Case study: improving accounting functions Essay

1. Introduction

a ) Background

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ABC Limited is engaged in the concern of digital media and public dealingss. The company produces movies and digital life for corporate clients. The merchandise and service portfolio includes high terminal movie & A ; synergistic media solutions including broadcast quality plans, telecasting commercials, exhibition pictures, developing movies, and 2D and 3D life. The company operates through two offices, one in London and the other in Birmingham. The company is professionally managed and headed by the Managing Director, Leigh Renak, an expert in the country of picture and life, who reports to the Board of Directors. The Company has been turning at approximately 11 % per annum in the last three old ages and recorded a turnover in the part of 15 million GBP in 2006. Net incomes after revenue enhancement are expected to be about 1.8 million GBP

The Company wishes to better the quality of its fiscal and direction accounting maps significantly and is in the procedure of choosing sellers who will be able to supply optimal solutions for these two demands. This peculiar papers contains the Users Requirements Specifications for the coveted Management Accounting System for ABC Limited.

B ) Aims and Aim

ABC Limited plans to implement a direction accounting system that will be able to assist the direction in efficaciously monitoring and bettering public presentation, and in heightening the competitory advantage of the company. The range of the direction accounting system has to travel good beyond the scope of regular fiscal accounting, even while doing full usage of the information generated by fiscal statements. The system will hold to be built on the pillars of truth, seasonableness and relevancy, all three factors being of utmost importance. The ownership and direction of the company is house in its demand for truth and is opposed to all efforts to prosecute in aggressive accounting. The direction accounting system must guarantee the unity of information, its timely entry and its relevancy for operational and strategic determinations. It must needfully integrate sophisticated and appropriate cost accounting inputs and include analyses that apart from concentrating on information internal to the company, besides go beyond the corporation’s boundary lines. The intent of the direction accounting system will be separate from that of mandated fiscal and revenue enhancement coverage and will assist the direction of the company to make its cardinal strategic aims.

2. Requirements of the Management Accounting System ( MAS )

a ) Scope and Properties

The MAS must include fiscal and operational information, both internal and external to the administration such that its handiness helps in monitoring and bettering public presentation, and in heightening the strategic fight of the company.

Apart from this, the MAS must be designed to guarantee that it has the undermentioned properties.

  • It must heighten, in a meaningful and important mode, the apprehension of the facts and phenomena being measured, and supply information that should be relevant for strategic determination devising. Irrelevant information should non be included in the scope of the system merely to supply organic structure and non substance.
  • The presentation of the information must promote actions that will be consistent with the strategic aims of the company.
  • The system must be based on the ethical beliefs and value systems of the company. It must guarantee the complete unity of information collected and presented and must guarantee that it contains relevant precautions and qui vives to inform the users in instance there are any grounds to doubt the veracity of the presented information.

B ) User Characteristics

The MAS will be used by the top direction of the company comprising of the Managing Director and other Executive Directors on the Board of Directors. They will besides be used by senior directors in gross revenues, selling and finance maps.

The Managing Director and other senior directors of the company have proficient accomplishments in digital media and in gross revenues and selling. While they do non hold detailed professional cognition of the finance map they are experient Renaissance man directors and are able to hold on critical and strategic issues comprehensively. These users want MAS that will give them relevant information on of import operational and fiscal parametric quantities that will include, inter alia, gross revenues, quality, client perceptual experience of quality, client dissatisfaction, budgets, prognosiss, actuals and discrepancies, costs, cost and quality optimization, and engineering. It must incorporate information both internal to the company and that while refering to issues beyond the boundary lines of ABC Limited, can act upon the operations and public presentation of the company. These users are pressed for clip and would prefer information that is relevant, concise and clear.

The MAS will be operated by directors of the accounting and finance maps and while these functionaries have good existent cognition and experience of accounting processs and statements, their exposure to sophisticated direction accounting systems is limited. While these directors will be responsible for fixing and updating the information envisaged in the system they are more comfy with existent historical accounting, revenue enhancement coverage and associated revelations. This deficiency of exposure can take to user strangeness with some of the constituents of the MAS, which must be kept in head while fixing the manuals and user ushers for the system.

B ) Particular Requirements

The MAS must accomplish three basic maps, ( a ) set up a relationship between the regular activities of directors with the strategic aims of the company, in other words all the actions of the directors should dovetail into a conjunct attempt towards accomplishing the strategic aims of ABC Ltd. , ( B ) empower and enable directors to affect the clients, providers, contractors and employees of the company in accomplishing strategic aims and ( degree Celsius ) take an basically long term position of corporate scheme and assistance in its promotion.

The MAS must integrate the undermentioned characteristics.

