Course Name and Code Essay Example

Accounting: Social Analysis

Introduction

This paper will consider various issues regarding management accounting. This paper gives a brief account of management accounting. The essay will explain the relationship between planning and its social impacts. The paper will achieve this by using a balanced scorecard to explain how planning can have social impacts. Many organizations seek the services of the strategic planning. This outstanding characteristic has demonstrated a well-intentioned step in the regeneration, renewal and revolution of the business. Nevertheless, in the present researches, this instrument of planning has faced recoil and incredulity from different analysts. The normalcy of political and economical indecision joined with technological change has augmented this shift. This disenchantment has ensued to the common phrases of not being at par with the changes in the society. Stakeholders, the society, consultants and many more have an imperative chore in safeguarding attainment of strategic plan. These steps or angles as stated may include comprehending and grasping of encounters and openings available, comprehensive evaluation of fault and strengths of the organization, all encompassing confronting of the plan, as well as setting up of an authorized planning group as well as involvement of senior management. Accordingly, this paper will consider these angles and many more as well as a brief outlay of what a strategic plan entails using the balance scorecard.

Social implications of the planning function of management accounting using balanced scorecard

A balanced scorecard is a strategic planning and a management system used in government, industry and business, non-profit organization, so that business activities can be aligned to the vision as well as a strategy of the organization; enhance external and internal communication along with monitoring organization performance alongside strategic goals. Briefly, balance scorecard aids in interpreting strategy into action (Norton & Kaplan, 2006). It starts with an organizations’ strategies and vision, from this level momentous achievement element are defined. Measures are instituted that aid in target setting and performance measurement in sectors which are germane to the approaches (Norton & Kaplan, 2006).

The execution of a balanced scorecard is essential to all levels in an organization but its implementation start at the corporate level. The balanced scorecard is not only an executive information system used in corporate management but also it should form the background for encouraging behaviour change in an organization to ensure alignment with the vision and strategy (Smith, 2006).

Creation of a balanced scorecard involves a number of step; identifying the vision of the organization, through identification of strategies it enables in showing how the organization will achieve its vision, secondly an organization has to define its perspectives and it involves explaining what will be done in each perspective, thirdly it involves identification of critical success factors. Lastly, the organization has to evaluate its scorecard (Norton & Kaplan, 2006).

The balanced scorecard offers a number of ways of viewing an organization. For instance, four perspectives, development of metrics, collection of data as well as analyzing it in relation to these perspectives: business process perspective, learning and growth perspective, customer perspective as well as financial perspective (Creelman & Makhijani, 2011).

The learning and growth perspective, this perspective entails employee training as well as corporate attitudes that are related to both corporate, as well as self-improvement. This perspective puts focus on intangible assets in an organization, majorly the internal and abilities of employees required to aid enhance the value in the internal processes. In a knowledge-worker organization, individuals are the main resource. Presently, with the rapid technological advancement, it is fundamental for knowledge workers to be in a continuous process of learning.

A number of metric can be instituted so that they can aid mangers in directing training funds where they can be very helpful. This can be incredible if learning and growth is part and parcel for success in a knowledge-worker organization. Learning is vital compared to training. It entails things like tutors and mentors in an organization. Additionally, it also includes the ease with which workers in an organization communicate in case they have a problem. This helps in solving the problem at hand. The learning and growth perspective describe how people, technology as well as organizational climate combine to enhance the strategy.

Business process perspective; refers to the internal business process. Business process perspective mainly entails measures such as quality, cost and throughput. Metrics that are based on this perspective enables managers to understand how well the business is operating and if the product and services match with the mission. Business process perspective involves a number of things: firstly, it means thinking in terms of the largest picture. This involves identifying how a business process that is defined relates to process outside and inside the organization. How does work flow both in and out of the process? Secondly, business process perspective entails thinking in terms of the process, not the software implementation.

This perspective (Business process) entails identifying outputs and inputs to the process as well as transformations that are taking place that make value to the customer. Thirdly, this perspective entails documenting processes to enable everyone know his role and understanding how it fits in the big picture. Lastly, the business perspective entails a commitment from senior management team to overcome challenges. In a nutshell, the business process perspective helps in identification of strategies that respond to the question” What must we excel at?”

Customer perspective; this perspective entails how customers perceive the company. This is based on analysis of various customers, satisfaction level and process that has been used to deliver services and products to clients. Emphasis should be put on new market, new products, customer service, customer satisfaction, customer retention and lastly what should the organization do so that it can be its customer’s valued supplier? Various metrics can be instituted in measuring success in relation to customer perspective. For instance, new customer acquisitions, reliability, response to time, returned orders, market share, repeat purchases, customer satisfaction, perceived value for money, on time deliveries (Norton & Kaplan, 2006).

