Standard Cost Accounting System As An Aid To Management Control And Planning

Project and Seminar Material for Accountancy / Accounting

Standard Cost Accounting System As An Aid To Management Control And Planning


Abstract


Standard cost accounting is an overview of how standard cost could serve as an effective tool in the hands of the management, it serves as a tool for planning, coordinating and controlling various activities of operation in an organization.

Standard costing system has been studied to emphasis its assistance to management planning and control. It has been discovered that it enhances proper operation of an organization and goals and objectives are achieved more easily. The standards sets guide the operation of the organization

Variances are analyzed and investigated when noticed and revision of such standards follows subsequently. The study has revealed that it is very useful tool for management to plan and control its operation so as to achieve goals and objectives of the organization.

This study made use of the questionnaire, personal interviews and reading of the organization manual to analyze the subject as well as draw conclusions and recommendations.


Chapter One


Introduction

1.1 Background of the Study

Gilbert, (2011) indicated that businesses are run with shareholders’ capital, long term and short term borrowing whether it is a small or medium enterprise and its performance is mainly measured in terms of profitability. He further reports that business contains exchange of goods and services which generates information for better analysis of business performance which is pivotal to profitability. Due to the nature and peculiarity of the Small and Medium-scaled Enterprises (SMEs), a well-organized, coordinated and operating accounting system will be difficult to maintain or run not forgetting that the most valuable resource an organization has is information which is generated from day-to-day operation of the business (Adebayo, Idowu , Yusuf , & Bolarinwa, 2013). Gilbert, (2011) further proclaimed that it is worthy of note at this juncture that the information derived from the daily transaction needs to be carefully collected or gathered, recorded or stored, processed and analyzed in order to produce meaningful output of decision making. It has been recognized that appropriate accounting information is important for a successful management of any business entity whether large or small (European Commission, 2008).

Standard cost accounting system (AIS) is vital to all organizations Curtis (1995), Wilkinson, Cerullo, Raval and Wong-On-Wong (2000). Curtis, (1995) further elaborated that standard cost accounting system provides a mechanism for proper recording of transactions most especially financial transaction, storage and re-production of information relating to financial flows and positions at a given period of time. It is also a “tool which when incorporated into the field of Information and Technology systems (IT), were designed to help in the management and control of topics related to firms` economic financial area” (Grande, Estanbanez & Colomnia, 2011). The SMEs in a competing business environment may not be able to strive for long time without proper management of its expenditure, cash-flows and also providing information for monitoring and control (Mitchell, Reid & Smith, 2000). This will aid effective budgeting, proper analysis of cost and decision making.

However, as mentioned earlier that by Gilbert, (2011), businesses are run with shareholders’ capital, long term and short term borrowing which should be adequately accounted for and with the accounting system mechanism created, organize a schedule of loan re-payment that will adversely affect the growth and expansion of the SMEs in the long-run as borrowing for expansion and continual existence is inevitable.

Grande, (2011) poses that standard cost accounting system can be used to translate these different dimensions into a common financial dimension. He further claimed that accounting information uses formalized categories for collecting and reporting information that creates a common language with which members of the organization can communicate and also that formalization permits the transmission of information with fewer symbols and this facilitates the coordination between different functions that needs to provide input to the decision-making process. However, accounting information is also an imperfect representation of the underlying decision problem, since not all aspects involved can be quantified perfectly in financial numbers (Galbraith, 1937).

In recent years standard cost accounting system received a lot of attention, it facilitates managers to take appropriate actions related to issues in organization, if AIS output is not accurate, management will take wrong decisions, moreover, it considered competitive advantage for organization with well-designed standard cost accounting system (Majed, Adel, & Alsharayri, 2011).


1.2 Statement of the Problem

Entrepreneurs are known to be the wheel behind the moving train of the Nigerian economy and as we also know that every large business starts small. It’s worthy of note that in spite the importance and the indispensable nature of SMEs in Nigeria, a lot of small and medium scale enterprises have not given much attention to book-keeping in relation to their business transaction despite its importance in the success of businesses. This could be as a result of lack of sound knowledge in book-keeping practices by owners or respective managers (Martin, 2005)

Curtis (1995) indicated that there is a difficulty in ascertaining whether comprehensive accounting records that satisfied the laws under which it was incorporated has been kept. He mentioned further that it is also hard to determine, to what extent its adherence to laid down accounting procedure is strictly maintained. Oladipupo and Ajase, (2013) mentioned that difficulty exist in determining how far non-recognition of the necessity of accounting to continued existence and growth, low educational background of entrepreneurs and employment of un-skilled accounting staff, have affected the overall performance of SMEs in Nigeria. They stated further that nevertheless, it’s not clear whether the accounting information derived from daily transactions is actually an important consideration in the overall performance of SMEs.

