Management Accounting and Business Decisions

This assignment delves into the significance of management accounting within an organizational context. It examines how management accounting aids in informed decision-making by providing stakeholders with crucial insights into costs, budgets, revenue, and funding requirements. The analysis highlights the importance of financial stability, addressing issues like cash flow imbalances and economic cycles. The assignment concludes by emphasizing the value of management accounting for efficient resource utilization and ultimately achieving business goals.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems. .........................................................................................1
Essential requirements of different types of management accounting systems.....................4
P2: Explain different techniques and methods used for management accounting reporting. 5
M1 Evaluate the benefits of management accounting systems and their application within
Marks and Spencer...............................................................................................................11
TASK 2..........................................................................................................................................12
P3: Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs....................................................................12
M2 Accurately apply a range of management accounting techniques and produce appropriate
financial reporting documents. ............................................................................................13
TASK 3..........................................................................................................................................15
P4 Ascertaining planning tools and budgetary control technique with merits and demerits15
M3 Analyse the use of different planning tools and their application for preparing and
forecasting budgets. .............................................................................................................23
TASK 4..........................................................................................................................................23
P5 Comparing the organisations implicating various management accounting techniques to
deal with financial problems................................................................................................23
M4 Analyse how, in responding to financial problems, management accounting can lead
organisations to sustainable success. ...................................................................................25
CONCLUSION..............................................................................................................................26
REFERENCES..............................................................................................................................27

INTRODUCTION
To resolve the financial and managerial issues in the organisation there is implication of
various management accounting system techniques. These are the techniques which will be
beneficial and adequate for the professionals in recording the transaction, summarizing it and
having the adequate analysis over the issues of the operations. In the present report there will be
various costing and reporting technique which helps in ascertain the costs and fund requirements
for venture. It also highlights the use of planning tools and budgetary control techniques in the
business performance as to have the better information regarding the profitably and efficiency of
the business. There has been analysis of the financial data of Eastern Ltd on the basis of marginal
and adsorption costing techniques.
TASK 1
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems.
Management accounting
Management accounting can be understand as per analysing the role of management and
accounting techniques therefore, management is denoted as making the effective plans and
control system to set the overall operational criteria of venture. On the other side, accounting
refers to recording all the transaction held in a period to analyse the cost and profits (Cooper,
Ezzamel and Qu, 2017). However, the management accounting is the process where all the
transactions were recorded by the accountants and they analyse the outcomes and make
necessary decisions.
Features of management accounting system:
There has been several features of management accounting system which will be
beneficial and helpful to the entity in terms of making the adequate analysis of performance and
efforts made by professionals of venture (Ax and Greve, 2017). However, the managements
accounting mainly used for decision making which enables the entity to have standards costing
and budgeting techniques. The main features of this technique are:
 It studies the causes and effect relationship in consideration of financial accounting,
profits and loss accounts.
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 It determines the total elementary costs such as fixed, variable and semi-variable costs.
 It is totally different from financial accounting as it is useful for managerial decisions.
 It helps in modifying the data and have the proper interpretation of such analysis.
Principles of management accounting:
There are various kinds of management accounting techniques which will be helpful to
venture in terms of attaining the adequate revenue with better efficiency. However, such
techniques will be helpful to the entity in terms of achieving the business objectives with proper
allocation of the resources (Kenno and Free, 2017). However, the main principles of this system
are as follows:
 The transactions were to be designed, recorded, reported and relevant statements were
presented by the accounting professionals on periodic basis.
 These cost are to be controlled on the basis of relevant sources and proper analysis.
 The accounting system facilitate the return on investment over the projected plan of
venture.
The management accounting information system:
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There are various kinds of management accounting reporting system which are meant to
be performed and analysed by the professionals of venture. Managerial professionals need to
make proper analysis of the financial accounting techniques for the operations of the business. It
helps in recording the transactions in the data set and provide the accurate results (Latan and
et.al., 2018).
