Related Literature (Management Accounting Practices)

Philippines Literature:

Management accounting practices (MAPs) are methods or approaches that are used in
management accounting that help in making business decisions in a variety of corporate
operations or activities. Whether an organization is focused on making a profit or not, these are
essential. Regardless of size, market, or mode of operation, every organization needs to
implement management accounting practices. Manufacturing businesses take the most advantage
of management accounting among the three categories of business operations—service,
commerce, and manufacturing—due to their intricate business operations and activities.
Businesses compete on costs and pricing because manufacturing businesses go through a
production process where cost assignment and allocation are very important. Additionally, most
manufacturing companies utilize cutting-edge technical advancements in their production and
information processes. Management accounting is an essential aspect of business operations,
particularly in the Philippines, where the business landscape is continuously evolving. The
country's economic growth has resulted in an increase in the number of businesses, which has led
to a greater demand for efficient and effective management accounting practices. According to
Cabrera (2015), management accounting is the process of applying appropriate methodologies
and concepts to economic data in order to help management create plans for legitimate economic
goals and make wise decisions with a view to achieving these goals. The author went on to
explain that management accounting is a process of gathering, analyzing, preparing,
communicating, and identifying financial data that is utilized by management to plan, assess, and
regulate operations inside a company. The creation of financial reports for non-management
parties, including shareholders, creditors, regulatory bodies, and tax authorities, is also included.

According to Harina (2012), the planning and control process also entails the following steps: (1)
establish a standard or budget that specifies what real performance should be; (2) evaluate the
outcomes of actual performance; and (3) compare actual performance to the standard or budget.
Planning, according to Mutya (2011), is identifying options and choosing courses of action
among those alternatives in order to realize an organization's goals. Budget categories like capital
and expenditure budgets are typically used to express it. Additionally, according to Cabrera
(2015), controlling involves comparing a firm's actual performance to its budget. Management
accounting is crucial for monitoring both the financial and non-financial performance of an
organization and can be viewed as a management tool for performance control because it serves
as the foundation for evaluating the performance of the managers. The managers' access to the
resources they need to perform their duties comes from management accounting (Garrison et al.,
2011).
In his book, Agamata (2012) explored how management accounting uses predictions and
estimations to support the planning function of management. To predict the future and
subsequently manage to reduce business risk, it depends on assumptions and trustworthy
approaches. Timbang (2016) added that cost-benefit analysis is a component of capital budgeting
as part of planning and control procedures in management accounting. Allocating money to
brand-new long-term investment initiatives is what it implies. It establishes a company's strategic
goals and is concerned with investment planning and management.

According to a study conducted by the Institute of Management Accountants (IMA) in 2019, the
use of management accounting practices in the Philippines is relatively low compared to other
countries in the Asia-Pacific region. The study revealed that only 47% of Filipino companies use
management accounting practices, while the average for the Asia-Pacific region is 59%. This
finding suggests that there is a need for greater awareness and adoption of management
accounting practices among Filipino businesses.

Furthermore, the study also identified several challenges that hinder the adoption of management
accounting practices in the Philippines. These challenges include the lack of skilled
professionals, inadequate training and development programs, and the high cost of implementing
new management accounting systems. These challenges point to the need for greater investment
in the development of management accounting professionals and the implementation of more
cost-effective management accounting systems. In terms of specific management accounting
practices, the study found that budgeting and forecasting are the most used practices in the
Philippines. However, the use of more advanced management accounting practices such as
strategic cost management, activity-based costing, and value chain analysis is relatively low.

Another study conducted by the Association of Certified Public Accountants in the Philippines
(ACPAPP) in 2018 revealed that management accounting practices in the country are heavily
influenced by the regulatory environment. The study found that compliance-related activities
such as financial reporting and tax compliance are the primary focus of management accounting
practices in the Philippines. This finding suggests that there is a need for a shift towards a more
strategic and value-driven approach to management accounting.

