Professional Documents
Culture Documents
Introduction:
Management accounting practice helps an organization to survive in the competitive, ever-
changing world, because it provides an important competitive advantage for an organization
that guides managerial action, motivates behaviors, supports and creates the cultural values
necessary to achieve an organizations strategic objectives.
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Objectives of the study :
1. To obtain a broad overview of the management accounting practices in Bangladesh.
2. To find out the using status of Management Accounting Techniques.
3.To evaluate the conception of managers as to importance of use and problems, if any, they
face in using the techniques;
4. To make policy recommendations on how to improve the practices of management
accounting in Bangladesh.
5. To identify the Management Accounting information structure.
Methodology
For smooth and accurate study every one have to follow some rules & regulation. The study
impute were collected from two sources:
Primary sources
Direct observations
Secondary sources
Website.
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Scope Of The Study
This study method was significant for me because before this study I have not enough
understanding to proceed with such type of research project also on this topic. The scope of
this study was strictly confined to the annual report & personal contact with the employees of
Bangladeshis companies. To collect the information I worked in the finance section & cost &
budget section of those companies. All other data related to the financial analysis was
collected from web sites of those companies & other related co.Investigative study method is
used in writing this report.
This study is characterized by flexibility and resourcefulness with respect to the methods,
formal research method employed by investigating various business industries in Bangladesh
and obtaining information by asking question to qualified personnel.
The study involves structured questionnaire, large sample and probability sampling plans.
Under the study once a new idea or insight is discovered, they may shift their exploration in
that direction. Observation method is used to complete this qualitative research.
Finally the purpose of this study is to determine whether management accounting technique
is used by the Bangladeshi manufacturing companies and whether those companies using the
technique apply the application process in their customer expectation, profit margin, cost and
price determination, cost reduction and management operations.
On the way of my study, I have faced some problems that termed as the limitations
of the study. In all respect following limitation and weakness remain within which
I failed to escape by any means. These are follows:
Budgeted time limitation: - It was one of the main constraints that hindered to
cover all aspects of the study.
Confidentiality of data: - Because of some divisional and confidential problem, I
could not get enough information. Every organization has their own secrecy that is
not revealed to others. While collecting data some company personnel did not
disclose enough information for the sake of confidentiality of the organization.
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Data Insufficiency: - Especially there is a lack of information about the
determination of the companies applying different costing method and the level of
costing applications in these companies. Sufficient books, publications, fact and
figure are not available. These constrains narrowed the scope of accurate analysis.
If these limitations had not been there, the report would have been more useful and
attractive.
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Computed by reference to the needs of managers, often using
management information systems, instead of by reference to financial
accounting standards.
The distinction between traditional and innovative management accounting
practices can be illustrated by reference to cost control techniques. Cost
accounting is a central method in management accounting, and traditionally,
management accountants principal technique was variance analysis, which is a
systematic approach to the comparison of the actual and budgeted costs of the raw
materials and labor used during a production period. While some form of variance
analysis is still used by most manufacturing firms, it nowadays tends to be used in
conjunction with innovative techniques such as life cycle cost analysis and
activity-based costing, which are designed with specific aspects of the modern
business environment in mind. Life-cycle costing recognizes that managers ability
to influence the cost of manufacturing a product is at its greatest when the product
is still at the design stage of its product life-cycle, since small changes to the
product design may lead to significant savings in the cost of manufacturing the
product. Activity-based costing recognizes that, in modern factories, most
manufacturing costs are determined by the amount of activities and that the key
to effective cost control is therefore optimizing the efficiency of these activities.
Activity-based accounting is also known as Cause and Effect accounting.
Both lifecycle costing and activity-based costing recognize that, in the typical
modern factory, the avoidance of disruptive events reducing the costs of raw
materials. Activity-based costing also deemphasizes direct labor as a cost driver
and concentrates instead on activities that drive costs, such as the provision of a
service or the production of a product component.
Managerial accounting has its roots in the industrial revolution of the 19th century.
During this early period, most firms were tightly controlled by a few owner-
managers who borrowed based on personal relationships and their personal assets.
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Since there were no external shareholders and little unsecured debt, there was little
need for elaborate financial reports. In contrast, managerial accounting was
relatively sophisticated and provided the essential information needed to manage
the early large scale production of textile, steel, and other products.
After the turn of the century, financial accounting requirements burgeoned because
of new pressures placed on companies by capital markets, creditors, regulatory
bodies, and federal taxation of income. Many firms needed to raise funds from
increasingly widespread and detached suppliers of capital.
To tap these vast reservoirs of outside capital, firms' managers had to supply
audited financial reports. And because outside suppliers of capital relied on audited
financial statements, independent accountants had a keen interest in establishing
well defined procedures for corporate financial reporting.
The inventory costing procedure adopted by public accountants after the turn of the
century had a profound effect on management accounting. As a consequence, for
many decades, management accountants increasingly focused their efforts on
ensuring that financial accounting requirements were met and financial reports
were released on time. The practice of management accounting stagnated.
In the early part of the century, as product line expanded operations became more
complex, forward looking companies saw a renewed need for management-
oriented reports that was separate from financial reports. But in most
companies, management accounting practices up through the mid-1980s were
largely indistinguishable from practices that were common prior to World War I.
In recent years, however, new economic forces have led to many important
innovations in management accounting.
Management accounting is not new in any sense of the world. The origins of modern
management accounting can be traced to the emergence of managed, hierarchical enterprises
in the early nineteenth century (Johnson and Kaplan, 1987) [2]. The Industrial Revolution in
the early nineteenth century resulted in the emergence of a factory system that dramatically
changed the production process (Ashton, D., Hopper, T. and Scapens, R.W. 1991) [3]. This
has created a new demand for accounting information. Market information, which had
automatically provided details of materials and piecework labor costs incurred in meeting
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each customers order, was no longer available. In particular, information was required to
determine the cost of the internal operations and also to measure the efficiency of converting
materials leading to the finished product (Parker, 2002) [4].
Johnson and Kaplan (1987) [2] suggest that, notwithstanding the impact of the Industrial
Revolution, the emergence and rapid growth of railways in the mid-nineteenth century was
the major driving force in the development of management accounting systems. New
measures such as cost per ton-mile, cost per passenger mile and the ratio of operating
expenses to revenues were created and reported on a segmental and regional basis. Many of
the innovative management accounting measures developed by railway companies were
subsequently absorbed and developed by the other business sectors.
During the nineteenth century the development of so-called scientific management has made
further advances in management accounting. The scientific management experts developed
new cost accounting procedures to evaluate and control physical and financial efficiency of
tasks and processes in complex machine-making firms and to assess the overall profitability
of the enterprise (Johnson and Kaplan, 1987) [2]. At about the same time as scientific
managers were refining their techniques for determining standard, articles advocating the use
of standards for cost control were published (Longmuir, 1902 [5.I]; Garry, 1903 [5.II];
Whitmore, 1908 [5.III]) [5]. According to Solomons (1965) [6], in 1911 G. Charter Harrison
designed and installed the first standard costing systems. In 1918 Harrison published the first
set of equations for the analysis of cost variances. Another pioneer of standard costing
Harrington Emerson in a series of articles in the Engineering Magazine of 1908 and 1909
advocated the development of accounting information systems specifically directed towards
the achievement of efficiency objectives. Emerson was possibly the first writer to stress that
information on standards
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