Management Accounting Techniques for Financial Obstacles

The report provides a detailed analysis of management accounting techniques used by firms to overcome financial challenges. It covers reporting, budgeting, and planning tools that help identify requirements for funds and facilitate efficient use of resources in industrial operations. Additionally, it discusses methods and techniques to resolve financial obstacles in business, such as financial governance, benchmarking, variance analysis, and key performance indicators.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
P1 Different types of management accounting systems.........................................................1
P2 Management accounting reporting and its various methods.............................................3
LO 2.................................................................................................................................................7
P3 Techniques of cost analysis to prepare an income statements by marginal and absorption
costing.....................................................................................................................................7
P4 Kinds of planing tools and budgetary control system used in the business operations....9
P5 Techniques to resolve the financial obstacles by firms...................................................12
CONCLUSION..............................................................................................................................13
........................................................................................................................................................14

INTRODUCTION
Accounting activities geared to the preparation of information for managers to help them
plan and control a company's operations. In the management accounting, managers use the
provisions of accounting information in order to better inform themselves before the decide
matters within their organisation, which aids their management and performance of control
functions. The procedure of making the management reports and accounts that provide
appropriate financial information needed by the managers to develop their daily basic decision.
The present report is based on the United parcel service organisation which is an American
multinational package delivery company and a provide of supply chain management solutions. In
this report, explanation of management accounting, and requirements of different types of
management accounting systems are covered. Along with this, different types of methods used
for management accounting reporting and appropriate techniques of cost analysis are discussed.
Other than that, advantages and disadvantages of various types of budgetary control tools and
effective adaption of the management accounting system are covered. Moreover, income
statements prepared and explained by the marginal and absorption costing techniques.
LO 1
P1 Different types of management accounting systems
Management accounting also called as managerial accounting and cost accounting. It is
differs from the financial accounting. Management accounting involves preparing and providing
timely financial information to the enterprise managers, so that they can make their daily basis
decision. Moreover, its provide the statistical information to the manager, so they can able to
make short term managerial decisions. In the management accounting, manager can include the
details of the company's available cash, sales rules, the current state of the company's accounts
payable and receivable. There are different types of management accounting system, which can
be used by the United parcel services in their enterprise and some various management
accounting systems are given below:
Job costing system: - One of the important and effective management accounting system is the
job costing system (Ezzamel and Qu, 2017). In this method, company can determine the all cost
and expense of the employees who are working in the company. Managers is using job costing
management accounting system for the tracking the cost and revenues by job and enable
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standardized reporting of the profitability. There are different types of employees and department
in the organisation, so manager allotted different types of work and task to the employees
according to their knowledge, information and profile, however they can easily accomplish the
work on time at their work place. It is the very useful and important for the United parcel service
company. They can also use this management accounting system in their business, however
managers can make their daily basis decision. There are some department in the organisation,
they are not able to providing their effective performance to the company, so manager can
examine abut their productivity. Through this management accounting system, they can able to
know about job cost of the organisation.
Inventory system: - It is the most important management accounting system in the organisation,
because through it, they can able to prepare the report with appropriate figures of the sales,
purchases, return and raw material of the production department. This is one of the effective
system to examine the entire figure of the company. Inventory system is the process of
determination of the sales figures, purchase, return and another figures for the company. Through
it, they can prepare the effective reports of the business. Along with this, manager can use the
effective software of the inventory system in the business and they can evaluate the sales and
purchases from the system (Lorenz, 2015). Through this management accounting system,
manager can secure the entire figures, information and data in the inventory system, and when
they need it, they can use this entire information in the company. However, United parcel
services organisation should use the inventory management accounting system, so they can able
to know about their entire information of the business figures. It is the main and important
management accounting system in the company, because through it they can save and secure the
entire data and information in the system. Manager is able to see when they need it in the future.
So company can identify the all cost and expense of the organisation.
Cost system: - In the job costing they evaluate the job productivity of the entire employees and
department, but in the cost management accounting system, manager are determining the entire
cost and expense of the organisation. However, they can get the information of the company's
performance in the market. Along with this, through cost system, they can identify the expense
and cost of the entire departments, production department, human resource department and
marketing department (Granlund and Lukka, 2016). Other than that, through this system,
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manager can know abut the all expenses which used for the infrastructure of the organisation,
furniture and another expenses of the organisation. It is the another useful and important system
of the management accounting. Organisation has different types of machinery, computer system,
infrastructure and building for their business, however, they should analysis the entire expenses
in this factors f the business. When they analysis the all expense of the enterprise, then they can
control the cost and expense in the factors. Moreover, cost management accounting system can
be used by the United parcel services for their business.
