Management Accounting Practices in UK Manufacturing Firms

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In the present level of conscious market demand and necessities, companies are facing shift competition on varied marketing conditions. To overcome these companies are making move which are more concentrated on maintaining performance and clearly maintaining a documented approach for all data on financial front. These widespread demand in maintaining the management accounting for UK countries have made manufacturing companies to get use to work on these strategies. This has been a main base for all other countries and it improves the performance of company in varies aspects. In traditional and other countries, methodology followed for management accounting differs depending upon the origins. They earlier had an economical principle of work methodology and solve day to day management queries. Hence the importance of management account system of companies operates in scenarios, in which there is actual need of information and decision making ability at all levels of the management. In order to simplify the traditional methods of management of accounts, one need to work on various cost of operating mechanism and factors which influence their work. (Bromwich, 1999)

In my view point we study all the details of the management accounting position in various companies in UK. These companies make up contingency issues which can rather maintain or delay the transitional work on management account system. In our study we go through in detail about various aspects and methodologies in manufacturing companies dealing with management accounting in transitional phase. While we work on these issues, differences rise about levels of development and accounting of finance and auditing issues of regulation, which are a real precondition for design and putting forward management accounting in different areas of the companies. These can be maintained at different levels of characteristic work. (Anderson, 1999)


The main aim of this proposal is to showcase various aspects of management account system from traditional level to present use of account system. It also delves into various characteristic view points of working small and big manufacturing companies in UK, even considering market level options in India.


The main objective of this paper is to provide basic mechanism in transitions of economy. It is better we take up various transitions about various accounting system.

Exploring practices in management accounting in UK manufacturing practices and the changes which it came across and its causes.

To examine the benefit of the above changes in management accounting system.

To study the performance of the firm in relation to the management accounting practiced.

To compare the management accounting practices in UK, with that of India.

Literature Review

The effect of management accounting systems on a firm's performance in today's dynamic business environment has always been a subject of debate but there nothing much has been published on it. Ð…Ñ-m аnd Khim ling (1998, p.341) suggests that management accounting system synergises with production systems such as JIT and TQM and has positive effects on the performance of the firm. Klаmmеr (1973, p.361), through his investigation, argues that there is no relation between the sophistication of capital budgeting techniques and the performance of the firm. Mеrсhаnt (1981, p.824) suggests that there is a link between budgeting and performance. He also mentions that there is a link between budgetary plans and departmental performance of the firm while zerobase budgets had a negative link.

Activity Based Costing (ABC) is a relatively new costing technique where costs are allocated to the activities and cost of the product is determined by the number of activities consumed. It is focused on determining the true cost of the product. According to Kеnnеdy аnd Аfflесk-Grаvеѕ (2001, p.36), the performance of the firms practicing ABC is better in comparison to those who did not adopt ABC method.

Management accounting techniques in advanced economies are sophisticated and well developed. With many economies are undergoing reformation, these advanced management accounting techniques can prove to be useful in such economies. However, use of advance management accounting techniques in less developed economies is not easy and they would possibly not be feasible even though are very important for decision making process

There have been some researches on the study of management accounting systems in developed and emerging economies. Change in manufacturing technology in emerging economies has led to changes in cost structures. Capital intensive manufacturing units have led to high overhead costs. Such changes created a need for more advanced and sophisticated management accounting systems which can facilitate more accurate cost estimation. There has been an overemphasis in the traditional methods than the more competitive contemporary methods (Fry еt аl. 1993). Traditional practices have focused more on reduction of costs to increase profit (Аndеrѕоn аnd Lаnеn 1999, pА08).

According to a scenario analysis performed by Vоkurkа аnd Lummuѕ (2001), implementation of ABC is beneficial only where the overhead costs are less than 15% of the total costs.

Сhеnhаll (1998) investigates that firms with management accounting system focusing on customer satisfaction, on time delivery, reduction of defects and improving quality tend to be more profitable. Ð…Ñ-m аnd Khim Ling (1998) argues that it would be appropriate for firms with advanced production systems such as TQM and JIT to have advanced management accounting systems while traditional management accounting practices would be appropriate for firms with high volumes and low degree of advance manufacturing system.

We can see survey at different levels which led to management accounting, which carries in countries of different continent and publication of various journals on this topic. (bhimani,1996:Drury et al 1993;Lukka,Granlund,1996;Amat et a.,1994).It has mentioned in various journals, where management accounting or research work done as a part of publication for Management accounting research and European Accounting Review, it mainly dealt with eastern and central Europe transition countries . These applications of management were presented at the Congress of European accounting association. It has generalized and found out the work on these fronts are mostly at the stages of initiation and developing these methodology at it own right for researchers to work on it are going at a pace

As developed by a company, which has chemical functions (Vamsi,2000), It latter have a detailed work on bringing about management accounting which are brought about by the European accounting review ,which on this account presented various papers .It has made study which range from(1993-2001) .There have been several publications which have been worked on eastern-European and Asian countries . There have been several publication which tried to address the subject of accounting aspects in countries like Poland, Czech Republic and Romania etc 1995. (Haldma, 2002)

In fact it merely confirms transition of countries which are in prioritized level and development of accounting are more at the initial stages of development and we need to work on these analyzing process

