Category: Accountancy

The balance sheet is one of the four core financial statements used to report the companys financial information. The three primary characteristics documented in the balance sheet are assets, liabilities, and shareholder equity (The four core financial statements, n.d.). The former refers to cash, inventories, land, equipment, and other purchases and acquisitions of the company. It is essential to record the assets to understand the organizations financial state and make weighted decisions and investments. Liabilities refer to obligations that the company needs to pay for, such as salaries or debts. Shareholder equity concerns the overall capital invested in the company and can be calculated as Assets  Liabilities.

As a result, the balance sheet conveys crucial financial information, beneficial for corporations and investors. It is possible to understand the companys economic state by using financial ratios that could be derived from the statement. Therefore, investors can evaluate the organizations business performance by analyzing the balance sheet. If the assets are not balanced with liabilities and shareholder equity, it might imply financial problems. Lastly, it is essential to note that balance sheets are recorded as information at a particular date, indicating the importance of other financial statements for a complete business performance analysis.

The total amount of assets for the ABC company constitutes current assets ($144,000) and long-term assets ($128,000) and is equal to $272,000. The total liabilities comprise current liabilities ($26,000) and long-term liabilities ($90,000), equivalent to an overall $116,000.

In the current case, short-term receivables exceed short-term payables by $3,000. It implies that the company generates more money from its received assets, such as revenue from buyers, than it needs to pay to suppliers and vendors.

The order of assets and liabilities listed on the balance sheet is significant because it correlates with their relevance to the current economic operations. For instance, assets are sorted by how quickly they can be converted into cash, and the order of liabilities correlates with their payment date.

The total debt formula is totaldebt=(short term debt + long term debt)

Therefore, the total amount owed = $26,000 + $90,000 = $116,000

Total assets of the company ($272,000) exceed total liabilities ($116,000), which is important since it allows for more equity. Thus, the difference between net assets and net liabilities assumes more money in retained earnings ($96,000), which can be reinvested in the company and expand the business (Classified balance sheets, n.d.).

If the company borrows an additional $10,000, the two balance sheet accounts will not change. The new Total Assets will be equal to $282,000, while the Total Liabilities will be equal to $126,000.

Retained earnings refer to the generated revenue that can be reinvested in the business and used to further develop the company (Classified balance sheets, n.d.).

According to the balance sheet, the total wealth of the company could be perceived as equity (Common Stock + Paid-in Capital + Retained Earnings) or Total Assets  Total Liabilities. In the current case, the total wealth is equal to $156,000 or $272,000  $116,000.

If the company pays $10,000 to dividends, Cash and Retained Earnings will be affected negatively. The new value of the Cash graph will become $82,000, while Retained Earnings will decrease to $86,000 to preserve the balance between Assets and Liabilities with Equity.

References

Classified balance sheets. (n.d.). Principles of Accounting.

The four core financial statements. (n.d.). Principles of Accounting.

Introduction

Knowledge about business-related courses was not clear to me and I had no intention of pursuing any business-related course. That was back in my early education days, even though my father managed a fairly large business firm in the region. It was not until my college studies when I decided to try pursuing a business course just to find out how the so-called managers control business activities. The desire to make coherence of what managers do in these businesses made me develop an interest in business courses. As I joined the course, I developed an interest in various business topics such as how to interpret balance sheets, income statements, and other books of accounts. I could be able to identify people who use accounting information and possible careers in the accounting industry.

Identification of most relevant topic

The systematic collection, analysis, and reporting of financial information are important in business management since managers can determine how much cash reserves the business should have at hand, how much the business owes its creditors, taxation as well as how much profit a business makes per annum. These documents are prepared by auditors employed in the firm or external qualified persons. The course has enabled me to learn that without confidence in financial statements, there is little investment, and without investments, there is no growth.

The impact of the course on the perception of the accounting field

The accounting career is of great importance to individuals since it encourages good work ethics which are very relevant when it comes to public relations and the general success of business entities. Knowledge in accounting reporting is also of great relevance to business secrets. This helps in the protection of the business secrets against the competitors enabling the business to craft a competitive strategy. Secondly, accounting knowledge gives a strong background in business management which is essential in business development. Accounting careers are also of great importance since qualified accountants can become consultants in various businesses as well as in other related fields. This results in self-employment which is a positive factor in economic development.

Another use of accounting information is the management of liabilities. Liabilities when combined with assets make a business ledger accounts. The ledger account is useful in the calculation of revenues earned by the organization per specified duration of time, and income earned with the available resources. This leads to establishing meant for the rate of return. They are also used to explain the employment opportunities that the firm can offer per unit time.

Entrepreneurial skills obtained in business careers are useful in starting and managing business transactions which leads to the creation of employment for both trained and untrained laborers. This leads to economic development for individuals and a country at large. The knowledge of the division of labor ensures efficient functionality of the business assets and also the responsiveness of the laborers towards the firms equipment as well as work specialization. These are essential tools for the expansion of business activities.

Conclusion

In conclusion, accounting information is one of the most essential factors and contributors to economic growth. This is because this information provides ample knowledge that allows the strategist to develop sustainable business ideas that can ensure that the entire business is well taken care of. The way the course has enabled me to understand business and accounting approaches has had long term effects not only on my view of business courses but also on my view of various developmental issues.

Introduction

Many multinationals have been seeking better ways to expand their businesses further so as to increase profitability. For those companies that have different businesses within the same group, individual managers have been put in charge to oversee these operations. As a matter of fact the management has used different ways of evaluating the performance of the individual managers. Individual managers are tasked with overseeing the growth of their specific portfolios and should be judged on how their portfolios perform.

As a finance director there will be need to establish the parameters within which the operations and programs will achieve the desired results. In evaluating the performance managers are assessed on what they have accomplished. This is done by measuring the activities that they were supposed to accomplish.

Discussion

There is need to measure the portfolio performance for easy evaluation of the groups progress in relation to its goals. Without measuring the performance of the individual managers the director will not be able to know where to improve. It will also be easy to know where to allocate or reallocate more money for proper sustainability. Since the group wants to increase its profitability it will be easy to compare with others and borrow the best strategies. To enhance growth it will be necessary to measure the performance so that the manager can tell whether the finance position of the group is declining or improving.

It is through defining the performance in relation to the desired results that managers will make their work more operational. The use of residual income is one of the ways by which the performance of individual managers can be measured (Swans burg 12). This will look at the income that an investment centre earns which is supposed to be above the required return. If the individual manager does not give this then the manager will look for better ways of correcting the problem.

The performance of managers can also be measured using the return on investment method. Since the businesses are independent the managers have control over their decisions. With this autonomy each manager will strive to give the best segment. The rate of return of generate their assets is used to measure their performance. This will explain if they are making sound investments with the funds entrusted under their care.

Cost Center Managers

Cost centers are parts of the company that dont produce direct profits while adding to the costs of running the company. This includes the marketing, research and development departments and finally the customer service desk. Although not profitable money spent in these departments like on research and development might lead to innovations that might seem profitable (Wandryk 8). When there are investments in customer service the company will likely get more customers and increase customer loyalty.

Cost centre managers are always delegated the responsibility of reconciling and monitoring the cost centre reports. They evaluate this performance on a monthly basis and ensure that the transactions are in accordance with the companys core targets. The advantage of using cost centre managers is that it will be easy to classify operations and in the process costs will be easy to measure (Wandryk 10).

In the process the managers will be able to control the costs as they can plan for future costs after having a proper analysis of the actual costs. Cost centre managers have the ability to plan well which will improve on the companys budgeting.

This will in turn have adverse effects on the company as it may reduce sales. It is also easy to use business metrics to know the benefits that the use of these managers will give to the company. These managers have control over the costs of their portfolios which will be effective in reducing the whole costs of the company and in the process increase profitability. In the long run they are able to minimize costs and provide the essential services and products to the company and the customers.

