Management Accounting Report

This report explores the principles of management accounting, examining various systems, reporting methods, and planning tools. It analyzes how management accounting can help organizations address financial challenges and achieve sustainable success.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
TASK 1 ...........................................................................................................................................1
P1. Explanation of management accounting and various types of management accounting
systems...................................................................................................................................1
P2.Various methods which are applied for management accounting reporting.....................2
M1.Evaluation of the advantages of management accounting systems.................................3
D1.Explanation of management accounting reporting and management accounting system
which is integrated within the organisational process............................................................3
PART 2............................................................................................................................................4
TASK 3............................................................................................................................................4
P4.Explaining pros and cons of various types of planning tools which are used for budgetary
control.....................................................................................................................................4
M3.Analysis of use of different planning tools and their application which are used for
preparing and forecasting budgets..........................................................................................6
D3.Evaluation of planning tools that are applied for accounting to respond appropriately to
solve the problem of finance..................................................................................................6
TASK 4............................................................................................................................................7
P5.Evaluate that how organisations are adapting systems of management accounting to
respond the problem of finance..............................................................................................7
M4.Analysis that how, in responding the problem of finance, management accounting can
lead companies to sustainable success...................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Management accounting is the provision of financial information and advice to an
organisation for use in the company for the growth and development of its business. It can be a
process of designing reports of management and accounts which provide, reliable and relevant
financial and numerical data and information in given period of time which is required by
managers to make day to day and short term decisions (Otley, 2016) . This assignment is related
to Hotpoint Electric Heating Company which is an American and European brand of domestic
appliances. It was founded in 1911 by Earl Richardson and the ownership of the brand is split
between the American company Whirlpool. In this assignment discussed about management
accounting system, management accounting techniques and the use of planning tools which is
used in management accounting. Further will be compare the ways in which organisations could
use management accounting to respond to financial issues.
PART 1
TASK 1
P1. Explanation of management accounting and various types of management accounting
systems
Management accounting- It is the process of analysing business costs and operations to design
and design internal statistical report, account and record which aid mangers in decision making
process context of attaining organisational objective. In Hotpoint, it can be a process of preparing
management accounts and reports which provide needed and reliable financial information to the
mangers on time so that they can create or generate strategies for attain the goals and aims of the
company. It is required fro planning, decision making, identifying early signs of problems and
strategic management.
Management accounting system- It is a process and profession or a particular area which
consist participation in management in decision making, performance management system and
providing smartness in financial reporting to make control on management. In Hotpoint, it is a
confidential internal reports that aid mangers indecision making (Renz, 2016). The purpose of it,
to collect information through various sources and help the mangers take decision in context of
pricing, planning, strategies and cost reduction etc. There are different types of management
accounting system, some of them are as following:
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Inventory management system- It is one of the most important management accounting
systems because it help the organisation to track the status of products and services. It is the
combination of technology such as hardware and software or a process and procedure that is
used by firms to monitor and maintain the stocked products. These products can be company's
assets, raw materials and finished products (Maas, Schaltegger and Crutzen, 2016) . In Hotpoint,
this system can help the organisation to check the availability of the stock related to products and
services. It is required for identifying the availability of products and services which are related
to finance.
Cost accounting system- It is a structure and framework that can be used by the company
to analyse the cost of their goods and services for profitability analysis, make control on cost and
inventory valuation. It is vary helpful for the firms because it help in estimate about the cost of
goods and services. In context of Hotpoint, the company can use it in verifying the cost of
different products and services of finance. It help in focusing on those products and services
which are important and beneficial. It is required for the company to make control the cost under
budgetary constraints management which has set for a specific product and service,.. With the
help of it, the firm allocates limited resources to particular projects and production process.
P2.Various methods which are applied for management accounting reporting
There are various methods that can be used by an organisation for management
accounting reporting some of them are as following:
Budget reports- It is very critical and internal report that is useful for management in order to
estimate performance with actual performance. It is critical in measuring company performance.
In Hotpoint, a budget estimate is prepare on the basis of past experiences because a great budget
always caters for unforeseen circumstances that might arise. It is beneficial for the organisation
because it make an estimation of income and expenses for specific time period and the firm
follow it to achieve its objectives.
Benefits- It is beneficial because it can guide managers to offer and provide better employee
incentives, cut costs and renegotiate terms with suppliers. It help the managers to maintain,
monitor and prepare budget of the firm so that they can not face any problem in future related to
it.
Performance report- It is a report of the performance of something which mention and describe
the performance of anyone (Chenhall and Moers, 2015). It can be an annual performance report
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which evaluate the performance of employees of the organisation. In Hotpoint, the manager of
the company can use it to make key strategic decisions about the future of the firm. It is
beneficial because it reduce the complexity that which employees is reliable for the reward on
the basis of performance. With the help of it, the management department of the company can
address the outcome of an activity or the work of an individual.
Benefits- It is beneficial for the company because it focus on result and aligns organisational
activities and processes to the aims and objectives of the company (Cooper, Ezzamel and Qu,
2017). It helps in ensure equitable treatment of workers because appraisals are based on results.