Types management accounting system:
Cost accounting: The costs accounting will be profitable in terms of analysing the costs
incurred in each functions of venture. There are various costs accounts which will be helpful to
the entity in terms of analysing the requirement of funds for the operations. However, these costs
includes job costing, batch costing, variable, fixed, direct and indirect.
Tax accounting: This is necessary for the business growth of venture to have the better
revenue as well as periodically making payments of the taxes. It is essential for entity in terms of
making the payments of corporate taxes, duties, transportation charges etc.
Budgetary: The professionals in venture need to present their estimation towards the
requirement of funds and costs going to be incurred in the particular activity. The budgets
include several budgets such as sales, cash, production, promotion etc.
Auditing: It will be helpful to entity in context with having a periodical audit of the
accounts which will facilitate the overall information regarding the performance of venture.
Financial accounting: It includes preparation and presentation of all the financials of
firm such as balance sheet, income statements, cash flow statement etc.
Management accounting: There is need to include all the management accounting
techniques which will be helpful to them in terms of analysing status of the costs and resources
available to them.
Accounting system designing: This a computer based data system which keeps the
records of all the necessary transactions held in venture. Therefore, the motive is to design the
accounts and the source of information which must be cost effective in order to facilitate the
information. It includes Single or double entry, account code structure, cash or accrual basis,
Divisional representation, Reports, Procedure, controls etc.
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Non for profit accounting: This type of accounting technique is not having any
commercial owner as the funds generated in the accounts will be utilised for the welfare of the
society. It will be used in health and social care services, educational or technical development,
donations etc.
Inventory management system: this technique will be helpful to venture in terms of
making the adequate analysis over the availability of resources in the organisation as well as
proper management of inventory it checks the numbers of imported goods as well as numbers of
exported goods. Therefore, such determination will be beneficial in decisioning the production
level of the business.
Job costing: To determine the level of funds utilised while performing a particular job or
tasks. However, there are various departments and different jobs are being performed by the
individual which is need to be managed and monitored. Moreover, it helps in analysing the costs
incurred in each operations such a direct material, labour and overhead expenses.
Price optimisation: To analyse the satisfactory costs over the products and services there
is need to have appropriate pricing decisions. It must meet the costs of the operations as well as
must be convenient for the consumers.
Essential requirements of different types of management accounting systems
The requirements of different kinds of management accounting system which will be
helpful in various operational factors such as:
 It helps the ascertaining the costs incurred in each business operations such as labour,
material, manufacturing, selling etc.
 It manages and executes the price fixation with the help of various budgetary techniques.
 It will be beneficial in reducing the costs as well as proper control over the level of
wastage.
 The Unprofitable or unfruitful activities will be identified and which will help the
managers to make the decision to find the alternative solution.
 The accuracy of the financial accounts will be checked and analysed
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 The influence of such technique will be helpful for the entity in terms of having the
satisfactory internal control, pricing strategies as well as in estimating the business
requirements.
P2: Explain different techniques and methods used for management accounting reporting.
The decision making will be successful only if there will be proper reporting and records
of the transactional information. Therefore, there are various reporting techniques which can be
analysed as follows:
A. Job costing: There is the analysis which will be based on level of operations made the
professionals and the profits earned over such operations (Dekker, Kawai and Sakaguchi,
2018). However, it helps them in analysing the costs incurred in finishing a particular unit
of operations.
Importance: It will be helpful tool in determining the requirement of funds in each
department as well as satisfactory estimation. It will be helpful in analysing the costs
incurred in each business activities such as direct labour, material and various overheads.
It determines the capital utilised while performing a job which will be helpful to
managers in cost decisions.
Example:
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B. Overhead allocation: This is the reporting technique which will helpful to the entity in
contact with allocating the funds to the overhead expenses of the organisation (Christ and
Burritt, 2017). However, it includes the costs such as direct labour, machine hours and
various relevant costs which are meant to be analyse and financed by the business.
Importance: The importance of this tool which will be helpful in determining the cost
incurred in all the business transactions such as Direct labour, Material costs etc.
