Responsible To Control Variances And Increase Cost Effectiveness Accounting Essay

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Relevant Experience:

My research proposal is based on management accounting principals and the reason i have chosen this topic is because i have more than three years experience in the field of management accounting. I have worked in lucky cement limited as a management accountant for a period of more than three years.lucky cemen is the largest cement manufacturer of Pakistan, holding a market share of 20%, sponsored by Yunus brothers group which is one of the largest business group of the country based in Karachi and grown remarkably in the last 50 years. my key responsibilities as a management accountant were

Responsible to control variances and increase cost effectiveness.

Prepare Industrial Reports to check market share of the company and industry.

Prepare Production Reports and coordinate with production to increase efficiency and cost reduction.

Have helped the company for their GDR project.

Responsible for making costing reports and finalization of accounts.

Name of collaborating establishment (if any).


The programme of research

Title of the proposed dissertation: (Research Proposal)

Concept of management accounting?

Aims of the investigation:

What is the likely hood propensity for small or medium sized enterprise to use management accounting techniques?

What advantages companies get by using cash flow forecast?

Identification of mechanics?

Background to the study: (Literature review - 2000 words max

What is management

A comprehensive explanation of the concept ''management'' poses innumerable difficulties. Invariably it leads to descriptive phrases such as ''making decisions, giving orders, establishing policies, providing work and rewards and hiring people ro carry out policies''. Management sets certain objectives which it tries to accomplish through the effort of the people it directs. In this sense, it looks towards a final goal through a series of steps and processes. To be successful management requires the integration of its own knowledge, skills and practice with the know how and experience of those who are entrusted with the task of carrying out the objectives. These objectives can be achieved by the management, together with the efforts of all employees, through performance of two basic management functions which are planning and controlling. (dyson,2007)


Planning is fundamental to the management process, a process of sensitizing an organisation to external opportunities and threats, of determining dealable and possible objectives, and of deploying resources to match the objectives. Without planning there is no basis of controlling, for planning provides the foundation upon which the control function operates. Effective corporate planning is based on facts collected and analyzed. Reflective thinking, imagination, and foresight are of invaluable help. The planner should be able to visualize the proposed pattern of activities individually and collectively, internally and externally. Planning is basically looking ahead - preparing for the future. It involves the choice of several possible alternatives, a matter of making a decision. Planning must precede the doing.

One kind of plan, among several, is the budget. The budget is not only the most important plan of an organisation, but also the basic link of cost accounting with management. The use of budgets, particularly in connection with the control phase of management, has been termed ''budgetary control''. In a budget, anticipated results, as envisioned by the planners, are expressed in quantitative data such as dollars, labour hours, number of employees, units of input and output, and production made and sold.

For the budget or any other kind of plan to operate effectively, an integrated balance must be maintained among the various plans and programs engineering, manufacturing, marketing, research, finance and accounting participate in the establishment of the corporate plan. No single function should plan and act individually and independently from other function, for all are interdependent. Failure to recognise the fundamental truth can cause unnecessary complexity and difficulty in planning and can result in disaster for the organisation.

Closely allied with proper planning are the determination and establishment of company objectives. An objective is a target, an end result. Corporate planning includes such area of investigation as the nature of the company's business, its objectives and major policies , the timing of the major steps in the plan, and other factors related to long range plans.

When asked to state the objective of the business enterprise, many people point to the need for realizing a profit. However, in the last few years business people have tended more frequently to soft pedal profit maximisation and to emphasise the modern corporation going list of social obligations, yet the phrase ''social responsibilities'' rarely defined remains a hazy concept. Profits are the indispensable elements in a successful business enterprise, a firm making in adequate profits will not only not survive but will perhaps become a social or economic disaster to the very society it is expected to support. Social responsibility is fair-weather concept, management cannot begin to think in terms of philanthropy unless profits are adequate. However, profit cannot remain the sole objective of the company and its management. It is limited concept in today's economic society and does not give the whole answer. Management must execute a series of thinking processes and actions which will guide it to produce specific products or render serviced in a definite manner or method, in a volume, at a time, at a cost, and at a price that will, in a long run, assure a profit and also win the cooperation of employees, gain the goodwill of customers, and meet social responsibilities. Such a company will be able to make a strongest case for profit maximisation, business logic and changing public expectations suggest that plans should be formulated within the framework of four major parameters - economic, technological, social and political. Organisational objectives and performance criteria must be boarder and more sophisticated.(Matz and Usry, 1997)