Cost centers do not directly contribute to the profit of the company and incase the budget is cut off the managers may experience some rollbacks. In addition to these it might not be easy to justify investments in the staff, new technology and equipment because of indirect profitability (Wandryk 17).

Profit Centre Managers

A profit center will directly add profits to the company. Since individual portfolios operate on their own, profit centers are evaluated separately in terms of profitability. A profit centre manager is supposed to take care of all the revenues and costs that have an impact on profits. The manager is supposed to drive the sales revenue that will increase the cash flows and at the same time take care of the costs (cash out flows).This is very challenging to the finance director as it is more complex to track all the managers.

The profitability of these portfolios will be easy to determine due to these independence (Drucker 5). Using profit centre managers will make it easy and efficient to compare the relative profitability of the different portfolios and come up with measures to improve on the performance. It will be of importance to the manager that as individual evaluation is done this opportunity can be used to review the targets that have been set.

Profit centre managers can not have access to investment funds which might reduce their morale of working to increase profitability as they wont feel in charge. In the process of evaluating individual portfolios there might be conflicting scenarios as some roles might be almost the same (Drucker 9).

Investment Centre Managers

Investment centers take into consideration the costs, profits and the investment fund. In this case the manager controls the revenues and the liabilities which will be used to assess the performance. The managers are supposed to ensure that there is a high return on the investments under their portfolio.

The individual managers have the decision rights in terms of the capital expenditure and investment (Drury 16). It is assumed that they are aware of the investment opportunities around their portfolios and are expected to seize them. There is the accountability of the costs revenues and net assets in investment. Managers are in charge of purchasing capital and making investment decisions.

Using investment center managers gives them the vital experience in making decisions and hence they are able to tackle every investment opportunity that arises. This will be aimed at increasing the growth prospects of the company. The freedom that individual managers have will yield job satisfaction and authority that increases productivity.

The finance director is also relieved off a lot of problem solving and identification which leaves enough time to strategize on improving the financial prospects of the group. On the other hand investment centre managers might make decisions without understanding the big picture of the group that might lead to conflicts (Drury 26).

Lack of coordination among managers is likely to be seen as there might be cases where the companys strategy may not be well communicated to the different portfolio managers. Lack of a strong central direction makes it difficult for managers to spread innovative ideas in the company or firm

Conclusion

The manager will be concerned with ways to increase profitability of the company and should choose the best evaluation method that will not contradict the set targets. All these should take into consideration the costs and revenues with a long term objective.

To achieve these there is need for effective decentralization among the portfolio managers. Apart from the company wide income statements, it is important to have individual portfolio reports so that they can be reviewed. Individual income statements are in most companies used to evaluate companys profitability and performance. It should specifically emphasize on the portfolio rather than the whole group.

In the long run it will be easy to use business metrics to know the benefits that the use of these managers will give to the company. These managers have control over the costs of their portfolios which will be effective in reducing the whole costs of the company and in the process increase profitability. In the end they will be able to minimize costs and provide the essential services and products to the company and its customers.

Costing

Organizations are supposed to know the costs of the products or services that they give out so that they can make the right decisions in relation to their accounting ethics. Good decisions can only be made after the management has got the right information. Quality decision making will only be consistent if there is correct and appropriate information. Managerial accounting helps indecision making process.

The management needs to know how the costs are captured and later on assigned to specific goods and services. This will entail the collection and the interpretation of the different costs. Hence it is very vital to know how much it will cost to produce a product or service. In knowing the costs the management will be appreciating the sacrifices made in producing the good or service. This will also help to know the variables that are driving the costs.

Marginal or Variable Costing

This is a method that involves the variable manufacturing costs. It is the change in the total costs as a result of producing an extra unit of a given product or service. In evaluating this kind of costing the total cost and the quantity have to be looked at critically. There might be changes to the volume at each level production which should be considered.

In addition to these the marginal costs at the levels of production include other additional costs that might be needed to produce the extra goods or services. Marginal costs are supposed to vary in each level of production (Kotas 14). These can also include the changes in the proportion of the business as it grows. Managers may be faced with situations where the unit level costs vary with the products and services that have been produced.

It is mostly used in cases where materials become an integral part of the finished products. This approach is also more applicable in situations where there is the use of direct labor on the individual units of the products and services. For instance there might be an occasion where the management might need to produce additional goods with new equipments in place and this will involve the costs of the new venture.

Marginal costing is distinct from other methods of costing because the profit for a given period of time cannot be affected in case there are some unexpected changes in the inventories (Kotas 32). This allows the profits to move in the right direction like the sales that the goods and services will be generating over the period.

For companies that have cash flow problems this method is very efficient as the net operating income will be much closer to the net cash flow. On the other hand in absorption accounting, managers assume that unit product costs are also the variable costs. This is well tackled under marginal costing as the product costs should not necessarily contain any fixed costs.

When this method is used the impact of costs on profits is occasionally emphasized as the core of the business. In the other two methods these costs are mixed with other variable costs and normally end up in the inventory. It is also easy to estimate the profitability of the business unlike in other methods where profitability is obscured with other allocations.

Absorption Costing

This is a method of costing where all the manufactured goods and services will be taken care of by the units of the goods produced. These costs will involve the expenses of the finished unit in inventory (Sheffrin 18). In addition, it also takes care of direct labor and direct materials. It is vital to know that absorption costing comes in handy when the organization does external financial and income tax reporting. Absorption costing does not put into consideration whether the production costs are either variable or fixed.

This method will be mainly used by managers in cases where the fixed manufacturing overhead is supposed to be related to each unit of a product that is produced. On the other hand there might be occasions where inventories increase and need to be deferred to future periods. Also in case the management needs to match its costs and revenues it will need to use absorption costing as the manufacturing costs will be assigned to the individual costs of producing the products.

It is clear that one can choose on the absorption method of costing because it recognizes the importance of fixed costs when producing goods and services. In addition to these it is also easy to prepare financial reports with this method as it can give a proper evaluation and analysis (Sheffrin 29).

There might be occasions where the production remains constant while the sales are fluctuating and this method will be efficient in such cases unlike the other two methods (Marginal and activity based) because fixed costs are not agreed upon to change into variables.

Activity Based Costing

This is a method of costing that first of all identifies activities in an organisation. Then it later on evaluates the cost of each activity (production of the goods and services) on how they demand. In addition to these the overhead costs are analyzed in relation to the direct costs that the organization will incur in producing the goods and services (Drucker 16).

The organisation will be able to analyze the goods and services depending on their costs and know how to increase production. This will also help in the pricing as those goods and services that attract a lot of costs will be highly priced than those goods that are less costly to produce (Cokins 7). The long run effect is that there will be the assigning of individual costs on activities that have a bearing on providing goods and services to the customers.

Activity based costing can be used to understand the product and customer profitability. It can also be strategically used in pricing decisions. In cases where the management has some inefficient products and activities it can easily use this method to find out where the problem is and improve on it. This is very hard to accomplish when using the other methods like marginal costing (Cokins 14)

The management can also be faced with a situation where they are having unnecessary costs that might be transferred to the final price. In this case they can easily use the activity based costing to find out where those unnecessary costs are coming from and correct the situation to the better.

One will be compelled to choose this method because it can help to fix prices of products easily (scientifically). Since this method takes a critical approach it is easy to look at the individual production activities and identify inefficient products in relation to the costs and revenues involved (Cokins 12). In addition to these it is very easy to control the costs of production at an individual level and improve on the operations of the organization as a whole.

This method has been used extensively to ensure that there is advanced accounting and measurements that save organizations from many expenses that are accrued in the course of accounting. It is also a good managerial accounting system for those organisations that are involved in the extensive production of goods and services.

Conclusion

Costing is very important for any organisation to ascertain the costs involved in producing specific goods and services. The costing information that an organisation gets can be very helpful in the pricing of the goods and services which has an impact on the revenues. On the other hand it can also be used for continuous assessments that will improve the performance. There are many ways that the management can evaluate the best costing approaches to use in achieving their set goals and targets.

