The procedures used in management accounting are entity specific Essay


The undermentioned study is sing the direction accounting techniques and processs that can be applied to the procedures of Nokia in order to optimise the use of resources and to do the procedures used by the company more and more efficient.


Nokia is a transnational corporation, headquartered in Keilaniemi, Espoo in Finland. The corporation is engaged in the concern of fabrication of nomadic devices and it is presently traveling towards cyberspace and communications industries. Nokia has achieved enormous success all over the Earth in the recent yesteryear due to the invention and lastingness of the nomadic devices it produces. Nokia is a extremely successful corporation due to its invention. It has been the innovator corporation in the production of the modern twenty-four hours nomadic phones. Consumes from all over the Earth prefer the nomadic devices of Nokia due to their lastingness and Nokia ‘s record of bring forthing successful nomadic phone theoretical accounts. The planetary gross of the company in conformity with the fiscal information for the twelvemonth 2009 was EUR 41 billion, and its operating net income was EUR 1.2 billion. This gross and operating net income suggest that Nokia has the possible to go the prima corporation in the concern of fabrication of nomadic phones all around the Earth. The gross of the company is significantly higher than those of other companies in the same industry ( Nokia Annual Report 2009 ) .

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Nokia ‘s operations are constituted of the production of communicating devices. Nokia produces nomadic devices for the complete scope of market sections. Nokia produces nomadic devices which are spread over a broad scope of affordability and public-service corporation. Nokia produces communicating devices that fit the demands of all the market sections. Apart from the production of nomadic devices, Nokia besides offer internet services such as ; messaging, music, games and application through its platform which is named Ovi.


The chief rivals of Nokia are:

LM Ericsson Telephone Company.


Samsung Electronics Company

Other companies in the Communication Equipment Industry.


The chief concern of Nokia is the production of communicating devices and the industry has become extremely competitory in the recent yesteryear. There are a figure of other corporations that threaten the endurance of Nokia in the industry as the leader of the market. Therefore, in order to keep the stableness of Nokia in the market, Nokia has utilized its competitory advantage positively. The competitory advantage of Nokia is the mobility of its work force. The operations of the company do non acquire hampered due to the distant handiness of the company ‘s work force. In this mode, the workers of the company remain connected to their workplace even if they are off. Apart from the mobility of its human capital, Nokia has besides utilized its innovator position in being advanced and in fulfilling its clients through a broad scope of communicating devices.


Management accounting is the division of accounting that is used by the strategic nucleus of an entity to do determinations that can assist the strategic nucleus manage the entity in a more economical, effectual and efficient mode. Management accounting is used to deduce relevant information which finally becomes the footing for the determinations made by the strategic nucleus of an organisation ( Hoque, 2005 ) . Management accounting is entirely used by the direction of the company therefore it is used for internal coverage of an entity instead than for the public revelation ( Weetman, 2002 ) . Contrary to fiscal accounting, direction accounting considers the future chances of the concern instead than the representation of the public presentation of the entity in the yesteryear. Management accounting does non show a historical position, but it provides possibilities for the hereafter of the concern ( Lucey, 2003 ) . The information required to transport out processs of direction accounting are provided by the direction information systems.

The processs used in direction accounting are entity specific hence any process that helps the direction make better determinations is adopted instead than the application of standardised processs as those of fiscal accounting ( Atril, 1994 ) .

Harmonizing to Chartered Institute of Management Accountants ( CIMA ) , direction accounting is the procedure of accretion, analysis, communicating and rating of the information used by direction to guarantee the rightness of controls within the entity and the optimal use of its resources ( CIMA, 2009 ) . Management accounting is a tool used by the direction to guarantee realistic monitoring of the public presentation of the entity and to seek improved ways to heighten its public presentation.

Harmonizing to American Institute of Certified Public Accountants ( AICPA ) , direction accounting helps the direction in three nucleus countries in an entity which are:

Strategic direction

Performance direction

Risk direction.

Strategic direction is a map of the strategic nucleus of the organisation which designs long term determinations and reviews the effectivity of execution of those determinations. Performance direction is the practical execution of the long term determinations designed by the strategic nucleus of the organisation. It is besides of import for an entity because the success of a concern depends upon the effectivity of the execution of the designed scheme. Risk direction is a map that evaluates the controls within an organisation against possible hazards in different maps of the organisation. Management accounting helps the direction measure the hazards and place effectual controls against those hazards. Therefore direction accounting helps an organisation in a figure of ways ( Coombs, 2005 ) .

Management accounting is extremely of import for the success of an entity. Management accounting is used by the direction of an entity to make a balance between the costs of transporting out the concern and the effectivity of the public presentation of the entity.


The direction accounting techniques that I would urge to Nokia in order to heighten the efficiency of its operations are ;

Discrepancy analysis,

Inventory direction,

Capital budgeting and Decision-making.

Discrepancy analysis

Nokia can easy track the divergences of its existent public presentation from its anticipated public presentation by carry oning the discrepancy analysis. Variance analysis is of import for Nokia because of its extremely competitory concern. Due to globalisation, competition all around the Earth has been increasing and it has caused vigorous fluctuations in the demands for communicating devices all around the universe. Therefore, in order to supervise the market state of affairs on a regular footing and in order to do determinations in conformity with the most up to day of the month information, Nokia should carry on discrepancy analysis on a regular footing ( Debarshi, 2011 ) .

Inventory direction

Inventory direction in footings of direction accounting is the rating of the turnover of the stock list and to cipher an order measure that ensures the optimal use of resources of the entity. Inventory direction is the most of import facet of concern for a maker, hence in instance of Nokia, stock list direction possesses extreme importance. Management accounting techniques sing stock list direction are used to cipher the turnover of stock list, demand of stock list on one-year footing, mean stock list and buffer stock. Calculation of one-year demand is used to plan budgets for the future fiscal periods and for doing determinations sing the arrangement of orders. An entity engaged in the concern of fabrication can do the most of direction accounting techniques by ciphering Economic Order Quantity ( EOQ ) . This computation helps an entity lower the cost of arrangement of frequent orders. Nokia can besides utilize stock list direction to guarantee the end-user satisfaction along with cost nest eggs.

Decision-making and capital budgeting

Decision devising and capital budgeting can assist Nokia heighten the procedure of long and short term determination devising. This direction accounting technique is used to measure the demand of an entity in order to optimise its public presentation, therefore it helps an entity make better determinations and better its procedures. Decision doing techniques take to capital budgeting. Budgeting includes determinations sing allotment of resources to the procedures where they can be utilized at their optimal potency.


The strengths of this analysis were the acclimatization of the direction accounting constructs with the procedures of Nokia. A fabrication entity can do the most of direction accounting techniques because an entity with fabrication concern in such a competitory environment demands to do important determinations on a regular footing, and direction accounting helps the direction make effectual determinations by showing true and just position of the internal public presentation of the entity.

The chief restrictions of this analysis can be the disablement of an entity to keep complete information sing its public presentation. Management accounting techniques are effectual merely when the direction possesses complete information sing the existent costs incurred for the public presentation of its procedures and other information sing the use of resources.


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