Management Accounting Practices at Easter Engineering Co. Ltd

This project analyses the management accounting practices at Easter Engineering Co. Ltd. It discusses the principles, techniques, and tools of management accounting, including the importance of management accounting, different methods used for reporting, advantages and disadvantages of budgetary tools, and comparison of management systems for responding to financial problems.

Unit 5 Assessment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Principles of management accounting and their importance with the help of relevant examples
......................................................................................................................................................3
Different techniques and methods used for the management accounting reporting....................3
Advantages and disadvantages of budgetary tools......................................................................3
Comparison of adaptation of management system for responding to the financial problems in
the organization............................................................................................................................3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Management accounting is the process of preparing reports about the business operations
which are considered to be helpful for the managers for making short-term and long-term
decisions. It is the branch of accounting which is known for being helpful for an organization in
the identification of the goals and measuring, analysing, interpreting and communicating
information to the managers. In this project the management accounting practices of the Easter
Engineering Co. Ltd will be analysed. It will discuss the different management accounting
principles which are useful for the integration of the management accounting system. The
different techniques and methods which are used for management accounting reporting has been
also analysed. The key advantages and disadvantages of the budgetary tools have been discussed.
MAIN BODY
Principles of management accounting and their importance with the help of relevant examples
There are different principles to the management accounting of the organization which
are considered to generally accepted,
Designing and compiling :
Accounting information are given in different forms, records, reports, statements and
other evidences for the past, present and the future which results in the designing and
compilation of the needs.
Management by exception :
Exceptions which are considered to be the factors that influences the presentation of the
information for management. This is the tool of budgetary control system and standard costing
techniques which follow the management accounting system (Bandara and et.al., 2020).
Control at the sources accounting :
Management accounting helps in controlling and pointing the ways in which the source
accounting with the performance of the individual workers, details related to the materials and
issues for the utilization of the services such as machine, power, repairs and maintenance of the
vehicles are use for quantitative and qualitative information.
Accounting for inflation :
The information of the organization can be considered to be the factor which influences
value of capital that is helpful for the contribution of the owners business decision-making. This
is also the real value of money which helps in the revaluation of the accounting. For example,

during the calculation of NPV in the capital budgeting tools the organization is able to manage
the factor of inflation (Johnstone, 2020).
Return of investment :
Management accounting has been considered to be the key information which allows the
organization in the calculation of their return on investment through different tools and
techniques. For this purpose the capital employed is calculated in the terms of the real money
value. The ratios, which are calculated for analysation of the return on investment helps the
company in the management of the operations which allows the growth of the organization.
Utility :
This is the factor which influences the related forms which are needed to be used for as
long as they serve a useful purpose to the organization. For example utilization of management
accounting helps the business to consider the key consideration of this organization (Tools and
Techniques of management accounting, 2022).
Integration :
The integration of the required information of the management is used for the integration
of the effective and maximum optimization of their operations. This is considered to be effective
for the maximum amount of accounting services which are helpful for providing the minimum
cost (Alabdullah, 2019).
Different techniques and methods used for the management accounting reporting
The different techniques and methods use in management accounting are,
Cost Report :
In management accounting the cost of the manufacturing includes the raw materials,
overhead, labour and any other costs which are added for deliberation. Hence, the cost report
offers a summary of all the information which is produced for the summary of the information.
The estimation of the monitoring of these reports allow the organization in development of a
clear picture of all the costs which are into the procurement of the articles. The estimation of the
monitoring of the reports can be helpful for the organization in development of a clear picture.
For examples,
COST REPORT
Particulars Amount

Prevention cost 45000
Appraisal cost 50000
Internal Failure Cost 62000
External Failure Cost 56000
Total Cost 213000
Budget Report :
Budget managerial accounting reports are considered to be the critical factor which helps
in the measurement of the company (Gonçalves and Gaio, C., 2021. This type of report allows
the business in create an overall budget for the understanding the grand scheme of their
businesses. This is also very effective for the estimation of the basis of the previous experiences
which is essential for the unforeseen circumstances.
BUDGET REPORT
Particulars Amount
New equipments 3000
Operational expenses 5000
Wages and salary 6000
Advertisement 3000
Projected total 17000
Accounts receivable ageing reports :
This is considered to be the factor which is directly influencing the account receivable
that impacts the ageing reports. This is effective for the allowing the managers to identify the
defaulters and make the business free of their issues.
Accounts receivable ageing report
Particulars Amount
ABC Inc 50000
XYZ Ltd 40000
MNO Pvt 10000
FLT Ltd 60000
Total Receivable 160000

Inventory Reports :
Inventory in itself is not an income statement account which has been considered to be
balanced in the current asset of the balance sheet. This is also the factor which changes the
inventory component of the calculation of the cost of goods sold. This is the report which is
required for the income statement.
Advantages and disadvantages of budgetary tools
The advantages and disadvantages of the budgetary tools are,
Cash Budget :
Cash transactions are considered to be the ones which affect the operations of the
organization the most. This is also known for the business which can be considered to be the
factor that is helpful for the limitation of the amount of cash for current spendings (Global
Management Accounting Principles, 2021). For being too busy paying of the interest cost and
also other previous purchases.
Advantages Disadvantages
This is very effective for avoiding the situation
of debt for an organization. This can be
considered to be very effective for managing
the situation of understanding the management.
This is the budgetary tool which has always
been considered to be helpful for the protection
of the organization against the theft. Cash
being very liquid has the most risk of being
displaced.
It is also the factors which affects the budget
better for the business that is considered to be
the one which has been able to analyse the
frequency of gathering attention to details,
tracking specific spending habits and proactive
management for ensuring that there is always
money for speding.
This is also the factor which limits the overall
spending of the organization and has been
considered to be the factor that influences the
ways in which the reservation of the debit and
credit card number be helpful for switching to
the cash only budget.
Zero Based Budgeting :