Good decisions can only be made after the management has got the right information. Quality decision making will only be consistent based on the correct information.

Marginal costs are supposed to vary in each level of production as they might include all costs. These can also include the changes in the proportion of the business as it grows. Managers may be faced with situations where the unit level costs vary with the products and services that have been produced.

Absorption costing method will be mainly used by managers in cases where the fixed manufacturing overhead costs are supposed to be related to each unit of a product that is produced. Activity based costing can be used to understand the product and customer profitability. It can be strategically used in pricing decisions.

Works Cited

Cokins, G. Activity based cost management: An executives guide. US: New York. 2001. Print.

Drucker P, F.Management Challenges of the 21st Century. New York: Harper. 1999. Print.

Drucker, P, F. Managing in the Next Society. New York: St. Martins Griffin. 2002. Print.

Drury, C. Management and cost accounting. UK: Derby. 2008. Print.

Kotas, R. Management accounting for hospitality and tourism. London: Bedford.1999.

Sheffrin, S, M. Economics: Principles in action. New Jersey: Upper Saddle River. 2003. Print.

Swans burg, R. Management and leadership for nurse managers. Canada: Toronto. 1990. Print.

Wandryk, K. The benefits of using electronic document software. USA: Mountain View.1995. Print.

The case study at hand presents several accounting problems faced by the Kansas City Zephyrs baseball club. The disputes arise because of the disagreement between the baseball team and the club owners on the benefits provided to players. Both parties are involved in bargaining negotiations, the ultimate purpose of which is to find out the true profitability of the club. It is suspected that unfair practices are implemented to create an illusion that the club is non-profitable and can no longer provide any benefits to the team members.

The areas of controversy include:

1. 1. Roster depreciation: The dispute is about whether the players should or should not be depreciated over time.
   2. Overstated player salary expense:

      1. some amount of the player compensation is not paid directly in cash;
      2. another part of the compensation is paid as the signing bonus;
      3. players who have been removed from the current roster receive benefits specified in their contracts.
   3. Related party transactions: The problem concerns the accountability of the stadium rent costs.

According to Owner-Player Committee (OPC), which represents the owners of the club, the roster of players must be depreciated as their value is decreased over time, whereas Professional Baseball Player Association claims that this measure would be unfair as the players become more experienced, which means that their value increases. On the one hand, depreciation is just as tax rules allow setting a value not exceeding 50% of the purchase price (the process is spread over a period covering six years). However, the owners are not right in this case as the processes of appreciation and depreciation run simultaneously. The value of the roster is increased because of trades and training and decreased through retirements and injuries. That is why the roster should not be depreciated.

As far as the second problem is concerned, players believe that, since they are not paid immediately in cash, deferred compensation is due when the cash is expended. However, the owners are right in this case: deferred salaries should be expensed in the same year when they were earned. Moreover, this 20% is spent on pensions for those who are no longer on the roster.

According to players, signing bonuses should not be paid entirely in the signing year as it is better to spread them over the whole contract term. Amortizing bonuses over the lives of contracts would significantly reduce annual salary expenses. Nevertheless, the owners are right: this argument is inconsistent with an argument against depreciation. There is no reason to provide bonuses over the length of the contract as they should be expensed in the same year in which they were incurred.

Another problem is to identify whether payments to players who have been released should be expensed when they are made or at the moment the player is removed from the roster (as the owners suggest). In this case, players are right: those removed from the roster can sign a contract with another team, so there is no point in expending the full amount at once as the contracts will be taken over. If the owners still insist on their decision, they should set up a reserve that would cover unpredicted losses.

As for related transactions, players claim that the owners of the club are also the sole owners of the stadium, which means that they can intentionally charge higher prices for the rent to demonstrate that the club has to sustain losses. It is hard to say whether they are right or wrong but still, their argument is indefensible. The price should remain the same since it cannot be changed based on opinion only.

Introduction

Lauras Laundromat is a registered laundry business that is located at Czech Road, Yukon Oklahoma. The business has been in operation for the last 3 years. Due to its location, the business is able to serve its target market that includes low-income tenants and busy career home owners due to the fact that it is set in an area with a large number of apartments. In beginning, the only other laundry business in the area was located about 3.5 miles from Lauras Laundromats.

The place has become popular with young adults because of its smart card system that allows its customers to have their laundry done with no need to carry loose change around. Their Speed Queen equipment is not only efficient but also environmentally friendly. Lauras Laundromat also provides other services such as soda and candy vending using a machine that is efficient. The young professionals also find the place relaxing because as they wait for their laundry to be done they can exercise on the treadmill while watching their favorite sports channel on 403 flat panel TV.

Their children are not left out as there is a secure and clean play center, complete with a 323 flat-panel TV and a DVD player. The place has grown from a laundry place to a sort of a relaxation center. The business is owned by Laura Ridley, a well knows home maker in the area. This business report is written to review their starting business plan, examine its current operational problems, and determine ways through which improvements can be achieved in order to increase profitability (Bratton 134).

Problem identification

It has been observed that for about one year, Lauras Laundromat has continuously experienced appreciating inventory costs, declining profitability and declining customer service quality (Carruthers and Wendy 416). These problems led to a team being set up to evaluate how the challenges can be solved and return the company to profitability. The areas that were investigated include technology change, quality of products, communication among the employees, customer satisfaction among other areas.

Preliminary results showed that the company did not adapt quickly to technology changes. They also pointed towards poor service and diversion from the market growth plan provided by the business plan. The low sales were attributed to a reduction of its market share due to a recent rise in the number of laundry businesses in the area.

This report aims to suggest a way in which the current means of doing business can be overhauled so that the business can be returned to the profitability path (Dubrin 80).

Assumptions

In writing this report, some principle accounting assumptions are used: the running of Lauras Laundromats is viewed to be a distinct and separate entity from not only its real owners but also any other business ventures in their possession(the accounting entity assumption). This means that the accounting entries of the owner and Lauras Laundromats as a business are not taken as one. This principle assumption is valued because it separates the personal financial problems of owners and from those that are unique to the business. All accounting entries including the profit and loss financial accounts only show revenues and expenses incurred by the business. Revenues from the owners are taken to be a capital injection into the business while expenses are taken to be liabilities (Fried 57).

Since the business is located in Yukon, Oklahoma. All the transactions are assumed to be in the US dollar. This assumption allows the business assets, capital, and liabilities to be evaluated in terms of the dollar. Thus the dollar is the unit of measurement. Lauras Laundromats is in the service industry thus some of the contributions made by the employees cannot be quantified monetarily. These include customer satisfaction, good employee relations, the effect of entertainment on customers, etc. These are thus left out of the analysis.

It is also assumed that Lauras Laundromat is a continuing business and will do so for an indefinite time. Lauras Laundromat has no intention to liquidate now or in the future, thus this analysis report shows the projection for the finite future.

The balance sheet clearly shows the difference between fixed assets, current assets, short term, and long term liabilities, also the capital and revenue expenditure. The balance sheet differentiates between incomes and expenditures for the financial year gone and those to occur in the coming year (Carruthers and Wendy 420).

Planning

The management of the company commissioned a study to evaluate its current share of the market and how it can be grown in the future. This comprehensive assessment included a technology review and also an impact analysis of the effect of new competitors. These reviews were aimed to increase the companys profitability (Fried 57). Another major problem that was noted was the conduct of employees. As a result of these findings, a strategy was devised to ensure that the employees of Laundromat are properly trained on interpersonal relationships and how to deal with clients. These were to be rooted in the organizational culture of Laundromats.

Anticipated Challenges and Solutions

The main problem facing the business is the rising cost of soap and detergents that are vital for the business over the last few years. The cost of labor and electricity has also been on the rise. This rise in the cost of soaps and detergent can be traced to the manufacturer who claimed that the cost of importing production material such as chemicals had gone up due to a weak dollar. The weak dollar and the rise in the rate of inflation made the employees demand more salary. Another problem that is projected to come up is the training of the workers, especially on organizational behavior. Thus the company was to come up with strategies on how it was going to appraise the employees to identify areas where improvement is to be stressed.

