The Impact of Planning Tools in Companies

This assignment analyzes the role of planning tools in enhancing management accounting practices within organizations. It examines how these tools contribute to generating more effective outcomes for businesses by providing a framework for strategic decision-making, resource allocation, and performance monitoring. The discussion delves into the reliability and effectiveness of various planning techniques, highlighting their impact on organizational success.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Concept of management accounting and essential requirement...........................................1
(a): Comparison...........................................................................................................................1
(b): Importance of management accounting tools ......................................................................2
(c): Cost accounting system: ......................................................................................................2
(d): Inventory management system.............................................................................................3
(e): Job costing system................................................................................................................3
P2: Presenting financial information...........................................................................................3
(I): Types of accounting report...................................................................................................3
(ii): Important of reporting information......................................................................................4
M1: Evaluate benefits of management accounting system ........................................................4
D1: Critical evaluation of accounting and reporting system ......................................................4
TASK 2............................................................................................................................................5
P3: Various costing method........................................................................................................5
M2: Techniques and reconcile the profit ...................................................................................6
D2: Apply and interpret the information.....................................................................................7
TASK 3............................................................................................................................................7
P4: (a). Different types of budgets and there benefits and limitation ........................................7
b) Steps of budget preparation....................................................................................................8
c): Importance of using budget tools as planning option............................................................8
M3: Analyse use of planning tools and their application...........................................................9
TASK 4............................................................................................................................................9
P5: Use of balance scorecard .....................................................................................................9
M4: Analysing in accordance with responding to financial issues...........................................10
D3: Critical evaluation of financial problem............................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting is a systematic process of recording various financial transaction
that are being incur by company from its daily business operations. A well organise system is
required in order to manage certain accounts in best suitable manner. The primary objectives of
using accounting system is to attain long term objectives. This project report provide necessary
information about certain transaction and operation those are determine, measure and recorded as
per the set standard (Abrahamsson, Englund and Gerdin, 2011). Every data must be related with
accordance to Tech Ltd. Comparison is done in between management and financial accounting.
Importance of using accounting data in decision making by every department are mention under
this report. Understanding of various types of accounting reports and costing method are discuss
clearly. Use of budgets in order to make sustainable future are mention effectively. Identification
of financial issues and measure to resolve them by using balance scorecard are discuss under this
project report.
TASK 1
P1: Concept of management accounting and essential requirement
In every business organisation, it is necessary to use appropriate accounting system in
order to manage and record various financial and non-official transactions. A value-adding
regular implementation procedure of planning, framing, analysing and recording of operating
data (Abdel-Kader, 2011). It is term as the most crucial techniques which is determine for an
internal evaluation whereas, financial accounting is termed as analysis of various financial
statements that are prepared during the period of time.
(a): Comparison
Financial accounting Management accounting
Such kind of information is use for the purpose
of external analysis of data.
This particular accounting is done at internal
parties in order to take idea about performance
of the company.
Under this, report are prepare on the basis of
past data of business those are submitted to
outside parties.
Information about inside decision are mention
as per the feedback those are incur from
operating performance of an organisation.
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Data is analyse on the basis of historical data
which is more slow in process.
From this, accounting results are generated on
timely basis.
It is use to measure only financial information
those are presented by Tech Ltd during the
time.
It is use to measure both financial as well as
operational performance reports.
(b): Importance of management accounting tools
It is categorise as a crucial aspects of any business organization. Most of the crucial
decision are taken on the basis of accounting record that are present by managers. It has been
seen that scope of MA is beyond number of exception (Bebbington and et. al., 2014). Their
function are majorly aligned towards development of plan that consists of following information
such as:
It provide efficient management control: With the help of various tools and techniques
of management accounting company can make planning and coordinative activities of the
business (Management Accounting, 2017). Getting standard and assessing actual performance on
continuous basis can enable the department to manage there valuable resources.
Maximising profits can be enhance: By the help of effective accounting system
managers can plan to control unnecessary expenses those are incur during the production
process.
