Alkarawy Heyder G WANNES - University of Babylon, Iraq
Nataliya Vasilevna KIM - South Ural State University, Russian Federation
Vladimir Ilich ZDUNOV - South Ural State University, Russian Federation


Outsourcing: The Improvement of Accounting System

Abstract:
The article is devoted to the issues of formulation and solving the problems of accountancy, expenditures, when we use outsourcing. The article marks the necessity to organize such accountancy, when pricing groupings are formed according to the events and changes that take place in business. The article underlines the necessity of accountancy for all expenditures that can be achieved by using the ABC - method (Activity Based Costing), when we calculate. Moreover, the article underlines the importance and necessity to define the fractions of assets to form the product cost of the certain forms or areas of activity. The article indicates the structural factors that influence the formation of full cost. These factors form tacit or transactional expenses. When we use outsourcing, we must manage by expenditures maintaining economic unity. The article splits off connections between the strategic components when we use outsourcing. At the end of the article, the authors present the conclusions due to the results of study.
Keywords: outsourcing, expenditures, pricing groupings, ABC-method, economic unity.
1. Introduction
Further, in modern sources of information there is no scientific evidence of outsourcing companies. In the accounting information sources choice between “make” or “buy” is limited to the comparison of alternative costs by cost apportionment. As Horngren notes some strategic objectives remain forgotten (Hall 2004, 255-260).
The choice of the “right” service provider has a decisive influence on the effectiveness of outsourcing. “Confidence in well-done work outweighs any price saving, which the customer can receive by referring to another performer.” (Morse, Davis, and Graves 2003, 43)
It is common knowledge, the foundation of any accounting system – chart of accounts. Chart of accounts by types of financial and economic activity includes the accounts used in management accounting. In accounting area information on expenses, changes in accounting procedures related to costs, as it requires multiple ways records and disclosure. With such a record, it is possible to obtain valuable information about competitors of the company. However, this may incur additional charges on accounting and analysis, expanding the scope of accounting, as well as on information on current costs.
2. Methodology
This research is based on theoretical (philosophical) method, applied approach, predictive analysis and special methods.
Applied methods of dialectical logic are effective means of cognition determining costs that help to take into account the share of assets in value creation of products in certain types or fields of activity. There is an influence discovered by means of system analysis of structural factors affecting the creation of full cost, which form the implicit, called transaction costs. When outsourcing there is a necessity to control costs while respecting the principle of economic unity. The relation between the components of the strategy is pointed by means of structural- functional analysis when outsourcing.
The laws of materialist dialectics such as transformation of quantity into quality, mutual penetration of polar opposites and their transformation into one another, development through contradiction or negation of the negation determines dialectical contradictions in the object of cognition that is outsourcing.



Applied research method of system analysis helps to identify uncertainties for each option and comparing options on certain criteria. In this study, we use various methods of qualitative and quantitative study of reality: deterministic and probabilistic.
3. Results
Cost accounting system helps management staff to make decisions related to the purchase, production, distribution and sales, with the focus on added value. Added value unit of goods and services can be both industrial, purely commercial, banking and even the activities of public authority (Porter 1985, 48).
Cost accounting system provides information on the cost of production: financial statements (income statement and financial situation) and information for the purposes of management, planning, monitoring in production and marketing.
At present the role and significance of items expenses grouping is increasing. Traditional role of cost calculation is product price determination for the purposes of preparing the financial statements. When we use services of external organization-outsources the role of cost calculation is to provide relevant information for management decision-making (Figure 1).

