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Practices of Strategic Management Accounting

University: University of Cambridge

  • Unit No: 9
  • Level: Undergraduate/College
  • Pages: 7 / Words 1634
  • Paper Type: Assignment
  • Course Code: ACCT401
  • Downloads: 16
Question :

Learning Outcomes

SLO3.  Use financial and non- financial performance measurement technique that allows managers to measures and control performance, both an operational and strategic perspective, including consideration of behavioural issues.

SLO5. Critically thinking and problem-solving skills to individual or group activities dealing with cost information for decision making.

S2. Critically examine the complex contemporary business issues using suitable accounting methods and approach and make appropriate recommendations based on synthesis theory.

Essay Topic

What do you mean by Strategic Management Accounting? Differentiate between developed and developing economies. Explain the critical issues in the contemporary organisations of any two countries: USA, United Kingdom, Australia, Canada, New Zealand, Malaysia. Korea, Taiwan and China.

Answer :

INTRODUCTION

Strategic management accounting is defined as the management accounting which emphasizes on the information relating to all the financial and non- financial transaction for taking a particular decision. The present essay is based in two countries one is developed which is Australia and the developing which is China. In the present essay the management accounting practices of both the countries will be compared and contrasted.

MAIN BODY

Meaning of strategic management accounting

As per the views of Renz. and Herman, (2016) Strategic management accounting is the one of the common accounting functions that play vital role in assisting managers in making business decisions. Before understanding strategic management accounting, it is very important to understand strategic management in systematic way. Strategic management refers to the practice in which managers of the company fully focused on the management of organization resources to achieve goals and objectives. Strategic management usually involved setting goals and objectives and analysing business performance in respect to them. By making comparison managers comes to know whether performance is good or bad. Here, strategic management accounting comes in the role. In the strategic management managers prepare goals and objectives and in accounting entire performance is measured. Thereafter, as part of strategic management accounting actual performance is compared with the goals that were determine under strategic management accounting.

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But Honggowati and et.al., 2017) argues that on this basis it is identified whether firm perform good or worst. If performance is worst then strategy is prepared to ensure that in next time period it will positive as per expectation. Thus, it can be said that there is huge significance of the strategic management accounting for the business firms because it assists them in bringing efficiency in the business operations and making effective use of resources in the business. Some of the commonly used strategic management accounting tools are target costing, Kaizen costing, life cycle costing, theory of constraints, benchmarking, activity-based management and just in time method.  In activity-based costing each and every production process activity costing is done and, on this basis, management comes to know that which activity cost is very high or in tolerable range or medium or very low. On the basis of inputs management decide that on which area they need to work.

Firms use techniques like process reengineering to find out activities that need to modify in terms of performing them at the workplace so that cost can be cut down. All these things lead to achievement of goal and efficient as well as effective use of resources in the business. In accordance with the thoughts of Carlsson-Wall, Kraus and Lind, (2015) Benchmarking is another approach of the strategic management accounting under which standards are determined and actual performance is compared with the standards. By doing so it is identified whether performance is good or bad. If results are good then there is no problem but if bad then in that case strict action is taken to handle the situation. Thus, there is no company that does not focus on the strategic management to operate business successfully. It is the effective and efficient management of resources and use of cost cutting approaches that lead to reduction in production cost and elevation in the business profitability. Now a day many of large corporates like Samsung and Daikin as well as Toyota etc are specifically paying due attention on strategic management accounting because it helps them to remain competitive in the market.

Management accounting practices used in developed country

In accordance to the views of Otley, (2016) the management accounting practices help the company in managing and taking decision by considering the financial information and the financial results of the working of the company. There have been many of the changes in the system of management accounting and this need to be adapted by all the countries. But still only the developed countries are adapting to the latest techniques of the management accounting. The developed country here is Australia and this is taking measures of adopting the new and advance management accounting techniques. They are ready to adopt the latest management accounting technique because of the fact that these latest techniques assist the companies of Australia in managing their work with efficiency and effectiveness. The management accounting aids the companies in managing their work in effective and efficient manner because this system consider all the financial and non- financial information and then take any decision,

But in contrast to this Maas, Schaltegger and Crutzen, (2016) articulates that the major reason behind their frequent adaptability is that the country is developed and financially it is in position of adapting to all the latest changes in field of management accounting. Further the management accounting practice used by Australia is the activity-based costing. This type of costing is being adopted by the Australian companies. Under this type of management accounting different business activities within the company and assign the indirect cost into the direct cost as compared to the conventional costing. The main reason for the use of this accounting method by Australia is that this method helps in identify and eliminating the product and services which are unprofitable to the company. This is possible because of the reason that ABC lowers the prices of those activities which are overpaid earlier.

But Hopper and Bui, (2016) suggest that another management practice used by Australian companies is the use of target costing under which the determination of the product's life cycle cost which need to be sufficient for developing the functionality and quality of the product. The target cost is the maximum amount which can be incurred over the product and the company still earns profit.

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Management accounting practice used by developing country

Management accounting practices are helps to manage company and country to taking important and effective decision for managing appropriate work formats. Those are very effective and valuable for countries to manage work any decisions for proper management. The developing county means who are in progress of developed in prefect manner. The developing country here is China taking measures of adopting the traditional accounting techniques. They are not ready to adopt any advanced and developed management costing. As per that this affect to management decision in lower margin. Here is assist the companies in Chain in managing work efficiency in proper manner. As per the view of the Messner, (2016) the companies in Chain is standard costing in traditional management accounting for taking their any management decisions. This is the practices which is substituting an expected cost for an actual cost in the accounting records. Those variances which are recorded to show the difference between the expected and actual costs.

On the other side, Hall (2016) cited that the job order costing is also used by companies of developing countries. This is the system for assigning and accumulating manufacturing costs of an individual units of outputs. This costing is used when the various items produced are sufficiently different from each other and each has a significant cost. This helped to take decisions for funds in respective manner by creating more effectiveness for work management. Those are help to managed in effective manner with proper and effective management.

Comparison and contrast in both the countries' management accounting practices.

Management accounting practices are help to take decision for proper management of accounting decision. Those are help to make more effectiveness for proper management in respective manner. Here is compare and contrast in both the country are here. As per view of Christ and Burritt, (2017) developed countries like Australia can use activity based costing, activity based management, target costing, life cycle costing and Just in time. Those are help to companies of Australia for adopting more latest and developed management techniques for proper management in respective manner. Like the activity based costing method is identifies all those activities which are to all products and services according to the actual consumptions with each aspects. This model is assigns more indirect costs into direct costs compared to conventional  costing. Those techniques are helped to take better financial decisions for higher management format in respective manner. On the other side, Otley, (2016) stated that the, developing country like China can use those management accounting process are full costing, standard costing, job order costing and process costing in respective manner. This has creates more effectiveness for proper management of decision making aspects. The developing countries are used proper management of works and its aspects. Those are used for unique products and process costing which are used for standardized products and services.

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CONCLUSION

In the end it can be concluded that use of management accounting practices is very crucial for the success of the company. This is majorly pertaining to the fact that this help the company in managing the business effectively. Thus, the present essay discussed the difference between the management accounting practices used in by developed country that is Australia and the developing country that is China.

Other Related Samples:-

Budget and Process Involved in Preparing Budgets

REFERENCES

Books and Journals 

  • Carlsson-Wall, M., Kraus, K. and Lind, J., 2015. Strategic management accounting in close inter-organisational relationships. Accounting and Business Research. 45(1). pp.27-54.
  • Christ, K.L. and Burritt, R.L., 2017. Water management accounting: A framework for corporate practice. Journal of cleaner production. 152. pp.379-386.
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