In conclusion, the current state of management accounting practices in the Philippines highlights
the need for greater awareness, adoption, and investment in the development of management
accounting professionals and systems. The challenges identified in this study provide valuable
insights for businesses and policymakers in the Philippines who seek to improve their
management accounting practices and drive sustainable economic growth.
Asian Literature:

Management accounting practices (MAPs) are important managerial tools that provide value to
all operational activities and improve an organization's performance. Thus, this is essential to
improving the efficiency and effectiveness of organizations. Additionally, MAPs serve as the
primary information system for effective information processing, assisting the organization in
adjusting to ongoing changes in the environment and enhancing performance (Reid and Smith,
2000; Nandan, 2010; Lucas et al., 2013). Over the years, management accounting practices have
evolved significantly, and different countries have their own unique practices.

According to Johnson and Kaplan (1987), the industrial revolution in the early 19th century is
when management accounting first emerged. Since then, as a response to the changing corporate
environment, other MAP strategies have been developed and put into practice. Understanding
what makes up MAPs is crucial since it can help us appreciate how SMEs use these tools and
strategies. This section begins with a description of MAP's procedures under each functional
area, followed by theoretical concepts of management accounting. A manufacturing company
can use the five areas of costing, budgeting, performance measurement, decision support, and
strategic management accounting to acquire a general overview of MAPs.

MAPs have been specifically considered as a method to support an organization’s infrastructure

for manufacturing businesses, as described by Ittner and Larcker (2002). According to Abdel-
Kader and Luther (2006), a broad set of MAPs can include costing systems, budgeting,
performance evaluation, information for decision-making, and strategic analysis. These new
methods have changed the basic principles of management accounting into something superior
that adds value to various practices (Ittner & Larcker, 2001). Some practices, including costing
systems as indicated by Dugdale and Jones (2002), have not been highly favored by the majority
of manufacturing businesses since they do not provide an accurate method of recording costs.
However, this recording helps to be exact in order to make sound management decisions. Target
costing and the costing of quality have been introduced by Abdel-Kader and Luther (2006) as
tools for confronting increased competition.

According to Mardiasmo and Suryanto (2019), management accounting practices in Indonesia

have been influenced by the country's cultural and economic factors. The study found that cost
management and budgeting are the most used management accounting practices in Indonesia.
However, the use of performance measurement tools such as the balanced scorecard and activity-
based costing is limited. In Malaysia, management accounting practices have been influenced by
the country's economic development. According to Ismail and Hassan (2018), the use of
management accounting practices is widespread in Malaysian organizations. The most used
management accounting practices in Malaysia are budgeting, cost management, and performance
measurement. The study also found that Malaysian organizations are increasingly adopting
sustainability reporting as part of their management accounting practices.
In China, the use of management accounting practices has been influenced by the country's
economic reform and market liberalization. According to Wu and Wang (2018), the most used
management accounting practices in China are budgeting, cost management, and performance
measurement. The study also found that Chinese organizations are increasingly adopting
strategic management accounting practices such as activity-based costing and a balanced
scorecard.

In Japan, management accounting practices have been influenced by the country's culture of
consensus and long-term orientation. According to Nakamura and Abe (2015), Japanese
organizations emphasize the use of management accounting practices for decision-making rather
than performance evaluation. The most used management accounting practices in Japan are cost
management, budgeting, and strategic management accounting.

According to the literature on MAPs in SMEs, SMEs make use of simple and traditional MAPs
in their organizations that are easy to use, comprehend, and maintain, since Halabi et al. (2010)
suggested that small enterprises have a basic comprehension of accounting reports. This is
supported by Lucas et al. (2013), who claim that small businesses tend to make decisions without
appropriate or additional financial information or analysis. The empirical evidence in this area is
mostly from developed nations, with limited information available from developing-country
SMEs. Furthermore, MAP research in SMEs has long been ignored, and the results are still
fragmented and interconnected (Lo'pez and Hiebl, 2015).