Figure 1 - Cost accounting role in outsourcing and in making managerial decisions
Figure 1 shows the correlation between items expenses grouping and the business world changes and events. For the purposes of planning and expense control, it is necessary to use different quantitative models and tools of accounting. In particular, such researchers as Kaplan and Cooper (1998) suggest using ABC-method (Activity Based Costing) within value chain in making decisions about outsourcing.
At first, the company should define its value chain. You can create the chain in its general terms, that is, each generic category can be divided into a number of discrete areas of activity. When defining relevant activities in the value chain it is necessary to define spheres with discrete technologies and behavior of costs. Such functions as production and management are divided into different types of activities. The right degree of analysis of the processes in the chain depends on the behavior of costs of a particular activity. The basic principle of dividing into spheres is different behavior of costs. Using outsourcing, the processes should de detailed before and after outsourcing. This level of detailing is necessary to understand how outsourcing has affected the dynamics of the value chain.
Secondly, when you define the scope of activities in the chain, you allocate assets and operating costs. The necessity of identifying assets proportion in value of certain activity types reflects the fact that assets utilization efficiency determines the amount of assets. Operating costs should be allocated to activities in the period they are incurred while the assets should be allocated to the sphere of activity they are used and controlled. M. Porter (Report of the accounts of the company for a job costing system in the company 2012, 66) focuses on the use of ABC-method in cost accounting, as this method is the specific technique of cost allocating in responsibility centers. The third step of an assessment of outturn costs helps to identify the structural factors that explain cost differentials in comparison with competitors. It is important to understand costs vary in economies of scale, externalities of education and treatment links in the value chain and as a result costs depend not only on the behavior of costs. Such scientists as J. Shank and V. Govindarajan (1992) show how important it is to pay attention
to the outside of the chain costs for the decision making. (Shank and Govindarajan 1992, 179 -197)
For example, in the context of outsourcing, contracting of specific activities in the internal chain can generate additional costs in the later period of production, owned by one of the company s customers. Therefore, clients can request price reduction for products if company has preferred outsourcing.

To diagnose the strategic advantages is to know the strengths and weaknesses of cost analysis within economic unity. Thus, this analysis allows us to study the decision-making process and to assess the factors and elements connected with functional operations of all subsystems of economic unity (Figure 2), allowing to establish links between input and output. (Atheer 2007, 64)
Figure 2 - Cost management and economic unity using outsourcing
Figure 2 illustrates the system of cost management when there is outsourcing that is one of the necessary information systems and reduces business costs. Management is supported by standards that reduce the cost of information production and characterized by the following features:
? using the principle of consistency that means the unified procedure of formation of the sub-accounts and analytical accounts and showing the relevant economic indicators across the vertical chart of accounts;
? using the principle of analyticity means that chart of accounts provides information with such details and generalization, which meets the needs of the relevant levels of management with the available information systems.
Management accounting system contains fewer items, but more detailed in accordance with the specific goals. There is a variety of activities, levels of analysis and total activity. In addition, there are multiple copies of documents, types of data that can be demanded so there is a necessity in harmonization goals and objectives, types of reports, types of required measurements and the preparation of balanced factors. These items must be prepared and organized in accordance with the established rules.
Researchers believe that the obtained information about costs according to the rules has positive impact on the elements of accounting systems. At the same time, these systems may change as private and common goals of the organization change. Making managerial decision is based on the analysis that cannot be conducted immediately. Outsourcing management accounting system should reduce the gap between accounting and strategic researches. (Arab Society of Certified Public Accountants, Management Accounting 2001)
4. Discussion
The analysis of accounting systems elements is essential for effective and rational use for searching methods to manage expenses for the following reasons:
? a variety of organizations forms helps to give specific measurements and various reports for each organization;
? the company size is determined by the costs of market coordination that are compared with the costs of internal components. (Ronald Coase, http://baguzin.ru/wp/?p=5116);
? a centralized or decentralized organization structure is connected with costs. Accounting system depends on a decentralized structure, which reports on amendments in accounting system;
? the main company opportunities require the analysis of other companies’ possibilities and research;

