1.0 Executive Summary.
Jane Julius Management consultancy Firm is an firm formed to give a consultancy about management system in order to improve the performance among the organization. This J.J. Management consultancy Firm provide advices on how company can apply new system of Management in order to improve and expand the scope of a company. The organization must consider new idea of improving the existing account system and this has been done after making a research about problem facing the organization. After making a research about how CED Limited company perform their daily activities, Jane Julius Management Consultancy Firm come up with finding and advice to the CED Limited Company Management
The advice or new ideas suggested is for a firm that is CED Limited Company to install what is known as Management Accounting system. Management Accounting System is a system with ability to give CED’s Managers detailed and analysed information which is required in planning and decision making. This report shows benefits of Management A/C System to be applied by CED Limited although it can lead to additional running cost of the organization. But as you can compare merits and demerits of applying Accounting Management System you will realize that it is more advantageous.
2.0. Background Information:
Accounting is a language of business because people in the business world – owners, managers, bankers, stockbrokers, investor all use accounting terms and concepts to describe the resources and the activities of every business. Is a process of recording monetary transactions, classifying it and interpreting the results. Purpose of Accounting is to provide an accurate record of what has happened to a business over a specified period of time. Information delivered helps the owner or the manager to operate the business much more effectively. Accounting is used to facilitate long term and short term decisions through provision of information to those responsible for managing organisation. Accounting is the process of identifying, measuring and communicating information to permit informed judgements and decisions by users of the information.
Branches of Accounting are Financial Accounting, Auditing transaction and Management Accounting. Accounting system provides information which can help to make the allocation of resources in efficient and effective manner. Therefore accounting system can be viewed as accounting information systems (AIS). Accounting information system is a system where by information are collected and recording and analysed in a systematic manner, Analyzing and interpreting the information collected and reporting the information in manner that suits the needs of users. Accounting information system exists in many organizations whether profit making or non-profit making however they vary depending on the nature, size and volume of data to be handled as well as information required by the organization.
Accounting information system can either be manual Accounting information system or computerized information systems. The basic accounting terminologies are event, Assets, Liabilities, Transactions, Account, Ledger, Journal, Posting, Trial Balance, Adjusting Entries, Financial Statements.
Financial Accounting concern with external use and normally it use general purposes statements while management accounting focus at internal users and is specific.
Accounting information system provide an overall picture of financial position and performance by answering the following questions:
How many wealth generated over a particular period, this can be answered through income and Expenditure statement.
What is the accumulated wealth at the end of a particular period through Balance sheet?
What changes in the owners equity have taken place over a particular period (Statement of changes in equity/ funds).
3.0. Brief literature Review:
MANAGEMENT ACCOUNTING SYSTEM.
To manage company efficiently manager should have information about each particular business process and company as whole. Management accounting is required to provide full and trustworthy information necessary for making correct management decision and plans.
The management accounting reflects all actual expenses and revenues of a company, so a top manager can get a clear picture of the company and make reasonable decisions. Management Accounting System solve the management accounting tasks by providing necessary information in a convenient way. Major tasks the system solves are:-
Providing the efficient management tools
Improving the executive discipline control
Improving the labour productivity due to reduction of document circulation time.
Accumulate the information for future use as a knowledge base.
Optimizing the business processes, automating the mechanism of their execution and control.
Formalizing document circulation processes.
System incorporate organizational structure, production management, customer relationship, Revenue/Expenses analysis, reporting and accounting system.
The organization life cycle has a significant impact on a firms Management Accounting system. The system help firm to move on along with the life-cycle. The influence of the live – cycle on Management Accounting has been reported to be especially important of growing firms (Davila 2005, Graulund and Taipaleenmaki 2005. It has also been suggested that the external pressure censed by capitalist drives the development of more organized control the processes and accounting systems especially in start-up and growing high technology oriented firm. Generally, as the firm develops, more complex structure and more sophisticated decision making styles prevail (Miller and Friesen 1983) Davila (2005) uses miller and Friecen’s life cycle model when investigating the adoption of management control system in growing technology oriented firm in Califonia. He reports that the size and age of the firm as live-cycle indicators, the replacement of the founder as CEO and the existence of outside investor are drives of the emergence of management control system.
Management Accounting Systems adopted by the firms is related to venture capital funding (Davik and Foster 2004). Investor require reliable control and reporting systems. (Granland and Taipaleenmaki 2005) Management Accounting and control system are divided into two categories i.e. issues related to budgeting decisions and management controls.
4:0. Findings – Information about the Management Accounting System .
