Management Accounting 2

ASSIGNMENT 1

BY

RAY, Ka Sing HO

CONTENTS

Page

Terms of Reference 3

Introduction 4

Main Body 5-9

References and bibliography 9-11

Terms of Reference

Explain the possible effects of placing employees in positions of 'failure' and 'success' on individuals and their aspiration levels.

Identify four situations from the literature or from my own experience where control systems may lead to distortion and circumvention, and discuss the behavioural implications of each.

Examine the behavioural consequences of implementing budgetary control systems in practice, and examine the ways in which they might be taken into account in terms of the alternatives that are open to management when designing such systems.

Introduction

The management accounting helps to measures and reports financial information and other information that helps them to fulfil the objectives of the organisation. It helps the managers to set goals and monitor the progresses of the policies they are have implemented. Further, it helps to determine the feasibility of policies that they are implementing. Another function is to get feedback for current policies.

Some of the management accounting systems are budgeting system, costing system, process costing system and management control system.

In the past, managers have dismissed the view that behavioural issues are a major consideration in management accounting systems. They have focused on the financial performance and not on such qualitative factors. However, as time pass, the behavioural context has become more important as it gains the notice of researchers. National and corporate cultures are also becoming an issue in designing the management accounting system.

In the discussion that follows, an attempt will made to shed some light as to the effects and impact of the behavioural context. The specific management accounting systems that will be discussed are budgeting system and activity-based costing system.

Main Body

Placing employees in positions of success are very important to an organisation. Imagine the perfect business: all employees are in the right position, they self-motivated, delivering top-level performances, and working efficiently and smoothly with office mates and executives alike. Far from being an impossible dream, this type of harmonious and high performing environment is not only achievable; it is becoming essential to a company's bottom line. Happy, successful employees are not only more productive but also, more likely to remain loyal and present on the job, maximizing efficiency and saving the company hundreds of thousands of money in continuous rehiring and retraining costs.

One of the purposes of a management accounting system is to provide information that helps the management to make decisions and create activities that help the organisation to achieve its goal and to encourage their employees to work in the best interest of the organisation. Therefore, the behavioural issue of employees is a vital aspect in management accounting.

However many accountants do not see the behaviour of employees as an important part of an organisation. This is due to the following reasons:

. It is only recently that behavioural implications have been noticed. Thus, time would be needed to change the mentality that it is only a minor or even non-existence part of management accounting.
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2. Very little research has been done on this aspect. Hence, accountants find that they cannot find a reliable source to follow.

3. Many managers are not concerned with this issue. Instead, they are more interested in the actual performance without knowing that behaviour is actually one of the motivators to perform.

Unfortunately, behavioural considerations are current and relevant in today's business world. Even though in many situations accountants perceive that there is no problem and everything is under control, the truth is that they cannot afford to ignore such issues. The following conditions ...

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