The role of Management Accounting and its challenges Essay

Section A:

Identify and discourse challenges that may be encountered, and explain briefly the effects of the challenges on the functions of Management Accounting maps in today’s organisation.

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Management accounting is concerned with the procurance of information to persons within organisation to assist them do better determination and heighten the effectivity and adequateness of bing operations. It allows more flexibleness than fiscal accounting but besides includes extra challenges which are competitory environment, obsolescence of traditional cost accounting and altering merchandise life rhythms, impacts of information engineering ( IT ) and client orientation.

Nowadays, concern environment is altering faster than of all time before, and the companies ‘ success in the market depends on the timely ownership of quality information. Harmonizing to Carmen, competitory direction accounting is an particularly of import to direction accounting beginning of information for geting competitory benefit, and is the drawn-out arm of strategic direction accounting. The largest challenge for directors in the modern-day concern environment seems to be roll uping the information on nowadays and possible competition to keep the company ‘s competitory place and find the scheme aimed at heightening future fight. ( MaliniA‡ , JovanoviA‡ , & A ; JankoviA‡ , 2012 ) With its competitory information, direction accounting enables the organisation to grok and acknowledge the betterment or gross revenues scheme of the competition. However, in order for competitory direction accounting to run into the demands of organisations, it is of import to cognize what it is that thrusts rivalry, and what impact it has on concern operations. ( MaliniA‡ , JovanoviA‡ , & A ; JankoviA‡ , 2012 )

The obsolescence of the traditional cost accounting may be encountered as a challenge in today’s organisation. Harmonizing to Carmen, cost control is an efficient manner to decrease the cost of those activities which do non convey the expected consequence and it is non merely curtailing them. Traditional cost accounting heeds the tracing of direct disbursals on cost object and an overhead costs allotment. It has a inclination to concentrate merely on production costs, non paying attending to jump costs. ( Carmen, N.D. ) It is utile attack every bit long as the indirect disbursals sum is diminished. Today, the indirect costs increased, the chief disbursals which can be traced without evasion on cost object are possibly the natural stuff costs. ( Carmen, N.D. ) Harmonizing to Carmen, the attempts made for taking those costs which don’t increase the value to the merchandise or service ought to be oriented to the full value concatenation, which can back up directors to separate the chances for cost decrease. On the other manus, more market contributes to the merchandise distinction to run into the consumer demands. The altering merchandise life rhythm will look in the organisation. The merchandises or services diverseness, every bit good as the clients, can immediate to the complexness growing of the operations. A successful organisation must now rush up the rate at which they introduce new merchandises to the market. Harmonizing to Carmen, developing competition in all countries has brought to the reduction of projects consequence. In these status ( the demand and manufactured merchandises diverseness, lessening of merchandise life-cycle, betterment of support activities, the development of operating expense cost importance etc. ) the cost decided through traditional cost accounting confirm itself sensible merely in endeavor with a comparatively moderately production system, which manufacture a little figure of merchandises and direct cost have an of import sum.

The following challenge will confront is impacts of information engineering ( IT ) . Information Technology is a powerful tools that immense influence in doing an organization’s concern a successful. We can see the impact of the engineering in many concern countries such as exchanging, distributed, entering and many more. Connor & A ; Martinsons ( 2006 ) commented that information engineering is a cherished aid because they provide information for doing determination. ( Moorthy, Voon, Samsuri, Gopalan, & A ; Yew, 2012 ) Micheal Gilman ( 2003 ) discussed informations excavation engineering and the importance of IT in supplying higher efficiency ensuing in improved concern determinations. ( Moorthy, Voon, Samsuri, Gopalan, & A ; Yew, 2012 ) Harmonizing to Moorthy et al. , 2012, application of IT in direction accounting has changed the position of traditional direction accounting but it besides face the deficiency of consciousness and apprehension of engineering available and suited based on organisation to be adapted in direction accounting. Besides, the impact of the cyberspace was develops e-commerce and impart to the alteration of fiscal model, markets, consumers’ cleavage and behavior and employment market. ( Carmen, N.D. ) Peter Drucker thinks that “in clip, the e-commerce will kill the traditional transnational companies” ( Druker, 2004, p.65 ) , because it is of import to reorganise these organisations, wholly different than it is now. ( Carmen, N.D. ) Harmonizing to Moorthy et al. , 2012, the chief consequence of IT is organization’s net incomes but the execution of new engineerings may cut down organization’s income, as the execution is dearly-won depending on the engineering adopted. There is a hazard to the organisations that if unequal engineering is chosen. However, direction and comptrollers have to analyze the achievability and the utility of the model before the use of IT in direction accounting.

Last but non least, direction accounting probably faced client orientation. In modern-day market economic system, the accomplishment of an organisation depends fundamentally on its capacity to bring forth merchandises and services that meet the demands and desires of consumers and to execute it better and more adequately than rival. ( MaliniA‡ , JovanoviA‡ , & A ; JankoviA‡ , 2012 ) Harmonizing to Carmen, all the organisations are moving on the market, the topographic point where all the exchanges are deployed and their fight is appraised. The market is the topographic point where the consumers’ wants and producer’s want will run into. Organization must comprehend that clients are important to their future accomplishment. This has resulted in the organisations doing client satisfaction an overruling precedence and to concentrate on acknowledging and accomplishing the cardinal success factors that are of import to be successful in today’s competitory environment.

Carmen, A. A. ( N.D. ) . Challenges of a dynamic and compex environment on direction accounting.Annalss of Universty of Oradea, Economic Science Series.

MaliniA‡ , S. , JovanoviA‡ , D. , & A ; JankoviA‡ , M. ( 2012 ) . Competitive Management Accounting – Responses to the Challenge of Strategic Business Decision Making.Economicss and Organization Vol. 9, No 3, 297-309.

Moorthy, M. K. , Voon, O. O. , Samsuri, A. S. , Gopalan, M. , & A ; Yew, K.-T. ( 2012 ) . Application of Information Technology in Management Accounting Decision Making.International Jornal of Academic Research in Business and Social Science, Vol. 2, No. 3, 1-14.

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