Introduction from the business operation. By applying this

Introduction to Management Accounting System (MAS)

Management Accounting System (MAS)
is a broad system which assists management in decision making and it is very
vital to all industries nowadays for them to survive through the competitive
circumstances. MAS comprise a lot of components such as inventory management
system, environmental management system, risk management system and so forth.
As per the case of Top Glove Corporation
Berhad (TG), (, 2017) few systems are applied such as Environmental
Management System (EMS), Risk Management System and Management Control System

Management System (EMS)

EMS is a system used
by organization to be more environmental friendly and in the same time to
increase its efficiency in operation. TG applies this system in order to
produce great quality gloves with low efficiency cost and keep healthy
environment (, 2017). This had cause TG to be the largest glove
manufacturer in the world with the famous in good quality gloves

Management System

TG also implements
risk management system. Risk management system is mainly used for assisting
companies to access and identify the level of risk occurred. TG frequently
faced inherent risk factors mainly arising from the business operation. By
applying this system, this enables TG to differentiate the risks arise base
on the level such as extreme, high, medium or low risk (, 2017).
A matrix called “Possibility of Occurrence” is associated with the rating in
order to help the management to access the monetary and non-monetary
consequences of the risks and considered about the measures to be taken to
reduce the effect of risks to the company (, 2017). This could be
one of the main reasons why TG could survive for 26 years in the rubber glove

Control System (MCS)

MCS is a system used to collect and
apply information to gauge the performances of organizational resources as
well as resource allocation. It affects the manner of usage of organizational
resources and implementation organizational strategies. The application in
MCS can be found in TG through the water management and the wastage
management (, 2017).
In the case of water management, TG
had successfully decreased the consumption of water by 11.7 % between year
2016 and 2017 (, 2017). This is due to the effort to recognise
and minimise the water wastage in
the production line and optimise the use of water through automated water
level control system at the production water tanks.
In the case of waste management, TG
focuses on the control of manufacturing waste in line with the concentration
on cost efficiency (, 2017). In all the factories of TG, methods
to allocate the waste and minimise the effects to the nature is applied.
Besides, TG places better efforts in practicing tracing and controlling waste
to guarantee disclosure of data of the operation (, 2017).












Benefits of Management
Accounting System (MAS) to Company

mentioned in the part of “Introduction to MAS”, MAS is really essential to all
industries, it brings a lot of gains to the entities in order to survive in the
intensive competitive market and even to be success. A company can be consider
as success not only when the company able to surpass from its competitors but
also have the ability to survive in the highly competitive business environment
and also regardless the economic condition especially during recession or

of all, the management accounting system enhances the management team to make a
more informed decision. It concerns on both qualitative and quantitative
information and thus enable the managers to generate a more detailed report
which is essential in the planning process as well as the decision-making
process. In the process of formulating the plan, the managerial accounting
information is more forward-looking and all the relevant information regarded
will affect the future organization are taking into consideration. By doing this,
the manager able to forecast all the possible outcomes with their corresponding
risk as well as the opportunity cost of the option. Besides, management
accountant is proactively taking part in the management team to carry out a lot
of what-if scenarios, profitability analyses and risk assessment before any
decision is taken. For example, a company needs to buy a factory for
operational motive, the management accounting system may assist the owner of
company to purchase it and prevent debt increases.

the other hand, the management accounting system is significant to facilitate
the managers in implementing and controlling the plan. During the
implementation process, the management accounting system supply both financial
and non-financial information to the managers which prevent the
shortsightedness and lead to cost efficiency. Through having a big picture of
the implementation, the routine process can be improved and become more
effective. Whereas in controlling the plan, the actual costs incurred are compared
with the budgeted cost. The necessary correcting action is taken in order to
adjust the deviation of activity and meet the organization’s objectives.
Meanwhile, the management accounting system has an attention-directing
function. It might not solve the problem arise, but it draws the attention of
management team to the potential problem areas and framing the problem. By
doing so, the management team can address the potential issue before it brings
any harmful effect to the organization.

that, management accounting system can enhance the efficiency of the overall
organization by motivating the managers and other employees to approach towards
the organization’s goal. The management accounting encourages the managers to
have a good communication line with the employees in order to keep them
informed about the organization’s goal. One of the ways to motivate employees
to devote their efforts to the organization is through providing a challenge or
target. By setting a target, the employees have an initiative to improve their
working performance. Therefore, the quality of goods and services can be
improved and the efficiency of human resource can be achieved. Besides, the
concept of employee empowerment also plays a critical role to enable employees
to strive their best in their work position. The on-the-job employee might be
the one who is most clear about the weakness and strength of his routine
working process. Thus, the employee empowerment may lead to the reduction of
costs wasted and the effective working process.

