MANAGEMENT ACCOUNTING & CASH FLOW BUDGETING

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student
Name of the University
Author’s Note

MANAGEMENT ACCOUNTING1
Table of Contents
Introduction................................................................................................................................2
Answer to Question 1.................................................................................................................2
Purpose of Budgetary Control................................................................................................2
Different Forms of Budgetary Control...................................................................................3
Cash Flow Budgeting.............................................................................................................3
Capital Budgeting...................................................................................................................3
Zero-based Budgeting............................................................................................................4
Rolling Budget.......................................................................................................................4
Operational Budget................................................................................................................5
Answer to Question 2.................................................................................................................5
Answer to Question 3.................................................................................................................6
How Management Accountants will use KPIs.......................................................................6
Advantages and Disadvantages of the Use of KPIs...............................................................6
Answer to Question 4.................................................................................................................7
Conclusion..................................................................................................................................8
References..................................................................................................................................9

MANAGEMENT ACCOUNTING2
Introduction
Management accounting can be defined as a process to assess the costs of the
businesses and operations to prepare internal financial reports, records and accounts for
assisting the managers’ process to make decision (Maas, Schaltegger and Crutzen 2016).
Planning is a crucial activity to the management accountants which involves in forming
short-term and long-term plans and actions for achieving organizational goals and objectives.
There are different management accounting planning tools that the management accountants
can utilize for making sure financial steadiness and performance; and these tools also play a
crucial role in solving different financial issues within the organizations. The main aim of this
report is the analysis of the use of different planning tools for gaining competitive advantage
and solving financial issues.
Answer to Question 1
Purpose of Budgetary Control
 The main purpose of budgetary control is to ensure planning for future through
establishing different budgets through the anticipation of enterprise requirements and
expected performance.
 Another purpose of budgetary control can be seen in operating different cost centres
and departments efficiently and economically (Isaac, Lawal and Okoli 2015).
 Budgetary control is established with the intention to eliminate waste so that
profitability can be increased.
 Anticipation of the future capital expenditure is another key purpose of budgetary
control.
 Budgetary control assists in centralizing the control system within the organizations.

MANAGEMENT ACCOUNTING3
 Another major purpose of it is to correct the deviation from established standards
(Isaac, Lawal and Okoli 2015).
Different Forms of Budgetary Control
Various types of budgetary controls can be seen that the management accountants use;
they are Cash flow budgeting, Capital budgeting, Zero-based budgeting, Rolling budget and
Operational budget.
Cash Flow Budgeting
Advantages
 Cash flow budgeting assists in ascertaining whether there is adequate cash balance for
fulfilling the regular business obligations.
 This also helps in ascertaining whether cash and liquidity requirements stipulated by
banks are maintained.
Disadvantages
 Excessive use of estimates in relation to future events for forming this budget is a
major disadvantage.
 There is not any scope in changing the numbers of this budget once it is developed
and this makes this budget less flexible (Cull 2017).
Capital Budgeting
Advantages
 Capital budgeting largely assists the companies in understanding different risks
involved in an investment project along with the opportunities.
 This plays a crucial role in the informal decision-making process on the investment
projects (Andor, Mohanty and Toth 2015).