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Compliance, control and competitive support are important factors that have shaped management accounting practice. However, modern business now places much greater emphasis on competitive support to achieve strategic objectives and less emphasis on compliance and control. Discuss factors that have contributed to the development of Management Accounting Practice and evaluate the usefulness of Balanced Scorecard in light of your discussion.

Qanats is a large ASX listed company that operates internationally and domestically. Access Qantas's most recent annual report and complete the following tasks:

1.identify Qantas's critical success factors (CSFs) and key performance indicators (KPIs)

2. Based on your answer in 1, construct a strategy map that aligns with Qantas's long term objectives

3. Develop a Balanced Scorecard based on your answer in 2. 

The Differences between Management Accounting and Financial Accounting

Management accounting is significantly different from financial accounting. Financial accounting is more concerned about the reporting aspect from a compliance and regulatory point of view whereas management accounting is mostly related to planning, cost management and decision making. An analysis of historical data is done mixing it with future projections to come up with a roadmap for future course of action and taking decisions based on the results (Abdullah & Said, 2017). Using various tools available in management accounting, the management would be able to prepare of all scenarios and plan their road to strategic objectives accordingly. But just like any other thing that requires to adapt itself and modify according to changing dynamics in global business, management accounting methods have also witnessed paradigm shifts over a span of several decades. In conjunction with the change in scope and nature and method of management accounting, the role of management accountants has also witnessed a tectonic shift. From number crunching, they have moved onto more consulting roles.

There are multiple reasons that have triggered to the development of more advanced new forms of management accounting. Below are some the reasons that may have caused such changes:

  • Factors outside of the organization or External Factors: Since a couple of decades or perhaps more, the amount of competition in any given industry has increased significantly. The increase in the number of market forces ensured that the customers have a lot to choose from. This in turn changed certain aspects related to consumer behavior(Alexander, 2016). The change in behavior now was required to be factored in differently by the business houses to cater to the changing requirements and expectations. The faster the responsiveness of the businesses the lesser would be the chances of dissatisfied customer or loss of brand image. Due to globalization the conventional barriers to market entry in different countries were gone and trans-national business became the new normal. This led to greater levels of uniformity in financial accounting and presorting and thus its effects had to be felt in the management accounting sphere as well.

  • Internal Factors: The internal dynamics and functional structure of an organization drive the management accounting practices in many ways. With the use of management accounting many segments of the enterprise such as core competencies of the business, the technical fields and the cycle of revenue generation could be managed and planned more efficiently. If a change takes place in the technology used to develop or manufacture a product or add certain additional attributes to it, corresponding variations would also be required to be made to the production process(Belton, 2017). Say for an example a production process that required 80 percent of manpower would now after technology advancement might be having automated process to 80 percent. This means that significant adjustment would be warranted in the product costing methodologies. In the earlier days many business models which exists now were not even conceptualized. An example of it would be e-commerce which would require a whole new dimensions of costing principles and management accounting to be applied. There has been a visible shift from use of conventional tools to more of those help benefit in customer analysis, tracking and monitoring such as Total Quality Management (Ruth, 2018).

  • Variations in organizational structure: If there are alteration in the organizational structure or functional restructuring of functional departments or units of the company, modifications are warranted in the way management accounting tools are to be applied in those environments. The changes could be in forms like corporate restructuring, downsizing or amalgamations or demerger etc.

The work of management accountants in today’s modern-day business environment requires them to take into consideration multiple business factors such the behavioral traits of the customers, the learning curve and level of expertise and technical knowledge of the workforce, the pace of technological advancement etc. The stated global standards and best practices will aid to the existing tools of management accounting (Ghofiqi, 2018).

Balanced Scorecard: It’s a widely accepted tool used by businesses to target certain key functional areas of the business. These functions are first identified and then worked upon to achieve the desired objectives out of it within or before set deadline. The method ensures the areas remain in focus. After the target completion date, the improvement in the marked areas is measured in terms of tangible business outcomes. Dr. Robert Kaplan and Dr. David Norton were the pioneers of developing this tool in the year of 1992.  There are several visible and measurable benefits of the Balanced Scorecard approach among which we can list the major six indicators as follows:

 Multiple initiatives and projects can be aligned: Balanced scorecard provides a robust framework for developing a strategy and effectively communicating it to people who are responsible to do the job as well as to those who will oversee its progress.

Reasons for the Changes in Management Accounting Methods

Enhanced reporting of performance: Performance dashboards are a crucial part of balanced scorecard approach that can report facts and figures in a more appropriate and easy to interpret manner. This eliminates redundancy and only important issues are available for the management to ponder upon.

Better quality information: The management has at its disposal more refined piece of information using several indicators of performance by which strategic objectives can be achieved. Decisions can be taken because of this by the management in a shorter span of time, making room for modifications possible if required without hampering the deadlines.