Safety and security of trade cycle: All those information which is receive from
accountants can provide more enough benefits to the company in order to take decision to protect
there resources. It will also secure them from getting affected from trade cycle.
(c): Cost accounting system:
It is known as a formal set of accounting system which is use analysing total cost which
is incur by the company during the production of product s and services during the year. In
general terms, it is price paid for making or delivery something. It is mainly involve recording,
classifying and measuring cost for manufacturing products and services. By the help of this Tech
Ltd can estimate its total cost of products in order to determine profitability evaluation and
measure to control unnecessary costs (Becker, Ulrich and Staffel, 2011). There are various types
of cost those are incur by the company are mention underneath:
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 Actual: It refers as total expenses those are made in order to acquire an assets that
consists of supplier invoice expenditures. These are actual liable with the direct labour,
material and other charges related with production process.
 Normal: It is known as method of pursuit production costs those are based on
manufacturing costs related with prices of inputs. The actual price are taken use for direct
labour and material those are estimated during the time.
 Standard costing: It is identify as practice of substituting an expected cost for an actual
costs in an accounting statements. It is use to analyse difference among expected and
actual costs.
(d): Inventory management system
In every business organisation, it is known as an effective system which is use for
tracking inventory level of a particular stock. It can be use in case of production units where,
managers need to create work order detail, bill of material and other useful information about
production details (Bennett and James, 2017). It is termed as one of the effective measure of
supply chain management the guide flow of production from one department to other.
(e): Job costing system
It is know as one of the effective system in management accounting that record the costs
of production job in-spite of following entire process. By the help of this managers can analyse
and track cost of each job that are incur during production process.
P2: Presenting financial information
If Tech Ltd wants to analyse performance and present position of the company they need
to make use of report which is prepare by collecting necessary information from various
department. These report are useful in taking future investment decision by investors and other
shareholders in order to gain competitive advantages.
(I): Types of accounting report
In order to record various financial transactions into financial statements of Tech Ltd they
need to prepare certain report. Some of them mention underneath:
 Performance report: It is termed as an essential activity in project accounting system. It
is use to analyse performance of an organization by comparing there present and past
data. The investment decision can only be taken if their position is more effective from
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last year operation. The Tech Ltd is involve in continuous manufacturing of electronic
gadgets in more effective manner. Because of this, they seems to be in perfect position as
compare to other.
 Account receivable aging report: This particular report can provide accurate
information about unpaid customer detail and new credit memos. It is one of the primary
tools which is use for collections overdue payment.
 Inventory management report: According to this particular report, every information
about total closing and opening stock are recorded under this report. The main objective
of making such kind of report is to manage and control flow of extra stock from the
business operations (Harris and Mongiello, 2012).
 Job cost report: It is known as accounting in which tracks total costs and revenues
collected from a particular job. It enable perfect standard reporting for profitability
generated by job. Hence, all expenses those are incur from a particular products during an
activities.
(ii): Important of reporting information
It is crucial for managers to determine every information gather from various department
must be helpful in the preparation of reports. For the purpose of making investment planning
such kind of system is more vital. With the help of all these report investors or other shareholder
can make future planning for growth. Chances of getting competitive analysis would be increase
if proper record of data is recorded by the company. In order to make some useful decision for
expansion and growth of business can also be determine by using these reports.
M1: Evaluate benefits of management accounting system
In case of Tech Ltd, they need to use accounting system in more appropriate manner to
record and analyse various financial statements of the company. If account offer of the company
is implementing right tools and techniques to record accounting information in different
statements. The efficiency of business can enhance through proper use of cost accounting system
and job costing. Profit earning is the main motive of Tech Ltd that is incur by proper use of
resources without paying any extra cost to them.
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D1: Critical evaluation of accounting and reporting system
According to Huber and Scheytt, 2013, both management accounting and reporting is
crucial aspect for Tech Ltd to manage and control regular operation of the business. With the
help of accounting system managers can identify about price and cost incur during the period of
time. Whereas, reporting is essential for summarising collected information for the purpose of
preparing financial statements. On the basis of this, investors use to make valuable decision for
the betterment of an organisation.