Price optimising system: - It is another management accounting system for the organisation and
price optimising system is based on the price of the products and respond of the customers.
Company is providing their product and services different prices, however trough this
management accounting system can identify the response of the entire customer's for the
different prices of the organisation. This management accounting system has main power to
identify the response of the customers, however they can set the prices of their products and
services. Along with this, after knowing the response of the entire customers, they can analysis
the prices of the competitor (Wagenhofer, 2016). Moreover, through it, they can increase their
sale of the products and profitability of the business. Through this management accounting
system company can know about the response of the customers, so they can able to make an
effective planning for satisfying the customers. Along with this, they should use this
management accounting system I their business. However, they can able to increase their
profitability and revenues of the business.
P2 Management accounting reporting and its various methods
It is the effective process of the preparing the performance report of the United parcel
services. Through management accounting reporting, organisation can monitor the all
performance and presentation of the organisation. It is the main and important methods of the
entire reporting, because trough it manager can prepare the all reports of the department and
organisation. There are different types of management accounting which are used in the United
parcel service company (Van der Stede, 2016). In the management accounting reporting,
manager can include the budget report, inventory report, job costing and account receivable agig
report for the business. The entire reports of the management accounting are very important for
the enterprise. Through it, company can know about the all performance of the organisation,
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business, and employees of the United parcel services. Along with this, they can able to addition
their profitability and revenues of the business. Other than that, through this report, company can
able to improvement in the all factors. In order to increase the improvement and performance,
they can provide the training session and development program to the employee who has fewer
abilities, skills, information and knowledge. There are different types of reporting system and
methods, but United parcel service should some following management accounting reporting for
their enterprise:
Budget report: - It is the report of internal process used by the managers to compare the
estimated, budgeted projections wit the actual performance number achieved during the period.
In the United parcel service company, different types of department and employees are working,
ad manager allotted different types of task and work to them (Tucker and Parker, 2014). Some
employees can able to accomplish their task on time, but some employee can not able to provide
their effective performance to the company. According to this situation, manager can increase
their budget on the department or employees who are providing the effective performance to the
organisation. Along with this, they can decrease the budget on the lower performance department
or employees. Budget report is very useful and important in the business, because through it
they can identify the all budget of the company. Moreover, through it, they can analysis about
the all department and employees who are providing their effective performance to the company.
Budget report should be used by the United parcel services company, so they can also increase
their profitability and revenue of the business. Along with this they can able to beat any of the
competitor in the market. It is very biggest achievement of the organisation, if they are
accomplished the budget report in the business. Through it, they can control the cost and expense
on the all department of the company. Moreover, it is very useful report which can used by the
company for their business.
Account receivable aging report: - This report is most important of the management
accounting reporting of the business. Accounts receivable aging report is based on the unpaid
customers invoices. United parcel service company is providing the credit services to their
customers, and they are providing the effective services and products to the custners with some
effective credit services. Along with this, there are numbers of customers who are able to pay
their amount on the time, but some time some customers are not able to pay their outstanding
amount to the company (Taylor and Scapens, 2016). I order to get the outstanding amount,
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company can make the account receivable aging report. However, through this report the can
able to know about the customers who are not paying their outstanding amount to the
organisation. With information of unpaid customers, company can take the action against the
customers, so they will be bale to get their outstanding amount from the customers. It is the very
useful and important report of the company, because it increases the finance of the organisation.
Other than that, through this report, company can able to get their target and goals of the
business. However, United parcel services should use this management accounting report for
their business, so they can able to know about their unpaid customers and then they can get the
outstanding amount from the customers with effective activities. It is the very beneficial report
for the organisation, because through it they can increase the profitability and revenue of the
business. Through his report, they can able to increase their brand value in the entire market
(Schaltegger and Crutzen, 2016).
Inventory report: - It is also the important report of the management accounting reporting. United
parcel services company can use or prepare this report for their business. Thee are various types
of products and services in the company. They are providing the products and services in the
market, so manager should collect the entire data of the sale and purchase and then they should
secure the all figure in the inventory system of the business. Through it, they can prepare the
report of sale and purchase of the month. Further, they can able to know that which products and
services are providing their good performance In the market. Which products are satisfied the
customers, so they can able to give better services to the customers. It is the very important
report in the business, because through it manager can know the value of the products and
services (Luft, 2016). Along with this, company can know about the raw material of the
production, so they can reduce the budget on the production, if they found that they don't need
the more raw material for the production. Inventory report show the entire figures of the sales,
purchased and raw material of the production. However, they can examine about the higher an
lower performance of the products and services. Through this entire process, company can
improve their products quality and services, so it will beneficial for the customers. Along with
this, it is the very important report for the company, so United parcel services should use this
report for their business.