Therefore, the allocation of various overheads will be profitable in terms of saving the
costs incurred in each unit operations.
Example:
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C. Life cycle costing: This technique will be helpful to the entity in terms of analysing the
costs of the products and services (Van der Stede, 2017). It compares the least costs of
such products with the initial investments over such operations.
Importance: It helps in determining the costs required for the particular product and
services and services since the initial start-up to till the present costs of the same. It can
be analysed as per determining the capital invested in the operations with operating cost,
maintenance cost and disposal value of the products. This analysis provide information
regarding life cycle costing of the business.
Example:
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D. Standard costing: This technique is used as to have the substitute costs in spite of
estimated and actual costs. It records the variance between estimated and actual costs
incurred in such practices (Cooper, Ezzamel and Qu, 2017).
Importance: This is beneficial tool in analysing the adequate costs to such operations on
the basis of budgeted and actual costs. That helps in deciding whether to reduce of exceed
the fund for such activities.
Example:
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E. Integrated cost: This is the costs which determines the risk associated with the practices.
Thus, it can be said that it ascertain the good quality and costs of products and services
with the resources available to this (Ax and Greve, 2017). It will be helpful to the entity
in terms of estimating the accurate costs to such work.
Importance: To analyse the quality of goods and services on the basis of its costs it is
the best techniques which are need to be implement by the professionals in the business.
Example:
F. Financial accounts: This technique is helpful in recording of all the financial transaction
incurred in a period. The process lies here that the managerial professionals summarised
such information and make the adequate analysis over the outcomes (Kenno and Free,
2017). However, it will be helpful to the managers of internal stakeholders in accurate
assumptions, forecast and business planning.
Importance: These accounts are very helpful in analysing the revenue and expenditures
over each business transactions. To present such data will be helpful in deciding the
framework and operational means of the entity.
Example:
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M1 Evaluate the benefits of management accounting systems and their application within Marks
and Spencer
The preparation of forecasting table and budgets with the help of past performance and
future estimation that will be helpful in enhancing the activities, growth and profitably of Marks
and Spencer. However, the influence of all the managerial accounting tactics will enhance the
efficiency of firm on the long term basis. To determined the profitable growth of the application
of such techniques will be beneficial for entity for having the long term gains. The main aim of
implicating such techniques into operation is to reach the targeted goals of the entity.
In reporting methods venture will have reports of all the transactions that held in the
premises such as purchase, sale, lending and borrowing etc. It is and informative tool that will
help the managers to have the accurate data and details regarding the transactions.
 In relation with the management accounting these reports will be analysed by the
professionals and they make efficient decision to reduce the costs as well as allocate the
appropriate capital to fund the requirements.
 Marks and Spencer seeks the profitable returns over their invested capital in each
departments.
 Therefore, the reporting from each units will help the managers to decide whether to
increase or decrease the costs over operations.
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TASK 2
P3: Calculate costs using appropriate techniques of cost analysis to prepare an income statement
using marginal and absorption costs.
Marginal costing:
Income statement for the Eastern Ltd as per marginal costing
Particulars Details Details Amount
Sales revenue 1500*35 52500
Less: Cost of Goods sold
Direct Labour 2000*5 10000
Direct material 2000*8 16000
Variable production overheads 2000*2 4000
Less: Closing inventory
Direct Labour 500*5 2500
Direct material 500*8 4000
Variable production overheads 500*2 1000 22500
30000
Less: Other variable costs 52500*15% 7875
Contribution 22125
Less: Fixed Costs selling and administrative 15000+10000 25000
Net loss -2875
Interpretation: On the basis of this technique it can be said that there has been loss at the
ned such as-2875. This technique follows implicate the use of only variable costs into operations.
It does not require fixed costs to make the measurements. However, the closing inventory
through such operation is 7500 as per mentioning only variable costs.