addition, management accounting system can be used to improve the performance
of employees and organization. Through establishing a rewarding system, the
employees are motivated to maximize the value of the organization. The management
accounting system would save the target sales or production and record the
output of employees in order to appraisal the performance of employees. Once
the employees hit the target or accomplished the task, the managers would
reward them the positive feedback, chance to get promotion or paying them
higher salary. Different management levels are evaluated on the different basis
such as the salespersons should be measured based on their number of sales made
whereas the manufacturing employees should be evaluated based on their the
quantity of the product produced. Otherwise, the management accounting system
can be used to act as a mean to evaluate the performance of the organization’s
subunits such as departments, divisions and product lines. The managers of the
subunit are encouraged to strive their highest possible effort to achieve the
target in line with the organization’s goal. It highlights to the manager the
area of successful operation and area needs improvement. The performance
evaluation report also helps the top management to identify whether a subunit
is a feasible economic investment or an idle and cost-wasting investment.

as all we know, the advanced technology leads to the rapid spread of idea and
the changing of the business environment which become more and more boundless
and competitive. Therefore, the continuous improvement is vital for the each
organization to promote the improvement in quality of goods and services and
the effectiveness of processes and systems. The management accounting system
plays a crucial role to make sure the competitiveness of an organization in
long-run. It acts as a benchmark to measure the ability of the organization to
compete with others and flexibility of the organization against the changing business
environment. By using the balanced scorecard, the performance of the
organization can be assessed based on the internal control system, flexibility
to cater the changing needs of customer as well as the innovative and
continuously learning operation.

Next, the application of MAS at
national level suffers, mostly deserved due to the lack of professionals in the
field and also the lack of an appropriate managerial vision
(, 2017). The advanced of managerial accounting barely manage
to enter the Romanian environment and tend to be considered with the
unwillingness. The economic, political, legal and fiscal contexts represent the
bona fide of encouragement to adopt practices that are contrary to the concept
of real performance (, 2017). The reason for a company to
become successful is because of the enforcing of authority (,
2017). It can be said that it was a tradition in the organization of managerial
accounting systems (, 2017). However, it only applies to the
knowledge and abilities of multinational companies which can able to enforce
the Romanian practice to act within the limits of how powerful the managerial
accounting systems are. In fact, the migrate of immediate liquidities that are
obtained by any mean ruin any intention of efficient functioning of a
managerial accounting system. Approach that used by the survival had completely
misrepresent the quality and relevance of accounting information. Therefore,
the force of implementation had cause the vulnerabilities exploitation in the
adopted systems and also creates an image of functionality beyond reproach.

Besides that, the managerial
behavior will also influence the managerial practices, as evidenced in the
national context (, 2017). Management decisions can establish
the form which been given to the accounting information in compliance with
certain objectives. The managerial approach which counted to be wrong is due to
the reoriented on a very short-term which involves variation in the production
of accounting information. The national principle that can be found is
“tomorrow is another day” which sincerely brings overwhelming for the
managerial accounting tools (, 2017). In order to prevent
this matter to happen again, the tendency to invent and use of creative
accounting techniques in a poisonous matter becomes a must for Romanian
managers, who tend to transform it into a common practice. And lastly, the cash
flow route will also impose to the form of the accounting information and also
performance level.

Moreover, the results applying MAS
should not be recognized independently from the organizational and managerial
context (, 2017). New skill should be link up with the
interdependence of all organizational process and informational revolution
between managerial accounting and managers at all levels (,
2017). The transition to a new aspect regarding production accompanied by the
equivalent accounting challenges. This does not mean that all organizational
issue will find their solution. There is no turning back once the changes
applied. Somehow, no tool or method can be overrated in any kind of perception.
The organizational and managerial context plays a radical role in the change of
process and also the subsequent application of MAS. On the other hand, the
transition process should be gently and attentively being formed.

In addition, the adoption of modern
MAS has an extensive effect in all organizational structures. But, managerial
accounting yet not able to reach the stage in which the financial interference
of an organizational “earthquake” of this kind can be examined. All
organizations develop in time at certain particular characteristics that become
necessity for their operation. The implementation of new managerial systems,
otherwise considered to be compulsory, cannot solve the difficulties caused by
the reaction of the human factor and by the specific racial type. These problems
become fundamental aspect that can regulate the failure or even success of the
implementation, regardless of the benefits offered by the new system.

Lastly, applying MAS can means a
great effort to promote change, this involved the purpose for change, goal for
applying changes and the tactic, creative respond. One MAS is applied it will
also attract the occurrence of creative accounting nature, especially when
crisis time. As such, MAS presented most relevant sets of information which
enables managers to differentiate the effectiveness of various techniques,
degree of questionable, level of legal methods used to enhance the financial
statement presentation. As the financial presentation gave a good picture, it
may leads to better credit ratings of the company. When a company have a great
credit ratings, it may cause the lift of level of creditworthiness which
enables company get bank loans easier. Meanwhile, more potential investors will
be lesser reluctant to invest their money in the company. So, the company will
have high level of capital and leads them going concern from liquidation and
have a greater share price which may even let a company to stands out in the



of Traditional Budgeting









Solutions for the Criticisms
of Traditional Budgeting

Criticism 1:
Complicated process consuming times

Flexible ways
to reach goals

Managers can give greater flexibility in how they
achieve their targets. For example, top management may agree to specific
goals with the managers and the managers to achieve their goals in their own
way by given authority. No detailed budgets are required and focusing on
managers who achieve their overall targets.