Job cost report: - It is the accounting which tracks the costs and revue by the job and enable
standardized reporting of the profitability by job. It is the report of the all costing and expense on
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the employees and department of the company. Job costing report is based on the performance of
the department and employees in the organisation. In the United parcel service company number
of departments and employees are working, but they all are not able to provide their effective
performance to the company. However, United parcel services company can identify the all
performance and productivity of the employees and department of the company trough the job
costing report (Lyly-Yrjänäinen and Lukka, 2014). It is the very useful and important report of
the organisation. Through it, company can know about the all performance of the employees.
Further, they can enhance their budget with the higher performance of the department and
decrease the budget with the lower performance of the business. There are some employees who
can give their best performance to the company, so manager can provide them some incentive
and bonus for the good performance in the organisation. Along with this, for lower performance
of the department and employees, manager can arrange the training and development
programme. However, they can increase their knowledge, information, abilities and skills.
Through it, they can able to provide their better performance to the company. Job costing is very
necessary in each and every organisation, because through it company can know about the
performance of the all department and employees of the organization. However, United parcel
services company should use this management accounting reporting in the business. If they will
use t, then they can able to increase their improvement and [performance in the market Along
with this, through these reports, they can able to increase their profitability, revenue and brand
values in the entire market from the business.
All of the above management accounting reporting are beneficial for the United parcel
services company. They should use the entire reports for their business. Other than that, they can
increase the profitability, revenues and performance of the business. Moreover, company can
improve their employee's performance in the business. However, manager can get the effective
report from the improvement (Williams, 2014). Along with this, through this effective report,
the can achieve the target and goals of the business. One of the important things of the reporting
is, company can make some effective and useful strategies and planning for the performance in
the business. Through it, they can make smooth work environment in the organisation, so
employees will be able to provide their effective performance in the company. However, United
parcel service should follow and prepare the entire reports of the management accounting
reporting for their business.
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LO 2
P3 Techniques of cost analysis to prepare an income statements by marginal and absorption
costing
Marginal costing: - It is also known as variable costing and this is the costing technique whereby
decisions can be taken about the ascertaining of the all cost or the examination of the fixed and
variable cost to search out the effective procedure and goods for the production (Quinn, 2014).
Income statements by marginal cost: -
Costing: - It is the method for inventory valuation whereby whole manufacturing expenses are
allocated to the cost centres to identify the all cost of production. Absorption cost is the
traditional technique for cost ascertaining, also known by the name full absorption costing (Lavia
López and Hiebl, 2014).
Income statements by absorption cost: -
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Difference between marginal and absorption cost: -
 Marginal costing is a decision making method for ascertaining the total cost of
production and absorption costing is an apportionment of total costs to the cost centre in
order to examine the total cost of production (Tucker and Lowe, 2014).
 Product cost considered as the variable cost and fixed cost can also be considered as
period costs whereas variable and fixed costs are considered as product costs.
 Marginal cost's classification of overheads is fixed and variable but absorption cost's
classification of overheads is production, administration, distribution and selling.
 Profitability and revenues examined by the volume ratio of profit and in the absorption,
due to the inclusion of fixed cost, profitability and revenues gets affected (McGovern
and Davie, 2015).
 Marginal costing is used in the decision making process whereas absorption cost is used
for external reporting in the organisation.
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 Marginal costing can not be used for inventory valuation under accounting standards and
absorption costing can be used for inventory valuation under the international accounting
standard.
LO 3
P4 Kinds of planing tools and budgetary control system used in the business operations
There has been various kinds of budgetary system used for the business operations which
will be fruitful as to enhance the productivity and quality as well as operational performance of
the organisation. However, there has been various advantages and disadvantages of such
methods as:
Zero based budgeting: These are the budgets which are being prepared by the
professionals in terms of having proper operational outcomes. Hence, these budgets are prepared
on the basis of zero base that means that there is no implication of past transaction or balances.
Thus, here the budgets are initiated on zero balance (Joshi and Li, 2016). The funds will be
allotted on the basis of requirements of finance. However, there has been various advantages and
disadvantages of zero based budgeting such as:
Advantages:
 It is the most helpful managerial tool as it initiate the budget from zero level so it
becomes less complex.
 It brings the appropriate results with having the accuracy in outcomes as it have the
disciplined techniques to execute and preparing it.
 It is the most flexible budget as the funds will be rise and reduced as per the operational
requirements.
Disadvantages:
 Due to unclear base it cannot be estimate that what level of expenditures has to be made
by firm in the future time.
 There will be high chances of having the manipulation of money and managers will use
funds for their personal means.