Balance Sheet

Source: Fried, Gunther. Relevance Added: Combining ABC with German Cost Accounting. Strategic Finance 23 (2005): 5661.

Best Management Practices

The company will seek to increase productivity through the adoption of the following best management practices. The company will ensure that it builds a reliable workforce that can deliver. This will be achieved by boosting the employees morale through activities such as production recognition awards (Dubrin 20). This will ensure that the performance of the workers is consistent with the desired standards. Specific activities to be carried out include coaching, training, and the provision of more resources (Bratton 67). Laundromat will ensure that its clients are treated to quality efficient services that will make them come back.

All the written guidelines will be followed to ensure that all activities are planned and carried out in compliance with the requirements of best management practices(Dubrin 25). The companys activities will also be carried out as required by various legislation, regulatory framework, and policies that apply to such businesses(Bratton 67).

Works Cited

Bratton, William. Enron and the Dark Side of Shareholder Value.New Orleans: Tulane Law Review, 2002.

Carruthers, Bruce and Wendy, Nelson. Accounting for Rationality: Double-Entry Bookkeeping and the Rhetoric of Economic Rationality. American Journal of Sociology, 97(2006) 412-420.

DuBrin, Young. Fundamentals of organizational behaviour. Toronto: Thomson Nelson. 2007.

Fried, Gunther. Relevance Added: Combining ABC with German Cost Accounting. Strategic Finance 23(2005): 5661.

ERP is a single kit of computer applications that aggregates the processes within the organization. The system allows furnishing a holistic view of the business where the database is unified and integrated. The AIS has developed into a profound and extensive system with the help of the ERP. Moreover, the application of the new accounting methods facilitates furnishing the inside necessities of the organization.

Thus, information systems furnish the anticipation based on the existing intelligence, which spans the financial accounting, administration maintenance, and fiscal breakdown, as well as contributing to the efficiency of the business.

AIS supported by ERP

The introduction of the ERP technology has greatly influenced the accounting practices in the financial and management accounting, audit, and taxation. Many companies that have implemented the ERP in their work started to use the sophisticated accounting methods (for instance, the ABC method, the analysis of financial results, budgeting, and other) (Chowdhury, 2011). In addition, this technology makes it possible to calculate the profit and, in general, analyse the firms profitability.

It is worth mentioning that the ABC method has allowed companies to show better results in terms of the targeted cost and other variables (Daoud & Triki, 2013). Further, the indicators of the balanced scorecard were higher in the organizations that started utilizing the ERP technology. Therefore, the AIS uses several accounting practices, in particular, the financial management and management control. Apart from that, the AIS has some of the characteristics attributed to financial information, which is obtained by the data information systems (for example, timeliness, integration, and aggregation).

The accounting information systems shall not be limited to the classical orientation as they can be applied more broadly. The frame shall comprise of the non-fiscal arrangements that are beyond the scope of the companys internal processes. However, it should be ensured that the probability of the upcoming events is anticipated. Among other things, the accounting information system should provide the timely data in real time.

It should also allow the data about the most crucial happenings and provide the prompt feedback. The next point is that the quality control system should presuppose the technical characteristics and should be flexible, easy to use, reliable, and integrated (Daoud & Triki, 2013). The fineness of the data in the accounting proceedings facilitates the decrease in time and periodicity of fiscal reporting (monthly, quarterly and annual financial statements) as well.

Accordingly, the complex integrated AIS improves the accounting performance and practices of the organization. It should be mentioned that an ERP system is a reliable and convenient source of information for the majority of the accounting methods (Ray, 2011). The accounting information should be useful for managers since it enables them to react and reflect quickly to the changes in the environment and to the market requirements. In this sense, the more relevant data is obtained from the system, the better assistance it provides for the determination of the operational reserves.

Information for Adopting Theoretical Foundation in the Study

Generalizing, the research is based on the two levels, which are both theoretical and practical. Theoretically, it is an effort to elucidate corporate performance from the AIS point of view putting it into the ERP context (Daoud & Triki, 2013). The authors represent accounting practices as a feature of the AIS to the model of Delone and McLean.

Practical part consists of study, which examines a moderating effect caused by accounting staff competency. It is mentioned that the top management commitment coupled with the external expertise are the key factors in determining the AIS. Continuing the managerial aspect, the authors claim that managers must support and pay close attention to the usage of the latest technologies in order to succeed in the AIS (Daoud & Triki, 2013). The research also suggests that in order to overcome the lack of the AIS, the external technical expert with the technical expertise is needed. Furthermore, the authors state that the accounting department personnel will require preparation on the renewed IT systems.

Important Hypotheses Proposed by the Authors

The authors put forward a number of hypotheses allowing the in-depth research on the issue. The first hypothesis is that the quality of the information obtained from AIS will affect the accounting practices. The introduction of the contemporary multi-functional information technology, such as ERP, implies changes in the accounting management practices (Hurt, 2015). In this regard, the technical support of this technology is perceived as the capabilities of all of its designed specifications (Daoud & Triki, 2013).

The second hypothesis suggests that ERP quality control system affects the accounting practice utilized in the firm. This hypothesis dwells upon the informational influence of the factors on the contingency, upon the impact of the external examination of the quality of AIS, as well as upon the external examination of the quality of the information.

The next assumption is concerned with the level of the outside competence, which influences the relevance of the data offered by the AIS. It is worth noting that the system provider is one of the key factors in maintaining the quality system. Good external expertise will allow achieving the organizational goals faster. In addition, the authors hypothesize that the quality of the external expertise affects the quality of the ERP system.

They argue that an external expert can contribute to the introduction of the changes, and can provoke the application of the new accounting methods (Daoud & Triki, 2013). In addition, they suggest that the quality of the external expertise defines the usage of the specific accounting practices. A poor understanding of the financial information will not allow the firms managers of the AIS to harmonize the information requirements with its technical capabilities (Romney & Steinbart, 2015).

Another point is the level of the dedication of the managers to the ERP application and its impact on the reliability of the data provided by the system. It is assumed that senior management commitment corresponds to the easiness of the AIS utilization. In the same manner, the intensity of the dedication of the top managers to the system application has a positive impact on the capacity of the ERP system.

Among the other things, the authors suggest that the managements commitment to the implementation of the ERP project is important for the use of the accounting practices. In this case, the impact of the information system of the accounting and the performance are examined. The authors explore a statistically significant link between the accounting practices and companys efficiency (Daoud & Triki, 2013). Higher efficiency will be expressed in the autonomy, an increase in the turnover, and a reduction in the costs. The authors also emphasize the influence of this aspect on the business processes that, in turn, affect the business performance. It is obvious that the technology will affect the strategy of the adoption of accounting and it may consequently result in higher performance.

It is likely that the timely and dense information assists managers in considering the lucrative possibilities and enhancing the operational capacities. The extensive frequent forecasting and information support the activities of companies operating in a competitive and volatile environment. Information offered by the system allows managers to have a better idea of the work of each department within the organization.

Thus, this information can be employed to determine the required enhancements and to help seize the market potential. Moreover, the next hypothesis is concerned with the quality of the information available to the AIS and their impact on the firms performance (Daoud & Triki, 2013). The ease of the technology usage is one of the major aspects of the ERP system quality. It goes without saying that it affects the performance improvement.

Another hypothesis expresses the idea that the ERP system of the quality control has an impact on the companys performance with respect to the interaction between the AIS, the competence of personnel, and the activities of the organization (Daoud & Triki, 2013).

The knowledge and skills of the staff are the crucial agents in the advancement of the AIS. The employees are to perform a variety of tasks in the accounting sphere; their responsibilities include the financial and information systems organization. The required skills will give these professionals an ability to control the operation of the AIS, and, subsequently, affect the performance of the organization (Valverde, 2012). Finally, the relationship between AIS and business performance is crucial; the more competent the accounting staff is, the more effectively the organization will function.

