Management Accounting: Principles, Techniques, Budgetary Tools, and Financial Problem Solving

This report discusses the principles and importance of management accounting, techniques and methods used for management accounting reporting, advantages and disadvantages of budgetary tools, and how organizations are adapting management systems to respond to financial problems. The case study of Eastern Engineering Co. Ltd is used to illustrate the concepts.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Explain the principles of management accounting and why it is important to integrate
management accounting systems within an organization............................................................3
Explain the different techniques and methods used for management accounting reporting.......4
Explain the advantages and disadvantages of the budgetary tools..............................................6
Compare how organization are adapting management systems to respond to financial
problems......................................................................................................................................7
CONCLUSION................................................................................................................................9
REFRENCES.................................................................................................................................10

INTRODUCTION
Management accounting is defined as a method or tool which facilitates accounting information
to organization for conducting different types of activities such as monitoring, controlling, and
planning appropriately. This type of accounting system is highly beneficial for organization in
various aspect decision making process, developing strategies and identifying the problems
quickly. In aspect of management accounting it provides exact information to company and due
to this management easily take effective decision for achieving their targets and also for
increasing overall productivity. The chosen company is Eastern Engineering Co. Ltd for
analysing the effect of financial management or management accounting effectively
(Almatarneh, Jarah and Jarrah, 2022). This company have the wide range of electronic
equipment’s which includes printers, scanning machines, heavy machines which are used in
industry etc. This report will cover about the principles of management accounting and why it is
important to integrate management accounting systems within an organization. It also covers the
different techniques and methods used for management accounting reporting, explain the
advantages and disadvantages of budgetary tools.
TASK 1
Explain the principles of management accounting and why it is important to integrate
management accounting systems within an organization
Principles of management accounting is defined as a providing guidance on identifying
past present and future data including non-financial and financial information from external and
internal sources. But management accounting is defined as concept or tool which is beneficial for
Eastern Engineering Co. Ltd for receiving meaningful accounting data and that is very essential
to company manager in their decision making procedure. These accounting technique includes
performance evaluation, financial examination, forecasting and budgeting and others. In this way
organization are able to take useful decisions which is highly essential for run the organizational
functions smoothly. For organization management accounting has various importance which is
considered by Eastern Engineering Co for sustaining their performance which are described
below

Helpful for making plans – In context to Eastern Engineering Co. Ltd, due to the
effective use of management accounting system higher authorities are able to implement better
plans for their future growth. It facilitates all non-financial and financial to organization on
regular basis. Therefore, effective management accounting is highly essential for distributing
meaningful and reliable information to all categories of employees within low time and also for
maintaining good coordination between them. Because due to keeping effective communication
between worker’s company are able to develop and initiate their plans and policies regarding
their product and services effectively.
Assist in decision making – It means that due to the effective use of management
accounting system management of Eastern Engineering Co. Ltd are able to take right decision
for their business activities. Due to always taking right decision company are able to decrease
competitor’s threats and legal risk at higher rate in their business activities (Al-Mawali, 2021).
For always taking correct decision company must collect and evaluate all financial data
effectively in the form of simplified charts, graphs and tables. With the help of using various
graphs and tables company easily understand the problems of whole firm and their employees in
their effective manner.
For pricing optimizing – Management accounting system also help the Eastern
Engineering Co. Ltd to decide the best price in their services and products. Due to keeping best
and valuable price in their product chances are easily increased for enhancing the brand
popularity in market effectively. When organization always keep best and valuable, then
definitely their profitability and productivity are easily increased in market at higher rate. With
help of effective price customers are easily attracted in large number towards their product and
services in long term.
Measuring the performance – In context to Eastern Engineering Co. Ltd with help of
effective management accounting system higher authorities are able to analyse the current and
previous performance of employees in long term. It also includes different techniques such as
variance analysis etc. which is highly useful for evaluating the actual performance of the
employees effectively. Due to this it is mandatory for organization that they must always
maintain little bit strict atmosphere in their workplace area. It leads to sustain the work efficiency
and productivity of their employees for long duration.

Explain the different techniques and methods used for management accounting reporting
Management accounting reporting is a very important part of organization and it help to
manage management accounting reports in systematic way. In this way Eastern Engineering Co.
Ltd will get the clear or defined picture of their activities. It also facilitates the essential data to
firm which is related with the cost cutting, reward to high performing employees and in which
way profits are increased for company. It is a highly beneficial method for company in various
aspects which includes manufacturing reports budget, reporting, accounting and others. The
methods or techniques which is considered by this company in management accounting reporting
for run their activities are described below –
Inventory and manufacturing report - It is a highly effective and useful report to
company for producing and delivering best quality services and products to customers in time. In
context to Eastern Engineering Co. Ltd, management must utilize this report effectively for
achieving competitive advantage and maintaining goodwill of their image in market for long
duration. With help of this report company are able centralize their information regarding their
labour cost, inventory cost and others. It also helps them to utilize their workers effectively for
achieving better production output with low cost in their production procedure (falih Chichan
and Alabdullah, 2021).
Account receivable ageing report – This report facilitates the detailed data regarding the
unpaid consumer invoices. In context to it is very essential for Eastern Engineering Co. Ltd to
maintain this report. Because with help of this report company are able to evaluate the credit
balance of their various customers according to their given specific time period. The other
advantage in this report is that it is highly helpful for implementing effective credit policies and
due to this capability of consumer’s repayment is easily increased in low time.
Budget reports – It is a very important report which is developed by organization for
preparing proper budget of each activity. With help of this budget report Eastern Engineering Co.
Ltd are able to maintain control on the expense of their many departments according to their
decided amount. In this way they are able to made comparison between current and previous
year of budget which leads to reduce the extra expense effectively.
Performance report – It is defined as those report where overall performance of the
employees is recorded and analysed by top level management. The performance of the report has
a huge importance for Eastern Engineering Co. Ltd and it also help the firm for determining