? financial reporting system requires an extended amount of data for automatization or historical data analysis.
Report preparation is important for accounting system in the service and industry sectors while in management accounting system it must contain current information about financial results and information about the quality and efficiency reports (Horngren et al. 2005, 14). The accounting methodology in accordance with its specification requires additional elements of accounting, the necessity of which is caused by different reasons.
Firstly, the diversity of activities, the level of analysis, the level of accounting systems varies according to the special goals of each of the accounting systems. In the systems of financial reporting and accounts, the analysis is held due to the measurement of financial results in terms of clients, geographic regions, quality of work, etc. Account and use of costs by type of activity helps to reveal financial results in the context of specific activities.
Various types of analysis in accounting systems for the purposes of cost management and traditional expenses look as follows (Ahrens and Chapman 2007, Michael 1992).
Revenue cycle is the process of relations between the seller and the customer for the supply of products or services including conclusion the sale and purchase agreement, goods delivery, aftersales service; billings, debtors’ management, crediting money resources to an account. For planning production schedule, it is necessary to know costs of production, used materials, etc. Costs for planning do not increase the cost of production, but the calculation of production costs is important to evaluate the effectiveness of the economic unity.
Accounting system includes different operations, for example, the preparation of documents. Documents confirm primary data and include the forecasting documents: lists, reports or bills. Documentation is regarded as one of the tools in the system of internal control (Shank and Govindarajan 1992, 124).
James A. Hall divides three types of documents (Marshall and Steinbart 2004, 51). The first type is the original documents that describe external events affecting business processes of economic events, such as ordering and sales. The second type of documents is for describing the operations and activities regarding the purchase and storage. The third type of documents is notification (correspondence) that is sent to the customer at the company s expense and submitted into the company tracking system of all customer relationships (Moscov et al. 1989, 347).
There are different types of reports using for cost control (Bouquin 2006, Briciu 2008, Horngren et al. 2005). For example, cost reports show actual costs, unit costs and can serve as life cycle cost reports. (Briciu et al. 2010, Hall 2004, Michael et al. 1988, Mikhailov 2006) Figure 3 shows the relationship between the components of the strategy by means of outsourcing, depending on the scheme, Robert & David (Coase, http://baguzin.ru/wp/?p=5116).

Figure 3 - Correlation between strategy components using outsourcing
Actually, technical analytic account “Expenses on elements” is used when outsourcing. These costs are collected on the sub-account of the first order “Other material costs”, which represent expenses for industrial works and services provided by outside organizations or companies.



Due to the multiplicity of processes by which the product reaches full readiness and is designed for offtake in the production phase, the accounting system must include cost accounting for all products taking into account the following important points (Kaplan and Norton 1990):
? using the detailed information provided by the system;
? using information system in planning budgets preparation, monitoring performance of operations;
? the correlation between the cost of the product and the total cost method (in this case, all direct costs are considered as distributed according to centers of production).
Conclusion
To summarize, we can draw the following conclusions:
? Outsourcing some types of activities helps to achieve such goals as cost saving, flexibility in operations and quick response to client requests. Outsourcing is an important element of maintaining the competitive position of the organization on the market. In addition, the main point of outsourcing is redesign, the aim of which is to improve the quality of work in accordance with customer’s requirements.
? Cost accounting system is essential; it allows forming the information base for making effective managerial decisions. Outsourcing accounting allows you to target the rational use of funds intended for the execution of the order in accordance with the pricing groups.
? Considering cost accounting, it is possible to use ABC method because of the division of company infrastructure, processes and activities, unrelated directly to the company but having a significant role for economic and financial indicators. The cost of outsourcing contracts has a decisive influence on purchase, operation, distribution and sales decisions. At the same time, outsourcing is connected with some risks that should be considered not only in relation to a particular field or function, but also in the diversity of risks or their combination. The main criteria of making decisions are to ensure business continuity.
? It is necessary to take into account planning and company strategy in the process of cost-benefit analysis and making decisions of outsourcing contracts to determine the strengths and weaknesses of the company, the effectiveness of environmental opportunities and threats and the adoption of a systemic and strategic plans.
? Costs and separate cost accounting, the process of management accounting at the enterprises should be based on Uniform corporate automated control system of finances and resources and can be used with accounting outsourcing. The recommended system can improve the quality of accounting information and help to make the correct managerial decisions by all authorities.