Panopticism and its Significance
Discuss about the Lean Management Accounting Practices.
The theory of Panopticism is based on panopticon which was developed by an English philosopher, Jeremy Bentham. The concept stated a structure of prison system which involved supervision of the inmates of the prisons. As per the concept, a prison be circular in structure and have a tower from where a guard can supervise every activity of the prisoners with the prisoners being able to see the guard. Later Michel Foucault adopted the concept of panopticon on the basis of which the theory of panopticism was developed (Brunon-Ernst, 2016). As per the view of Foucault, panopticon is useful for effective surveillance and monitoring activities which can results in modification of the attitudes of individuals. The use of such surveillance and monitoring activities are applied in a prison so that the attitude of the prisoners can be adjusted and modified. The use of panopticon is mainly used for the disciplinary actions which are used in the prisons (Brown, 2014). The framework is also useful for collection of data which can be obtained during surveillance activities.
For example, in todays world of control and technological advancements the application of panopticon is quite relevant. The data can be collected with the use of data mining activities and the data thus collected can be made available to the companies and individuals for the purpose of surveillance of data. the basic use of a panopticon is for the surveillance of business or individuals.
The relevance of Panopticism is very useful for the management accounting process which can be used in the management for the purpose of keeping track of all the transactions in a business and also ensure that the transactions which are recorded are correctly represented without any mistakes or errors. Moreover once the errors or mistakes in the transaction are identified then the management can apply corrective measures to change the transaction and record a correct one.
Management accounting process may be defined as the application of financial data and results which can be applied in the decision-making process, performance management system and also for forecasting of results (Fullerton, Kennedy & Widener, 2014). The major functions which are associated with management account are discussed below:
Planning and Forecasting: The process of planning involves forecasting and planning ahead of the activities of the business with a view of pursuing the goals and objective of the business. The purpose behind planning activities of the businesses is to ensure that the management of the company takes into consideration all the aspects of the business which are cost, finances, operations, marketing and similar other activities of the business in the decision-making process. Moreover, another importance of the planning process is that the targets and various performance standards are set. The various decisions which are taken in the planning process by the management can be related to allocation of funds, decisions relating to operations, numerous decisions relating to costs and finances. Some of the main tools which are used by the management in the planning process is the use of budgets, value chain analysis. The preparation of the budget is the responsibility of the management and which requires ample judgements and estimation which is possible through the planning process. For example, the process of planning involves budgeting for various financial and other resources for which standards are set as per the estimates of the management and also on the basis of previous year’s performance of the company. The budgeting techniques are used by management for various important decisions regarding allocation of funds, financing and cost reduction decisions and also measuring of variances.
Functions of Management
Organising: This is one of the functions of management which is followed by planning process. The method of organising involves the proper utilization of resources, setting up of different departments and assigning the respective works to such departments. The process of organising involves combination of human resources, financial resources and physical resources for the purpose of executing the business activities of the company. The basic function of organising is that of an administration as well as proper functioning of the organisation. The next step after planning process is organising as planning process establishes what activities are to be engaged in by the company and also the goals of the business whereas organising states the easiest and the most reliant way in which the management can achieve the plans and also the goals as established by the business.
Controlling: The function of controlling deals with the measurement of the performance of the company in comparison to previously set standards of performance. Therefore, it can be said that the controlling activities of the business is useful to measure how much the company has achieve and whether the activities of the business are in pursuance of the goals of the business. The controlling activities of the business applies techniques like budget analysis, standard costing techniques, variances analysis and similar other techniques. The controlling activities of a business also focuses on the establishing the reasons as to why the standard which were set in the planning process cannot be achieved and the actions which are taken by the management for correcting such factors.
Van Halen was a rock band which is engaged in rock band performance. The band operation scale grew larger in mid 1980s and the band started to move from small cities to large cities for stage performance. As the operations of the band increases therefore there was a need for controlling the activities of the band. Thus, the checklist system was introduced to effectively manage all the activities of the band. The checklist of the band was included a rider- no brown M&Ms. The checklist was sent to every location where the band will be performing to state the conditions of the band and also the term of engagement which are to be followed other the band can cancel the scheduled performance. One of the conditions which was included in the checklist that the band did not want a single brown M&Ms. The band requested for pretzels and yoghurts before each performance. Thus, from the above discussions, it can be clearly said that the band used the checklist as a control device for managing activities of the business.
Perpetual Accounting System involves immediate recording of transactions relating to purchase and sales transaction and also update their respective ledger accounts immediately. The perpetual inventory system involves continuous upgrades of inventory records in the respective ledger accounts (Bauer et al., 2012). For example, in case of a retail store which uses computerised system of inventory measurement can automatically update the inventory records about the raw material used and also keep track of inventory records of raw materials. From the analysis which is conducted above it can be concluded that perpetual inventory system does not require physical verification of stocks (Berlemann & Wesselhöft, 2014)
Overtime refers to the additional working hours which the labourer are required to work which is more than the normal working hours of the business. In case of overtime the wages offered by the company are also above the normal working hours of the business. The amount can be treated in different ways by the management depending upon the nature of the situation (Holzhacker, Krishnan & Mahlendorf, 2015). The cost can be treated as a direct labour cost in case of order from the client and also as overhead cost in case of fault of the management.
In case of both traditional and ABC Costing techniques, the indirect costs are projected and the same are allocated on the basis of the cost drivers which are most appropriate (Mahal & Hossain, 2015). The basic differences between the two processes are on the points of complexity and accuracy which exists between the two processes. In case of traditional costing method costs are allocated on the basis of random aggregate rate and is less precise. These factors are covered up by activity-based costing techniques, however it is a bit on the complex side.
The benefits which are associated with ABC Costing techniques are:
- The method improves the processes of organization
- The products which are not productive are recognized by the business by the use of this method (Kapi?, 2014).
- The method of ABC costing is easy to understand
- It is good for business
Reference List
Berlemann, M., & Wesselhöft, J. E. (2014). Estimating aggregate capital stocks using the perpetual inventory method. Review of Economics, 65(1), 1-34.
Brown, F. (2014). The power of panopticism.
Brunon-Ernst, A. (2016). Deconstructing panopticism into the plural panopticons. In Beyond Foucault (pp. 33-58). Routledge.
Fullerton, R. R., Kennedy, F. A., & Widener, S. K. (2014). Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7-8), 414-428.
Holzhacker, M., Krishnan, R., & Mahlendorf, M. D. (2015). The impact of changes in regulation on cost behavior. Contemporary Accounting Research, 32(2), 534-566.
Kapi?, J. (2014). ACTIVITY BASED COSTING-ABC. Business Consultant/Poslovni Konsultant, 6(32).
Mahal, I., & Hossain, A. (2015). Activity-Based Costing (ABC)–An Effective Tool for Better Management. Research Journal of Finance and Accounting, 6(4), 66-74.
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