In conclusion, the use of management accounting practices is widespread in most Asian

countries, with budgeting, cost management, and performance measurement being the most used
practices. However, there are also differences in the adoption of strategic management
accounting practices such as activity-based costing and a balanced scorecard. Understanding the
management accounting practices in different Asian countries is crucial for organizations
operating in the region.
World Literature:

Management accounting applies to any type of business organization, regardless of the nature of
its operation, geographical location, industry affiliation, or size. Current management accounting
practices have incorporated financial and non-financial techniques that aim to provide crucial
information at both the operational and organizational levels. According to a 2017 article by
DeBenedetti, management accounting practices offer instruments to measure and raise profit
margins while decreasing operating costs. Furthermore, executives may direct their firms in the
appropriate direction and increase profitability by carefully applying management accounting
procedures. Sometimes people think that management accounting involves more than just adding
and subtracting. The management accountant of today lives by the concept of creating value by
means of values.

The primary sources cited in publications' references, according to Erserim (2016), are applicable
to all fields of accounting and not just the subject of management accounting. The management
accounting literature includes a wide variety of business management journals, especially when
the frequency of use of periodicals is taken into consideration. According to Garrison et al.
(2011), this is the case. These writers concluded that, in order to uphold this credo, management
accountants must remain consistent in their adherence to moral principles while using their
expertise to shape judgments that benefit the interests of organizational stakeholders. These
abilities include risk management, strategic implementation, planning, budgeting, forecasting,
and decision support. As a result, management accounting is focused on giving information to
managers, or the internal stakeholders in an organization that direct and oversee operations.

According to the Institute of Cost Accountants in India, management accounting aids in more
effective business operations. Compared to cost accounting, management accounting has a wider
range of applications. In other words, management accounting can be seen as a continuation of
cost accounting. For the effective operation of a business, management accounting applies the
theories and methods of financial accounting, cost accounting, and other contemporary
management techniques. Determining strategy and creating plans to realize desired management
objectives is the focus of management accounting. Corporate planning and strategy are
successful and meaningful thanks to management accounting. Financial and accounting reports
were used by management accounting processes to make decisions, plan operations, and
implement control procedures. Additionally, management accounting offers some instruments
that may be used for the organization's decision-making processes, such as financial statements,
cash flows, fund flow analysis, ratio analysis, different analyses, and budgeting (Breuer et al.,
2013).

Further, according to Siyandbola (2012), management accounting uses both financial and non-
financial information and is typically designed for internal users who use the information to
make decisions that support the accomplishment of the organization's goals and objectives.
However, Ramli et al. (2013) noted that management accounting is viewed as a crucial
component of any organization's operations and that the data it provides will help internal users
make wise decisions and contribute to the enhancement of the effectiveness and efficiency of
current operations. Along with the evolution of management accounting practices, the roles of
management accountants have also altered to reflect this shift from an emphasis on cost
estimation and financial control to the production of value through efficient resource use. Sharma
(nd) says that management accounting is closely linked with planning due to the fact that it offers
information for making decisions and that the entire budgeting process is built on accounting-
related reports. By producing reports that assess the effects of different actions on an enterprise's
capacity to achieve specified goals, management accounting aids managers in planning. For
instance, if a business company chooses a profit target for the coming year, it should also choose
a strategy for achieving that profit target.

Management accounting, on the other hand, supports the control function by generating
performance reports and control reports that draw attention to discrepancies between expected
and actual performance. Such reports provide the foundation for implementing the necessary
corrective measures to manage operations. The management by exception idea is applied while
using performance and control reports. A manager will typically investigate any large
discrepancies between budgeted and actual outcomes to figure out what went wrong and,
potentially, which subordinates or units could require assistance. Budgets are typically included
in planning. According to Accounting Tools, the process of budgetary planning involves
creating a budget and using it to regulate the activities of an organization. The goal of budgetary
planning is to lessen the chance that an organization's financial outcomes will be less favorable
than anticipated. The creation of a budget is the first stage of financial planning. Following
completion, a budget model is utilized to manage a company's operations. In order to achieve
this, managers need data and information that is used in the decision-making process and in the
operation's control; as a result, management accounting serves management by supplying the
necessary data and information, as well as guidance and recommendations.