When considering the survey of several European countries at various levels ,Countries of eastern and central European made out proceedings from the information at the authors disposal and found surveys' at the design of companies. These design were regarding the cost management and management accounting which have been carried out in Poland(Sobanska,whuk,1999lSyychta,2001 etc) and countries of other Estonia manufacturing companies (Haldima,1997). They worked on a comprehensives work on the accounting project of research and tried to address the issues of management accounting system. To make it clear ,Investigations have revealed that eastern and European countries indicate a state of art working study methodology (varmsi,2000).When we work out these strategies of characteristic study ,we find out management accounting practices at the basic approach which were conducted by Anderson and Linen(1999,India) ,and Luther and Long den(2001,South Africa). (Haldma, 2002)

With regards to the management accounting, the emphasis on performance measures in terms of traditional and non-traditional, in the literature has increased. Improved organisational performance is often linked to the management techniques such as balanced scorecards and other modern techniques which fit in the company's strategy. The critiques of financial measures are seen to have put more weight on the non-financial measures as they seem to be more of an internal utility and they do not provide the managers with enough information in order to make sound decisions. (Ittner & Larcker 1998).

Contingency theory has also been criticized for many reasons. As Fisher (1995) points out, contingency theory lacks clarity and specificity (e.g. variables are ill-defined). The relationships and causality among contingent variables are unknown. Although the most obvious contingent variables have been studied, others have yet to be identified (Fisher 1995). There are no robust measures for the variables (Chenhall 2003). As Perera (1997) points out, contingency research only shows associations among the variables at issue. Another criticism of contingency based research is that it has relied on traditional, functional theories and has not applied more interpretive and critical views (Chenhall 1993). The weaknesses of survey instruments also cause problems. Researchers have used different operational definitions for the same variable, there are only limited number of variables in the questionnaire, the implications of the range and depth of variables are highly dependent on the exact nature of the questions being asked and the methods being used to determine an answer, the measurement of performance is problematic etc. (Fisher 1995, Chapman 1997). (Hyvonen, 2008)


The main hypothesis for this proposal is providing basic analysis on management accounting system in manufacturing companies in UK. What changes can be brought in companies with regard to developing countries with regard to India. In this paper emphasis is given on various data analysis previous and present level of procedures which are due followed.


The methodology here we follow is taking information on management process and study there levels of application and procedures .Majorly studies have been concentrated more on the accounting aspect. There has been little study on the management aspects when there is transition in environmental aspects.

In order cope this aspect, emphasis is given on studying various accounting mechanism in manufacturing companies. Differential aspects are taken care and whole new point of account management work studies is taken.

As, in this paper we need to consider various viewpoint of management accounting system in India manufacturing companies. We study all the basic facts.

Management accounting for manufacturing companies in UK

We can say there 's has been period of big change which brought about a decade long .If one looks at the environment of business and experience, which has to been up to limits of clients ,employers and manufacturing companies resource status. The main encouraging aspect in management account system is at the macro level, which leads to altering of business environment which can change radically and find great transformation in accounts professions. We need to look out for managerial options at the professional account level and leads to transformation. In these scenarios, we mainly work on principles which have relation between regulators and accountant at an individual level. More importance is given to the sustainability of success for any manufacturing organizations. These aspects of sustainability have made a greater progress in today's business world. In other aspect we can bring out development and value added management focus in transforming to better terms. (Bromwich, 1999)

In various scenarios work has been enabled which can have their names changed. There were the days, one would see rise in accountants at the chartered level increase at world level. But, we have seen a reverse trend in maintaining these levels due to

Increasing overhead cost which is affecting finance.

Work done by outsourced professional of accounting firms.

Main competition among different jobs.

Taking up various challenges which are specific one.

Management accounting in Indian perspective

The main aspects for any company in this competitive scenario is managing product and service generation cost with respect to quality and performance. It is indeed more important to know that customers are more concentrated on high quality and performance based product and service at the same level of price which needs to be taken up.There is a serious urge from the share holders of the company who are demanding a high rate of investment with the company. The main aspect for any Indian manufacturer is to get better profit gain on cost which has to bear at production level. As, in scenario there's a serious competitions between domestic and other companies products .Small companies had realize management of cost is continuous program which needs to be improved continuously. (ANAND, 2005)

In today's aspect leaders of market are pursuing cost reduction which needs to be a most strategic aspect in market representation scenario. It can be said that most of market is continuous widening gap between them; they need to redeploy methods so that effective utilization of growth is better at greater level. The most effective challenge is the identifying critical tasks which industries in India are facing for a decade long. Hence the frame work needs to work out which give effective activity base performance management system.

For working out an analysis, it has been found out that companies of around 53 out of which 26% responded on better use of activity based costing for product pricing and feedback on operations. In the figure depicted below it is mentioned that 77% of ABCM user companies which are into manufacturing sector and other 23% are in service based industry. These statistics are taken on record in 2000 where favorable rate in India is 38% and other 26% in USA and the other 40% in Norway. There's been a huge increase in no of users of ABCM which has reached to 58%.It has all the functionality of cost management and financial reporting which are within the enterprise. The usage of ABCM system has reached advanced stages which has extending facility level at customer level activities. (paula.sharman, 2003)