Absorption costing:
Income statement for Eastern Ltd as per absorption costing method
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Particulars Details Details Amount
Sales revenue 1500*35 52500
Less: Cost of Goods sold
Direct Labour 2000*5 10000
Direct material 2000*8 16000
Variable production overheads 2000*2 4000
Fixed overhead costs 2000*5 10000
Less: Closing inventory
Direct Labour 500*5 2500
Direct material 500*8 4000
Variable production overheads 500*2 1000
Fixed overhead costs 500*5 2500 30000
22500
Less: Under-absorption on overheads 5000
Gross profit 17500
Less: Total production cost 17875
Net loss -375
Interpretation: On the basis of above mentioned analysis it can be interpreted that the
firm may have losses in the end but it has covered all the costs of the entity such as labour
material etc. the closing inventory will be cost at 10000 as containing all the variable and fixed
costs.
Working Notes:
WN 1:
Overhead Absorbed 2000*5 10000
Overhead Incurred 15000
Under- absorption on overheads 5000
WN 2:
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Fixed Production cost 10000
Variable production overheads 52500*15% 7875
Total production cost 10000+7875 17875
M2 Accurately apply a range of management accounting techniques and produce appropriate
financial reporting documents.
From: MOA
To: GM
Subject: Presenting the information about the favourable managerial accounting technique
which are need to be implicated.
Sir,
In relation with presenting the fruitful data set which reflect the higher profitability as
well as appropriate allocation of the costs. There are marginal and absorption cost techniques
which will help the entity in terms of identifying the sufficient profits. Thus, here the adsorption
method will have favourable results as it is consisted of all the costs incurred while producing a
unit. However, there are various other techniques which will be helpful for the management
accounting techniques such as
 Financial planning
 Revaluation accounting
 Fund flow statement
 Cash flow statement, historical checking
 Analysing final accounts
 Communicating the informations etc.
In accordance with the Marginal costing techniques the business had loss of -2875 and
in absorption technique it was -375. Therefore, in relation with the costs of each techniques the
absorption technique is quite fruitful for the business as it consider full cost method and present
the adequate net profit. In the marginal costing technique there is proper consideration of the all
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the variable expenses such as direct material, direct labour and production overheads. Thus, in
accordance with the absorption costing technique it considers all the costs fixed plus variables.
There are various reporting techniques which are need to be implicated by the professionals as
to have better operational control such as:
 cash flows
 start-up costing
 profit and loss statements
 Balance sheet
 Budgets and forecast tables
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TASK 3
P4 Ascertaining planning tools and budgetary control technique with merits and demerits
To determine the use of various budgetary techniques and planning tools in terms with
enhancing the business performance and motivating the employees to make effective utilisation
in the growth of entity.
However, below listed are some budgetary control techniques and planning tools that will be
helpful in framing the business operations-
Budget:
These are the financial plans for a specific period which enables a business to perform
and make efforts in the previously determined criteria. Including the estimated costs for the
production, demand in the market, sale volume, revenue generation, required quantities, assets,
amiabilities and cash flows of the firm (Black, 2017). The motive behind implicating such
technique as to have better record of all the transactions and operations of the business.
Budgetary control:
This is the technique under with the plans can be modified and redesigned by the professionals as
per the changes in the level of cost, income and expenses. The system follows the technique of
analysing the planned costs with the actual expenses made in such operations (Definition of
budgetary control, 2017). This variation with decide the changes in operations and the costs of
business.
A. STATIC BUDGETS
This budget is based on the anticipative level of the organisation on the basis of revenue
and outputs during an accounting period. These are the data which are being gathered and
analysed before the budgeting persiod begins. Moreover, it has many advantages and
disadvantages as follows:
Advantages:
 There is no need of any modification and updates.
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 It bing the strong inside view of the organisation in relation with the costs and profits
gathered by them.
Disadvantages:
 There is lack of flexibility as it does not require any updates.
 It is insufficient in allocating the additional resources.
Example:
B. ZERO BASED BUDGETING
This is the technique of planing the budgets with no influence of the past costs and
revenue (Latan and et.al., 2018). The budget starts from the zero balance and the funds
will be facilitate over such tasks as per the requirements of it.
