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HI5017 Aspects of Management Accounting System Assessment Answer

Assessment Details and Submission Guidelines
TrimesterT2 2019
Unit CodeHI5017
Unit TitleManagerial Accounting
Assessment TypeAssignment
Assessment TitleIndividual Assignment
Purpose of the assessment (with ULO Mapping)
Students are required to develop their understanding of the purpose and use of management accounting systems, and its usefulness in aiding managers make informed decisions. You are to critically evaluate two journal articles to analyse the practical use of management accounting systems by contemporary companies, in terms of their relevance to the real-life companies’ decision-making by managers and
achievement of business goals (ULO 2, 3, 5, 6, 7 & 8)
Total Marks30
Submission Guidelines
  • All work must be submitted on Blackboard by the due date along with a completed Assignment Cover Page.
  • The assignment must be in MS Word format, no spacing, 12-pt Arial font and 2 cm margins on all four sides of your page with appropriate section headings and page numbers.
  • Reference sources must be cited in the text of the report, and listed appropriately at the end in a reference list using Harvard referencing style.
  • It is the responsibility of the student who is submitting the work, to ensure that the work is in fact her/his own work. Incorporating another’s work or ideas into one’s own work without appropriate acknowledgement is an academic offence. Students should submit all assignments for plagiarism checking on Blackboard before final submission in the subject. For further details, please refer to the Unit Outline and Student Handbook.
Format of the Assignment Submission:
You should at least have the following details:
  1. Assignment Cover page clearly stating your name and student number
  2. Abstract (one paragraph)
  3. Table of Contents
  4. Body of the assignment with appropriate section headings
  5. Conclusion
  6. List of References.

Purpose:

Individual Assignment Specifications

This assignment aims at developing your understanding of the purpose and use of management accounting systems, and its usefulness in aiding managers make informed decisions. You are to critically evaluate two journal articles to analyse the practical use of management accounting systems by contemporary companies, in terms of their relevance to the real-life companies’ decision-making by managers and achievement of business goals.

Assignment Task:

Journal Article Critique (30 Marks)

You are required to read the journal article by Watts, Yapa and Dellaportas (2014), “The Case of a Newly Implemented Modern Management Accounting System in a Multinational Manufacturing Company”, Australasian Accounting, Business and Finance Journal, 8 (2), p. 121-137. The journal article is attached as a separate file in Blackboard under the folder <Assignment>.

Required: Critically evaluate the role of management accounting systems (MAS) and the provision of accounting information for the case company by answering the 4 questions below:

Questions:

  1. Identify any three (3) specific examples of the different types of management accounting methods and/or techniques from the case. (3 marks)
  2. Are MAS relevant to contemporary organisations? Discuss this with reference to:
    1. What evidence is there from the case company? Include examples in your answer. (5 marks)
  3. Compare and contrast this finding with one other journal article you will need to find that has discussed about management accounting systems in another real-life company or companies. Did this second study have similar findings as the first chosen article, or mixed and/or different findings? Explain with examples. (5 marks)
  4. What conclusions do you make about the relevance of MAS in today’s competitive and (in most cases), uncertain business environment? (4 marks)
  5. Provide four (4) specific outcomes or lessons learned from each of the two articles’ research findings that will be useful for management accountants in Australian companies to learn from, and justify your answer [i.e. provide 2 outcomes from each of the two studies]. (8 marks)

Another 5 marks are determined by the overall presentation of your assignment.

Answer

MAS

Introduction

This report reflects the key aspects of the management accounting system and how this helps in strengthen the business outcomes and efficiency of the process. MAS system makes the performance of the company strong and efficient. It helps in gathering the relevant information to the managers to make their strategic decisions in the organization. It is used to analysis, evaluate, forecaster and decision-making process. In the starting of this report, examples of various types of the management accounting system and its implication in the business process have been taken into consideration. After that relevancy and accessibility of the MAS to the contemporary organization have been assessed. Afterward, the comparison of two journal articles in context with the MAS system has been made. In addition to this, these two journal articles have been assessed by taking a real-life example. After that in the end, four specific outcomes and output concerning the learning from these articles on the MAS system have been divulged. This report has reflected the core aspects of the MAS system and how it could be used by the organization to make more effective contemporary accounting framework in the process.  

1. Given examples of types of MAS accounting method and techniques from the identified case. 

After assessing the case, there are following MAS system have been identified and divulged. 

  • Performance management accounting system (PMAS):-

This MAS system is adopted by the decentralized organization. In this all the operational process in different level of company is set up as key performance indicator which helps in assessing the control and performance level of organization (Hopper, and Bui, 2016).

  • MAS (Management accounting system)

In the given case of the study, it is found that the company adopted SAP r/3 system process which was planned for the rolling back in the process. However, the system adopted takes lot of time and consume high costing for the data gathering in the organization. However, this system is wider than others and information gathered through this system is deployed by every member of every department of the organization at different places. Nonetheless, this gathered information is more useful to take decisions at the tactical level. However, MIS is not useful for the strategic management as the managers at the strategic management are more inclined to use the financial reports and financial data to make the strategic decisions (Ferlie, and Ongaro,  2015).

