Management Accounting Theory

Analysis on Management Accounting Theory

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Introduction To Management Accounting

Management accounting is tool of business in calculating day to day operations of business. It is the provision of financial data and advice to company for use in the organisation and development of company. In this report a journal published "Management Accounting as a practice" by Thomas Ahrens and Christopher S. Chapman has been discussed. A critical Analysis has made of the selected article published in accounting journal. Its analysis and critic is included. Strength and weakness. Implications of Accounting profession, Relevance of the unit and financial accounting theory have concluded.

Summery Of Article

This article is all about "management accounting as practice" written by Thomas Ahrens and Christopher S. Chapman in Accounting Organisation and society at sciencedirect.com on 2007. In this article distinctive theory approaches have been taken to understand role of management in organisation is explained. Various management theories and principals have been made by various authors and journals and books.

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Objectives of the organisation and learning for organisation structure of restaurant is guided to employees and directors of restaurant so as proper implementation of management accounting can be understood (Bonin, 2013). This article stats that historical and contemporary studies of accounting have shed lights on diverse way in which accounting has been and is being implicated.

Accounting and organisational objectives are interdependent in the sense that objectives are are influenced by knowledge of potential accounting. Contingency theory have discussed and it shows analysis of fit between context and accounting are supported through questionnaires that collect the aggregate information about organisation and subsystems. The idea of social order and as a direct outcome of activities is not now in the accounting literature and has given a various specific notions of practice. In particular government studies have developed a complex practice of accounting raised from historical systematic study of power of knowledge.

Accounting remained a potential in more generally all organisation practice were described as successive design of policies, system and architecture that sought to act upon organisational members who were mare user and their activities were never described. Actor Networking theory (ANT) have been summarised that explains that ANT sought to replace notations of social structure entities and level etc. with the concept of heterogeneous network of human and non human.

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The studies have given support to those who drew notion of cognition in practice to question the idea of transferable skills. Key to understanding cognition in practice is that it is distributed over environment outside of the actor and that element of it take place outside there heads through meaningful interaction between charts, images, gestures, or in relation to this article or management control system. Field study of restaurant has made. Restaurant is one of the largest full service chain restaurant in the UK. Restaurant were wholly owned by company and were run by salaried manager.

Restaurant division has given substantial result of sales return over period of years. This growth has been attend by acquisition of small chains but by addition of new unit. More then 200 restaurant were organised as profit. So this article is all about management theories. Field studies management structure, menu design, management control practice, senior manager practice and discussions have been made regarding restaurant. Management accounting provides an understanding of government accounting that is useful for fund allocation and economic stability effectively (Freeman and et.al., 2014).

Limitations Of Article

As per detailed study, it has been analysed that information provided under article is having various limitations. Various advanced working and concepts in regard to management accounting were not presented in the article. Along with this, by having an application of measures the issues can be resolved in management accounting but in article the proper information is not presented. Language used in the article in not clear which creates an obstacles in understanding. Moreover, information about methods is also not properly presented which impacts the effectiveness of overall article outcomes.

Critical Evaluation On Management Accounting Theory

Strength Of Management Accounting

Management accounting is multidisciplinary approach that is helpful for management of overall business operations and enhancing quality services of organization. In this regard, several tools and techniques are applied for forecasting and decision making for further business activities. Including this, actual performance of entity is presented through analysing financial and non-monetary tools (Rutherford, 2016). However, several ideas are created for adopting changes and improving quality services of firm. Moreover, it is valuable for effectiveness of company and sustaining its good reputation in market for long time periodicity. In accordance to this, management accountant of organization analyses financial performance as per which costing and budgeting is implemented.

Through costing method, price of goods and services to be produced is determined. Similarly, effective price determination leads to prepare income statement for showing off economic structure of restaurant. Along with this, management accountant of organization recognizes performance of employees of the firm and further prepares strategy to increasing their working efficiencies. It encourages them for better quality work and contributing effectively for working in team. Including this, management accounting is helpful for taxation as well making decisions for effective fund and increasing revenue for public welfare (Biondi and et.al., 2013).

Management accounting theories including contingency, agency, market and hierarchies, MAS implications, summary and conclusions and so on are useful to measure organizational behaviour, economic factors and different effects.

Contingency theory - It provides company's technology, environment and managerial process. In this process, internal and external environmental factors as well their impact on organization's performance is created. It presents relationship between entity's environment, structure and technologies for operating business activities. Through using this management accounting theory, proper idea and systematic steps are provided for implementing changes according to fluctuations in environmental factors (Li, 2014). It is related to accepting changes as well improving strategies for better quality services of organization at high level. There are several rules and regulations are determined for getting information and creating plans for better performance at large scale.

Agency theory

Management accounting is related to establishing good relationship among contract parties. Under this system, agreement between agent and principal is presented including risk, incentives, pay off, skills and effort, agents motivation and so on (Miller and Power, 2013). Therefore, for maintaining understanding among workers of restaurant is effective through applying this theory that is valuable for good quality of work. Agency theory is applied for risk preferences, new assumptions about time discounting as well trade-off between intrinsic and extrinsic motivation (Pepper and Gore, 2015). Including this, information are obtained for determining shares of risks and pay-off. Therefore, considerable resistance is obtained though agency theory for maintaining contract between principal and agents.