Better Strategic Planning can be done: Balance Scorecard portrays the entire flowchart of business as a strategic map. This map can be then used to analyze and identify cause and effect relationship so that issues can be redressed as and when they occur or in some cases even before they occur. This would save the enterprise critical time and resource which becomes of paramount significance. It also underscores the fact that the since strategic maps could be finalized and created, it means that there is harmony between various operations and there is universal consensus as to what are the objectives to be achieved. This is also an example of goal congruence (Coate & Mitschow, 2017).

Alignment of different segments of an enterprise: One of the most critical and beneficial aspects is that the various units of the business and service or production functions get integrated into one. The functions like risk management and budgeting computations are integrated to present the company wide status of operations.

Better communication within the organization and improved execution rate: The strategies are more likely to be executed within a set deadline and focus remain on it until the objectives are met. Because of the strategy map everyone is made aware of the task at hand and acts accordingly. A complete picture makes it comparatively less cumbersome to communicate certain aspects both within departments as well as to their stakeholders including the shareholders (Wellmer, 2018).

1.Following are the critical Success factors:

a) Constant focus of the management: The senior management of Qantas is very much committed to its cause and maintains a strong vigil on the key performance indicators.

b) Highly trained Workforce: The on-board flight staff as well as ground staff are pro-active on their job and have duly put on ground their learned skills and knowledge. They can also be seen to take charge in evet of any unforeseen circumstances.

c) Routes: Since profitability gets impacted most by the choice of routes and the frequency to be offered on those routes, Qantas conducts good research and due diligence before taking a call on these aspects.

d) Non-stop travels: Since civil aviation relies a lot on time management demands of customers, shorter flight duration on long routes holds a key. Since the year 2006, the airlines have steered its way into the long-haul flights segments has grown exponentially in terms of number of flights.

e) On-board flight services and promotions: Several revenues generating add-on facilities for consumers have been initiated such as selections of seats, choice of meals, lounge access services and hassle-free payment gateways. This makes life easier for customers as well as makes the airline earns some extra bucks.

 Defined Target Segment

Measure of completeness

Time frame to achieve it

Status or Progress report

Operational performance of segment

Return on Invested capital >10%

FY18-FY20

FY18 Return on Invested capital > 10% for all segments

Customer

Constant improvement in Net Promoter Share

FY18-FY20

Maintain NPS at premium against business rivals

People

Improvement in employee engagement

FY18-FY20

80% in FY18

Transformation

$400 million per annum gross income

FY18-FY20

$ 463 million in FY18

Innovation

Identification of newer products or services to develop them, introduce new processes to optimize capacity (Yadao, 2018)

FY18-FY20

New route from Perth to London, Launch of Premier Everyday Credit card, Qantas distribution program, etc.

Strategic Category/Objective

Measuring scale

Scorecard Target

(Outcome Range)

Actual Result

Profitability or net income of the group

PBT

50 %

(0-100%)

Achievement is Above the set target

Margin of profit earned from the Domestic market in Australia

Cumulative domestic income of Qantas Domestic and JETSTAR profit margin: EBIT

10%

(0-15%)

Achievement is Above the set target

Safety of People and Operational Safety

Measures taken for people’s safety

Assessment related to operational safety on board the flights

15%

(0-22.5%)

Target Partially achieved

Target Achieved

Customer

Punctuality of flights, Coverage and frequency in the domestic market, Net Promoter Share

15%

(0-22.5%)

Partial Achievement of Target.

Growth of business, Transformation and Projects

JETSTAR Japan underlying PBT and Qantas Transformation benefits, 786 project milestones

10%

(0-15%)

Achievement is Above the set target

References

Abdullah, W. & Said, R., 2017. Religious, Educational Background and Corporate Crime Tolerance by Accounting Professionals. State-of-the-Art Theories and Empirical Evidence, pp. 129-149.

Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education, 71(4), pp. 411-431.

Belton, P., 2017. Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat International ltd.

Coate, C. & Mitschow, M., 2017. Luca Pacioli and the Role of Accounting and Business: Early Lessons in Social Responsibility. s.l.:s.n.

Ghofiqi, M., 2018. formation of views and interests to the accountants profession in master of accounting students of jember university force of 2016 using structuration theory analysis. the 3rd international conference on economics, business, and accounting studies.

Ruth, W., 2018. 'Worrying': Companies' reporting of climate risks goes 'backwards'. The Sydney Morning hearld, 20 September.

Wellmer, A., 2018. The Persistence of Modernity: Aesthetics, Ethics and Postmodernism. fourth ed. UK: Polity Press.

Yadao, J., 2018. Forensic accountants and big data.

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[Accessed 24 June 2024].

My Assignment Help. 'Essay: Management Accounting: Differences From Financial Accounting, Reasons For Changes, And The Balanced Scorecard.' (My Assignment Help, 2021) <https://myassignmenthelp.com/free-samples/acc203-managerial-accounting/cost-management-and-decision-making.html> accessed 24 June 2024.

My Assignment Help. Essay: Management Accounting: Differences From Financial Accounting, Reasons For Changes, And The Balanced Scorecard. [Internet]. My Assignment Help. 2021 [cited 24 June 2024]. Available from: https://myassignmenthelp.com/free-samples/acc203-managerial-accounting/cost-management-and-decision-making.html.

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