Advantages:
 These are very flexible budgets as the funds will be assigned to the business operations as
per the requirements.
 It requires lower costs as the budgets are prepared on the zero basis.
 It has favourable and disciplined execution of the performance made in such tasks.
Disadvantages:
 There are higher chances of having manipulation of the fund requirement informations
basically on short term business planning (Dekker, Kawai and Sakaguchi, 2018).
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 Not appropriate informations were presented regarding the requirement of capital amount
in the business operations.
Example:
C. INCREMENTAL BUDGETING
Under this method the managers and accounting professionals of entity analyse the costs
incurred in the previous year and then make the surplus budget to that amount (Christ and
Burritt, 2017). Therefore, it will have the increment carnages in the funds.
Advantages:
 It is the easiest way of determining the costs and preparing the budgets for the operations.
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 It enables the ongoing business to have the continues growth in the operations as well as
in findings.
 It approaches the large deviations in the budgets with gradual variations (Van der Stede,
2017).
Disadvantages:
 It ensures the increment in the operations and the requirement of funds in each period.
Therefore, some time s that will be need to reduce the funds in such operations which
enhances the manipulation of the capital (Cooper, Ezzamel and Qu, 2017).
 To have the increment in the funds for the operation which will be problematic for the
other departments in context with not having proper amount of money for the operational
practices.
Example:
D. ROLLING BUDGET
This the budgetary technique which take the variance balance of the previous period to
the next year. Therefore, it can be said that the budgets are carry forwarded to the
upcoming period with addition as if required (Ax and Greve, 2017).
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Advantages:
 This the dynamic nature of the business as the various budgeting techniques are outdated
and follows the traditional method of analysing the costs and revenue for the upcoming
period.
 The carry forward nature of these budgets will be helpful in determining the logical
outcomes from the operations (Kenno and Free, 2017).
Disadvantages:
 It is the most time consuming process as it take higher attention and efforts from the
professionals in regards making the effective cost decisions.
Example:
E. FLEXIBLE BUDGETING
This budgets are based on having the flexible changes in amount of capital invested in the
operations. The changes are to be made in accordance with the changes in the operations
as well as budgetary process of the entity (Dekker, Kawai and Sakaguchi, 2018).
Advantages:
 It is highly dynamic or versatile budgeting technique which changes as accordance with
the requirements.
 It engaged the managerial professionals to make continues execution of the operational
practices and have the favourable utilisation of the resources.
Disadvantages:
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 It may be flexible and beneficial for the business as to have the surplus budgeted revenue
but these are inefficient and inaccurate in terms of providing outcomes (Van der Stede,
2017).
 There will be lack of informations as the costs are continues change and have the huge
variations.
Example:
Planning tools used for budgetary control
These are the tools which helps the professionals to have better informations regarding
the probability and the level of costs has to be made by them in such projects. Thus, it helps in
efficient decisions making (Christ and Burritt, 2017).
a. Pricing strategies: Determination of the cost effective prices over the products which
will bring the valuable returns to the organisation. The accurate pricing decision will
help the firm in gaining profitability and helps in increasing the efficiency.
Advantages:
 It helps in managing the industrial prices as well as monitored the life cycle pricing of the
products and services.
Disadvantages:
 This technique only implied maximum time as per the demand of the products and
services of the organisation.
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b. Common costing system: There are various costing techniques which will be helpful
in analysing the level of inputs were made by firm in each tasks such as job order
costing, cost accounting, batch costing etc.
Advantages:
 It helps in improving the cost control in the organisation which is helpful for the
managerial planning and decision making.
 It helps in reducing the production costs as well as better record keeping.
Disadvantages
 The analysed variance and outcomes has the controversial materiality. The results cannot
be reliable.
c. Strategic planning: To plan for the operations, marketing, costs and the level of
efforts made by the numbers of employees this all come under the strategic planning.
However, it will help the managerial professionals in terms of deciding the budgets
for the operations.
Advantages:
 Helpful in increasing the innovation plans in the organisation which in turn helps in cost
controlling as well as operational planning.
