MODUL PERKULIAHAN
Akuntansi
Manajemen
Management Accounting and
Business Environment
Fakultas Program Studi Tatap Muka
01
Economic and Accountancy
Business
Abstract
Management accounting is
concerned provide the information to
the managers, that is inside
information in the organization to
people who direct and control its
operations especially control of the
productions. Few approaches
developed to assists organization in
meeting these challenges such as
Just-in-Time (JIT), Total Quality
Management (TQM) and Theory of
Constraint (TOC)
Kode MK Disusun Oleh
84033 Alfiandri, MAcc
Kompetensi
After completing this module, the
student should be able to
1. Understand role of management
accounting
2. Understand the differentiation
between management
accounting and financial
accounting
3. Understand management
function in the organization
4. Understand basic concept Just-
In-Time (JIT) and Total Quality
Management (TQM) and TQC
Pembahasan
1. Introduction

Every business organizations either large or small have manager whose responsibility to
control and monitor the company business activities. In order to control and monitor, the
managers need the information both financial and nonfinancial information. Each of
managers in each department needs specifically variety of information that in line with
their needs accordingly. For example, manager operational, they need specific
information about cost of material of the products, labor that neither directly touch make
the products and indirectly involve make the product and also overhead costs.
In order to obtain understand the information of management, this study provides the
information how and what information the management needs. Module one introduce the
definition of management accounting and differentiation management accounting with
financial accounting. Content in module one is also consisting, management function,
just-in-time (JIT), Total Quality Management (TQM) and Theory of Constraints (TOC)

2. Module objective

There are some objectives in the module one namely,

 Understand definition of management accounting as well as role of management
accounting.
 Understand the differentiation between management accounting and financial
accounting.
 Understand three board management function in the organization i.e., planning,
directing and controlling
 Understand the JIT which includes its concept, its consequences and its benefits
 Understand the TQM and its roles
 Understand the TQC

3. Management accounting point of view

Management accounting defines as the process of identification, measurement,

accumulation, analysis, preparation, interpretation and communication of financial
information used by managements to plan, evaluate and control of organizational
operation and also assure appropriate use of and accountability for its resources (IMA

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 2008). Simple definition, management accounting is concerned provide the information
to the managers, that is inside information in the organization to people who direct and
control its operations. Management accounting provides a variety of reports that
depends on the managers need accordingly. For example, budget department needs
specific reports from others department how they performed and also to compare
between plan with actual budgets. Because this subject toward to firm’s management
oriented, study about management accounting covers the understanding of what
manager do, the information managers need and also about general business
environment.

 Management accounting versus financial accounting.

The main differences between management accounting and financial accounting are
results orientation. Management accounting is prepared the information to internal
users i.e., the managers in the organization while financial accounting is prepared the
information to external users such as, shareholders and creditors.
Table 1 below shows the distinguish between management accounting and financial
accounting

Management Accounting Financial Accounting

Internal Users e.g., Managers External users e.g., Stakeholders,
Creditor
Type of report : Frequently Monthly, Quarterly, Semester and Yearly

Special purpose for specific decision General Purpose e.g., Profit, ROI
e.g.,
Costs, Control
Content of report: very detail Content of report: highly aggregated

Recording: beyond double entry Limited double entry

Table – 1 Comparison between management accounting and financial accounting

Table 1 show the objective of management accounting is for internal users while the
objective of financial accounting is external users. Type of reporting for management
accounting is frequently which means no specific time to provide the information to
the managers and that depend on the manager’s needs i.e., daily, weekly or three

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 days once. Type of reporting for financial accounting is regularly basis i.e., monthly,
quarterly, semester and yearly. In term of providing the information, it provides for
special purpose that leads to specific decision such as cost control of raw materials
and controls the labors. Financial accounting on the other hand provides the
information to external users which aim for general purpose such as profitability,
return on investment and return on assets. Content of report in the management
accounting is very detail due to managements need evaluate and measure the
quality and quantity of the products while content report in the financial accounting is
aggregated. It means the information is accumulated and calculated in specific
period. For example, administration expenses in the income statement. It states and
reports monthly, semester and yearly. Recording transaction in the management
accounting is beyond double entry which is not rely on the debit and credit while
recording transaction in the financial accounting is stick with double entry model i.e.,
debit and credit

 Board Management Function

In order to carry out business operational activities, the managers should have three
essential tasks such as, planning, directing and controlling.
Firstly, planning is to identify alternative and then select from among the alternatives
the one that does the best job to achieve organization’s objectives (Garrison & Noreen
2006). Planning is a thing should be set up in advance to achieve the company
objective.

