Management is the combination of planning, organizing, directing and motivating, performance evaluation and controlling. The accounting is the Process of identifying, measuring, accumulating, analyzing, preparing, interpreting, and communicating information to meet the needs of the intended audience (Melse, 2006). Management accounting is the process of the preparation of financial and related information used by managers inside organizations to make strategic, organizational and operational decisions (Jeffrey, n.d.).
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A Management Accounting Analysis of an Organization
‘Bata India Ltd’ is one of the leading companies in the Bombay Stock Exchange. It follows a structured management accounting system, which maintains a chain of command in case of information supply, and the directors are responsible for internal control. The budgets are regularly prepared; budgets are prepared for every next year. During the preparation of budgets, it always tries to ensure the participation of all responsible budget related members of the company, example-in case of sales budget- sales manager and sales man. After budgeting period it attempts to comparer it with actual result and if there are any variances it analyses it to control and minimize.
That’s why it prepares its financial statements as comparative basis. It follows job costing and batch costing structured in its operation so that it can easily determine and control costs of products. It does not use ABC system in its materials control. But it is very helpful for garments company because it uses different qualities and prices of materials and that’s why ABC system very helpful in case of its materials control. The break even point is always analyzed as a result it can estimate that what it has to do in the next year and how that will be possible (Zerres and Zerres, 2006, p111). In case of 2007, the break even point was (8674.8 million revenue in Indian rupees -406.0 million net income in Indian rupees) 8268.8 million Indian rupees.
At fast estimates the expected costs and than adding the estimate profit with the cost, the prices of products are calculated. To communicate and disseminate effectively and to manage company’s resources effectively, all accounting information is supplied to all managers to plan, evaluate and control as their requirements by analyzing, interpreting, and accumulating. It uses computerized accounting system so that all necessary information can be easily collected, stored, analyzed, and interpreted.
It is helping the company by many ways such supplying related information in every decision making sectors. Day by day the performance of the company is increasing such as the total revenue was 6939.1 in 2004, 7083.8 in 2005, 7702.1 in 2006 and 8674.8 in 2007 millions in Indian rupees and net income was -629.2 in 2004, 97.0 in 2005,. 273.8 In 2006 and 406.0 in 2007 millions in Indian rupees. It is the indicator of improving performance and a good management accounting system helps to improve its performance.
The effectiveness of MAS
This study thinks that the managements accounting system of that company is overall going to be good because the MAS does the various majors tasks such as Providing the efficient management tools, Improving the executive discipline control, Improving the labor productivity due to reduced document circulation time, Accumulating the information for further use as a knowledge base, Optimizing the business processes, automating the mechanism of their execution and control and Formalizing document circulation processes. Two types of information are provided through MAS to managers such as external information and internal information (Zeng, et al., 2007).
In external information, the information relating to economic, competitors, social accusation, MAS practices in other countries and technology are included and in internal information, the information relating to corporate goals, strategy, organizational structure and IT are included and the availability of these helps to improve manager’s ability in planning and decision making.. Diffusion of information such as channels of communication, feelings of insecurity, internal politics, centralization of information and organizational structure are also supplied by the MAS.
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This study thinks that if one company can improve its MAS, it can complete the every steps of a management process such as formulating strategies, communicating these strategies throughout the organization, developing and carrying out tactics to implement the strategies and developing and implementing controls to monitor the success of strategy in terms of achieving strategic objectives of the organization. As a result the company will be more effective in its performance and that’s why the Bata India Ltd has to improve its MAS day by day if it wants to continue its better performance.
Jeffrey, Ng. (n.d.). Management Accounting. Web.
Melse, Eric. (2006). The Financial Accounting Model from a System Dynamics’ Perspective’. Social Science Electronic Publishing. Web.
Zeng, S.X., et al., (2007). Managing information flows for quality improvement of projects. Measuring Business Excellence Journal. Volume 11. Issue 3. 30 – 40.
Zerres, Christopher and Zerres, Michael P. (2006). Break-Even Analysis and Measures of Performance. Springer Berlin Heidelberg. Dritte, überarbeitete Auflage. 109-129.