accounting in improving effectiveness and efficiency in presenting financial statements of the organization. Analysis and Discussion According to the existing context of the organization, there is no product costing system, which has been in operation. Nevertheless, some managers have registered complaints in relation to the lack of knowledge of the unit production costs, as well as the inability to pinpoint, which contracts of transactions have been profitable for the business entity. From this context, the organization tends to encounter diverse challenges in relation to the lack of management accounting information, which continues to hamper its activities in trying to pinpoint problem areas. Moreover, these issues are also evident in the lack of ability of the organization to identify cost reduction possibilities. In the first instance, integration of a new group of management accounting will be essential in enabling the organization to increase effectiveness and efficiency in relation to all functions of management. Management accounting is also vital in facilitating the actions of the business entity with reference to target-fixing, decision-making, selection of the appropriate product-mix, and price fixation in attempt to address the needs and demands of the target audiences (Parker 2012, p. 56). Similarly, management accounting is essential in forecasting and budgeting, thus developing the crucial platform for planning and relevant financial activities (Gond, Grubnic, Herzig, & Moon 2012, p. 209). The approach will enable the organization to control wastage and defects, thus the most effective approach to reduction of costs while enhancing competitiveness of the business entity in the industry of transaction (Burns, Euske, & Malina 2014, p. 41). Management accounting tools are ideal in the provision of reliable, credible, and authentic mechanisms to execute business functions. Additionally, the new approach will facilitate completion of effective communication between all levels of management. These benefits associate with controlling cost of production, hence the perfect platform for increasing the profit percentage (Burns & Scapens 2000, p. 18). The organization will focus on the utilization of the concept to incorporate proactive-analysis to the governmental policies, as well as socio-economic situations for the efficiency in assessing external environmental implications on the business entity. From this analysis, it is essential to note that management accounting will be essential in the execution of the following functions: Provision of data Modification of data Analysis and interpretation of data Means of communication among levels of management Utilization of qualitative information Facilitation of control, thus translation of the objectives and strategies into goals for attainment. Conclusion and Recommendations In the course of adopting and implementing management accounting, the organization should focus on utilization of appropriate scale and scope to address the challenges facing the current system with reference to identification of sources of defects, as well as sources of profitability. For instance, the scope of the new proposal should focus on integrating financial accounting to facilitate the achievement of full control and coordination of the operations effectively and efficiently in accordance with the demands and expectations of the shareholders and stakeholders (O’Connor, Vera-Muñoz, & Chan 2011, p. 250). In addition, the scope of management accounting should integrate elements of cost accounting. This is because of the influence of marginal costing, standard costing, and differential costing in the operations and control of the business activities or transactions. Management accounting should also consider the revaluation of accounting for the maintenance of capital and calculation of the profits in accordance with the financial facts (Cooper, Ezzamel, & Qu 2012, p. 13). Management accounting should consider the integration of inventory and budgetary control for effectiveness and efficiency in handling the demands and expectations of the shareholders and stakeholders (Lukka 2010, p. 112). These attribute will substantiate the role of statistical methods, as well as interim reporting for improved understanding of the business activities with reference to sources and defects and profitability levels. Bibliography Burns, J., & Scapens, R. W 2000, Conceptualizing management accounting change: an institutional framework, Management accounting research, 11(1), pp.3-25. Burns, J., Euske, K. J., & Malina, M. A 2014, Debating diversity in management accounting research, Advances in Management Accounting (Advances in Management Accounting, Volume 24) Emerald Group Publishing Limited, 24, pp.39-59. Cooper, D. J., Ezzamel, M., & Qu, S 2012, Popularizing a management accounting idea: The case of the balanced scorecard, University of Alberta School of Business Research Paper, (2013-03). Gond, J. P., Grubnic, S., Herzig, C., & Moon, J 2012, Configuring management control systems: Theorizing the integration of strategy and sustainability, Management Accounting Research, 23(3), pp.205-223. Goretzki, L., Strauss, E., & Weber, J 2013, An institutional perspective on the changes in management accountants’ professional role, Management Accounting Research, 24(1), pp.41-63. Lukka, K 2010, The roles and effects of paradigms in accounting research, Management Accounting Research, 21(2), pp.110-115. Modell, S 2010, Bridging the paradigm divide in management accounting research: The role of mixed methods approaches, Management Accounting Research, 21(2), pp.124-129. O’Connor, N. G., Vera-Muñoz, S. C., & Chan, F 2011, Competitive forces and the importance of management control systems in emerging-economy firms: The moderating effect of international market orientation, Accounting, Organizations and Society, 36(4), pp.246-266. Parker, L. D 2012, Qualitative management accounting research: Assessing deliverables and relevance, Critical Perspectives on Accounting, 23(1), pp.54-70. Weißenberger, B. E., & Angelkort, H 2011, Integration of financial and management accounting systems: The mediating influence of a consistent financial language on controllership effectiveness, Management Accounting Research, 22(3), pp.160-180. Read More