  • Analysiss of gross revenues, operational and fiscal costs, working capital and fund use, and profitableness
  • Comparison of prognosiss and actuals and grounds for discrepancies
  • Rejections, petitions for rework and grounds for the same
  • Comparison and benchmarking of the selling, production quality and cost position of the company with that of major rivals
  • Status of work in advancement at the studio and clip left for its completion, and inside informations of slippages, with grounds for the same

The system must include dependable and appropriate prediction, budgeting and bing systems. The bing system should be current and the use of activity based costing is desirable. Analysiss of issues like client wise profitableness, loss of gross revenues due to clients who were non converted, and get down to complete production rhythm clip for occupations are illustrations of relevant direction accounting information.

The MAS should non stay restricted to being merely a reworked representation of fiscal accounting figures. It must besides include relevant non-financial informations on operating activities like gross revenues, production, package development and use, and scripting and redacting to show a holistic place of the company’s operations. Some exemplifying illustrations of helpful inside informations would be client outlooks of characteristics and monetary values of merchandises, cost construction distribution between internal and external parties, impact of rework on costs, meeting of deadlines and clients perceptual experiences.

The long term consequence of managerial determination devising must be analysed and highlighted whenever necessary. On juncture, action initiated to cut down short term costs may impact the long term involvements of ABC Ltd, by taking to poorer quality.

Another illustration is the measurement of life rhythm costs. In the devising of new merchandises and taking contractors and providers, the Company might necessitate to see customers’ operating, fix, care, and disposal costs every bit good as their initial purchase cost. The MAS needs to foreground such developments. The proper handiness and leverage of this kind of information will enable ABC Ltd to work really closely with its clients and construct long-run bonds with them.

degree Celsius ) Software and Security

The package chosen for the MAS needs to be appropriate and, while non overly complicated, should integrate characteristics that streamline operations and can be customised to extinguish any unneeded manual interface. It should supply an acceptable degree of public presentation for watchword based multi user and multi location entree. Ascents should be simple and cheap to implement. It is of import that the solutions supplied be appropriately robust and able to stand the trial of clip. It would besides be advisable to avoid the usage of applications or services that may non be available in the close hereafter.

The MAS should hold first-class watchword protected security systems and must be accessible merely to specifically authorised users. User distinction must supply separate mandate manners for users allowed to update and redact information and those allowed merely read and download installations.

3. Integrity of Information

The MAS will pull its information demands from the fiscal accounting system every bit good as from inputs arising from the Gross saless Department, the Customer Service Managers and from Studio Reports, which contain important production and client information. While continuing unity of information is the primary duty of the fiscal accounting system, the MAS besides has an of import function to play in this respect and must integrate precautions and protective steps to guarantee a dual cheque and guarantee the riddance or highlighting of information that may look to be inaccurate. Incorrect or questionable information can come in the system through assorted avenues including figures refering to gross revenues, costs, rework, client satisfaction and truth of debt. The MAS must guarantee the debut of controls to guarantee observation of the company’s information unity policy.



1. Company: ABC Limited is a 15 twelvemonth old company engaged in the country of digital media and public dealingss. It is a little concern endeavor and has a turnover of around 15 million GBP. The ownership of the company has late changed its direction with the assignment of a new Managing Director who has been given the authorization to take and choose his ain squad. The MD has been given the mark of increasing gross revenues at 30 % per annum and duplicate the current turnover in three old ages clip. In add-on to new and enhanced gross revenues aims, the new direction has besides been entrusted with the occupation of bettering profitableness significantly every bit good as of introducing or modifying bing systems. The new information systems should increase the truth and unity of information available to the senior direction, guarantee that all regulative demands are satisfied and extinguish defaults, and better monitoring of operations, such that the aims of the company can be achieved.

2. Products and Services: The Company produces content rich movies and digital life for its corporate clients. They provide provide high terminal movie & A ; synergistic media solutions including broadcast quality plans, telecasting commercials, exhibition pictures, developing movies, and 2D and 3D life. ABC Ltd is known for its originative competency and have won a figure of awards for their different productions. The high definition digital studio has installations for recording, redacting, particular effects, multimedia and digital sound. While the company has a strong in-house squad for picture production, book authors and managers are frequently hired on contract for specific undertakings.

3. Existing Accounting and Information Systems: The accounting and information systems of the company have grown organically with the growing of the company. All the accounting, bing and direction information is produced by the histories section. The histories section is staffed with employees who have been with the company for some clip and though non professionally qualified, have gained experience on the occupation. They are guided in their work by the hearers of the company. The staff of the audit house often visit ABC’s offices and discourse the accounting and information position with the comptrollers every bit good as with the Managing Director. Basic fiscal inputs sing gross revenues and work in advancement is taken from client services directors and studio studies, while information sing wages, contractors payments and other disbursals are generated by the history section itself. A gross revenues prognosis is made at the beginning of each twelvemonth. The accountant prepares a direction information study at the terminal of the month in which concise information about gross revenues, costs, profitableness, prognosiss, actuals and discrepancies, and other relevant issues like of import facts about client outstandings is presented to the direction. Questions are answered as and when they arise. The company uses an accounting package bundle recommended by the hearer. Excel charts are used for smaller calculations, an country in which some of the accounting staff have first-class accomplishments.


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