In conclusion, the association of the accounting information systems and the ERP technology was inevitable and is obvious while most of the modern companies strive for improving their performance through the enhanced technological systems. Evidently, the combination of the systems provides benefits to the companies and facilitates support for their processes. The performance of a firm is highly related to its organizational and environmental peculiarities, and the integrated system provides companies with the holistic assistance in terms of these aspects.

References

Chowdhury, S. (2011). AIS in MBL. Saarbrücken, Germany: LAP Lambert Academic Publishing.

Daoud, H., & Triki, M. (2013). Accounting information systems in an ERP environment and Tunisian firm performance. The International Journal of Digital Accounting Research, 13, 135.

Hurt, R. (2015). Accounting information systems. New York, NY: McGraw-Hill Education.

Ray, R. (2011). Enterprise resource planning. New York, NY: McGraw-Hill Education.

Romney, M., & Steinbart, P. (2015). Accounting information systems. New York, NY: Pearson Education Limited.

Valverde, R. (2012). Information systems reengineering for modern business systems. Derry Township, PA: IGI Global.

Introduction

While applying for a job, a person should consider all the merits and drawbacks of the future profession. Thus, it is necessary to find out the jobs perspectives for further promotion. Then, one should study the salary rates and benefits packages. An applicant should be aware of the degree required for that job. Finally, the job must conform to the type of the applicants personality. Personally, my goal is to become an accountant since it fits my psychological type of personality. To be more confident in my choice, I consider it reasonable to compare accounting and marketing since these professions have much in common.

Main body

First, it is necessary to consider the jobs outlook. Many experts think that the accounting profession is one of the most effective routes to the peak of cooperation (Gaylord 46). In accordance with a governmental forecast made ten years ago, the accountant will be in high demand nowadays. Moreover, due to the dramatic development of adaptable accounting systems the role of accountants lies not in providing figures but in analyzing the financial data (Goldberg105). As for marketing, it offers excellent career opportunities in numerous domains such as professional selling, advertising, marketing research and product management. The marketing profession is also in demand in non-business organizations like hospitals, museums, and even social agencies (Lamb 14). As it can be seen, the job prospects are great both for marketing and for accounting.

Each profession requires a proper education and experience. However, there are people who successfully perform the accounting operations without being certified. That is why, for a non-certified person, a traditional four-year degree would be sufficient. Becoming a certified public accountant demands a higher education accomplishment. To be more exact, the core knowledge of a diligent accountant should include Financial and Management Accounting, Auditing and Taxation, Informational Technology and Business Finance. Moreover, the acquaintance with Law and Economics is also of paramount importance. A considerable emphasis is made on the study of information technology since an accountant has a direct connection with the finance data processing that is carried out by means of computer technologies (Elliot 781). Unlike accounting, the minimum requirement for the marketing profession is a masters degree. To increase the possibility of access to more respectable positions in marketing, it is obligatory to get the masters degree. Bachelor degree holders may face a serious competition (The United States Department 176). On a whole, accounting demands a lower educational level.

Finally, while choosing a profession the salary is also of great significance. Hence, according to the U.S. Bureau of Labor Statistics, in 2002 the average annual salary of accountants was $47,000. In addition, the holders of the bachelors degree get $40,000 per year, while people with complete higher education have $43,000 annually. It is should be also mentioned that the salary fluctuations greatly depend on the place of work since higher salaries are typical of larger cities (Alba et al. 79). Salaries for experienced marketers, however, may vary from $ 50,000 to $80,000. Marketing managers salaries are not so attractive as it was several years ago but still they are rather competitive (WetFeet 51). Although marketers have more respectable salaries than accountants do, still the salaries of accountants tend to be steadier.

Conclusion

After comparing the two professions, I have been assured that both careers open brilliant opportunities for promotion. However, I am still assured that accounting is exactly what I wanted. The fact that accounting mostly deals with figures but not with people fits me perfectly since I am a very introverted person. Moreover, marketing consists of a direct communication with customers and, therefore, that does meet my requirements.

Works Cited

Alba, Jason, Barthija, Manisha Thornton, Matthew. Vault Career Guide to Accounting. US: Vault Inc., 2005.

Elliot, Barry & Elliot, Jamie. Financial Accounting and Reporting. England: Pearson Education Limited, 2006.

Gaylord, Gloria. Careers in Accounting US: McGraw-Hill Professional, 1997.

Goldberg, Jan. Great Jobs for Accounting Majors US: McGraw-Hill Professional, 2005.

Lamb, Charles W., Hair, Joseph F., McDaniel, Essentials of Marketing. US: Cengage Learning, 2008.

The United States Department. Occupational Outlook Handbook 2006-2007 Edition US: McGraw-Hill Professional, 2006.

WetFeet Careers in Marketing US: WetFeet, Inc, 2008.

This study analyzes and compares the rule- and principle-based accounting systems used by Apple and Samsung, two of the worlds top consumer electronics manufacturers. Even though the two international corporations operate in the same industry, they follow distinct accounting procedures. Apple utilizes the Generally Accepted Accounting Principles (GAAP) model, whereas Samsung adopts the International Financial Reporting Standards (IFRS) framework (Apple Inc., 2021). The information presented in this study demonstrates that the two systems have the same goal: to maximize shareholder value while fostering accountability in preparing financial statements. In contrast to IFRS, the GAAP approach has a greater level of required conformity. Compared to Samsungs principle-based structure, the rule-based model assumes a greater level of compliance for Apples financial reporting.

In order for a firm to operate successfully, financial performance is highly critical. Consequently, a well-developed financial report might assist managers or investors in comprehending their goals and tracking their progress toward achieving them. Researchers have recently stressed the necessity to understand the methodology used to create solid financial reports in order to make wise investment decisions and compare corporate performance based on the significance of financial reporting to business success and investor relations.

The argument between adopting the principle-based and rule-based accounting models lies at the heart of these arguments. The rule-based framework specifies a series of steps businesses must take while creating financial reports. Contrarily, the principle-based framework stipulates a list of controls or actions with which companies must comply to meet their accounting goals (Camfferman & Detzen 2018). When comparing company performance on a regular basis, adopting the concept and rule-based standards of financial reporting have been a point of disagreement in practice (Persson, Radcliffe & Stein 2018; Camfferman & Detzen 2018). As a result, the focus of recent talks has been on finding the optimum financial reporting model to apply globally in assessing business performance for massive multinationals operating in several jurisdictions.

By contrasting and analyzing how the rule-based and principle-based models of accounting are used in the consumer electronics sector, this research contributes to the argument. This is one of the most vibrant tenets of the technology sector, which has fueled expansion in many e-commerce industries. The creation of new devices by two top corporations, Samsung and Apple, has been at the center of the revolution. South Korean firm Samsung is situated in Seoul and produces consumer electronics (Apple Inc., 2021). Its mission is to improve the world by bringing richer digital experiences to life through cutting-edge goods and technology (Samsung Inc. 2019, p. 1). Apple, in contrast, is a California-based American business. To deliver the best user experience to consumers through new hardware, software, and services, according to their vision statement (MSA 2019, p. 1). Due to their shared market niches and operations in the same sector, Samsung and Apple are established rivals. Although Samsung has a larger market share (24%) than Apple, which has a smaller market share (27%) (Mourdoukoutas 2018), Apples market value is more crucial.

Due to Apples reliance on the GAAP model and Samsungs usage of the IFRS system, the two companies have different accounting methods. The latter is equivalent to the principle-based approach to accounting, whereas GAAP is associated with a framework that is based on rules. Key portions of this research will compare and contrast the two accounting systems and demonstrate how the two businesses mentioned above have used them to raise shareholder value and strengthen investor relations. However, it is crucial to comprehend the similarities and differences between the two financial reporting systems before getting into the specifics of this research.