M1.Evaluation of the advantages of management accounting systems
Benefits of Inventory management system
 This system minimize the inventory cost and maximise the sales & profits.
 It help the company to achieve efficiency and productivity in operations.
 Inventory management system help in tracking and checking the stock of goods and
services.
 The most important benefit of this system is that it reduce the risk of overselling.
Benefits of cost management system
 The most important benefit of this system is that it help in figure out those tasks which
are running smoothly and staying within the allocated budgets.
 It is beneficial to develop estimation of cost of all goods and services which are produces
by the firm.
 It is helpful in identifying causes by which high cost are occurred in the process of
producing product and services.
 It predict the future expenses and cost according to the work towards the expected
revenues.
D1.Explanation of management accounting reporting and management accounting system which
is integrated within the organisational process
It is too crucial in context of organisational process to integrate the management
accounting reporting with accounting system because both are connect with each other. When a
company prepare any managerial reports, it is necessary that data and information must be taken
form the management accounting system (Hopper and Bui, 2016). Without it, the firm can not
take future decision and prepare an accurate report with correct information. Inn Hotpoint, the
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management department of the company prepare various reports by using different tools and
techniques of management accounting.
PART 2
TASK 3
P4.Explaining pros and cons of various types of planning tools which are used for budgetary
control
Budgetary control
It is a process which is used by the managers of the organisation to set financial and
performance aims with budgets and make compression between the actual budgets or adjust
performance according to the need. In Hotpoint, it refers to cost and operations which are
monitor and control by manger in a given accounting period (Senftlechner and Hiebl, 2015).
Budgetary control include the preparation of budgets, coordinating the departments and
establishing responsibilities to gain maximum profit. The manager of Hotpoint consider various
factors to set financials and non financial target for the purpose of controlling and coordinating
financial activities of different departments. There are different types of planning tools and their
advantages and disadvantages are given below:
Forecasting tools- It is a planning tool which is used by management of the organisation inn its
attempts to cope with the future risk and uncertainty. This kind of tools are used by firms to
anticipate the results and future plans on the basis of previous data and information. In context of
Hotpoint, Forecasting is monitoring what is going to happen in the future on the basis of past
information and situation from which the form passed away. This technique can be used by the
managers of Hotpoint to guide the future need and requirement by determining the financial
statements. The firm can used it, to make calculation within the ratios and going through the
previous information and data or available information.
Advantages
 The primary advantage of this tool is that it provides Hotpoint a business which provide
valuable information that can use to make decisions about the future of the company.
 It can provide benefits to manager to formulate better future plans by considering the
valuable financial information (Bobryshev and et. al., 2015).
Disadvantage
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 The data and information collected by managers from the different departments of the
organisation may not be easy for making suitable strategies and programs for the future
actions.
 It can be a complex task for the manger of the company to formulate correct future plans
for the growth of the company (Chiarini and Vagnoni, 2015).
Contingency planning- It is an another tool which is used by the company to manage the
several risks that are arise causes of unexpected situations while performing various operations
in the company. It is a instrument that useful in establishing of different plans, strategies to
overcome certain issues occurring at the workplace. In Hotpoint, this tool help by formulating
various plans and designing different activities to eliminate the conflicts and issues in performing
daily operations as well as reducing the unexpected and unfavourable situation in the firm.
Advantages
 It is beneficial for the company because it help in solving or taking action towards
unexpected issues within the company.
 It is beneficial for the organisation because it reduce the chances of uncertainty, losses
and failure by formulating essential plans and strategies.
Disadvantage
 Contingency planning consume more cost and time when the manager need to be updated
with the changing situation.
 During the time of developing plans, policies and strategies for uncertainty, it can lead to
create problems among ideas of different managers to deal with the current and
respective situation.
Flexible budget- It is a tool that help in making changes in the budgets that adjusts or flexes
with changes in volume or activity. This budget is highly used by the companies to control the
budget. It help in estimating the revenues and expenses on the basis of results and it used to
evaluate the growthful or unsuccessful areas of operations of performance during a financial
period (van Helden and Uddin, 2016). In Hotpoint, the manager of the company can use it to
make easy changes if there is any change occur in the activity.
Advantages
 It provide correct and accurate information or data related to the budget which covers
various range of several activities.
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 Flexible budgeting make coordination between different activities of the business which
is operating by Hotpoint.
Disadvantage
 It requires more planning because it track expenses and adjust for any differences
between financial period.
 It include more rules so it is vary complicated that can easily be bent or broken by some
who is struggling to stay within the boundaries (Nielsen, Mitchell and Nørreklit, 2015).
M3.Analysis of use of different planning tools and their application which are used for preparing
and forecasting budgets
Budgetary control define the clear image of a company by providing various tools and
instruments that are useful in formulating the future financial performance and aims with the
help of determining the previous budget. These kind of control help Hotpoint to plan the result
by analysing the current and past budget. There are different tools such as contingency planning,
forecasting tool and flexible budget that can be used by the company to for preparing and
forecasting budget. With the help of forecasting tool, the manager of the company analyse the
future uncertainty on the basis of past and previous information of the budget. By using
contingency planning, the management of the company can formulate plans and strategies to
remove and reduce unexpected problems and hurdles. With the help of flexible budget, the
manager of the company can analyse the previous budget and financial statement which help
them to maintain and monitor the financial position of the company. All these describe planning
tools can be used by the manger of Hotpoint to manage, estimate, forecast and monitor or
prepare the budgetary activities in context of organisational growth.