TASK 2
P3: Various costing method
Cost is an estimation of total amount which is being paid at the time of producing
products and services. These are related with the business either directly or indirectly. There are
various costing method which are being used in order to analyse total net profit of Tech Ltd they
are getting during the time (Kokubu and Kitada, 2015). In accordance with using costing
method, there are two important reasons can be particularly consider. The impacts are seen in
income statements of Tech Ltd which is prepare by using both these methods. Some of them are
discuss underneath:
Absorption costing: These are related with all those cost which is incur on production of
products and services. Under this cost, all cost should be included those are directly related with
the company. During the computation of net profit both variable and fixed costs are taken into
consideration.
Marginal costing: It is known as all those cost which is related with production of one
additional units. Under this, all the expenses are categories into two categories such as fixed and
variable cost. But, fixed costs are not to be distributed at the time of calculation of net profit for
the year.
Comparison:
Absorption costing Marginal costing
Inventory can be valued at the full absorption
cost which consists of fixed and variable cost.
Under this only variable manufacturing cost
can be use for valuing inventories.
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It is entirely based on function of production or
non-production costs.
It is related with behaviour of variable and
fixed cost changes.
To calculated gross profit: Sales – COGS In order to identify contribution: Sales-
variable cost.
It is not so effective for decision making. Most of the investors use to select marginal
costs for making valuable decisions.
Computation of net profit as per using marginal costing:
Particular Amount Amount
Sales 52500
Less:
Variable costs Nil
Opening stock 0
Cost of production 30000
Closing stock 7500 22500
Variable sales overhead -7875
Contribution 22125
Less:
Fixed production cost 7500
Selling overhead 10000 17500
Net profit using marginal costing 4625
Calculation of net profit by using absorption costing method
Particular Amount Amount
Sales 52500
Less: COGS
Opening stock 0
Cost of production 40000
Closing stock -10000 30000
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Under or over absorption in fixed
production 2500
Gross profit 27500
Less:
Fixed production cost 10000
Selling overhead 7875 17875
Net profit using marginal costing 9625
M2: Techniques and reconcile the profit
In order to make proper analysis of net profit from using both costing method which is
more reliable is identify accordingly. It has been seen that if Tech Ltd is using marginal costing
then the net profit incur is about 4625 while, if mangers are using absorption costing the results
are quite effective. They are getting a healthy profit of 9625. From the above calculation the
reconciliation can be determine as:
Profit from absorption costing: 9625
Difference : 5000
Net profit from marginal costing: 4625
From the above, it has been seen that difference is observed because of fixed cost
overhead.
D2: Apply and interpret the information
In order to get more reliable outcome in near future. They need to apply various costing
method those are helpful in generating positive results to the company. After evaluating net
profit by using both method it can be determine that difference of 5000 is being incur because of
fixed costs. For the purpose of making crucial decision the managers need to use marginal
costing because it is more accurate in terms of net profitability.
TASK 3
P4: (a). Different types of budgets and there benefits and limitation
Management need to prepare budget in order to predict its future targets which is of
maximum profitability earning (Leitner, 2013). Tech Ltd use to formulate budgets in order to
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take decision to control cost and expenses those are being incur at the time of production
process. Some of them are mention underneath:
Master budgets: It is known as comprehensive estimation about use of management
those are excepts to consider every aspects of company resources those are utilise during that
period of time. It use to cover information about income, balance sheet and cash flows etc.
Advantages: Easy to make decision by evaluating only one statements. It can save both
cost and time for investors.
Disadvantage: Once master budget is prepared then it is very difficult to make any
modification.
Operation budgets: It is use to record all those expenses and income which incur by
Tech Ltd during the year (Otley and Emmanuel, 2013). The main objective of this budget is that
it record at quarterly, monthly and yearly basis.
Advantages: Regular monitoring of total expenses those use in a single day can be
analyse more easily.
