ACCOUNTING

Analyzing Accounting Systems

Analyzing Accounting Systems

Introduction

The world is evolving at a very rapid pace where hundreds of new technologies are being developed on a daily basis. To survive in such a dynamic environment, businesses need to be flexible and need to constantly adapt to the changes. To steer such businesses away from their untimely demise and to steer them towards financial prosperity, the accounting and finance departments play key roles. For these reasons, the old accounting systems may have met its match in this new evolving business environment. As a result, companies need to focus on the new management accounting systems which would allow them the flexibility and planning to survive the extremely competitive and changing environment.

Discussion

What is Managerial Accounting?

Management accounting or managerial accounting is basically focused on the acquisition and the utilization of the accounting data by the managers of various companies (Geense, 2012). Such data allows these managers to make informed decisions allowing the company to equip its management with the necessary tools and functions, ensuring proper management of the company

Arguments related to Old Management Accounting Systems

During the past several years, many financial experts and critics have questioned the practicality and use of the traditional accounting systems and its techniques in the actual business and working environment (Geense, 2012). For example Goldratt once mentioned that traditional management account does not focus properly on the production of the company's goods or products and thus become a major inhibitor of a company's productivity. Others have argued that old management accounting techniques are no longer valid as the production and business processes are constantly changing and evolving. Some experts even claim that traditional accounting systems fail to provide relevant, useful and timely data about the activities and its processes. Such data allows the management to proper observe, plan and control the company's processes, ensuring that the company runs efficiently and effectively.

Problems with Traditional Methods of Accounting Systems

As a result of the increasing national and international competition, many companies are focusing on improving their manufacturing to be on par or even better than the international standard. However, companies now face a significant hurdle towards the road to everlasting prosperity. Most of the organizations still use the same account management systems that were developed years ago. These systems were made for the businesses environment that is completely different from the environment that is present during these times (Way, 2012).

The old methods of accounting management systems can quickly become a major obstacle for any company's road to prosperity mostly because such accounting systems measure the incorrect things. Instead of measuring factors that customers care about, the tradition accounting management systems depend on difficult accounting measures focusing mostly on variance analysis rather than on factors that drive the actual organization forward (Way, 2012). Implementation of total quality management might give little economic benefit for a company using traditional accounting systems, even though its is successful (Maher, 2011, p. 125)

Because of several years of labour productivity and machine productivity reporting, the employees and ...