  • Financial statement analysis and historical costing: 

It is analyzed that when Company (A) uses its financial statements and historical data to make the decisions then it also uses other information's. The financial statement is accompanied with the following details such as income and expenditure, balance sheet and other cash flow statements which are further used by the company to assess its financial decisions and undertaking any strategic program. It is further analyzed that historical costing also helps in preparing the financial statement and revealing the true and fair of the recorded items in the books. This information at the management level is used to make the financial decisions such as merger, amalgamation, deploying the funds and making the financial management decisions in the organization (Dornier, 2018).

2. Relevancy of the MAS system in the (Contemporary organization)

i. Evidences gathered from the case study

 This MAS system has been researched by assessing the operational working environment of the company and its relevancy in the process. In the case of Company A, the given analysis reveals the key implication of the MAS system in the company and how MAS is used at the different process system of organization (Dornier, 2018).

In this case, Company A embeds decentralized management system which operates at management level who are responsible and accountable towards the strategic work assigned.  The relevancy of the deployment of the MAS system in Company reduces with the downward process department hierarchy level such as strategic management, tactical management, and operational management. At the strategic management level, MAS is less used by the Company A but in case of tactical operational management, it is used by employees to make the effective decision making (Ferlie, and Ongaro, 2015).

In case of the given Company A, it is found that the all the operational and decisions taken in the operational level are related to the shorter time period and all the decisions taken by the line managers in operational level are complete based on the information gathered from the MAS system. This helps in providing the key information which helps production level managers to assess the present decisions on the basis of its impact and output towards the organization. This system provides the information related to the internal functions and helps line managers to figure out the capacity, deployment and available resources of the organization. Therefore, due to the operational process inclinational toward the internal information MAS system is highly relevant for them (Hopper, and Bui, 2016).

In addition to this, by assessing the upward management hierarchy level, it could be inferred that tactical management decision-makers are also using the MAS system in their decision-making process. It is analyzed that all the decisions taken at this level are under the time frame of 6 months to 12 months. The management decision-maker at the tactical management deals with the customer related issue, and supply chain management program which are based on the information related to the external sources and internal sources. Therefore, due to its implication in both areas, MAS system is also relevant for this tactical management department (Manyaeva, Piskunov,. and Fomin, 2016).

 At the strategic level management of Company A, it is analyzed that managers at this level take strategic decisions which are based on the financial statements and historical data to make the decisions then it also uses other information's. The financial statement is accompanied with the following details such as income and expenditure, balance sheet and other cash flow statements which are further used by the company to assess its financial decisions and undertaking any strategic program (Watts, et al. 2014 ).  The relevancy of the MAS system at this level becomes irrelevant and more focused is made on the financial information and books of accounts. It is further analyzed that historical costing also helps in preparing the financial statement and revealing the true and fair of the recorded items in the books (Pugh, 2016). This information at the management level is used to take the financial decisions such as merger, amalgamation, deploying the funds and making the financial management decisions in organization (Watts, et al. 2014 ).  

Therefore, after assessing the available information on the MAS systems and its implication in the company given in the case study, it could be inferred that MAS system is more useful for the tactical management and operational management (Steiss, 2019). When it comes to usage of the MAS in the strategic management, the relevancy of the system becomes less useful. Nonetheless, the relevancy of the MAS system is less useful for the Company A but it does not mean that it applies in each and every case, some companies use MAS system in their strategic management department to make the imperative decisions where complexities are high and work process is cumbersome (Suhail, 2018).

Comparison of journal article-1 with the article-2 (MAS implication in Iraqi companies)

In this case, we have undertaken one more article having title of influence of the strategic management accounting on the performance of the Iraqi service companies.

Influence of the strategic management accounting on the performance of the Iraqi service companies”

By assessing the given article, we have undertaken that relevancy or deployment of the strategic management accounting (SMS) in total 127 Iraqi Companies. However, survey method and questionnaire forms have been used to gather the required data.  All the decisions taken by the management of the companies by using the SMS system is done to make the decisions (Xiaojun, 2017).

In the given article, finding of the MAS system implication in the Iraqi Company has been given which reflects how well the MAS system is used by company to strengthen the business process and outcomes. In this article, usage of the information strategic marketing actions is developed to improve the business performance of the company. It is analysed that MAS system is very crucial for the companies in its strategic decisions and helps in improving the process outcomes (Linsley Shrives,& Wieczorek-Kosmala, 2019).

Comparison between the two journal articles

In this, both articles have been assessed and both articles reveals the contradicting results. In the given first journal article, implications of the MAS system in the manufacturing company has been taken into consideration. In the case of the Company A has divulged that MAS system is less useful for the strategic management level and would be used only in tactical and operational level department (Azudin, & Mansor, 2018).  In the journal article-1, there was given the implication and usage of the MAS system only in the operational and tactical department and in case of the strategic department, MAS system is completely avoided. In addition to this, strategic department of company A given in the journal article-1 focuses on the usage of the financial statements, books of accounts and journal books to make the decisions in the process (Yeoh, Koronios, & Gao, 2008).