Disadvantage: It is too time taken activities which require complete data about total cost
of productions.
Cash budget: According to this budget every cash related transaction are recorded into
this specific budgets. It can be collected from various activities such as operating, investing and
financial activities.
Advantages: Proper information about total cash inflow and outflow is being determine
by using this budget.
Disadvantage: Once recovery time is complete then the it is difficult to make entries.
b) Steps of budget preparation
There are certain steps those are essential for preparing budget for the company:
Step 1: Set financial objectives for Tech Ltd in order to generate more profit during the time.
Step 2: Estimating total incomes which is going to in invested by the company for up coming
year.
Step 3: Identification of UN-expected expenses and savings in operational budget.
Step 4: Analysis of total fixed costs and variable cost which is going to charge in next continuous
production process.
Step 5: Recording of total spending which is being done during the period of time.
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Step 6: Review of total saving done by Tech Ltd in accounting year.
Pricing strategies: By the help of effective pricing plan, Tech Ltd can evaluate various
prices that can be paid by customer for the electronic gadgets (Ratnatunga and Alam, 2011).
There are various pricing strategies are available with the managers. Some of them are discuss
underneath:
 Price skimming
 Cost base pricing
c): Importance of using budget tools as planning option
There are certain aspects those are useful in planning of budgets on the basis of data
collected. Forecasting planning tools is termed as an essential budgeting control process which is
use for evaluating future profitability for the company. Whereas, situational analysis is another
important planning tools which is prepare according to the demand of managers.
M3: Analyse use of planning tools and their application
For effective outcomes in every year, managers use to adopt various planning tools which
is helpful in budgetary control process. Some of them are forecasting tools which are use to
control future cost those are affecting productivity of the company.
TASK 4
P5: Use of balance scorecard
In every business organisation, it has been seen that plenty of issues are arises which are
affecting performance during the time (RW Hiebl, 2013). As mention under the case of Tech Ltd
they are getting a loss of 1.5 million in an accounting year. It will be occur because of financial
issues. Some of them are:
 Profitability: There are some issues which is related with the profit of the company such
as maximum cost is incur on expenditures. This will results in huge loss for as well as
productivity at the same time.
 Cost accounting issue: Some of them are related with recording of transactions into
various financial statements (Sisaye and Birnberg, 2012). Manager needs to control extra
cost those are levied at the time of production.
Measure to rectify the above financial problems:
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KPI: With the effective use of key performance indicators in Tech Ltd they can identity
exact performance of an organisation. It can be analyse by using past and previous year data.
Financial governance: This is another tools which is been based on government
regulation. The policies made in accordance with working of organisation operations are
implemented in proper manner.
Comparison
Tech Ltd Unicorn Grocery
They are associated with the production of
electricity gadgets.
This company is involve in production of
grocery items for the various customers.
According to it financial position they are
getting a loss of 1.5 m.
With small business operation the chances of
getting maximum financial issues are more.
Benchmarking and KPI is an appropriate
techniques which is being useful for them to
overcome their financial problems.
SMART tools and financial governance is best
suitable method which is effective for this
specific company.
M4: Analysing in accordance with responding to financial issues
In relation to remove all those financial issues those are arises in an organisation they
need to use effective tools. Some issue are related with productivity and performance of the
company. Cost accounting system can be an effective techniques which can useful for analysing
financial problems in Tech Ltd.
D3: Critical evaluation of financial problem
In order to increase better performance of an organization they need to use different tools
and techniques. If financial issues cannot be rectify on time it will affect the operations and
performance of the business (Suomala and Lyly-Yrjänäinen, 2012). Balance scorecard in an
essential techniques by which issues can be easily resolve.
CONCLUSION
From the above project report, it has been concluded that management accounting is a
vital aspects for Tech Ltd in order to manager their day to day operations. After making proper
analysis, it has been seen that with effective utilisation of accounting and reporting system
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various issues can be resolve in more quick and fast. Examination of costing method and
planning tools can be more reliable techniques which is helpful for the purpose of generating
more effective outcome for the company.
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