Continuous or rolling budget

Another alternative is to reduce the time of budget planning by
executing a continuous or rolling budget. CIMA Official Terminology defines rolling budgets as plans or budgets which are kept continuously updated by adding a further accounting period during the
earliest accounting period has expired (Walker, 2008). The continuous budgeting concept usually applied to a
twelve-month budget, so there is always a complete annual budget. It also can be applied to
monthly budget or quarterly budget. If a company elects to use continuous
budgeting for a shorter period of time, such as
three months, its ability to create a high-quality budget will be greatly enhanced. Sales forecasts tend to be much more
accurate over periods of just a few months, so the budget can be revised according to the likely estimates of the company activity (Bragg and Bragg, 2017). It also forces
management to reassess the budget regularly and to produce budgets which are
more up to date (,

Budgeting Software

Decimal’s Budgeting Software has been developed as budgeting approach to
improve this criticism and budgeting process. Processes of Decimal’s
Budgeting Software are accelerated by automatic data consolidation in a
centralized database which provides simultaneous access to multiple users
(, 2017). It enables all managers and authorized users to enter
budget data directly while keeping track of changes made. Decimal’s Budgeting
Software provides users the ability to prepare, manage, track and control
their budgets, forecasts, projections and scenarios. Decimal Suite features
can efficiently manage your budget, excluding possible budgeting pitfalls as
planning errors, losing expertise when employee leaves, unable to monitor
cost reduction initiatives, to monitor variances or to provide relevant and
timely information (, 2017). For example, ” The Decimal’ budgeting
software enabled the Retraite Québec (company) to reduce by half the time
required to prepare the budgets”.


2: Major focus on temporary financial measurement


could be overcome by placing more stress on manager’s long-term performance
and adopting a profit-focused budget assessment, while also placing more
emphasis on participative budgeting. In addition, attention should also be
given to expanding the performance measurement system and focusing on areas
of key outcomes for short-term and long-term considerations. In particular,
the balanced scorecard approach can be adopted. The balanced scorecard is a
strategic planning and management system used to align business activities
with the organization’s vision statement. The Balanced Scorecard (BSC) was
originally developed by Dr. Robert Kaplan of Harvard University and Dr. David
Norton as a framework for measuring organizational performance using a more
BALANCED set of performance measures (, 2017).
Traditionally companies used only short-term financial performance as a
measure of success. The “balanced scorecard” added additional non-financial
strategic measures to the mix in order to better focus on long-term success.
The system has evolved over the years and is now considered to be a complete
integrated strategic management system (, 2017). If the
Balanced Scorecard system is implemented, company-wide should be the key to
the successful implementation of the strategic plan/vision
(, 2017).
result of the Balanced Scorecard should be:
Improved processes
Motivated/educated employees
Enhanced information systems
Greater customer satisfaction
Increased financial usage
Monitored progress


3: Lack of motivation of managers

Participative budgeting

Participative budgeting is a great motivational tool because people who participate in it may work harder to achieve their budgeting goals, cooperation is facilitated and more realistic budgeting figures are
obtained. Wisegeek
(2012) define Participative Budgeting as a budgetary process that involves the active participation of a
wider range of employees in the process of creating a workable budget for a
department or even an entire company. This is also known as “bottom-up
budgeting”. This
contrasts with imposed or top-down budgets where the ultimate budget holder who has no chance to participate in the budgeting process. With a
participative budget, employees of the company structure are invited to
provide input into the assessment of the company’s needs for an upcoming
budgetary period. Working within guidelines designed by company management,
those employees consider various line items and decide how to allocate funds
to improve the company’s opportunities for growth. In many instances, this
approach has the benefit of identifying possible strategies that employees
who are directly involved in the day to day operation of a particular area of
the company can use it to determine the allocations that ultimately save
money and help that area to function with a greater degree of efficiency(wiseGEEK, 2017) . Agro Success
Berhad is a case study company used a bottom-up or participative budgeting.

Changes in rewards and punishment system

Besides that, the rewards and punishment system
must be changed so that it is linked to a series of performance criteria rather
than being controlled by the performance of short-term financial budgets.
Consideration could also be given to changing the reward system from focusing
on responsibility centre performance to a rewards based on the company’s
overall performance.


4: Concern on inflexible formal organizational structure


The dynamic budget can overcomes the
criticism of fixed budget which emphasizing a rigid formal organization
structure. This is because the
dynamic budget can be recast on the basis of activity level to be
achieved. Thus it is not rigid and is a flexible budget. According to CIMA,
“a dynamic budget is defined as a budget which, by recognizing the difference
between fixed, semi-variable and variable costs is designed to change in
relation to the level of activity attained”. Dynamic budgeting can be used to more easily update the budget for which revenue or other activity data has
not yet been finalized. Under this approach, managers will approve all fixed expenses and variable expenses as a part of income
or other activity measures. Then the budgeting staff completes the remainder
of the budget, which flows through the formulas in the flexible budget and
automatically alters expenditure levels. This approach can improve the
efficiency of the budgeting
process, especially when the management team is working through a large
number of iterations.