After going through the Audit report CED Ltd for the year to 30 June 2006 the following findings prevailed. The company operates the accounting procedures proper that is it capture all information concerning revenue and expenses. Accounting records kept proper with supporting documents supporting every transaction taking place such as receipt or voucher for money received and that paid out, invoice Bank statements, Journal vouchers, Payment vouchers, Local purchase orders (LPOs), Goods Received Notes. Also book of Accounts such as Bank or cash Book for each bank Account, Petty cash Book, Nominal Ledger Journal Wage book, Asset Register, Stock control book was kept proper. The Audit report confirm that the audit has gone very well this year and the firm is growing well.
The performance of that year was a result of interim audit to words the end of the financial year whereby number of problems pointed out and management took an immediate action to solve the problem. Advice about the management of company is outside the Audit and is not strictly part of auditors’ function. That is if that advice was not made the audit report could be not well. To have a close look at the future the company is advised to install management Accounting system.
5.0. Finding – Relevant information about the topic in question.
What is Management Accounting system.
Is a Accounting system which give internal information of the company to improves managers ability in planning and decision making It gives information like organization’s ability to continue to provide service, organization’s liquidity, financial flexibility, ability to meet obligation and weeds for external financing. It also five information on how the organization’s resources are used in providing various programs or services, how the management have discharged their stewardship responsibilities and other aspects of their performance also it gives details about cash receipts and cash payments of an organization during a financial year. Accounting systems provide the information which can help to make the proper allocation of scarce resources in efficient and effective manner. Therefore accounting system can be viewed as Accounting Information Systems (AIS). It is involved with identifying and capturing relevant information, recording the information collected in a systematic manner, analyzing and interpreting the information collected and reporting the information in the way which suits the need of users. Managers need detailed analysed information and not summary information on the external environment and its unavailability for planning doest not enhance good achievement. Managers do not get the information they need for planning and decision making because these are certain types of information in the organization that should not be diffused across the lie rarely. The availability of internal information improves managers ability in planning and decision making.
To solve the management accounting tasks is to applied management accounting system. This is automated system which make easier to make management decisions, by providing the top managers with necessary information in a convenient way. They business processes, helps executive displine, enables remote work with the information.
Management Accounting system is an intergrated system. The following major modules serve for automating the accounting and management of different company activity facets; Staff/organizational structure management module, Production management module, customer relationship module, Revenue/ Expenses Analysis module, Reporting module and Accounting interfacing module.
Staff/Organizational structure management module
The module reflects the organizational structure in the automated system. Departments, sub-departments, and positions are formed according to the company’s staff list. It enable designating employees on existing positions, setting their salaries depending on the remuneration scheme.
Production Management module
It contains the tools for working with the information about production process customers, projects develops and financial documents . The module automates all the company’s production process. Customer Relationship Module, Revenues/Expenses Analysis Module, Reporting module and Accounting Interfacing Module.
6.0 Installation of Management Accounting System:
Installation of Management Accounting system would require an extra cost. The company must admit it although expected benefit would outweight the installation cost.
With management Accounting system there is a substantial benefits one of it is to get information about performance of a company at any time is required. It is not necessary to get that information from the annual accounts, that’s a long time since some of the events took place and becoming too late when things goose wrong. Management Accounting system can be used instead of employing an auditor to undergo an interim audit as a means of addressing the problem before the accounting period.
It is difficult to prove on paper that such a system pays for itself but evidence shows that for a company to proper improvement management system plays a vital role.
Also having a system is one thing and utilizing it is another thing. For sure CED limited with competent staff they can maximize the benefit of the system.
Management Accounting system is not a fraction in accounting system. But is a new idea which can be adopted for the purpose of improving the performance of the company. With management Accounting system there is a substantial benefits which organization can get such as getting information about performance of a company at any time is required. It is not necessary to get that information from the annual accounts, that’s a long time since some of the events took place and becoming too late when things goose wrong. Management Accounting system can be used instead of employing an auditor to undergo an interim audit as a means of addressing the problem before the accounting period.
To be able to manage a company efficiently, one should always have full information about both each particular business process and the whole company. Accounting can not always provide the top manager with such information, because it focuses mostly on the needs of external entities like tax office. The purpose of the management accounting is to provide full and trustworthy information necessary for making correct management decisions and plans.
The management accounting reflects all factual expenses and revenues of the company, so a top manager can get a clear picture of the company operation and make reasonable decisions.
2.0 The Role Of Management Accounting Systems In Enhancing
Organisational Effectiveness In Jordanin Commercial Banks – The
Phoenix Bank Case Study
3.0 Financial Management Guide for non-profit organizations
national endowment for the arts office of Inspector General
4.0 MACSYS: Management Accounting Systemn.html.