Market and hierarchies

An important theory of management accounting is termed as market and hierarchies under which rules and regulations for determining prices and allocation of restaurant's labour is presented. In this process, various plans and information are presented related to accountabilities and setting various aspects related to workers' salary and information implications. However, by using market and hierarchies theory of management accounting is useful for solving out problems occurred for labour market. Along with this, different ideas and tools are obtained for labour management as well implementing strategies for better work performance.

Through following on rules and regulations of accounting theory, it is beneficial for making decisions and controlling over uncontrollable variables. In this regard, allocation of resources and fund can be gained efficiently that affects efficiency of restaurant at high level. Management accountant of organization recognizes market value of firm as well incurred expenses and gained revenue impacts on market and hierarchies (Quinn, 2014). Therefore, economic income of net cash flow and change in present market value is determined.

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MAS implications

Above mentioned all three management accounting theories get managed by which trust is build up for selection and socialization. However, overall terms related to organizational structure, environment, contract between principal and agents is created. In this process, MAS is related to controlling over excess of material and funds are monitored effectively. Apart from this, various development and control mechanisms are presented for effectiveness of restaurant (Miller and Power, 2013).

Therefore, planning procedure and decision making tools are applied for better work performance and enhancing quality services at high level. It is interlinked with strategic and risk management is obtained for carrying on entity. It influences good relationship among labours of the organization also remains able for creating structural framework that presents performance of company also appropriate for decision making to operating business activities in future time. It influences overall expansion of enterprise and improves product services that are liable for adequate allocation of resources and fund.

Management accountant of organization implements set strategies according to planning procedure. It is able to create structure of entity to present performance that generates several ideas for effectiveness. In this process, overall business operations are get managed that are useful for labour management and following on rules and regulations agreed for creating contract. However, relationship among all workers can be build up that is interrelated with efficiencies of restaurant. By preparing and implementing strategies, proper management of all business operations can be gained efficiently (Messner, 2016).

Drawbacks of management accounting theory

Wrong interpretation of organization's performance is unable to make decisions for further business operations. In this regard, it is difficult to analyse entire business operations and following on rules and regulations provided in management accounting theories. In this process, lack of coordination among labours of restaurant is unable to encourage them for better services as well uncertain changes in environmental factors are not able to getting adjustment (Beattie and Smith, 2013).

Therefore, it is required for management accountant of organization to analyse all business operations critically on the basis of which different strategies are prepared for better performance as well encouraging workers for improving their skills.

Financial accounting theory

Following on financial accounting theory is beneficial for economic stability and improving profit earning capacity of organization. Under this system, management accountant of entity analyses all economic tools as income statement, balance sheet and different aspects (Fullerton, Kennedy and Widener, 2014). It creates several ideas for financial development that affects entire business operations. In this process, records are also prepared and maintained that affects on organization's performance also able to enhance efficiencies at high level.

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Conclusion

The report is concluded that management accounting theories are essential for following on all rules and regulations related to managing all business operations. In accordance to this, several accounting theories are described including contingency, agency and MAS that is effective for enhancing efficiencies of restaurant. However, ideas and tools are obtained for labour management and implementing quality services of organization at large scale. In addition to this, significance of management accounting theories is presented through this assignment. Moreover, Thomas Ahrens and Christopher S. Chapman views on management accounting as practice is understood that affects on entire business operations' management. Thus, various tools and techniques for management accounting is identified through this report.

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Recommendation

In this regard, it is necessary for management accountant of organization to analyse all business operations critically as well preparing strategies for adequate management. Including this, it will be benefited for effectiveness of organization and accounting practices. However, proper recommendations for effective management and business operations are effective for implementing action plans. In addition to this, preparing and maintain all accounts that presents income and expenditure are useful for accounting standard.

Moreover, it will be liable for organization to prepare strategies and making decision for improving efficiencies and recording all business transactions effectively. In accordance to this, systematic knowledge related to entity's business activities can be recognized that impacts on firm's effectiveness. Thus, preparing and maintain balance of income and expenses should be done in systematic manner so that proper management of all operations can be gained that affects business and marketing strategies at high level. Thus, it is required for management accountant of organization to apply different kinds of theories for recording and reporting data for production and distribution of goods and services are implemented for organization's effectiveness.

References

  • Bonin, H., 2013. Generational accounting: theory and application. Springer Science & Business Media.
  • Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management.
  • Gaffikin, M. and Aitken, M., 2014. The Development of Accounting Theory (RLE accounting profession depends greatly on accounting education to prepare
  • Accounting): Significant Contributors to Accounting Thought in the 20th Century. Routledge.
  • Li, W., 2014. Problems of Fair Value Accounting Theory in Practice. Journal of Hubei Water Resources Technical College.
  • Messner, M., 2016. Does industry matter? How industry context shapes management accounting practice. Management Accounting Research.
 
 
 
 
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