Panopticism and its Relevance to Management Accounting

Panopticism is a concept which was introduced by Michel Foucault who was a French philosopher which deals with social theoretical and communal framework. The framework is introduced after the name of Panopticon which focuses on external surveillance. The concept of panopticon focuses on a design which will facilitate effective surveillance with a view to improve the attitude and behaviour of the individual (Hope, 2013). The framework is designed such that the focus is on modifying the behaviour and attitude of the individuals which involves surveillance activities. This is a disciplinary course of action which is used in prisons for proper observation of the inmates of the prisons and also for collection of data on the same.

For example, the concept of panopticon is very useful in the today’s era of digitalization which involves improved and innovative technologies. For the purpose of collection of data various activities such as data mining techniques are used to ensure that all the relevant data are collected and the same is made available to companies and individuals for the purpose of surveillance of data.

The application of Panopticism is very useful in the management accounting process as it is very useful to keep track of all the transactions in a business and at the same time also ensure that all the transactions of the business are recorded effectively without any mistakes or error in the recorded transactions (Featherstone, 2013). The use of panopticism in accounting is that the transaction which have any errors or mistakes can be rectified and ensure that the process of accounting is kept authentic.   

Management accounting may be defined as the process of accounting which is applied in management decision making process, allocation of resources and other similar activities of the business. The management accounting process focuses on using the financial data and estimates of accounting in the process of management (Weygandt, Kimmel & Kieso, 2015). The main functions of management accounting process are given below in details:

1. Planning:The process of planning may be defined as the process of forecasting and planning ahead for the future operations of the business. The main purpose of planning process is that the business can forecast the activities and set the targets of the company as per the objectives and goals of the business. The management of the company is involved in the planning process of the company and they are the one who are responsible to set the targets of the company. The decisions which are taken by the management of the company are related to allocation of funds, operation decisions and also other financing decisions. One of the major tools which is used in the planning process is the application of budgets (Kerzner & Kerzner, 2017). The management of the company are responsible for preparation of various budgets such as finance budget, cost budget, master budget and other similar budgets. For example, the management can use budgets for the purpose of setting targets and also measuring the performance of the company in terms of the budgets set previously. Other uses of budgets are allocation of funds, financing decisions, measuring of variances.
2. Organising:The method refers to the business model of the company and also deciding what part of the management plan will be executed by which department and what amount of resources are to be allocated to the same (Dean, 2013). The process of organising also focuses on the goals and objectives which the management is required to be followed. The different departmental managers are responsible to organise the processes of the business so that the performance of each department can be measured effectively. For example, the statements which are prepared on the basis of management accounting framework and such relates to operations, products and other decisions.
3. Controlling:The function of controlling deals with the evaluation and correction of the results of the business. In other words, controlling activities refers to all activities which measures the performance of the business on the basis of the standards which are set by the business in the planning process (Griffin, 2013). The controlling activities of the business uses many techniques such as budgets, standard costing and similar other techniques.

Rock band Van Halen is a band which performs musical concerts. The band has been using Checklist as a control measure for keeping track of the activities which the band does in a day to day basis. The band has various concerts scheduling, charity programmes, auditions for which the band has to keep track of where effective use of checklist is done. Moreover, the performance of the band along with the number of members present can also be incorporated in a checklist. The checklist provides an effective means of keeping a track of what the band has to do on a daily basis. In addition to this the checklist is also used by the members of the band to keep track of the musical instruments which are used by each member and even those instruments which are kept as a stock for future replacements. The effective use of a checklist allows the band to check its schedules which are there for a day and further plan the activities of the day or for the next day. Thus, from the analysis of the effectiveness of a checklist system in the rock band Van Halen, it can be said that a checklist if properly used can serve as an important tool for controlling the activities.