Disadvantages
 There will be lack of knowledge in individual as it does not consider the financial
requirements as well as analyse the managerial perception.
d. NPV: This is the technique which ascertains the present value of the future cash
flows. It will be beneficial in terms of identifying the profitability over such
investments.
Advantages:
 The basic advantage of this technique is that it facilitate the present value of the future
cash which will be discs outed over a certain percentage.
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 It considered the costs of capital for making the accurate assumptions and which enables
the managers to make favourable decisions (Latan and et.al., 2018).
Disadvantages:
 It does not need the guesswork or workings for analysing the costs of capital for the cash
flows.
 It compares the projects belongs for the different size and investments which is quite
complex and uncertain to have the better analysis over the requirements.
E. IRR: The process lies under this technique is to analyse the rate of returns over the
amount invested in the firm as well as the cash flows of that period (Ax and Greve,
2017). Therefore, it helps in ascertaining the profitability over such investments.
Advantages:
 It the accurate method of analysing the time value of money and give the equal weight-
age to all cash flows.
 It determines the uniformly in ranking which facilitate the maximum profitability to
shareholders (Van der Stede, 2017).
Disadvantages:
 It is very complex and difficult to analyse.
 The assumptions were made here are unrealistic.
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M3 Analyse the use of different planning tools and their application for preparing and
forecasting budgets.
The costing system, strategic planning and various planning tools will help the professionals in
analysing the requirements as well as they will become able to make the most appropriate
decision for the operations.
According the use if planning tool the business will have effective control over the capital
circulation. Therefore, it can be said that a firm need the planning tool to analyse the profitability
of the future transaction and the projects. Thus, it can be said that there are various kinds of
operations and plans of venture the tools such as NPV, IRR and ARR will be helpful in
determining the profitability of such projected plans of the firm. In order have the sufficient
increment in the profits and revenue of the entity there is need to implicate such techniques
which will enhance the productivity and better internal control.
TASK 4
P5 Comparing the organisations implicating various management accounting techniques to deal
with financial problems
Major financial problems
In accordance with the above listed financial problems of the organisation there are
various issues which are need to be resolved and overcome by the business professionals such as:
 Closure and Shut down: There has been big problem that has been faced by the
professionals such as making the financial disclosure in the market. It will be sort out as
if the better management accounting operations will be operated by the firm.
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 Make or Buy: The cost of production is always high due to improper management of
funds for the operation as well as inappropriate utilisation of resources. Therefore, buying
and article will cost a firm higher instead of producing such articles.
 Pricing: The prices over the products and services which must be an effective decision
that will help the organisation in analysis the costs of the products. In these regards the
cost must be determined as per the market competitors and their rates which will be
helpful to the firm in setting the competitive prices.
 Capital investment: There are higher capital investments which affect the firm in
making adequate revenue generations.
 Special Orders: It will require higher costs than compared to the common order and on
which the consumers will pay more amount. Therefore, it will be profitable for the firm
in retaining the higher revenue from such orders.
Effectiveness of Management Accounting
There is need to bring the adequate changes into operations which will be helpful in
terms of motivating the staff to make the adequate efforts as well as suggesting them to report
the top level directors about each tasks. There is need to assess the industrial position as to meet
the competitions. It will be helpful in having the adequate competitive development. Moreover, it
will be helpful to the entity such as:
 Motivating staff: This technique is helpful in measuring the performance of entity and
the workforce which in turn helps in enhancing the performance and efficiency of the
workforce. It will be motivating as it presents the positive competitive environment in the
organisation.
 Measuring the performance of activities: It helps in managing the business
performance as all the costs and expenditure will be monitored and executed by the
professionals. However, there will be appropriate increment in the growth and
profitability of the firm which lead it has the better liquidity and efficiency.
 Organisational goals: To attain the targets of the firm such as setting small targets and
implied the budgetary and reporting techniques. Thus, it also provokes the innovating
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ideas from the employees in the entity. It also builds the market value of the firm in the
external environment which will be attractive to the investors.
