Essays on The Main Role of Management Accounting of British Airways Case Study

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The paper 'The Main Role of Management Accounting of British Airways' is a perfect example of a management case study. This airline is the UK's highly domestic and internationally booked airline with enormous home and international destinations. For instance, BA flies to approximately 550 destinations across the globe.   Additionally, besides scheduled flight services, the airline offers freight, mail, and ancillary services to both domestic and international. According to the British Airways Report (2009), the firm was privatized in 1987, and after that the company has exceedingly continued to develop increasingly regardless of the stiff competition in the aviation industry across the world.

The recent economic downturn impacted heavily on the airline industry. Nevertheless, BA has worked to maintain its attractiveness; thus, its future is filled with hope. For example, the BA's main objective is to become the most responsible airline in the world by coming up with guiding principles that are geared towards strategic decisions, and this will assist the company in achieving this critical objective (British Airways Report, 2009). Products: The company products include domestic flights and across Europe, sometimes also referred to as short-haul products.

Short-haul products are products like UK Domestic, Euro Traveler, and Club Europe. Secondly, the company also offers long haul products, which include world club, world traveler, and world cargo. Processes: the company has developed lean processes that will provide the accounting, control, and measurement the will necessitate lean operations across the company. Competitors: British Airways is a company that operates globally; hence it has global competitors like Southwest Airlines, Emirates Airlines, Etihad Airlines, Air France, Virgin Atlanta, Swiss Airways, and DHL. Policies: the company has various policies, including privacy policy, baggage-free policy, and sex discrimination policy. Management Accounting and its roleManagement Accounting is a task that involves gathering, classifying, summarizing, evaluating, and reporting information that is essential in assisting managers in their day to day decision-making and control activities (Hart & Wet, 2008).

Management accounting's key focus is on planning and controlling the company's internal activities; the latter is completely different from financial accounting, where the core emphasis is on reporting to shareholders, creditors, and public regulators. In this regard, management accounting demands the collection, analysis, and interpretation not only cost or financial data but also other data, including sales, price, product demand, while measuring physical quantities and capacities.

Management accounting employs both financial and costs accounting techniques that include marginal or direct costing, standard costing, and budgetary control. In this view, management accounting is an extension of cost accounting to a new management perspective. The main role of management accounting is to provide economic information to managers in order for them to achieve organizational goals and objectives (Weetman, 2006). It has been established that the information flow system is critical when designing a management accounting system.

Owing to this, managers at each level must be equipped with a clear understanding of the objectives and goals assigned while receiving a flow of relevant, up-to-date information. Management accountants for this matter are tasked with providing forecasting and planning, variance analysis, re-examining, and scrutinizing costs coherent within the business organization. To expand on this, effective management accounting systems, together with management accountants must rather generate information that allows proficient allotment of costs between the cost of commodities sold and stocks for profit reporting both internally and externally (Kim & Thorne, 2005).

Consequently, they must provide relevant information for managers to make better economic decisions. Lastly, they should provide information for forecasting and planning, performance capacity, and continuous integrations (Steven & Bragg, 2007). Information needsBusiness organization management accounting information needs to fulfill the requirements of internal users. The overall need for this information is aimed at meeting the following objectives: Planning: This involves choosing an appropriate cause of action and stipulating how the action will be realized in the organization. Planning entails identifying alternatives and then selecting one from the alternatives that will facilitate in furthering or achieving the organization's goals.

When making such choices, managers are called upon to balance the opportunity against demands made on the firm's resources (Horgan et al. , 2002). Good plans and forecasts of managers are best formally expressed in budgets. These budget preparations are always under the directives of management accountants or the controller: the accounting department manager. Directing and Motivating: managers are also bound to oversee the daily activities in order to maintain the functionality of the organization.

Managers are tasked with assign duties to employees, arbitrate disputes, answer questions, and solve on-the-spot conflicts while also making a decision that affects customers and employees (Sarker & Yashmin, 2005). Given this effect, they direct the work, particularly that that accomplishes routine activities. Management accounting data, like daily sales reports, are used for daily decision making (Horgan et al. , 2002). Controlling: When accomplishing control function, managers are tasked with ensuring that the plan is followed consistently. Feedback usually signals that operations are on track. In more complex organizations, feedback is provided through detailed reports that compare budgeted results to actual results.

These performance reports usually identify where operations are inconsistent with the plan and where the organization requires additional attention for optimal performance (Horgan et al. , 2002). Other informational needs are: Collection: this entails collection information in money terms linked to transactions resulting from the organization's business operationsRecording and classifying: this is basically bookkeeping purposes. Summarizing: this is entails summarizing data to come up with reports that are of benefit to the various users of accounting information, both internally and externally (Hugh et al. , 2005). Methods and TechniquesThere is a myriad of techniques and methods through which a company can undertake management accounting.

The table below is a recommendation of management accounting techniques that British Airways Company can employ in order to increase its current and future profitability. The research and analysis of the report wholly relied on a secondary data source that was highly economical, time-saving, helped in the general understanding of the problem, and also allowed to access information that would have been otherwise impossible to get. The analysis performed can help set a platform for primary research. In contrast to the above-mentioned benefits of the secondary data, the latter is sometimes obsolete and does not fit the marketing research factors.

For instance, you may require specific information like disposable income only to find the data available, giving you gross income. The accuracy of the secondary data is not known. In some instances, the data might be outdated.

References

British Airways. 2009. Annual Report and Accounts. Available at http://www.britishairways.com/cms/global/microsites/ba_reports0910/pdfs/Strategy.pdf

Cadez, S. 2006. The Application of Strategic Management Accounting Techniques in Slovenian Manufacturing Companies. Zagreb International Review of Economics and Business, vol. 9, no. 1, pp. 61-75

Garrison, H. R., and Noreen E. W. 2004. Managerial Accounting. New Delhi: Irwin McGraw – Hill.

Hart F. J. De and Wet De J. 2008. EVA and Innovations in Decision Making and Financial Management‟, Working paper series.

Horngren, CT, Sundem, GL., and Stratton, WO. 2002. Introduction to Management Accounting. New Delhi: Pearson Education (Singapore) Pvt. Ltd.

Hugh, M. C., Hobbs, D., and Ellis, D J. 2005. Management accounting: principles and applications. London: Sage

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Knight K., and Collier M. P. 2009. Target Costing in the Automotive Industry: A Case Study of Dynamic Capabilities. Working Paper Series.

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Sarker B. J. and Yeshmin F. 2005. Application of Responsibility Accounting: Bangladesh Perspective. The Cost and Management, vol. 33, no. 6

Shil N. C., Alam Mohammad F. and Naznin M. 2010. Cost and management accounting practices in Bangladesh: a survey. International Journal of Managerial and Financial Accounting, vol. 2, no. 4, 1, pp. 364-382.

Steven M., and Bragg, J. 2007. Management accounting best practices: a guide for the professional accountant. New York: Willey and Sons

Weetman, P. 2006. Management accounting. London: Prentice Hall

Wegmann, G. 2007. Developments around the Activity-based Costing Method: A State-of-the Art Literature Review. Working Paper Series.

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