Financial perspective; this perspective encourages identification of relevant high-level financial measures. For instance, designers can be encouraged to select strategies that help answer the question “how do we get shareholders?” This is concerned with the view of performance. Shareholders take part in a number of aspects regarding financial performance; these measures of success include revenue growth, cash flow, return on shareholder fund, share price, cost reduction and growth in sales revenue. Others include sale revenue, net profitability ratio, profit growth, increased return on assets, growth, profitability, process of cost saving, corporate goals, profit ratio, economic value added, return on capital employed and operating cost management (Economy & Buchman, 2007).

The balanced scorecard is essential for any successful organization since: firstly, it helps in better prioritization, for instance, the business perspective offers a methodology that is used to prioritize events basing on business process criticality instead of business process. Having a balanced scorecard helps in setting standards. This helps the organization stick to its set standards. The standards should not only be too high but also achievable. This will act as motivation for employees and managers. The balanced scorecard will act as a measurement system and it is based on the mission, objectives as well as goals in an organization. This system offers feedback mechanism to the employees. It also helps in analyzing actual performance against expected performance (Economy & Buchman, 2007).

Management accounting in developed and less developed countries

Significantly, research on developing countries has increased over the past twenty years. Therefore, this is welcome since this work has always been marginalized and considered to be an esoteric in spite many people living in developing countries. Their accounting needs as well as concerns are very pressing just like developed countries. Furthermore, developing countries are part and parcel of mosaic world trade and developed nations can get some lesson from them, for instance, resolving ethnic tensions and poverty reduction. Management accounting in developed countries is more developed compared to developing countries. Most of the management accounting strategies used in developing countries have been adopted from developed countries this has had ramifications on the effectiveness of the systems since some of them have not been fruitful hence leading to programs that are not effective. Some of the issues associated with copying managerial accounting methods from developed nations include; poor enforcement of the policies, inadequate funds to effectively monitor the systems.

Origin of management accounting

Immediately after the Industrial Revolution, economic development took place predominantly in the Middle and Far East. Some of the oldest existing business records dates back to Assyrian, Chaldean-Babylonia as well as Sumerian civilisations (Sharpes, 2013). Different types of small industries and service business were developed and one of the oldest known commercial document dates from around 3500 BC. In Babylonia formal legal codes ensured that, record keeping was mandatory. The most common is the Code of Hammurabi that necessitated that any agent selling goods for any merchant must ensure that the merchant gets a sealed memorandum that quotes prices (Shotter 214). All the records were put on clay tablets. When papyrus was introduced in Egypt as a writing surface helped in ensuring that writing is less cumbersome and allowed use of different supporting documents (Szczepanowska, 2013). In spite of the early development, development stagnated for years. This can be credited to the inability of expressing goods in terms of a common substance that is monetary unit.

During Chao dynasty in China, accounting reached peak of sophistication that hardly improved until double entry techniques was introduced (Ebrey, 2010). The Chao, who used coined money, inherited and developed concepts of financial accountability and administration that originated during the Shang and Hsia dynasties. Coined money begun in Greece at around 630 BC. One amongst the oldest and largest surviving records of system of responsibility accounting was maintained by Zenon who was a manger of an estate. All the supervisors were supposed to give frequent accounts of all the transactions. Regularly, the accounts were summarized and audited. The accounting system spread in the entire Middle East and Mediterranean. Later on, the accounting system was adopted and modified by Romans. The main objective of the accounting approach was to protect owner’s property.

According to Goloby (2008), the Industrial Revolution gained momentum between 1760 and 1830 and this can be attributed to various reasons, however the common are technical inventions, which restructured the manufacturing world, for instance, James Watt steam engine in 1765, James Hargreaves’s spinning jenny between 1764 and 1767 and spinning frame by Arkwright in 1768. During this period, Britain experienced rapid population growth, extensive capital use as well as conversion of rural to become urban communities and an increase in novel social classes (Mokyr, 2008). In US, the impact of Industrial Revolution did not have a great impact compared to what was experienced in United Kingdom. Even though it had an indirect impact on US economy, factors, which had remarkable impact, were from railways and telegraph around 1840.

After 1849 and particularly between 1850 and 1860 telegraph and railways revolutionized the traditional methods of production as well as distribution (Lee & Yung, 2010). Coal provided cheap as well as flexible energy sources that enabled railways to offers, regular as well as dependable transportation that was pertinent to large production volumes and distribution. High income per capita, technological innovation and rapid increase in population augmented complexity of existing production as well as distribution process as well as high volume and rate of the transactions. During that time the existing market mechanism was not able to co-ordinate the transactions effectively. This resulted in creation of administrative co-ordination. In order to solve this problem, entrepreneurs formed multi-unit organization and they appointed managers so that they could administer them

Conclusion

For success in any organization, implementation of a balanced scorecard is fundamental since it will be able to put several important elements together. For instance, it offers a number of perspectives such as business process perspective, learning and growth perspective, customer perspective as well as financial perspective. Organizations should adopt the balanced scorecard since it is associated with many gains. Just as it clearly stated before it helps in establishing standards that organization strive to achieve. Additionally, a balanced scorecard acts as a feedback mechanism to organization. Consequently, without a balanced scorecard an organization lacks effective measure to make sure it achieves its objectives.

Reference

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