Zero Based Budgeting is the overview of the budgeting of an organization which allows
the business in the adaptation of the budgeting techniques. This is also known as the traditional
tool of budgeting and is considered to be effective for each new period for the justification of
expenses before adding a new budget for the creation of old and recurring expenses.
Advantages Disadvantages
Manager needs to justify all the operating
expenses and thus it ensures about the
consideration of every amount that needs to be
spend by the organization.
This has often been seen to be resulting in the
businesses focusing on more of a short term
thinking. However, for the company thinking
in long-term is much more important for
example, spending on research and
development.
This method has been considered to effective
in checking all the costs which are helpful for
the extreme levels of actions that are to be
taken for the protection of the budget from
cuts.
This method has been also known to be
resource intensive which allows the business in
closely reviewing and justifying every budget
element that is rather good for the business in
the modification of existing budget.
Activity Based budgeting :
Activity based budgeting tool is the method of budgeting which helps in the preparation
of the activity based costing which is considered to be effective for the overhead costs. This
management accounting tool is also known for the consideration of the budget that arrives at the
current year's budget, instead of the activities which incur the cost which are deeply analysed and
researched by the organization.
Advantages Disadvantages
This is considered to be the factor which
allows the business in gaining the competitive
advantage which allows it to grow the
organizational opportunities for elimination of
the unnecessary activities.
This is known as the budget that is hard for
being understood in an organization. The
creation of this budget has been known to
influence the operations of the organization
which is the reason why this method cannot be

used by small organization.
This is the method of budgeting which has
been known for creating unity amongst the
individuals which allows the departments of
the managers to keep a single department
during the creation of the budget.
The preparation and application of this budget
has been known to be very resource
consuming. This is eventually a loss for the
organization as it increases its operational
costs.
Comparison of adaptation of management system for responding to the financial problems in the
organization
The different management accounting system which helps the organization to respond to
the financial problems are,
Benchmarking :
Benchmarking in the management accounting involves a comparison of the accounting
practices which is helpful for the processes and performance that is the metrics of the best
accounting practices in the industry (Balstad and Berg, 2020). For example the ideal profitability
ratio is considered to be 10-20% which can be considered to be the benchmark for this
organization that it needs to achieve in order to avoid any financial problems. For a company like
Easter Engineering Co. the benchmark in the market can be considered to be point of sales that
allows the growth of the business. This is going to be very effective for the organization in the
management of the business.
Key performance Indicators :
KPI in management accounting is referred to the set of quantifiable measurements which
are used by the company for an overall long term performance. This is also known as the factor
which is specifically helpful for the determination of the company's strategic and financial
operational achievements. For example in order to measure the defective products the total
products which are produced needs to be measured with the help of getting number of lows as
possible (Chaudhry and Amir, 2020). For Easter Engineering Co. the collection effectiveness
index is helpful for showing the effectiveness of company to collect all the accounts that are
receivable from customers over a given period. CEI of this organization can be considered to be
higher than the operations.
Variance Analysis :

Variance analysis is the study of deviations of actual behaviour in comparison to the
forecasted or planned behaviour. Hence, in this tool the business compares the budget with the
actual performance of the organization. The differences that arises is factor which is further
considered for making improvements. For examples,
Particulars Actual Budgeted Variance
Total costs 213000 170000 43000
CONCLUSION
With the help of this project it can be concluded that the management accounting at
Easter Engineering Co. Ltd can be improved significantly with the help the discussed tools and
techniques. In this project the principles of the management accounting and their importance has
been discussed. This project has been able to analyse the different techniques and methods for
the management accounting for the given organization. In this project the advantages and
disadvantages of the budgetary tools have been discussed. In this project the comparison of the
different management accounting system has been analysed.

REFERENCES
Books and Journals
Alabdullah, T.T.Y., 2019. Management accounting and service companies' performance:
Research in emerging economies. Australasian Accounting, Business and Finance
Journal, 13(4), pp.100-118.
Balstad, M.T. and Berg, T., 2020. A long-term bibliometric analysis of journals influencing
management accounting and control research. Journal of Management Control, 30(4),
pp.357-380.
Bandara, S. G. D. K and et.al., 2020. Employee welfare and job satisfaction in the Sri Lankan
hotel industry. International Journal of Construction Management, pp.1-10.
Chaudhry, N.I. and Amir, M., 2020. From institutional pressure to the sustainable development
of firm: Role of environmental management accounting implementation and
environmental proactivity. Business Strategy and the Environment, 29(8), pp.3542-
3554.
Gonçalves, T. and Gaio, C., 2021. The role of management accounting systems in global value
strategies. Journal of Business Research, 124, pp.603-609.
Johnstone, L., 2020. A systematic analysis of environmental management systems in SMEs:
Possible research directions from a management accounting and control stance. Journal
of Cleaner Production, 244, p.118802.
Qian, W., Hörisch, J. and Schaltegger, S., 2018. Environmental management accounting and its
effects on carbon management and disclosure quality. Journal of cleaner production,
174, pp.1608-1619.
Online
Global Management Accounting Principles, 2021 [Online]. Available through:
<https://www.cgma.org/resources/reports/globalmanagementaccountingprinciples.html
>
Tools and Techniques of management accounting, 2022[Online]. Available through:
<https://theintactone.com/2019/11/23/tools-and-techniques-of-management-
accounting/>