D3.Evaluation of planning tools that are applied for accounting to respond appropriately to solve
the problem of finance
Planning is helpful for the company to formulate strategies in advance so that in future it
can run or operate its business properly. In Hotpoints, the management department of the
company can use various planning tools such as contingency planning, flexible budget and
forecasting tool ton estimate and forecast unexpected conflicts and problems in context of
increase the profit and productivity of the company (Dekker, 2016). To make positive impact in
the economic condition of the firm. These all tools can be use by the organisation to reduce and
resolve the uncertainty and those issues that can be faced by the company in future.
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TASK 4
P5.Evaluate that how organisations are adapting systems of management accounting to respond
the problem of finance
Financial problems- It is a situation where a person and organisation face the problem of lack of
fund and not be able to meet its bills on time or afford necessary basic needs. There are several
financial issues and hurdles that are faced by by companies and affect the profit and efficiency
and productivity of the firm (Schaltegger and Burritt, 2017). To overcome and get rid from this
kind of situation, there are various strategies which are applied at same time. There are various
problems occurred in the firm related to it, some of them are as following:
Working capital- It refers to the fund which is available with the company to mange the day to
day activities of the company. It is also known as the net working capital which is available in
the company inform of current assets, cash, inventories of raw materials and finished goods etc.
In Hotpoint, it help in determining the return on investment and providing correct amount of
capital. In the company, it can be calculated in term of current assets minus current liabilities.
This company face this issues in term of debt problems cause of lack of working capital which
affect the daily activities of the company.
Money management- It is a process tracking, investing, budgeting and evaluating expense and
taxes of money. In Hotpoint, it is the process of saving, investing and spending or overseeing the
capital which is use by the company. It help the company through available resource to maximise
the profits with the help of different activities.
Risk management- It is the process of forecasting and evaluating of financial risks together with
the identification of procedures to avoid or minimise their impact. It can be a process of
identifying, assessing and controlling threats which are generate to an organisation's earning and
capital. Hotpoint also face these kind of risk and problems. To overcome them, the management
department of the company design and develop various strategies and activities. To forecast or
manage them, the company mange its budget and inventory management system (Bennett and
James, 2017).
Problem of cash flow- It is a problem that mean a business spend more money than its earning.
This problem occur within the company because they fail to look at their financial statements.
Another reason can be, the companies are not maintain and monitor their budget and financial
record. In Hotpoint, cause of this problem can be low profits and more losses. This problem is
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faced by the company because the firm invest more fund on the promotion of its business and not
pay back its debts (Strauss, Kristandl and Quinn, 2015).
Financial governance- It refers to the way by which an organisation collect, manage, control
and monitor its financial information. In context of Hotpoint, it involve track financial
transactions, manage performance, control and compliances and various others. Good financial
governance help the company to solve challenges and achieving the organisational objectives.
Management approaches
It is a process of defining the use of accounting tools which help the company to solve
the issues and achieve the objective and understand the need of organisation to achieve them.
There are various approaches, some of them are as following:
KPI- It is tool and techniques that is used by the organisation to measure the
performance. In Hotpoint, it can be a quantifiable measure used to evaluate the success of the
company and employees also in meeting objectives for performance.
Benchmarking- It is a tool which is used for the company to measure the quality of an
organisation's policies, products, strategies and programs or others. It can be used by Hotpoint to
identify the opportunities for improvement to reduce the gap with the competitors in context of
monitoring performance on the daily basis activities.
M4.Analysis that how, in responding the problem of finance, management accounting can lead
companies to sustainable success
Management approaches such as key performance indicator and benchmarking play and
importunate in Hotpoint to achieve the sustainable growth of the company. Benchmarking help
the company to analyse the gab that are generated by the competitors. With the help it, the firm
and reduce and monitor uncertainty or unexpected situation. Key performance indicator help the
company to reduce the risk and competition which are created by competitor in the same
industry (Otley, 2016).
CONCLUSION
It can be concluded from the above information which is mentioned in the report that
management accounting is an important tool and techniques to manage and monitor the fund and
finance of a company. In this report, management accounting, management accounting system
and the benefits of its are explained. Benefits and disadvantages of various types of planning
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tools are explained. Financial problems and management accounting which lead the organisation
to sustainable success is described in the assignment.
REFERENCES
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management: current practice and future trends. Routledge.
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Bobryshev, A. N., and et. al., 2015. Management accounting in Russia: problems of theoretical
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Dekker, H. C., 2016. On the boundaries between intrafirm and interfirm management
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Wiley & Sons.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts
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Strauss, E., Kristandl, G. and Quinn, M., 2015. The effects of cloud technology on management
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