Whereas in the journal article-2, it is found that the details given in this article has no link with the theory given in the journal article-1. It has been given that MAS system deployment in the Iraqi companies is used to assess the strategic decisions and evaluating the gathered information. The Iraqi Companies usages the MAS system to make the strategic decisions such as increasing the production level, undertaking the merger and strategic alliance and investing in a particular project. In this article, it is given that MAS system is more useful and helps company to assess, evaluate and estimate the results for the better strategic decision making. This system is useful to make the unique strategic decision making and assessing the positive and negative impact which Iraqi companies could have from its decagons making (Turban, Sharda, & Delen, 2010).

Another example could be taken for the SAP R/3 MAS system implication in the company A. it was analysed that the SAP R/3 was more complicated and was linked with the procedural work of the company A (Watts, et al. 2014).   It was considered that Company A had issue in the implication of the MAS system in its all the department.  In the given case, company was indulged in rolling out the MAS system in its process which negatively impacted the procedural work and made it more complicated (Asamoah, 2018). In the end, company had to switch to KPI technique which was more suitable and linked with its existing department process (Watts, et al. 2014).  In this case, MAS was not useful due to its high complexities. In the case of the Journal article-2, it was given that Iraqi companies were easily adopting the MAS system in its all the three departmental work. These companies were using the MAS system to make the tactical, operational and strategic decisions to make the effective use of its available resources. In addition to this, these Iraqi companies are more inclined to hire IT employees to handle its MAS system for the better outcomes and mitigating the identified issues. 

3. Conclusion based on the relevancy of MAS in today’s environment

It is analysed that the relevancy of the MAS system is based on the several factors such as economic changes, business complexities, technology advancement and staffs inclination toward the changes. Ideally, MAS system is more prepared by those organization which is facing high complexities and issues in its business process.  It is considered that MAS system and its implication in the process is highly costly and could be handled by only those organization which are having high turnover and more return. Nonetheless, those organization which small in size and having less complexities in its procedural work should not consider installing the MAS system. In addition to this, many big companies are installing the MAS system to set the database automation in its procedure. It helps in setting up automation in process and help manage employees to take imperative decisions with the help of MAS developed process. In the dynamic world, MAS system is very useful as it helps in assessing, evaluating and estimating the results which further assist in reducing the chances of loss in the strategic decisions taken by organizations. Nonetheless, in the market, there are several customized MAS system which is more preferable by the companies. The customized MAS system provides the strategic advantage and make business more sophisticated as per the client's need and demand. The employee's redundancy is also imperative to determine the relevancy of the MAS system in process. It is analyzed that if employees of the business are facing complication to adapt with the new system then this MAS system will be less useful for the organization.  

However, those companies which could reduce the complexities and errors in the system could easily adopt the MAS system to strengthen the business outcomes. The MAS system is more relevant in case when it could be customized as per the companies’ need and demand.  

By assessing the journal article-A it is found that MAS is useful but limited to its usage for two department.  But in case of the given journal article-2, it was given that companies were more inclined to adopt the MAS system in its all the department. it helps to make more informed and effective decisions. 

Therefore, it could be inferred that the relevancy of the MAS in very imperative in today's competitive world. It helps companies to take one step ahead as compared to other rivals. It helps them to make more informed decisions.  

4. four (4) specific outcomes or lessons learned from each of the two articles’ research findings that will be useful for management accountants in Australian companies to learn from

Journal article-1

In this case, tow journal articles have been assessed and following outcomes and lessons have been learned from these two articles. 

  1. In the journal article, Company A had issues of installing the MAS in its process. Companies faced the issue related to the adaptability and it was needed to set up a homogenous accounting system to adapt MAS in process. The learning here is related to is that company needs to adapt to the changing business needs.
  2. All the employees must undergo the training and development process so that they could be more inclined to adopt new system.  
  3. In addition to this, another learning is that the company also needs to assess the impact of the adopting the MAS system while adopting the MAS system in organization.  
  4. Another learning was that Company A should have pre-planned the adoption of the MAS system in context with the management decisions and capabilities of its existing process to tackle the new MAS system.

In the given journal article-2, total of 127 companies have been assessed and following outcomes have been found. 

  1. All the Iraqi companies were indulged in using the MAS system for its qualitative and quantitative information. This helps in strengthen the process decision-making process. However, the same results may not find in case of other companies. The management accountant were having wider prospects in their accounting work (Guo, & Zhang, 2019, May). 
  2.  There was linked of SMA and MAS accounting work which encounter each other’s issues and drawbacks. It might be costly for other organizations to afford this new system.
  3. The information generated by SMA system in Iraqi companies were timely based information which may become absolute if it is not used in time.
  4. Time and cost is a key imperative factor while determining the adoption of the MAS system.  

Conclusion

After assessing the information available, it could be inferred that the business operational and tactical level decisions are judged or controlled through the set KPI indicators of the organization. This will set as the benchmark for the organization which will be useful to strengthen the business outcomes. By assessing the business performance and managing system of the organization, several data have been gathered in relation to the MAS system (Management accounting system) in the organization. However, Time and cost are key imperative factor while determining the adoption of the MAS system. 

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