The primary purpose of this study is to examine critically whether accounting information is an important consideration in the overall performance of SMEs in Nigeria. The secondary purpose of this study is to examine whether the level of skillfulness of the accountant also affects the overall performance of SMEs.


1.3 Objective of the Study

The main objective of the study is to evaluate the standard cost accounting system as an aid to management control and planning.

While the specific objectives are to;

  1. Examine the benefits derived by SMEs from the adoption of standard cost accounting system.
  2. Examine the relationship between the adoption of standard cost accounting system and the profitability of SMEs.
  3. Examine the relationship between the adoption of standard cost accounting system and the overall performance of SMEs.

1.4 Justification for the Study

Quite a number of researches have been carried related to this study such as Sajady, Dastgir and Nejad (2008) who examined the evaluation of effectiveness of standard cost accounting systems on medium scaled companies, Omar and Ali, (2012), who examined the impact of standard cost accounting system in planning, controlling and decision-making processes in small businesses, Grande, (2011), who explored the impact standard cost accounting system has on performance measures. There are however many more researches related to this study but most of them have not really examined the effect standard cost accounting system has on the performance of SMEs in Kwara state. This study however distinct itself from other studies by examining critically the effect adoption of accounting system has on the performance measures of small businesses operating in the study area, Kwara state, Nigeria.


1.5 Hypotheses of the Study

The hypotheses for this study are stated in null forms which are;

  1. Ho: There is no significant relationship between adoption of standard cost accounting system and the benefit derived from it by SMEs.
  2. Ho: There is no significant relationship between the use of standard cost accounting system and the PAT of SMEs.
  3. Ho: There is no significant relationship between standard cost accounting system and the overall performance of SMEs.

1.6 Scope of the Study

The research work aims at determining the impact of standard cost accounting systemon SMEs operating in Kwara State. Due to insufficient time and other important resources, it was not able to comb through all SMEs operating in the whole of Kwara State but a representative sample was drawn out of the population in order to achieve the research objectives.


1.8 Definition of Terms

Accounting Ratio:

The ways of expressing the relationship between one accounting result and another, which is intended to provide a useful comparison.

Financial Statement:

These are formal records that outline the financial activities of a business, an individual or any other entity.

Small and Medium Enterprise:

The Central Bank of Nigeria (2012) defines SMEs in Nigeria according to asset base and number of staff employed. The criteria are an asset base between ₦5million and ₦500 million, and a staff strength between 20 and 300.

Accounting Information:

This is a system of collecting, storing and processing financial and accounting data that is used by decision makers.

Entrepreneur:

An individual who exercises initiative by organizing a venture to take benefit of an opportunity and, as a decision maker, decides what, and how much good and services would be produced.

Accounting System:

Gilbert, (2011) defined accounting system as an organized set of manual and computerized accounting methods, procedures and control established to gather, record, classify, analyze, summarize, interpret and present accurate and timely financial data for management decisions.

Unskilled Accountant:

This is one not having or requiring any special skill or training on accounting job/profession.

Book-Keeping:

This is the systematic recording of financial aspects of business transactions in appropriate books of account.

Performance:

It is the results of activities of an organization or investment over a given period of time.


Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

This chapter consists of a brief summary of findings that were obtained. It also presents the deduced conclusions and offers recommendations on how to improve the present situation. The research implications are discussed and suggestions of opportunities for further research presented. Section 5.2 is the summary of the study, section 5.3 gives the conclusion, 5.4 outlines the limitations of the study & section 5.5 outlines recommendations for further research.


5.2 Summary of the Study

The aim of the study was to find out the standard cost accounting system as an aid to management control and planning. The study measured the effectiveness of the standard cost accounting system based on the various dimensions, including, system quality, information quality, service quality, system use, user satisfaction and net benefits of the standard cost accounting system.

The findings of the study indicated that the standard cost accounting system used in the automobile industry in kwara state are quality systems. The researcher evaluated various characteristics of an information system. These characteristics included ease of use, system flexibility, system reliability, ease of learning, as well as system features of intuitiveness, sophistication, flexibility, and response times. The findings further indicated that the quality of information was guaranteed. The results indicated that the outputs from standard cost accounting system were clear, accurate, and timely.

The results of the study indicated that staff and customers utilize the capabilities of standard cost accounting system. The results show that the web sites of the automobile companies are updated regularly and contain accurate information. The findings further indicated that standard cost accounting system contribute to the success of individuals, groups, organizations, industries, and nations. Some of the benefits included improved decision-making, improved productivity, increased sales, cost reductions, improved profits, market efficiency, consumer welfare, creation of jobs, and economic development.