The two primary forms of accounting standards implemented by various nations worldwide are GAAP and IFSR, as previously mentioned. While GAAP is associated with the principle-based framework, the latter is a synonym for the principle-based accounting system. The majority of US-based businesses, including Apple, adopt the GAAP methodology, whereas Samsung uses the IFSR methodology (Rampulla 2018; Samsung Electronics Co., Ltd. and its subsidiaries, 2021). The two systems goals are comparable since they both work to encourage responsibility in the creation of financial statements. This similarity may be seen in how they both handle inventories.

For instance, both approaches permit the use of the first-in-first-out (FIFO) inventory management strategy to increase shareholder value (Camfferman & Detzen 2018). Similarly, they both permit the use of the weighted average cost approach to reduce operating expenses and inventory items that are not needed. Both accounting systems enhance shareholder value by increasing the quality and openness of the information in financial reporting.

The incentive theory, which postulates peoples inclination to embrace rewarding acts and reject those that have adverse effects, might account for this commonality. Therefore, businesses utilize rule-based and principle-based accounting systems to promote shareholder value as the ultimate reward, regardless of the accounting style they use. The GAAP framework mandates rigorous adherence to the same standards, but the IFRS model requests less data about a firms financial performance (Camfferman & Detzen 2018). The degree of latitude provided to businesses to accomplish their accounting goals is the cause of this variation.

Companies are allowed to pursue their accounting goals under the principle-based model, but the GAAP framework is rigid. The rule-based approach, for instance, mandates that businesses produce a statement of comprehensive income. However, as its supporters do not view this index as a significant indicator of financial success, this need is not necessarily valid for the IFRS. In contrast, Samsung adopts the IFSR standard to encourage consistency and transparency while creating financial statements. Its processes were developed to comprehend a companys financial performance and empower investors to make wise monetary judgments in light of a thorough data assessmentThe fact that Samsungs IFRS approach is principle-based rather than rule-based makes it different from Apples GAAP methodology.

When Apple and Samsung use separate accounting software, it brings up differences in financial reporting requirements that are predicated on how both businesses have consolidated their financial accounts. For instance, Apples GAAP promotes a risk-reward system, whereas Samsungs IFRS accounting structure is focused on a control approach (Camfferman & Detzen 2018). Because of this, several businesses that were emphasized in Apples income statement were not included in Samsungs statement of operations. For instance, Samsungs income statement does not separate special items, whereas Apples income statement does, and this item is noted below the net income (Market Watch 2019a; Market Watch 2019b). According to the conclusions of this study, Apple and Samsung use various accounting systems, which provide them with differing degrees of regulatory compliance and financial reporting independence. These two systems differ in mechanism, method of fixation and recording, as well as regulatory features.

In this context, certain recommendations can be derived, because based on the above information, it can be understood that any regulatory measures will greatly affect the immediate profits of the company. The same will affect the cost of raw materials, organizational and marketing costs, as well as the salaries of employees. In this case, we can recommend a local adaptive strategy for the implementation of methods from both systems. As well as an analysis of market conditions in the search for the most appropriate accounting and regulation practices. Apple has fewer options to modify its financial reporting requirements thanks to the GAAP framework. However, Samsung has greater latitude to do this as long as it follows the IFRS frameworks guiding principles. Nonetheless, the evidence provided in this report shows that the direction and rule-based systems are similar in their objectives because they strive to promote accountability in the development of financial statements.

References

Apple Inc. (2021). Condensed consolidated statements of operations (unaudited). Web.

Samsung Electronics Co., Ltd. and its subsidiaries. (2021). Consolidated statements of profit or loss. Samsung Electronics Co. Web.

Camfferman, K & Detzen, D. (2018). Forging accounting principles in France, Germany, Japan, and China: a comparative review. Accounting History, 23(4), 448-486.

Market Watc. (2019a). Apple Inc. MarketWatch.com. Web.

Market Watch. (2019b). Samsung Electronics Co. Ltd. MarketWatch.com. Web.

Mourdoukoutas, P. (2018). Samsung beats Apple in the global smartphone market as Chinese brands close in. Forbes. Web.

Msa. (2020). Apple Mission Statement 2020: Apple Mission & Vision Analysis. MissionStatement.com. Web.

Persson, ME, Radcliffe, VS & Stein, M. (2018). Elmer G Beamer and the American Institute of Certified Public Accountants: the pursuit of a cognitive standard for the accounting profession. Accounting History, 23(1), 71-92.

Rampulla, R. (2018). Common U.S. GAAP issues facing CPAS. John Wiley & Sons, London.

Samsung Inc. (2019). Vision 2020. Samsung.com. Web.

Executive summary

This report provides valuable information on management accounting in detail and explores various aspects of this concept. The analysis of management accounting in the body section of this report is divided into five sections with each section describing a crucial aspect of management accounting. The first section enables an understanding of management accounting in general and describes different management accounting systems. The second part analyzes the various methods used for management accounting reporting while the third section focuses on the benefits of management accounting systems and their advantages within the organizational context. The fourth section explains how management accounting systems and management accounting reporting are integrated within organizational processes. The fifth section of the body is an analysis of two planning tools used in management accounting. The last part of this report provides a conclusion of the contents and recommendations on management accounting.

Introduction

Management accounting or managerial accounting refers to the process of identifying, collecting, and analyzing both financial and non-financial data within an organization that aids in internal decision-making. Management accounting varies from financial accounting as the latter focuses on financial information analysis and is guided by fiscal policy and government standards (Weetman, 2019). Management accounting is only used by the management team for various purposes within the organization and is not disclosed to people or organizations outside management.

There are various management accounting systems and their requirements vary as detailed below. Product costing and valuation is a managerial accounting system that focuses on determining the costs involved in the production of goods and services (Weetman, 2019). A breakdown of costs into subcategories such as variable, fixed, direct, and indirect costs is crucial for this system. Managerial accountants calculate the overhead costs associated with a certain product to ascertain the expenses incurred. A crucial aspect of the product costing and valuation system is marginal costing that aids in the valuation of goods.

Cash flow analysis is another method of management accounting that enables the determination of the impact of business decisions on cash. A managerial accountant focuses on the impact of a specific decision on cash inflow or outflow in the business in this system (Reza, Kusumaningrum, and Edi, 2017). Inventory turnover analysis is vital and is essentially the calculation of how often an organization has sold and replaced inventory within a given period (Amanda, 2019). A management accountant seeks to particularly establish the carrying cost of inventory, the expense of unsold items on the company.

Constraint analysis seeks to establish existing constraints within a production line or sales process (Amanda, 2019). This method is specific to either of the mentioned components. When a management accountant focuses on challenges within the production line, they may identify difficulties that are responsible for diminished profits and increased losses within the company. Challenges within the sales process may vary from difficulties related to the company or difficulties that are specific to the clients.

Financial leverage metrics is another method of management accounting that refers to a business entitys use of borrowed capital. The borrowed capital can be invested in acquiring additional assets or increasing return on investment (Amanda, 2019). This system includes a balance sheet analysis that can offer valuable insights into company debt and equity. Performance measures that are relevant in this case include return on equity, debt to equity, and return on invested capital.

Accounts receivable (AR) management is an additional method of management accounting and affects a firms bottom line. It enables a companys management to decide on whether a certain customer is becoming a credit risk (Amanda, 2019). This method focuses on how long a client takes to pay their debt and it is classified based on time. Grouping different clients on this basis enable decisions on which clients the company should consider dropping. Budgeting, trend analysis, and forecasting is the final method of management accounting that will be analyzed in this report. Deviations from budgetary plans indicate flaws within the plans made by the company. An analysis of trends enables the prediction of future business possibilities while forecasting enables the setting of targets.

Methods Used for Management Accounting Reporting

Management accounting reporting methods vary based on the nature of the management accounting method initially applied and the intended purposes. Budgeting reports analyze past expenditures within an organization and seek to establish whether the past expenditures were in tandem with intended targets (Maheshwari, Maheshwari, and Maheshwari, 2021). Budget reports also carry out forecasts of future budgets to enable efficient planning within an organization. Accounts receivable aging reports deal with credits and customer creditworthiness within the organization.

