Wal-mart stores are the leading retail company in the worldwide. It operates retail stores in various formats such as discount stores supercenters and neighborhood markets (Susan, 2012). Revenues from the United States are leading instrumental in Wal-Mart. For instance, the company recorded revenue of $446.95 billion in the fiscal year ended December 2012, an increase of 5.8% over 2011 (Susan, 2012). Meanwhile, the company’s strong market position in the United States provides economies of scale that promotes the brand image to the company. I choose to use Wal-mart stores to demonstrate the purpose of the managerial accounting because my sister works there in a managerial position. Thus, the paper will discuss how managerial accounting is working for Wal-mart’s planning and controlling as well as indicating the roles of managerial accounting compared with other companies.
Wal-Mart has operated over 971 discount stores in 47 states in the United States and over 3000 Wal-Mart in 48 US states (Susan, 2012). These stores serve over 150 million customers per week in the United States. Meanwhile, the company’s annual sales have increased to 446.95 during the 2012, fiscal year. Thus, all these performance success is associated to the Wal-Mart’s managerial accounting. Wal-Mart cannot invest in the new store location unless the projected annual sales are at least double the initial cost of the location’s property (Susan, 2012). The managers have decided that the cost of replacing overworked managers and employees would exceed profits from all three outlets. Thus, Wal-Mart managers use effective strategies to ensure their company is feasible and the employee turnover is lower than organizational standards.
The Wal-Mart managers utilize accounting information for controlling and planning its activities rather than preparing financial reports. Managers utilize managerial accounting information to plan for their decisions and actions such as opening new outlets. Meanwhile, managerial accounting provides the internal management of Wal-Mart with the information required to control the company effectively. Wal-Mart management uses budget variances, which is the differences between actual costs and the budget to control its operations (Davis and Davis, 2010). Similarly, Wal-Mart uses the budget variance to establish if the employees segment is achieving the company’s goals. Thus, the company uses its budgets as the management tool to show its plan to the potential investors.
Wal-Mart’s has designed its managerial accounting system in a way that offer its managers with accounting information associated with controlling and planning. The company has GAAP type standards and performs audits needed for managerial accounting. The Wal-Mart managerial accounting reports plans and reflect internal transactions such as the daily movement of products to different stores (Jiambalvo, 2009). Thus, Wal-mart’s managerial accounting has managed to work for its planning and controlling in various departments effectively.
Effective managerial accounting systems have helped Wal-Mart to build global alliances. The company has entered global markets via partnerships with local government. These and other ventures enable Wal-Mart to sell in these countries as well as a source for them. Thus, building blocks have played a significant role in the Wal-Mart expansion and arrangements with its rivals in competing for bargain based accumulation strategies (Clarke, 2011). The managerial accounting helps Wal-Mart to develop plans, evaluate its performance by setting goals and identify target consumers, which other competitors have not realized. To improve profitability and efficiency, suppliers are supposed to open their accounts to the retailers with the aim of coordinating activities to reduce costs. Thus, the use of managerial accounting has helped Wal-Mart to improve its performance because they are better managed compared with other organizations.
Clarke, E. A. (2011). Accounting: an introduction to principles and practice(7th ed.). South Melbourne, Vic.: Cengage Learning Australia.
Davis, C. E., & Davis, E. B. (2010). Managerial accounting for strategic decision making (Preliminary ed.). Hoboken, N.J.: Wiley.
Jiambalvo, J. (2009). Managerial accounting (4th ed.). Hoboken, N.J.: Wiley &Sons Inc.
Susan, B. (2012). “Wal-Mart Stores, Inc.” Bloomberg Businessweek, Issue 4309, p54-60.