In this particular context, the Economic Value Added or EVA can be considered as it is the effective method for analysing and measuring the performance of the divisional activities and managerial effectiveness. The reliability and effectiveness of this particular process is referred to the measurement of the financial performance displayed by the companies that are currently operating at a divisional basis. This particular process is suggested by many of the consultants. According to the literatures of management accounting and their performance in the different divisions, it is important to analyse and measure the financial performance of the individual divisions and their effectiveness. According to Emmanuel et al, (1995) and Keating (1997), there are different techniques of accounting are available in order to evaluate the economic performances of the divisions involved in the operating processes of the company.
According to the instance of Darwin Ltd, by considering the evaluation of the performance report provided by the related case study of the company, it can be acknowledged that management accountant gave their focus on two areas and these areas can be considered for the measurement of the divisional performance of the company. The first of them is related to the improvement in the financial performance measurement and it is guided by the EVA. On the other hand, the second technique used by the management is related to the integration made to the financial and non-financial elements of the division’s operation.
According to the case study related to the company of Darwin Ltd, the financial performance report for the year ending 31st December has been published and the entire report is presented for its one of the two divisions, named as the Bondi Division. The department is classified and utilized by the company in order to process the smooth progress of manufacturing and assembling the raw material that can be used for the purpose of basic house components. Therefore, the entire report has been produced and presented to declare the different types of overhead cost involved in the manufacturing process and thus declaring the net income earned in that particular financial year by the division. The entire presentation of the different values and figures has been published by considering the comparative basis. The basic comparison is done on the basis of the financial performance of the same division in the previous financial year. Also, in the report, the percentages of net growth increases or decreases have been displayed by conducting the comparison of performance. Also, on the basis of the different financial data extracted from the financial and non-financial activities of the Bondi Division, the particular representative values have been generated. Considering those values, the effective financial display of the major areas are being sorted out in the summarized portion. This particular method is the effective manner of presenting the divisional performance of the company at it helps the management and key decision makers to take the intended steps as necessary.
The particular style that is applied in order to present the financial performance of the Bondi Division as specified earlier is done on the basis of the Comparative Statement for Financial Analysis. According to this case, the management accountants of the head office of Darwin Ltd prepare the financial performance report at the end of each financial time period. It declares the vital financial information about the company which is considered helpful and important for the managers of the company. In this case, if the financial performance is analysed by the way of making the comparison related to the last year performance of the division, it helps the management as well as the company to identify different types of issues and constraints. The comparative performance similarities and differences help the management and the head office to identify the measures that can be taken in order match the desired level of criteria and to achieve the company objectives.
Therefore, the disclosing differences and similarities by the way of comparative analysis give the company the clearer picture and information that are not present in the different financial reports.
The accounting systems and the financial reporting systems inside an organization are the major part that report and forecast the different types of vital information related to the company. Financial reporting system plays a vital role in determining the financial position of the company in the market. The financial reporting helps to provide a clear and precise idea about the condition of the market with the help of the balance sheet, income statement and cash flow statement of the company, the financial statement are produced on the basis of the information and activities carried out by the company for the given fiscal year. Therefore it is evident that the accounting and financial reporting system are improved which eventually help the company to determine and identify the loopholes which defer the company overall profit for the given fiscal year. In this portion, the management and the company of Darwin Ltd will be given with the recommendation to improve their overall accounting system and enhance the process of financial reporting system.
In case of accounting system, it is more than tracking the cash inflows and outflows of the business. The effectiveness of the accounting system stands as identifying and eliminating the ways at which money is wasting and losing by the organizational processes and thus improving the overall profitability of the firm. Therefore, making the additional and recommended changes in the computerized or manual accounting system will let the company to save more time and money and also improve the quality of the financial statements.
First of all, improving the accounts receivables is a major part of the accounting system and it includes the streamlining of the collection efforts made. In this context, each and every department of Darwin Ltd should need to record all the invoices in the system at an appropriate basis, so that, the late payments or unpaid invoices can be alerted and the company can start the process of debt collection procedures.
Another effective recommendation can be given by the way of changes made to the account payable. If the changes are made effectively, it will certainly allow the company to avail all the discounts as offered by the vendors. In this case, the departments or divisions of Darwin Ltd should need to enter the invoice numbers at an appropriate basis into the accounts payable system. The establishment and the arrangement of the system need to be done on such a way that can notify the divisional heads of the company before crossing the deadlines of the payments. This will help the company to save the irrelevant and unnecessary late fine or penalties due to the late payments and the Darwin Ltd can save more money by the process.
In case of Bondi Department of Darwin Ltd, the effective inventory management system needs to be carried out as it will reduces the chances of facing the money lost due to the damages, spoilages and obsolescence of the raw material used for the manufacturing process. In this case, the inventory accounting programme must be prepared and set up by the company in order to track and record the raw materials brought to the firm and the assembled kits transferred to the Bronte Department. As there is the absence of the finished goods in the inventory, the First-in First-out method should be applied so that the damages or obsolescence can be eliminated.
Another useful recommendation is to provide the staffs and employees the proper training which will help them to understand adapt to the changes done in the entire accounting systems. It will ensure that their responsibilities can be maintained at a constant basis, at the same time the implementation process cannot be hampered.
The above practices in order to build the effective accounting system in Darwin Ltd also help the company to improve the financial reporting system. Additionally, the company’s management should need to review the peer organization’s financial statement for maintaining the best practices and also examine the different financial statement and divisional financial performance reports at a regular basis to serve towards the organizational objectives of the company.
Ethics is considered as the code of behaviour that is governed by the combination of moral, personal. Social and legal standards of what are appropriate and what is right for the entire community of working together. The appropriateness of the behaviour is varied by the way of changing situations and different types of conditions. Based on the factor, there are some number of ethical guiding principles that should need to be agreed by the different organizations and work cultures.
In every business including Darwin Ltd should have the presence of the proper ethics program that helps the owners, managers, agents and employee to work together for the common purpose of the organization. It will also support the organization to achieve goals by considering various dimensions. In this particular case, the Chief Accountant of the Bondi Division, Jake Thompson was approached in the last time period of the financial year by the divisional general manger to book the sale that is destined to be happened later the specific financial year. Though, this particular function will represent the better picture for the company’s stability and financial performance, but still it is considered as the unethical practice for the organization. Displaying the information that is relatively happened later the financial year is not the part of the process of that former operating year. Therefore, certainly it will represent a false value of the company and thus this factor should be considered as the ethical obligation faced by Thompson.
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