Functions of Management Accounting

Normal View:

Manufacturing Statement:

Income Statement:

Formula View:

Manufacturing Statement:

Income Statement:

As per the perpetual system of maintaining records for inventories the various purchases and sales which are made by the company are recorded immediately and the same is immediately updated in the ledger account for inventories. The special feature of perpetual inventory system is that the records of inventories are continuously updated and the records are maintained accordingly. In case of a retail store, the stock of the finished goods ae well the stock of the raw materials can easily be updated using the perpetual inventory system and proper records of the stock can be maintained under the perpetual inventory system. Moreover, with the continuous update of the records of stocks in a retail store which can facilitate proper scrutiny of records and the stocks at hand of the store whenever required by the store owner. In such cases perpetual inventory system is quite useful (Berlemann & Wesselhöft, 2014). Thus, from the above discussion it is clear that if perpetual inventory system is followed then there is no need to conduct a physical take of the stocks.

Overtime refers to the extra time which the employees of a company work over the normal working hours of the employees. For such overtime hours worked the employees are allowed overtime wages. The amount which the management of the company incurs as an overtime wages have different treatments which depends on the situation in which the overtime work was conducted by the business. In some cases, it is treated as an overhead expense when the employees or the management of the company is at fault and in other cases where due to the client’s order demands overtime then the expenses incurred on such will be treated as direct labour costs.

Requirement a:

Requirement c:

1. Journal Entries:
2. Ledger Posting:

There are various similarities between Activity Based Costing and traditional costing systems. In case of activity-based costing, various activities are identified and then costs are allocated to such activities. The basis of activity-based costing systems recognizes the relationship between costs, activities and products. The similarities between traditional and activity-based costing is that the indirect costs are identified and allocated on the basis of various cost drivers which are most appropriate as per the nature of the item (Weygandt, Kimmel & Kieso, 2015). The problems which were associated with the traditional method of costing is that the method was not that much flexible and a bit less precise as well. The limitations which were associated with traditional method of costing were improved and dealt with in case of activity-based costing techniques (DRURY, 2013). The benefits which are related to activity-based costing techniques are given below in details:

1. The methods of activity-based costing techniques improve the overall business processes of the business. In addition to this, the method of Activity-based costing will also improve the overall cost structure of the company. The techniques allows effective identification and recording of the items of indirect costs on the basis of effective cost drivers.
2. Another advantage of using this method is that the products which are not productive enough for the business are recognized and decisions are taken whether to make further investments in the production of the product or not to carry out the production process.
3. The method of Activity-based costing techniques is quite easy to understand, follow and implement and the techniques is very useful for the business.

The disadvantages which are associated with activity-based costing are given below:

1. The implementation process of Activity-based costing in a business is very costly in the business. The implementation of the system itself while replacing the traditional method is quite costly.
2. There are chances of misinterpretation in case of activity-based costing method and this is a weakness in this system.

Direct Method:

Step Method:

Reciprocal Method:

As per the allocation process,

1. a) Total Cost of S1 Department (x) = Direct Centre Cost of S1 + [20% x Total Cost of S2 (y) ]

Or, x = $20000 + (20% X y)

1. b) Total Cost of S2 Department (y) = Direct Centre Cost of S2 + [ 15% x Total Cost of S1 (x) ]

Or, y = $25000 + (15% X x)

Or, y= $25000 + [15% x ($20000 + 20%y)]

Or, y= $25000 + $3000 + 3%y

Or, y-0.03y = $28000

Or, 0.97y = $28000

Or, y = $28000/0.97 = $28868

x = $20000 + 20%y

Or, x = $20000 + (20% x $28868)

Or. x = $20000 + $5773 = $25773

References

Berlemann, M., & Wesselhöft, J. E. (2014). Estimating aggregate capital stocks using the perpetual inventory method. Review of Economics, 65(1), 1-34.

Dean, J. (2013). Organising learning in the primary school classroom. Routledge.

DRURY, C. M. (2013). Management and cost accounting. Springer.

Featherstone, M. (2013). Preliminary reflections on the visible, the invisible and social regulation: Panopticism, biopolitics, neoliberalism and data consumption. Journal of Critical Studies in Business and Society, 4(1), 6-37.

Griffin, R. W. (2013). Fundamentals of management. Cengage Learning.

Hope, A. (2013). Foucault, panopticism and school surveillance research. In Social Theory and Education Research (pp. 47-63). Routledge.

Kerzner, H., & Kerzner, H. R. (2017). Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & managerial accounting. John Wiley & Sons.