(solved) Management Accounting : PDF
Added on 2020-10-05
12 Pages3335 Words144 Views
MANAGEMENTACCOUNTING1
ContentsINTRODUCTION...........................................................................................................................................3TASK 2..........................................................................................................................................................3P4. Advantages and disadvantages of different planning tools used for budgetary control....................3M3. Assessment of different planning tools and their application for preparing and forecasting budget..................................................................................................................................................................5P5. Assessment of management accounting system in respond to financial problems...........................6M4. Assessment of how management accounting can lead organization to sustainable success...........9D3. Assessment of planning tools to solve financial problems which leads to sustainable growth and success of organization............................................................................................................................9CONCLUSION.............................................................................................................................................10REFERENCES..............................................................................................................................................112
INTRODUCTIONManagement accounting is the process of identifying, classifying, summarizing, recording,analysing and monitoring financial information which are used by internal management of theorganization for strategic decision making to attain organizational goals and objectives. Thisreport will highlight advantages and disadvantages of various planning tools used in budgetarycontrol. It also includes brief history of evolution of management accounting and assessment ofhow organization adapt to various financial problem in reference to ratio analysis, keyperformance indicators and benchmarking. It also highlights management accounting systemwhich are used to solve the financial problems of the organization effectively and efficiently.TASK 2P4. Advantages and disadvantages of different planning tools used for budgetary controlBudgetary control is a tool of finance that helps the manager of the company to control costof the company which includes budget preparation, department coordination and comparingactual performances with estimated performances of the company. It helps the company incontrolling cost and maximize the profit of company, it leads to coordination among variousdepartments of the company and it helps company to achieve economies of scale.1.Fixed budget: This planning tool of budgetary control is also referred to as static budget.Fixed budget do not vary with the change in the operation of business. Costs are fixed sothat expenses do not vary with the change in the revenue (Chenhall and Moers, 2015). Advantages of Fixed budgetFixed budget helps in measuring profits and performance of the businessaccording to the planned budget.This type of budget helps in keeping the cost down of business and gives cleardistinct ideas to prioritize important activities which are essential for the growthand expansion of business (Van der Stede, 2015).This budget is easy to use and easier to estimate the amount of tax for theparticular period.Disadvantages of Fixed budgetFixed budget cannot be amended at any time during the financial year, even whenthere is a change in the operation of business activity.3
Fixed budget is do not account for unpredictable events and activities and ishighly inflexible to the change in operations of business.This planning tool of budgetary control is not an effective measure to track andcontrol expenses.2.Flexible budget: It is a budget that adjusts with change in the volume and activity. Flexible budget gets altered amid the year for original sales, changes in cost of production and any other change in business working conditions. Advantages of Flexible budgetVariable cost in flexible budgets are characterized as percentages of sales. For example,if sales somehow increment significantly, flexible budgets would change in accordancewith spending on marketing to gain more profit of unexpected increase in income. A flexible budget can detect change in the overall revenue, and the team can takeremedial actions to fix the issue. Disadvantages of Flexible budgetIt can be tedious to think of exactly how variant those variable costs might be. Time is mostly at premium during the budgetary season.A lot of rules lead to people breaking them as it becomes difficult for them to abide with them. 3.Incremental budget: This type of budget is preparedby analysing and evaluatingprevious year’s budgeted plan by adding some incremental value to the budget whichhelps in achieving desired goals and objective effectively and efficiently.Advantages of Incremental budgetThis planning tool of budget is simple to use and well structured to consistentlyoperate in a stable manner for attaining long term goal of the company. Incremental budget is flexible and ensure there is no large deviation in the budgetas it changes gradually year after year (Advantages and Disadvantages ofIncremental Budgeting, 2019). Disadvantages of Incremental budgetThis method leads to lack of innovation and stays same with minimum changes inbudget plan.4
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
P4 Advantages and disadvantages of different types of planning toolslg...
|9
|2599
|137
Management Accounting: Planning Tools and Financial Problemslg...
|11
|3068
|58
Management Accounting Assignment - Solvedlg...
|9
|2513
|393
(DOCS) Introduction to Management Accountinglg...
|11
|2491
|62
Management Accounting: Assignment (solved)lg...
|14
|4746
|298
Unit 5 Management Accountinglg...
|7
|1540
|95