about their all departmental functions. Due to analysing this report company are able to increase
the sale and popularity of their product in market easily at maximum level. Due to keeping
effective performance in their activities and services firm also have the ability to develop
effective strategies for run their business activities smoothly.
From above data it is concluded that clear and effective report always play the important role for
company which leads to increase their work efficiency and overall productivity in long term.
Explain the advantages and disadvantages of the budgetary tools
A budget is basically a single document which is prepared by the organization with help of
various expenses and estimated income and these are related with future objectives and
strategies. Other budgetary control is also important for organization for establishing effective
monitoring and control on their operational activities (Hasanah, Ningrum and Rahayu, 2021).
The various advantages and disadvantages which is faced by company during the time of using
budgetary tools are –
Master budget – In this type of budget all the activities are gathered and collected in one
place. It is mainly utilized by large companies for maintaining all types of data in one document.
The budget comprises all the functions such as sales, operating expenses, assets, income and
others. This budget has some advantages and disadvantage which are as follow:
Advantages Disadvantages
 This budget represents the expenditure
of all budgets so that company are able
to reduce the extra expense easily and
can implemented that in a productive
activity.
 The main advantage of this budget is to
that a company can find all the
budgeted information in one report.
 This budget is highly complicated and
not able to specify all the activities such
as if the company want to know about
how much the marketing department is
expanding then it is not possible.
 This budget creates big
misunderstanding as it consists various
budgets within which create problem to
understand and update any kind of
information.

Flexible budget – It is the most common type and beneficial budget for the organization
and help them to fluctuate their budget according to their needs. This type of budget displays the
expenses and incomes at the various levels of activities. Flexible budget is one of the budget
which is highly suitable for organization to statistic and other budget. This budget has some
advantages and disadvantage which are as follow:
Advantages Disadvantages
 Flexible budget can be understanding
as a tool which can be used it cost
control as because it is suitable in
adverse situations.
 This budget flexible and easily
changeable according to the business
situations.
 This budget is only developed for a
particular time period. For example,
half yearly and quarterly.
 The main disadvantage of this budget
that if it shows unfavourable situation
of the budget which have bad impact on
the customers and investors.
Compare how organization are adapting management systems to respond to financial problems
Management accounting system is a very useful tool to company for achieving statistical
and financial data accurately (Neupane, 2021). The other advantage for using this system by
company is that solve the various types of problems quickly. In context to Eastern Engineering
Co. Ltd, some of the problems which are faced by this company are –
Financial problems – It is one of the problem which is raised due to the lack of capital in
business. Due to this fund is a very essential element in business for sustaining the company’s
success in long term. It means if the Eastern Engineering Co. Ltd wants to run their business
smoothly they need to manage their funds appropriately. Due to this company are able to run
their overall business smoothly.
Improper cash flow management – Here financial crisis is raised due to the difference
between out flow and inflow of fund. Due to facing this issue chances are easily enhanced for
decreasing their overall productivity and work efficiency at higher rate.

So, these above mentioned issues are needed to be solved by Eastern Engineering Co. Ltd
through various ways in order to operate their business smoothly.
Finance governance – It is defined as a procedure by which an organization can know
that in which way proper monitor and control on its organizational functions. This procedure
supports the organization for tracking financial transactions, managing their performance and
also for improving the efficiency of decision making. With the help of this method the
accountant of the Eastern Engineering Co. Ltd can know the availability of the cash and the
recovery amount in future.
Use of KPI – KPI stands for key performance indicator and this technique is utilized by
company for enhancing their success at maximum level (Ngo, 2021). There are two types of KPI
which are financial and non-financial, at present Eastern Engineering Co. Ltd is using the
financial KPI by which they can know about the proper management and utilization of their
monetary resources. It includes study of the financial statement of the present situations etc.
Basis Eastern Engineering Co. Ltd Siemens engineering
Financial problem Right now they are facing the
problem of unequal lack of
money management skills and
cash flow. Due to which the
position of the company is
decreasing day by day.
They are facing the issue of
unequal cash flow as their
income is not equal to their
expenses.
Management accounting tools For reducing the above
mentioned problems they are
used financial governance
technique. With help of this
method they are able to
maintain a proper control and
monitor on their operational
functions.
For solving the problem of
unequal cash flow they are
used KPI technique
effectively. In this firm easily
know that where they are
lacking to make the proper
credit policies for the
consumers.

CONCLUSION
After the analysis of above data, it is concluded that management accounting plays the
crucial role for increasing the economic growth, success and productivity of company. This is
possible because by developing the various management accounting systems and reports an
organisation can get the information about the overall performance of the business. The
functioning of various management accounting system such as Benchmarking, KPI etc. helped
the company for run their activities smoothly. These functions are also helpful for sustaining the
standard and quality in their product and services in any situation and also increased the working
capacity so that they will be able to overcome from the financial issues.

REFRENCES
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