Management Accounting: Tools and Techniques for Financial Management

This document provides an overview of management accounting and its importance in organizations. It discusses the different methods of management accounting systems, benefits of these systems, and how organizations adopt them. The document also covers the purpose and types of budgets, as well as various management accounting techniques to produce income statements and financial reports. Additionally, it explores how organizations compare and adopt management accounting systems to mitigate financial issues. Overall, this document offers valuable insights into the field of management accounting and its applications in financial management.

Management
Accounting

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INTRODUCTION
Management accounting is an important aspect of an organisation, as it aims to achieve the
company's goals (Bobryshev and et.al., 2015). It's not just past reports but is in a systematic
cycle of producing new data and also plans allow managers to run properly. Management
reviews would allow UK accounting professionals as well as executives to be well qualified for
current developments, thus lowering costs, allowing staff to function better, minimizing product
options to invest in products that give business the most returns. UCK Furniture can get a
successful response by using multiple outlets, since this study illustrates the distinctions.
MAIN BODY
TASK 1
Section 1
1.1 Explain management accounting
Management accounting is a wide area that focuses primarily on interpreting data and
information as well as presenting these data to senior managers with the goal of assisting them in
decision-making. Management accountants look at the actions happening mostly in a company
while taking into consideration the business ' needs. From that it emerges details and forecasts.
Management accounting is the process by which these forecasts and data are translated into
understanding which will inevitably have been used to inform decision making. If there's really
an internal or external emphasis is the key difference among management accounting and
financial accounting. In comparison, management accountants analyze and outcomes are kept in-
house for use by corporate executives to drive decision-making and more efficiently manage the
team.
Management accounting prerequisite: In order to produce appropriate management
information there are certain specific systems such as inventory management system, cost
accounting system, etc.
MA is important for decision making in managers and organisations. This is also important
for strategic and organizational policy formulation (Bedfordand Speklé, 2018).
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1.2 Different methods of management accounting systems
There are several accounting systems which are used by UCK furniture’s to evaluate their
operational efficiency as well as performance and it mentioned below:
Inventory Management System: This is largely a process that determines how stored items
are organized and placed (Chenhall and Moers, 2015). That is necessary to follow the normal
and planned path of production and storing of materials instantly at various locations within a
facility or within multiple locations of a supply network. It is the monitoring application for
production volumes, inventory, deliveries and orders. For certain situations, this tool is used in
the manufacturing industry to produce an order form, supplies bill, and other needed experience
for the company. UCK Furniture is effectively needed to reduce troubles in inventory levels over
storage or under storage.
Job costing system: It is a way of estimating the expenses which they incur on a kind of
product-related research (Kaplan and Atkinson, 2015). The application is commonly used in the
construction industries, and refers to allocating expenses at a business for design and builds
projects. Some businesses have been using this accounting approach to set different costs on
each job that is practically required to reduce manufacturing costs which further lead to
maximizing the productivity and competitiveness of the UCK Furniture business.
Price optimization system: this has been the most effective and critical program
contributing to the best price of different items. This helps management to change or set a new
product price which also means that current values need to be changed. It also lets managers
devise a pricing strategy and implement pricing policies. This approach requires scientific and
managerial skills, as well as other approaches to assess the most cost-effective price for specific
products.
Above discussed management accounting systems help the organization to operate their
operations activities and it also allow the managers to perform their task on the basis of the
outcomes. Managers of UCK furniture follow the inventory management system to track their
inventory level or order raw material accordingly. In addition, by using cost accounting system
managers estimate the product cost or minimise the cost throughout the production period.
1.3 Benefits of management accounting systems and applications
MA Systems Benefits
Inventory Management Sometimes it is helpful for the client to control and document
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Systems the flow of stocks within an enterprise (Kihn and Ihantola,
2015). This also examples range use inventories to their full
degree.
Job Costing System This is mainly useful in keeping responsibility and efficient
use of resources of multiple costs to various processes for
corporations.
Price Optimisation System This would be helpful for manufacturing management in
determining the most attractive markets for materials as well
as in assessing the value of the items being produced and
sold. This structure formed the context on which value
propositions should be developed.
TASK 2
Sections 2
2.1 Calculate profit by using appropriate techniques of cost analysis
(a) Prepare cost card:
Cost card using marginal costing:
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Cost card using absorption costing:
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(b) Merits or demerits of marginal or absorption costing methods:
Marginal costing:
 Merits: Periodically, variable costs fluctuate but in the long run fixed costs are constant.
No matter the level of output, marginal costs remain the same.
 Demerits: A complicated issue is the division of costs between fixed and variable. There
are no semi-variable or pre-fixed costs of real costs.
Absorption costing:
 Merits: This costing method is the most successful method of handling the finances.
GAAP accounting principle is right strategy to evaluate manufacturing cost. This takes
into consideration the fixed overhead costs involved in the manufacturing cycle and
integrates these into the price of the product which represents more realistic