Proper segregation of customers based on how long they take to pay their debts is the purpose of this report (Madhuri, 2020). The accounts receivable method classifies them in different categories such as those that pay in 30 days, those that pay in two months, and those that pay in three months. This classification enables a company to eliminate customers who are not creditworthy from their books and retain those who pay in desired time.

Job costs report provides an analysis of how much a project costs the organization. This report focuses on areas within a report that are ridden with wastes and enables the company to channel the excesses elsewhere while finding ways of reducing wastage (Madhuri, 2020). These reports may analyze a project upon completion or while it is in progress. A job cost report while a project or business venture is in progress ensures that the profitability, cost, and expenses of a venture are known beforehand.

Inventory and manufacturing reports are for companies involved in the manufacturing business to ensure efficiency in their business processes (Fay and Kazantsev, 2018). Labor cost, per unit overhead cost, and wastage are the most vital components of such a report and enable the managers to make comparisons between different assembly lines. The comparisons ensure management can make decisions on areas that require improvements within the manufacturing sector.

Performance reports contain information on calculated differences between actual results and budgeted performances. The performance report enables management to gauge the effectiveness of their plan for different employees and the business in general (Karevold, 2021). It enables management to identify prior errors and chart mitigation measures that ensure such errors do not occur in the future. Order information reports are additional reports for management accounting that provide vital information on orders made by customers. These reports gauge the effectiveness of ordering and delivery within the business.

The efficiency of the staff in meeting client demands can also be gauged by this type of report. It enables management to come up with measures that reduce the cost of placing orders and the management of these orders. Opportunity reports or a business situation report inform management of a particular event (Schaltegger, 2020). It enables management to understand occurrences within the business and make relevant decisions on the same. Situation reports are regularly made within an organization and are prompted by recent developments within the company that make their preparation crucial.

Benefits of Management Accounting Systems and Application within an Organization

Management accounting systems apply to companies and confer many benefits to the organizations that use them. Management systems are essential during the planning phase as plans are made based on sound information (Erokhin et al., 2019). Planning involves vital aspects such as budgeting. Planning how a company will utilize its funds is essential in guaranteeing long-term success. Planning also enables companies to effectively mitigate unprecedented challenges in operations.

Management accounting systems also offer grounds for efficient control of various operations within an organization (Pavia, 2019). Progress in various facets of a business can be measured and compared to a set standard that is anticipated. Various aspects such as production and sales can be assessed and evaluated based on these standards, ensuring profitability. Management accounting also enables better service delivery to customers hence ultimate customer satisfaction (Cuzdriorean, 2017). Better customer service is informed by adequate investigations into the internal running of the company. Recognizing flaws in customer service or quality of goods spurs reforms within the company that are geared towards the improvement of service delivery.

Management accounting also enables better organization within a company as the authority and jurisdiction of various managers within the company are set. Better organization by employees who clearly understand and adhere to their responsibilities ultimately ensures successful operations and success in business (Joseph and Wayne, 2020). Management accounting eases coordination within a company and ensures each department within a company is integrated into achieving departmental goals that eventually cause overall success.

Departmental goals ultimately lead up to greater company goals and coordination must be achieved within an organization. Efficiency is generally boosted within an organization that invests in management accounting (Joseph and Wayne, 2020). This is because avenues of time and resources wastage are identified and addressed. Management comes up with means of ensuring flawless flow in the work process ensuring minimal time wastage and also eliminates wastage of resources. Maximum utilization of time and resources ensures that a company can operate optimally and generate sufficient profits.

Management accounting ensures sufficient motivation within the workplace. Management accounting reports are usually submitted in the form of budget reports or situation reports and so on. These reports usually inform various essential decisions within an organization such as demotion and promotion of employees. These are crucial decisions that influence employee morale for those who are promoted to higher positions (Cuzdriorean, 2017). Those who are demoted are also encouraged to work harder and smarter in a bid to regain their previous positions. Good morale and motivation within a company are grounds for good performance and enhanced productivity.

Management accounting also contributes to better communication within an organization by ensuring the harmonization of information. Management accounting reports ensure that there is an efficient collection of data on the finances and business of a company (Ahmed, Ameen, and Hafez, 2018). Such information is relayed to employees and management in a clear and precise way. The net benefit of the benefits of management accounting listed above is enhanced profits within an organization. A company attains growth in profits and productivity as a result of management accounting. Tools used in management accounting are reliable ensuring unswerving data is provided to management.

Management Accounting Systems and Management Accounting Reporting Integration within Organizational Process

General management of a company and assignment of responsibilities within the organization is affected by management accounting systems. Management accounting reports are a great indicator of duties that should be performed by every member of the workforce (Hilorme et al., 2019). Such decisions are informed by flaws that are identified by performance reports and boundaries set for each employee to ensure effectiveness. Division of labor and specialization are vital aspects of production that are affected my management accounting reports due to the various insights discovered.

Acquisition of assets for organizational growth and assets assignment to various sectors of a business is also affected by management accounting reports. These reports identify the investments that are profitable for a business and encourage increased investment in these ventures (Doktoralina and Apollo, 2019). Additionally, they discourage investment in loss-making ventures, ensuring that a business can minimize wastage. Management accounting reports also identify sectors that are not adequately furnished with resources and enable management to make these decisions that increase allocation. Resource allocation does not necessarily refer to finances as it can also refer to the allocation of human resources to a department based on the reports.

Management is a crucial part of making decisions on employee hiring, demotion, and promotion based on both performance and customer demands. Management reports that indicate the input of various employees and sectors are integrated into the human resource department (Brierley, Gwilliam, and David, 2018). These reports can influence the hiring of additional employees if a business is booming and there is a need for a bigger workforce. The demotion of workers and the promotion of others can be necessitated by levels of customer satisfaction discovered by situation analysis reports.

Long-term decisions on the longevity of a business such as product diversification and stopping the production of a specific product are also affected. Budgeting and forecasting are affected by management accounting reports and these affect long-term business decisions (Ahmed, Ameen, and Hafez, 2018). Financial reports indicate the health of a business and negative finances may encourage management to quit on a product that is causing losses. Losses may also be necessitated by the rigidity of a company to one product and these reports necessitate diversification of production. Trendy products are often profitable at the start but gradually become loss-making ventures. Through management accounting, a company can forecast when that is likely to occur and make decisions that prevent this such as permanent closure.

Prior information of internal stakeholders before meeting external stakeholders and making decisions that mitigate flaws that may affect the external stakeholders is also a role of management accounting. Internal stakeholders essentially run a business but external stakeholders including the various management institutions are also crucial (Ahmetshina, Vagizova, and Kaspina, 2017). When internal management is capable of detecting a flaw within the system in time, they can rectify and evade potentially harmful effects of external stakeholders. This may include data of irregularities that were not previously detected.

Planning Tools in Management Accounting Analysis

Target costing is a management accounting planning tool that involves implementing a common set of tools on cost planning, cost management, and cost control. This method analyzes each stage of the production cycle and identifies costs at each phase of production and improves the technology used for efficiency (Cooper and Slagmulder, 2017). It evaluates techniques of market study, value analysis, reducing diversity, manufacturing technology, and the relationship between suppliers and customers.

Target cost refers to an estimated production cost for a specific product. This value is settled on by management after evaluating the facets mentioned above and aids in evaluating business progress (Ahn, Clermont, and Schwetschke, 2018). The targeted cost incorporates expected profits by the company and competition within the market. Management mostly moves in to control target costing due to their diminished control on the selling profits to ensure profitability.

Target costing is a very effective method of management accounting as it ensures that a business continuously makes profits given this is the primary role of a business. It also improves production technology as management settles for the cheapest and most effective means of production, generally boosting the companys quality of goods (Ahn, Clermont, and Schwetschke, 2018). This tool also reaffirms managements commitment to process improvements and product innovation to gain a competitive advantage. The detrimental effect of target costing may emanate from ruthless management that aims at achieving its target cost regardless of effects on employees (Cooper and Slagmulder, 2017). To minimize cost, management may lay off workers to ensure that minimal human resources are used for a cheap cost. In general, target costing ensures the setting of goals and their achievement by an organization.