Secondly, directing is pointing task as delegation and responsible from top

management to low managers. This involves people in the organization. The middle
managers and low managers should implement and operate the plans accordingly.

Finally, controlling is acting to ensure planning run on the track. Control and monitor is
one packaged that cannot be separated. Control and monitor can be named as
cybernetic logic whereby there are set in advance, output is measured, goals and
output is compared, feedback is provided and corrections are made if necessary
(Henri, 2006).

The three board management function also depicts in the structure of organization
which we find in the organizations. That sample structure of the organization is shown
in Figure 1.

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 Figure 1 – Sample structure of the organization

Figure 1 shows top managements build the plans to achieve organizational objective.
Middle managements have been delegate by top management to implement and
control (flow of the authority). Low management is operating the plan which they must
responsible to top of the line.

Many companies implement the system to enhance product quality, reduce the costs,
increase output, prevent delays in responding to customer and increase the profits.
There are few approaches that the companies implement in order to achieve their
objectives namely Just-in-Time (JIT), Total Quality Management (TQM) and Theory of
Constrain (TOC)

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  Just-In-Time (JIT)

Just in Time (JIT) is a philosophy that eliminates waste which is associated with time,
labor, and storage space. Basics of the concept JIT is the company produces only
what is needed, when it is needed and in the quantity that is needed. The company
produces only what the customer requests, to actual orders, not to forecast. JIT can
also be defined as producing the necessary units, with the required quality, in the
necessary quantities, at the last safe moment. It means that company can manage
with their own resources and allocate them very easily (Radisic 2013). Implementing
JIT system has several consequences should be considered by management. Firstly,
production would be held up and a deadline for shipping a product would be missed if
a key part was missing or found defective. Secondly, production would also held up
and do not meet the deadline due to delay delivery of the materials from the suppliers.
In addition to this, the suppliers must be able to deliver the material in the right time
and the right quantity as needed by the company (Garrison & Noreen 2006). Although
few consideration should take into consideration, some benefits have in the
implementing JIT such as, funds that were tied up in inventories can be used
elsewhere, the area which used to store inventories can use for others propose like
develop another production, throughput time is reduced, resulting in greater potential
output and quicker response to customers and that also meet the customer
satisfaction (Garrison & Noreen 2006)

 Total Quality Management (TQM)

Total Quality Management (TQM) is integrated organizational effort designed to

improve quality at every level. There are two major characteristic of TQM, firstly, a
focus on serving customers and secondly problem solving using teams made up of
front line workers. Furthermore, total quality management (TQM) is approach system
which design to improve quality of the products according to customer’s perspective.
In order to minimize product error, perhaps a model tool i.e., Plan-do-check-act
(PDCA) cycle is useful. Figure 2 depict PDCA cycle (Garrison & Noreen 2006).

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  Study the current process
 Collect data
 Analyze the data to identify possible
cause
 Develop a plan for improvement
 Decide how to measure improvement

Plan
 If successful, make the  Implement the plan
change permanent on small scale
Act Do
 If the results are not  Collect data
succeed, try again Check

 Evaluate the data collected

during the Do phase
 Did the expected improvement
occur
Figure 2 - PDCA cycle

 Theory of Constraint (TOC)

A constraint can defines as anything that prevents you from getting more of what you
want. Means of constraint is about “the Limit”. For example, when raw material is
constraint, management may go to secondary vendors and purchase at higher cost
than normal price. Another example, when a machine is chronically constraint about
the capacity and management exhaust the possibilities of using effectively, therefore
the additional capacity of the machine should be purchased.
Every company faces at least one constraint in their business activities therefore,
management should think ahead and focus the constraint in the business operation in
order to minimize errors and reduce the cost.

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4. Summary

Management accounting assists managers in carrying out their responsibilities that

includes planning, directing and controlling. Since managerial accounting provides the
information to internal users rather than external users therefore it differs substantially
with financial accounting. Managerial accounting is future oriented, emphasize segment
of the organization, is not governed by general accepted accounting principles and is not
mandatory.

The business environment in recent years has been characterized by increasing

competition and relentless drive for continuous improvement. Few approaches
developed to assists organization in meeting these challenges such as Just-in-Time
(JIT), Total Quality Management (TQM) and Theory of Constraint (TOC).

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Daftar Pustaka

Garrison, R.H. 2006. Managerial Accounting. Edisi 11. Penerbit Salemba Empat. Jakarta.

Henri, J.F. 2006b. Organisational culture and performance measurement systems.

Accounting, Organisations and Society 31, 77-103

Malcom, S. 2005. Performance Measurement and Management: A Strategic Approach

to Management Accounting. Sage Publications.

Radisic, M. (2013). Just in Time Concept.

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