manufacturing costs.
 Demerits: It is not similar to the marginal costs method where prices should not be used
as an effective means of calculating the productivity of a product (Lavia López and
Hiebl, 2015). Even though absorption costs contain fixed costs throughout the cost of
goods that will be constantly autonomous of efficiency or demand, while marginal
costing is predicated on capital contributed per unit but only requires the differential costs
of the product.
2.2 Range of management accounting techniques to produce income statement
Income statement at the end of costing:
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Working Notes:
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2.3 Produce financial reports
(a)
(b)
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TASK 3
3.1 Explain the purpose of budget and its different types
A Budget is standardized projected revenue and expense report which focusing on
potential strategies or goals (Sands, Lee and Gunarathne, 2015). In many other statements, a
report is a tool managed to predict future profits and spending for the expected to come year and
this is affected by economic goals.
The aim of budgeting is to delegate, coordinate, plan, maintain and motivate the capital.
This seems to be an effective method for taking decisions, reflecting on business results, and
predicting sales and expenditures. Limited services are efficiently managed with correct financial
planning.
Types of budget:
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Cash budget: This is a prediction of a firm’s liquidity over a specific time frame. Budgets
are used to determine that the company is able to pay its operational expenses. Companies use
revenue and performance projections to build a cash schedule, together with expectations
regarding expected spending and payment of accounts receivable records. A cash budget is
needed to make a decision whether a firm will have appropriate cash capital to keep the company
running.
Flexible budget: Flexible Budget is a program that moves or adjusts by changes in
quantity or operation. The most complex and practical budget is more versatile than a static one.
The static budget figures remain intact from the amount required as part of static budget
preparation and acceptance.
TASK4
4.1 Compare how organizations adopt management accounting systems
Financial problem: It's kind of issue related to lack of money or resources. Many of these
obstacles, companies are faced with many other problems such as financial crises which unable
the company to manage and operate their functions. Here are some of the problems facing UCK
Furniture which mentioned below:
Spend more than income: It is a kind of issue that occurs when a company spends but
earns less in relation to it. Despite of this firm the money shortage issue is met.
Unequal cash flow: There is some kind of issue that doesn't match the company's cash flow.
Lastly, cash inflow and outflow must balance but in the absence of it, financial issues occur.
Techniques:
Benchmarking: It is the process through which organizations can compare their operational
performance in terms of production and figure. There is a efficiency difference that can also be
covered by improving the outcome. Analyzing other firms will demonstrate what someone
requires to improve the company’s profitability and become a bigger leader in the field.
Key Performance Indicator (KPI): KPI is a calculated indicator that indicates how
effectively a company achieves its key business objectives. Organizations are embracing KPIs to
assess their achievement of goals. It depends on your organization to choose the right one, and
the part of the business you want to control (Shields, 2015). Will division can use different forms
of KPI to evaluate performance on the basis of specific business goals and objectives. Find out
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what types of main performance indicators are essential for your organization, industry or role.
UCK Furniture's managers identify specific KPIs and take necessary action.
Financial governance: it is kind of a framework linked to financial transaction collection,
monitoring and management. It plays a significant role in the evaluation of financial issues.
Basically, it serves as an instrument of control to understand the financial dilemma of the
company.
Basis UCK Furniture UCK Woodwork
Financial problem Due to more expenses in
comparison to earnings UCK
group faces the financial dilemma
of expenditures.
Company face a problem of
unequal cash flows. This results
in an immense financial problem.
Management
accounting systems
Company follows the cost
accounting system and estimates
each unit cost to solve this issue
and then build strategies
accordingly after that.
This company adopts inventory
management system for tracking
their stock and ensuring that the
raw material is ordered
appropriately.
Techniques To assess the financial results The company will follow
benchmarking techniques. They
need to follow key performance
indicator technique to quantify
which factor most impacts and
concentrate on it accordingly.
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Assess the use business accounting management tool to mitigate financial issues::
Budgetary control describes the process by which management teams compare the
outcomes with actual performance, then help decide and aim to avoid the gaps between
projections and actual revenues. It helps tackle problems that cause discrepancies between actual
data and estimated values. Monetary-ratio analysis is also a very important method of managerial
accounting (Weetman, 2019). Key financial ratios, such as current ratio, asset turnover ratio, acid
check ratio, equity ratio, debt coverage ratio, etc., are calculated and analyzed to assess market
growth and to determine the corrective actions to be taken to improve negative ratios. Each
planning technique used in management accounting also enables financial results to be improved
and financial issues avoided to achieve efficiency. In comparison, combination review of budget
estimation, calculation, and costing methods help to reduce financial challenges and improve
management accounting performance.
CONCLUSION
On the basis of above analysis, it has been observed that management accounting play
essential role in the organizations to manage their internal functions. There are various tools and
techniques which help managers to measure the overall performance of the business operations
which further used in improving efficiency as well as effectiveness. Organizations also face lot
of financial issues which generated from internal ineffectively. Managers implement various
management accounting techniques to overcome from these issues and improve their
performances.
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REFERENCES
Books & Journals
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