Essay on "Management Accounting This Memorandum Serves"

Essay 5 pages (1595 words) Sources: 5 Style: Harvard

[EXCERPT] . . . .

Management Accounting

This memorandum serves to show the benefits of management accounting and how the use of management accounting can clearly benefit the ongoing operations and profitability of Thai Corporation. Rather than focusing on the dollars and cents of Thai Corporation, a general overview of Thai and its operations will be covered and then a summary and the massive benefits of management accounting will be discussed and covered in great length.

Thai Airlines is a Thai airline that has been majority-owned by the Thai government since 2005 and has been in existence in some form since 1960 when it was founded by a Thai carrier in conjunction with Scandinavian Airline Systems. Thai Airlines shares have been traded publicly since 1991 after approval from the Thai cabinet and millions of shares are now in circulation. The airline offers both domestic and international air service. Their four "mandates" include to offer safe and convenient air service, to develop and manage environmental management systems, to incorporate environmental impact considerations on an ongoing basis and to provide support towards environmental protections. As one can see, they are focused dually on being a good airline but also on being a good environmental partner with the world (Thai Airlines, 2013).

Thai Airlines operates internationally and thus they would handle a lot of different currencies and operate at least in part in a number of different economic structures and limitations at any given time. As such, they would absolutely benefit from an accounting structure and measurement system that not only takes into account the legally mandated information and measurements but also metrics that are more internalized in nature so that they can be measured and tracked in such a way to streamline operations to be more profitable and beneficial to Thai Airlines while at the same time avoiding situations and expenses that can only hurt the firm if/when they happen to occur. Just because something is not legally mandated to be reported or tracked, such as those items that are required in each country's financial reporting laws, does not mean that it cannot be of benefit of Thai Airlines, or any other firm, to choose voluntarily to track and assess it as time goes on (Thai Airlines, 2013).

That all being said, management accounting and its use is not a panacea. The analysis has to be effective and done in a certain way so as to not waste any time or otherwise spending time on analysis and/or metrics that are not truly relevant to the ongoing costs and operations of Thai Airlines or, at the very least, not one of the more important metrics that can and should be measured. Any and all analysis should be based on complete, relevant and timely information and it needs to be looked at based on what most impacts the firm and why (AccountingExplained.com, 2013).

Analysis

The use of management accounting can be used to improve processes because the cost/benefit ratio of any process can be measured on both an initial basis as well as one or more changes is undergone so as to show whether a change caused the expected amount of benefit and, if not, how much it missed expectations by. The improvement of processes is just one way that management accounting can help improve the overall bottom line and competition-based standing of the firm in the wider marketplace (AccountingExplained.com, 2013).

One major way that management accounting can help Thai Airlines is through comparing how each product does over short- and longer-term horizons so as to show whether a product is profitable or not. This can be relevant both to an ongoing product that has been in place for a while but it can also be relevant for a product that is new and it can be shown how long it will take for a product to show profitability, assuming that this can even happen given the current arc of income and expenses directly and indirectly related to the product (CSUN, 2013).

Where the above leads is a choice between what products are going to be best for the firm to offer and improve as time goes on and whether some products might better served to reduced or even shuttered altogether based on the overall performance of sales and what is expected to be the case going forward. This long-term planning can also be useful in determining pricing because what has been previously accepted and tolerated in terms of prices by customers, or at least what is projected for a new product, can be compared against what will happen over time if prior projections and patterns hold. This can be compared to the income and profits for the product and thus show whether there is any viability to the product offering pattern that is currently slated for Thai Airlines or whatever firm is assessing their business operations using managerial accounting (McGraw-Hill, 2013).

If done properly, managerial accounting can be used to facilitate the planning, controlling, motivating and organizing of the internal and public financial operations of a firm like Thai Airlines. As far as planning goes, managerial accounting can speak to what is working, what is not working and what should be done next. As far as controlling, managerial accounting can point Thai Airlines in the directions it could or should go based on the metrics measured in the past as compared to what can and should be measured going forward. The directions undergone can be justified to decision makers so that the ensuing controlling that is undertaken can be justified and is thus less likely to be resisted because the decisions are clearly informed and based on real financial data (AccountingExplained.com, 2013).

On a similar note, motivation can be used because the financial metrics of financial and managerial accounting can be used to show progress and improvements and this can be used to foster even better and bigger improvements further down the road. Even when some managerial accounting metrics falter, motivation can still be used as a tool to bounce back with the knowledge that if/when things get better, proving it will not be an abstract sort of thing and will be provable to all parties involved (CEIBS, 2013).

As far as motivation goes, Thai would have to deal with a number of stakeholders and other parties and they may not always be on the same page. Since Thai is largely owned by the Thai government, they are one of many parties that has to be appeased when undergoing any changes. Even if financial concerns are the major reason for any change, this does not mean that the Thai government and/or the Thai people will receive it will (CEIBS, 2013).

There is also the necessary buy-in and sign-off of people like the Thai Airlines employees, the Thai Airlines board/executives and the vendors and other parties that work with Thai to any manner or degree. Just because any given section of people does not have literal veto power over a change does not mean that the change cannot be resisted and thus a disruption undergone that will further cloud an issue or make it murky even if the choice seems to be quite clear.

This is not to say that managerial accounting is all roses and sunshine because it is not. If applied unevenly, incorrectly or in a biased way, managerial accounting can present more problems than benefits. The persons in charge or implementing a managerial accounting ploy should be knowledgeable, have the company's best interests at heart and should not be permitted to have any preconceived notions or biases in place because that will only delay if not prevent the benefits that could be realized were the plan implemented more soundly and properly (CEIBS, 2013).

Conclusion

Thai Airlines is clearly operating in a tumultuous industry. Indeed, the terrorist… READ MORE

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