Break-even analysis involves computing and probing the margin of safety for a company based on revenues accrued and associated costs. The analysis shows how many sales are made before the cost of doing business is paid (Sintha, 2020). This method is used for corporate budgeting of various projects to ensure they remain profitable. This tool relies on calculations that involve fixed costs and variable costs. The break-even analysis is usually used to ensure that if a scenario where a company does not make profits occurs, the company still doesnt make losses. This point is considered the safe point for a company that ensures it can operate without making losses.

The break-even analysis is an important tool for any business as it ensures budgeting and setting of targets. This means that a business can plan for its available finances and ensure an equalization fund is in place to prevent stalling of projects (Vagner Iryna, 2020). This tool is also crucial for monitoring and controlling costs as the company can make only the products that do not jeopardize its operations. These products can be sold by the company without losses occurring. The company also produces a manageable amount of goods ensuring market saturation does not occur. Having the required amounts of goods in the market ensures that a company can effectively manage competition (Vagner Iryna, 2020). These benefits ensure that the method is very effective in management accounting.

Conclusions and Recommendations

In conclusion, management accounting is a crucial aspect of any business as demonstrated above. Management accounting ensures that the business remains healthy during operations without making catastrophic losses. It is recommended that management accounting be carried out regularly to ensure that flaws within the business are noted and rectified on time. It is also recommended that copies of the management accounting reports be availed to all the staff within the organization. Availing such crucial data ensures that all stakeholders are informed of the state of the company and act in the best interest of the business.

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Automation of Accounting and Control Processes

In the modern business world, automation in accounting and control functions in an organization is characterized by information technology (IT) in business processes. Accounting procedures in a business entity include financial planning, budgeting, financial reporting, payroll management, tax management, auditing, financial forecasting, and financial management (Marshall and Lambert 200). On the other hand, control processes involve the procedures applied by a business organization to ensure the reliability, accuracy, and validity of the third parties’ financial statements. Auditing, assurance, tax management, and compliance with authorities’ regulations represent a firm’s crucial control functions (Nnenna and Amaka 446). The integration of IT in accounting and control procedures through automation presents tremendous benefits to a business corporation from the analysis.

Enhanced accuracy and precision in the preparation and presentation of accounting data and information stand out as a fundamental benefit of automation in its practice. Gotthardt et al. link information entry procedures, such as stock-taking and financial forecasting, with the increase in the incidence of human error, particularly in instances where automation in these procedures is disregarded (93). On the other hand, the use of such innovations as artificial intelligence, including robots in various accounting procedures, triggers significant improvements in the extent of precision and the speed of executing accounting-related tasks (Gotthardt et al. 94). This, in turn, enhances the attainment of quality in various business operations, including the development of balance sheets.

Accounting-related innovations result in an enhanced understanding of its related processes and procedures. For instance, double-entry principles may be complicated to some accountants, especially in the application. However, the use of automation-oriented software linked to the field such as quick books facilitates the ease of applying accounting rules (Linton and Solomon 197). Furthermore, the timely delivery of financial reports and increased efficiency in accounting functions are also among the strategic advantages that result from the automation process through time and cost savings.

There are also enormous benefits that arise from the automation of control processes within a business enterprise. The use of IT in auditing and tax procedures helps facilitate the efficiency of business operations. The purpose of auditing as a control procedure is to ensure that the financial statements generated by the accounting department are reliable and accurate (Laudon and Traver 64). Therefore, the integration of IT into auditing functions contributes to the promptness in transactions’ ascertainment processes and the validation of the accounting and financial information prepared from relevant records. Automated controls facilitate business continuity by ensuring that the financial resources are appropriately utilized and allocated in the required model (Marshall and Lambert 203). Further, the automation in control processes, such as auditing, helps access investment funds since venture capitalists rely on audit reports during decision-making about investment options.

Although automation in accounting and control procedures generates significant benefits in terms of quality and operational efficiency, it is imperative to consider some of the challenges that result from the above-mentioned approach. One primary drawback is that this process requires a company to invest considerable financial resources in its implementation and maintenance; this, in turn, renders it costly (Gotthardt et al. 96). Automation of accounting processes may lead to job redundancy and the limitation of human effort in executing accounting and control functions. This, consequently, results in significant layoffs and the loss of jobs. Furthermore, the drawbacks presented by the possible risks of fraud and hacking within an IT environment extend to the automated processes (Laudon and Traver, 33). This, subsequently, limits its degree of reliability in the preparation of financial and accounting reports within an entity if fraud or hacking occurs.

Automated Monitoring of Operational Systems

The aspect of automation in monitoring operational systems is crucial and beneficial in enhancing operational efficiency in an organization’s procedures. Managers in a business organization often track the functioning of a company’s processes to achieve the entity’s goals and aspirations (Marshall and Lambert 201). The implementation of automated monitoring technology within the function of operating systems present key advantages and efficiencies to a company’s processes.

Operational systems are essential in business continuity; they enable management executives in pertinent departments to complete the structure of business activities while effectively monitoring the loopholes in productivity points. The adoption of automation technology in the monitoring functions saves on time as well as financial resources. Automated monitoring of operational systems presents the benefit of efficiency in business-process operations, which positively affects an enterprise’s profitability. For instance, control and monitoring systems within the production unit enhance the employees’ capacities to manage and keep track of the manufacturing systems and plants. Before being applied in the company’s operations, these technologies are usually configured. Furthermore, the customization of the structure and topology of pertinent production plants and data regarding the production process components’ outgoing and incoming interfaces must be done to enhance operational efficiencies. Process control images may also be integrated to facilitate the visualization of the organization’s production activities.

Such innovations as the computer-aided engineering exchange (CAEX) foster the standardized or syntactical computerized storage of planning information, facilitate the storage of uncompleted planning phases, and support object-derived conceptions. Its meta-modeling strategies typically simplify the development of systematic information exchange (Al-wswasi et al. 820). The above-mentioned innovation delineates its model structures, and during data dissemination, CAEX libraries can be transmitted to other systems along with its pertinent data. CAEX has been associated with significant reductions in manufacturing complexities due to its ability to export semantic and structural data from the CAEX libraries and interpret the data received.

Works Cited

Al-wswasi, Mazin, et al. “A Survey on Smart Automated Computer-Aided Process Planning (ACAPP) Techniques.”International Journal of Advanced Manufacturing Technology, vol. 97, 2018, pp. 809-832. SpringerLink. Web.

Gotthardt, Max, et al. “Current State and Challenges in the Implementation of Smart Robotic Process Automation in Accounting and Auditing.”ACRN Journal of Finance and Risk Perspectives, vol. 9, 2020, pp. 90-102. ResearchGate. Web.

Laudon, Kenneth, and Carol, Traver. E-commerce: Business, Technology, and Society. 12^th ed., Pearson, 2016.

Linton, Jonathan D., and George Solomon. “Technology, Innovation, Entrepreneurship, and Small Business: Technology and Innovation in Small Business.”Journal of Small Business Management, vol. 55, no. 2, 2019, pp. 196-199. Taylor and Francis Online. Web.

Marshall, Thomas, and Sherwood, Lambert. “Cloud-based Intelligent Accounting Applications: Accounting-Task-Automation Using IBM Watson Cognitive Computing.” Journal of Emerging Technologies in Accounting, vol. 15, no. 1, 2018, pp. 199-215. Taylor and Francis Online. Web.

Nnenna, Chukwuani, and Egiyi, Amaka. “Automation of Accounting Processes: Impact of Artificial Intelligence.”International Journal of Research and Innovation in Social Science, vol. 4, no. 8, 2020, pp. 444-449. ResearchGate. Web.