The study sought the challenges faced when using the standard cost accounting system. The findings indicated that the major challenges were lack of proper training and lack of proper system documentation as some of the challenges they face. Further, the results indicated that high staff turnover is a major challenge of using the standard cost accounting system. The results indicated that when the staff turnover is high, some of super trained staff leaves the organization and they happen to be having more information about the standard cost accounting system than the normal users of the standard cost accounting system. Other shortcomings included lack of finances and risk of obsolescence.

The findings of this study indicate that standard cost accounting system is an important mechanism of an organization that is vital for effective management decision-making and controlling organization. The results are consistent with empirical reviews which indicated that there exist a relationship between standard cost accounting system and organizational performance. standard cost accounting system are an effective decision-making tool for controlling and coordinating the activities of an organization. The findings also indicate that an effective standard cost accounting system increase system integration and improve internal communications throughout the organization. The top management team with various planning and management information system influences on strategic performance of the organization.


5.3 Conclusion

Accounting information systems are critical to the production of quality accounting information on a timely basis and the communication of that information to the decision makers. Existing literature offers evidence of the relationship between these standard cost accounting system and organizational effectiveness; though it is important to highlight that an in-depth study is required to examine other factors that may influence this relationship. The information value generated by AIS to shareholders and stakeholders in making investment decisions is invaluable. Financial managers need the financial and accounting data provided by AIS to evaluate the firm’s past performance and to map future plans.

This study showed that there is strong relationship between accounting information system and organizational effectiveness, which means access to accounting information, will lead to organizational effectiveness. Therefore, it can be concluded that accounting information systems have an impact on the effectiveness of companies in Nigeria.


5.4 Recommendations

Throughout working on this study, some suggestions concerning the expansion of the present study have arisen. First, in terms of data collection, I would suggest to collect data from different sources. This would include further case studies, interviews or face-to-face communication, and secondary data analysis.

Secondly, I would suggest similar studies to be done in more companies in order to compare the findings with the findings of this study. A survey would shed more light than just a case of selected companies in the industry.
Finally, a similar study could be carried out focusing on the effectiveness of accounting information systems in enhancing the organizational effectiveness. Similarly, a similar study could also be carried out focusing on factors influencing implementation of accounting information systems or even challenges faced during implementation of accounting information systems in the automobile industry in Nigeria .


Standard Cost Accounting System As An Aid To Management Control And Planning


Project Material Download

3,000 Naira


The Complete Material will be Sent to You in Just 2 Steps

Quick & Simple…


Step One Purchase

Make a Mobile Transfer or POS Payment of ₦3,000 to any of the Account Below

Access Bank PlcAccount No.: 0811003731
Name: Samphina Academy
Account Type: Current
Zenith BankAccount No.: 1225513212
Name: Samphina Academy
Account Type: Current

Or CLICK HERE To Pay With Debit Card

FOR CLIENTS OUTSIDE NIGERIA
CLICK HERE To Pay With Debit Card ($15)
GHANA – Make Payment of 60 GHS to MTN MoMo, 0553978005, Douglas Osabutey 

Step Two Purchase

Send the Following Details on WhatsApp ( 08143831497) After Payment

  • Payment Details
  • Email Address 
  • Standard Cost Accounting System As An Aid To Management Control And Planning

The Complete Material Will Be Sent To Your Email Address After Receiving Your Details
T & C Apply


  Contact Our Help Desk


⚠️ Need a different topic? Perform a quick search



Get A Complete Business Plan For Any Business In Nigeria

Business Plan for Businesses in Nigeria

  Business Plans in Nigeria


Disclaimer


This research material “Standard Cost Accounting System As An Aid To Management Control And Planning” is for research purposes and should be used as a guide in developing your research project / seminar work. For no reason should you copy word for word (verbatim) as samphina.com.ng will not be liable for any who copied the material.

The aim of providing this material is to reduce the stress of moving from one school library to another all in the name of searching for research materials. This service is legal because, all institutions permit their students to read previous projects, books, articles or papers while developing their own works. According to Austin Kleon “All creative work builds on what came before”.

samphina.com.ng is only providing this material “Standard Cost Accounting System As An Aid To Management Control And Planning” as a reference for your research. The paper should be used as a guide or framework for your own paper. The contents of this paper should be able to help you in generating new ideas and thoughts for your own research. Use it as a guidance purpose only.

Samphina Academy

Samphina Academy is an Online Educational Resource Center that is aimed at providing students with quality information and materials to aid them in succeeding in their academic pursuit.