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Activity based budgeting: These are the budgets which were being prepared by the firm
on the basis of it operations and the activities held in the premises. Therefore, it can be said that
the managerial and accounting professionals seeks every budget and level of work in the
organisation and then analyse the cost and funds requirements for thee operations. Hence, in
accordance with the level of expense made by such units in the previous period there has been
allotment of budgets and costs for the next period. This budgeting techniques will have several
limits and advantages such as:
Advantages:
 This is the most accurate technique which help in determining the adequate outcomes
from operations of the business.
 It is less complex and easier for the managers and accounting professionals to understand
and execute the industrial operations (Activity Based Budgeting, 2012).
 It involves six sigma and benchmarking techniques which helps in improving the
efficiency of the organisation.
Disadvantages:
 It may require the adequate amount of time or duration for the preparation of these
budgets.
 It will be complex in terms of identifying each activities and the requirements of funds
for the operations.
Incremental Budgeting: These are the budget which were being prepared on the basis of
having the slight differences in coming period. Hence, it can be understand as per the rise in the
level of operations which will reciprocally rise the requirements of funds to meet such operations
and thus on the basis of meeting it there will be increment in the budgeted amount.
Advantages:
 This is the simple and easiest budgeting process as it can be understand by everyone and
prepared by every individual in the premises.
 In brings stability in funding and allotting the costs in every piece of work (Incremental
Budgeting, 2017).
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 It helps in brining the operational stability for the long period.
Disadvantages:
 In accordance with its nature it has always increased in the level of expenditures so the
proper control and execution of spending of organisation is never been managed. There be inappropriate outcomes from such budgets and have the negative impacts over
the operations of entity.
NPV: This is the planning tool that will help the managerial professional in terms of
having the adequate knowledge of profitability of the projects which were being presented by the
accounting professionals in the operations (Khodzytska and Ivchenko, 2014). These helps in
identifying the present value of the future cash flow and will use for adequate decision making.
However, there will be various benefits and loopholes of these planning tool such as:
Advantages:
 It is beneficial in terms of analysing the present values of the future investments
therefore, which is profitable in decision making.
 It also helps the managerial professionals to identify the time on which they have the
profitable gains.
Disadvantages:
 The outcomes cannot be reliable as it totally based on assumptions or estimations.
Therefore, here the managers will not become to identify the actual cost will be needed in
the business operations.
Payback period: In accordance with this planning tool the managers of the organisation
will become to identify and analyse the adequate period and the time on which they will meet the
invested amount of funds on time (Klemstine and Maher, 2014). However, there will be several
advantages and disadvantage to these operations.
Advantages
 This is the most popular method and simple as it only considers the discounting factors
and the cash flow for the period.
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 These helps professionals in terms of identifying the time and period over which they will
meet the invested initial amount for such projects.
Disadvantages:
 It ignores the time value of money as well as have the fluctuating discounting rate in each
year. Therefore, it does not make proper estimation over what amount funds will be
gained by the firm over that period.
LO 4
P5 Techniques to resolve the financial obstacles by firms.
There has been various firms in UK who has adopted various techniques and methods
that helps them in making the adequate increment in the performance as well as making the
necessary efforts to retain profits. Hence, there are several performance appraisal techniques
which are to be used by United parcel service to overcome with the financial challenges such as:
Financial governance:
There has been allotment of various tasks, duties and responsibilities to the professionals
in the organisation as per the level of talent and qualification obtained by them (Otley, 2016).
United parcel service need to have proper allotment of such responsibilities to the qualified
managers, supervisors to execute the operations as well as it will affect in proper allocation of
funds for the business operations.
Bench marking:
This is the helpful technique which is need to be used by United parcel service as the
professionals in the firm will make small targets and goals and motivate the staff to make the
adequate efforts in terms of attaining them (Ozdil and Hoque, 2017).
Variance analysis:
This tool is beneficial as it presents the outcomes relevant with the profitability and
efficiency of the firm. Hence, in accordance with such challenges it can be said that United
parcel service will have proper information regarding firm's performance throughout the period
(Simionescu and Bica, 2016).
Key performance Indicators:
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This technique will help United parcel service in terms attaining the targets and making
the adequate efforts to achieve the objectives of the business (Joshi and Li, 2016). It helps
professionals to motivate employees in terms of making the efforts for attaining the targets of
business.
CONCLUSION
In accordance with the above study it can be said that the management accounting is
beneficial in terms of making the accurate and efficient decision making. Therefore, the report
has various reporting, budgeting and planning tools that helps in identifying the requirements of
funds as well as funnel the professional to utilise them in the industrial operations. Further, the
report will be beneficial as it contains methods or techniques to resolve the financial obstacle in
the business.
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