Management control is the systematic effort by business management to compare performance to plans. The control function is of prime importance in the accomplishment of objectives. The need of control increase with the size and complexity of the organisation. Continuous of an activity, task is required to keep it within previously defined boundaries. There boundaries are called ''budgets'' or ''standards'' are set up for manufacturing, marketing, finance and all other activities. Actual results are measured against plans; and if significant differences are noted, remedial actions are taken. Diagrammatically, the control can be pictured in the manner illustrated by the chart below

Setting objectives and making policy decisions





President or Manager

Board of Directors

Issue: Reports and graph charts

Leading to new decisions and tactical modifications

Result data assembled in cost and/or budget and/or electronic data processing departments

In small companies, planning and control activities are often tend to be performed by one person. The owner or the general manager of a small company can often perform these tasks without elaborate fact finding and analysis due to intimate knowledge of employees, material, money and customers. In a large concern with numerous divisions and a variety of products and services, planning and control responsibilities are not combined in the same person or group of person. In fact, the larger the business organisation the greater the problem of planning, and the more involved the process of controlling the activities of individual units scattered throughout the united states and foreign countries. For this reason many firms has initiated the decentralization of certain planning and control functions in order to place the reports and necessary corrective actions closer to the scene of activity.

Overall responsibility of control rest with executive management or in the final analysis with the president of the company. Because the president cannot attend to every aspect of the control program, authorities and responsibilities must be assigned to middle and operating echelons of management in order to ensure the success and control of management's plans. (Matz and Usry, 1997)


Authority is the key to the managerial job and the basis of responsibility. It is not only the force that binds the organisation together, but also the power to command others to perform certain activities. Managers work through people. Authority vested in the division manager. A department head or a supervisor enhances compliance with the plans and objectives of the organisations. Authority originates with executive management which delegate it to the various managerial levels. Delegation of authority is essential to the existence of an organizational structure. By means of delegation, the chief executive extends the area of operation, but must always retain the overall authority for the assigned functions, since delegation does not mean a permanent release from obligations. (Dyson, 2007)


Closely related to authority is responsibility. The essence of responsibility is obligation. It arises particularly in the superior subordinate relationship due to the fact that the superior has the authority to require specified work or servicers from other people. As these other people accept the obligation to perform the work, they create their own responsibilities. However, since responsibility cannot be delegated, the superior is, in the last analysis, responsible for performance or non-performance by the individual. (Dyson, 2007)


Accountability is basically an individual rather than a group problem, and the principle of single accountability has become well established for profit and not for profit organisations. Divided authority and responsibility result in divided accountability. The organisation structure must avoid duality or pooling of judgement, for this diffuse responsibility and nullifies accountability. Without single accountability control reports would not only be meaningless, but corrective actions would be delayed or not forthcoming at all. (Researcher own knowledge)


Organising is essentially the establishment of the framework within which required activities are to be performed and by whom. Without proper organisation a person cannot function as a manager.

The term ''organize'' or ''organization'' systematization of various interdependent parts and units into one whole. Considered in this sense organizing requires

Bringing the many functional units of an enterprise into a well conceived structure.

Assigning authority and responsibility to certain individuals.

These organisational efforts include the task of getting people to work together for the good of the company. Because of the attitudes, ambitions and ideas of the many persons involved, indoctrination instructions, and patience are needed to arrive at the desired organisational structure.

Creation of an organisation involves the establishment of organisational or functional units generally known as divisions, department, sections or branches. These units are created for the purpose of dividing task into workable parts leading to specialization of labour. A manufacturing enterprise usually consists of at least three large fundamental activities; manufacturing, marketing and administration. Within these three basic organisational units numerous departments or sections are formed according to the nature and amount of work, the degree of specialization, the number of employees, and the location of the work.

After organisational units have been created, management must assign the work to be done within each unit. Appropriate division and distribution of work among the employees combined in organisational units are vital to the attainment of company objectives. Of still greater importance are the relationships between the superior and subordinate on the one hand and among managers within the management team on the other. For ultimate success, the authority relationship binds the units into one whole. (Matz and Usry, 1997)

Organization chart

The organisation chart sets forth each principal management position and helps to define authority, responsibility and accountability. The accountants report must help management evaluate the effectiveness of its plan, must pinpoint success or failure in terms of specific responsibility and must establish the situation that will lead to corrective actions. An organisation chart is essential to the development of a management system and management reports which parallel the responsibilities of individual for implementing management plans. Generally, an organisation chart in the form is illustrated below.

This type of organisational chart is based on the line staff concept, a concept that is particularly useful when a company's product lines are simple and not subject to frequent changes over the years. The fundamental assumption is that all positions or functional divisions can be simply categorized into two groups: one group, the line make decisions and perform the true management functions. The second group, the staff - gives advice or performs any technical functions. (Matz and Usry, 1997)