 Organisation's long run competitiveness: It brings the appropriate growth of the
business which capable them to meet the external challenges. It manages the internal
control in the organisation which will be helpful in bring the capabilities to meet the long
run competitions.
Compare ways in which organization could apply management accounting to respond to
financial problems
Key performance indicators: This includes various techniques which enables the
professionals to make the adequate analysis over the use of resources as well as making the
effective changes in the operations. It ascertains and evaluates the performance made by
organisation and employees to attaining the business objectives of venture. It is the most fruitful
method which helps in encouraging and motivating the employees to make appropriate efforts in
achieving the organisational aims (Ax and Greve, 2017). The big entities in the retail business
such as Tesco, Iceland supermarket uses this technique to provoke the courage of workforce.
Thus, it will be helpful for the organisation as if they make analysis over the variance of the
organisational and employee's performance.
Bench marking: This is the technique which set a target and analyse the performance of
the organisation and the workforce in achieving the business objectives of venture . However,
under this method the managerial professionals set small targets and time limits to the staff and
they motivate them to make efforts in achieving such minor objectives (Dekker, Kawai and
Sakaguchi, 2018). Moreover, it can be said that the achievements over small aims will lead the
firm to attain the large victory. The manufacturing units are implicating such methods into
operations such as Ford Motor company. The level of efforts made by professionals in the
organisation as well as the estimated outcomes need to be compare and the variance of their
performance must be appreciated.
Variance analysis: Under this method it follows the process of analysing the difference
between budgeted and actual costs incurred in the business activity of venture. The remaining
balance will be carry forwarded to the next period (Van der Stede, 2017). However, such balance
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will be used in the further prices and which is the best technique to decide the costs over such
functions. Therefore, the managerial professionals will plan for reducing the costs as well as
making the increment in such costs.
Budgetary targets: It will be helpful tool, in analysing the financial problems indulged
with the organisation which will be affective and helpful for the firm in making the appropriate
execution over organisation activities. For the non financial organisation there will be use of
such techniques in analysing the costs incurred during the period as well as requirements of
funds. For the profit organisation it will be helpful in ascertaining the performance and
profitability of the firm.
Preventing financial problems
To have proper control over the operations as well as financial control in the business
there is need to adopt several changes which will be helpful in attaining the business goals.
However, there are several issues which will be sort out such as:
 Get insurance: It is necessary to have the profitable insurance over the assets or
investments of the organisation.
 Ability to afford payment of the charged item: It consisted that the business must
make payments to the operations which will be affordable to them otherwise, they must
avoid it.
 Avoid large rent or house payment: These are the factors which are affecting the higher
outflows of the cash payments. Thus, it will be suggested to the professionals that they
must avoid such kinds of large payments
 Avoid Co-signing: To sign the business contract there is need to avoid the cosigning
agreements. Therefore, it will have the direct impacts of the income gathered by the
organisation.
M4 Analyse how, in responding to financial problems, management accounting can lead
organisations to sustainable success.
The major problem is being faced by every entity is the suitable capital allocation and the
better utilisation of the previously existing resources. However, in terms with the management
accounting technique various methods and costing techniques helpful for delivering the
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appropriate information regarding the costs requirements as well as revenue retention capacity of
the firm. Therefore, there are several suggestions which are needed to be implicated by venture
such as:
 Ascertaining the social and environmental trends which has impacts over creating the
company value
 There is need to analyse the challenges which were being faced by organisation as to
have a suitable business model, performance outlook, as well as license to perform the
tasks.
 Financial problems in organisation: The issues like imbalanced cash flows of the
business, in appropriate economic cycle and the in appropriate findings. The availability
of the funds will have the affects over the organisational goals.
CONCLUSION
In context with the above mentioned report it can be said that the main use of
management accounting is to make the most efficient and favourable decision for the business
activities. It enables the stakeholders with the accurate results which are relevant with the costs,
budgets, revenue and fund requirements in venture. Further, it can be said that with the help of
such analysis the business will be beneficial to determine the adequate use of such resources.
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