Managerial Accounting Assignment: A Reflective Journal OnAccounting Practices Followed By Non-Profit Organizations

Question

Task: Individual Reflective Journal Specifications Purpose: The Individual Reflective Journal is to ensure each student is able to contribute to document a critical reflection of their personal learning process, as experienced during this unit. A significant aspect of the reflective journal will be your reflections on what you learnt and experienced from your individual assignment.

Managerial Accounting Assignment Task:
1. Reflections on the selected peer reviewed journal article based on the assignment topic. What went well, what did not go to plan, how did you addressed any difficulties, and what had you learnt from it.

2. Reflections on the research experience. What was enjoyable, what was difficult, what insights had you gained, and any issues, challenges you experienced.

3. Reflections on what you had learned from the individual assignment, including the relevance of budgeting as a management technique to businesses today. What insights had you gained and what had you learnt from it.

Answer

The article I have selected in thismanagerial accounting assignment for peer review is titled ‘Role of Management accounting in applying new institutional logics’. It is a case study of the management accounting practices followed by the non-profit organizations and a comparison between two such leading organizations.
I have learned through this article that though two organizations might have the same organizational structure, they could be adopting different strategies according to their management and customers and how these strategies materialize or not. Every organization is surrounded by its own set of historical beliefs, customs, and patterns, and hence the institutionalization of the processes might be carried out at different times to yield different results (Spires, Wallin & Young, 2012). There is also the existence of a conflict of interest in the organizations which makes it difficult to implement any new system. Change management is yet another challenge for these organizations wherein the old arrangements have to be done away with and the newer processes have to be implemented (Mohr 2017).

Upon analysis of this article, I have understood that though non-profit organizations existed for service motive, as years passed by, they started facing a financial crisis due to which they had to shift their focus on the profit motive and it was at this time the management of these organizations had realized that the systems were not in place (Mohr 2017). Until such point of time, they had not taken the initiative to revise and review the systems.

This article discusses the challenges these two organizations have faced in the process of the corporatization of their activities and the separation of the profitable activities from the non-profitable ones. As a non-profit organization, significance was laid on the numbers on the financials but the management soon realized that financial accounting was not sufficient as the organization had to give equal significance to cost and management accounting. Unlike a normal corporate, in a nonprofit organization, the institutional logics involve bringing different factors under one roof for the agreement of a common management accounting practice. The cost allocation practices at these two organizations are studied in detail and this paper provided me the opportunity to study the new management tools and techniques. It was in the year 2007 when the access was provided to the accounts and statements of these two organizations and the research was carried out to find out the diverse nature of their budgetary practices.

I have learned in this assignment that the relevance of the management accounting practices is connected with wider social interest leading to the creation and maintenance of organizational areas. The compromising nature of these two organizational goals required the tolerance of the imperfections in the accounting system whereas the disruptive system of accounting involved the purification of the accounting systems. Through this review, I have learned that institutional arrangements are not about setting up perfect systems or controls but about constantly updating their systems and establishment of the enforcement mechanisms. In a practical scenario, the case is much different than what is explained in the books and theories.

Change is nature’s law and no organization is an exception to this. The benefits of the traditional system of budgeting were pretty much evidential however with the step towards the corporatization of these institutions, it was practically understood that budgeting alone was not a sufficient technique for cost control and management (Spires, Wallin & Young, 2012). The organization was faced with the external pressure to alter its systems and in such a scenario I understood the importance of the synchronization of the goals and strategies of the organization with the systems that it uses. To achieve the desired results, everything must be on the same track.

Upon the analysis, I have understood that Finland was a tax-financed country and hence it was able to provide sufficient subsidies for the working and functioning of the nonprofit healthcare organizations. Until and after the year 1970, the finances of the government started falling and the number of patients started increasing. This was the time these organizations had to start the implementation if sophisticated management controls systems as the financial situation of these organizations started deteriorating (Jarvinen 2016).

In both organizations, the top management had been slow in the implementation of the changes. The structure of these two organizations was slightly different but the difference was that while VRI had followed the top-down budgetary approach to a certain extent, CRI had not been following budgeting in entirety and hence it was lacking the accounting sense of a private business venture (Jarvinen 2016). The management driven approaches led to the management have full control over the transactions of the inter companies and due to the lack of effective communication techniques, the budgeting strategies were not communicated to the lower levels of the organization failing the system.

Due to the conditions existing today, budgeting alone was not a sufficient tool for management control and effectiveness. Modern accounting tools like activity-based budgeting, benchmarking and balanced scorecards are required to be used with every line of product or service requiring a different and specific strategy (Jarvinen 2016). CRI was better placed than VRI as it had not solely relied on budgeting but adopted other techniques as well but still, it was not able to beat the financial crisis.

I have understood that despite the systems and techniques implemented, the organization might find it difficult to overcome the crisis if its fundamentals are weak and the top management has not been able to implement the systems appropriately. There has to be proper division of work with the fixation of responsibility centers and the sources of incomes and losses have to be identified more systematically. As profit generation became the primary motive, the focus of these systems had to be aimed at the separation of the charitable activities from the profitable ones to avoid any cross subsidizations and make financial planning and strategy implementation to synchronize with the long term growth. It is also not practical to recommend budgeting to any organization as it cannot be used as a standalone measure.

References
Jarvinen, J.,T. 2016, ‘Role of management accounting in applying new institutional logics’, Accounting, Auditing & Accountability Journal, vol. 29, no. 5, pp. 861-886.

Mohr, Z. 2017, ‘Cost accounting at the service level: an analyis of transaction cost influnces on indirect cost measurment in the cost accounting plans of large us cities’, Managerial accounting assignmentPublic Administration Quarterly, vol. 41, no. 1, pp. 91-129.
Spires, E.E, Wallin, D.E,& Young, R.A 2012, ‘Aggregation in Budgeting: An Experiment’, Journal of Management Accounting Research, vol. 24, pp. 177-199.