Management Accounting Principles and Techniques for Eastern Engineering Co. Ltd

This report discusses the different management accounting principles and techniques that can be used for effective decision making in Eastern Engineering Co. Ltd. It explains the benefits and drawbacks of budgetary tools and systems and compares how different organizations undertake MA systems to respond to financial problems. The report also includes different types of MA reports that can be prepared for highlighting company’s internal performance.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1. Defining management accounting principles and its integration with MA systems...............3
2. Explaining different techniques and methods that can be used for management accounting
reporting.......................................................................................................................................4
3. Explaining the benefits and drawbacks of different budgetary tools......................................5
4. Comparing how different organizations undertake MA systems to respond to financial
problems......................................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Management accounting refers to the process which manager undertakes for presenting
monetary information in a structured way for the purpose of effective decision making. In the
context of business, MA techniques help higher management team in making proper assessment
of cost, internal financial process, sales, spending etc. The present report is based on the case
scenario of Eastern Engineering Co. Ltd which will provide deeper insight about the extent to
which MA systems are aligned with reporting aspects. Further, it entails different report which
an accountant can prepare for highlighting company’s internal performance. Report also depicts
the significance of budgetary control tools and systems in dealing with financial aspects.
TASK 1
1. Defining management accounting principles and its integration with MA systems
The management accounting is being defined as the process through which company
prepares the business reports and take decision on the basis of these outputs. For the effective
analysis of the business and its performance the use of management accounting system is very
important (Abdusalomova, 2019). There are different types of management accounting
principles assistive to Eastern Engineering in order to effectively work in better and effective
manner. The different management accounting principles are as follows-
The first principle of management accounting states that all the accounting information
need to be recorded and compiled in proper manner such that the decision can be taken. This is
necessary for the reason that the decision making is based on the financial information only and
in case the information is not correct then it will affect the working. Further another principle
states that there must be integration of all the required information within the process. This is
particularly because of the reason that when the integrated working will be present then this will
outline and present the working in better manner.
The different types of management accounting system and its integration with
organization’s working are as follows-
Cost accounting system is a type of system which integrates the working of Eastern
Engineering in proper and effective manner. Under this method, the working of the company is

analyzed on the basis of the cost which is incurred in preparing and running the business. This
cost accounting system is very helpful as it provides a base to the company that how they have to
manage the cost and aim at reducing the cost.
Inventory management system- this is another system under management accounting
which is integrated by Eastern Engineering to improve its working. Under this system the
company provides for effective management of inventory (Javed and Malik, 2021). This is
focused because in case the inventory will not be brought on time then this will affect the
working of the company to a great extent. Hence, the use of this technique by Eastern
Engineering assist in on time availability of inventory which in turn result in better working.
Along with this another method is job costing system, where in the cost is being allocated
to each and every activity within the business. This method assists eastern engineering in costing
each job and accordingly find the better job which is providing more profit. With help of this,
method Eastern Engineering can decide that out of all the product line which is more profitable
and which is not.
All these methods of management accounting are important for Eastern Engineering as
this will integrate all the working of the business in direction of attaining the objectives of the
business. this is very important for the reason that when the effective management accounting
system are being used then this will improve the working efficiency of the business. hence, as a
result of this the profitability of the company is increased and this provides a competitive
advantage to the company as well.
2. Explaining different techniques and methods that can be used for management accounting
reporting
MA reports may be defined as the one which clearly exhibits company’s performance
pertaining to specific time period. There are several reports which Eastern Engineering can make
for getting deeper insight about the aspects of operational cost, profitability, regional sales level
etc.  Budget report: With regards to Eastern Engineering budget report is highly crucial as it
helps in analyzing departmental performance. It helps organization in assessing the extent
to which every department performed activities in accordance with benchmarks. Budget

report gives clear indication about areas where cost controlling measures need to be
undertaken for enhancing profitability aspect. Besides this, budget report is also used by
business organization for setting or devising incentive plan for employees. Accounts receivable ageing report: This report helps firm in managing cash flows in the
best possible way. As, it assists in assessing whether debtors are making payment within
the specific time period or not (Types of Managerial Accounting Reports, 2021). By this,
manager can ascertain debtors who are making default in relation to payment due to
them. Hence, through evaluating all such aspects business unit can make significant
modifications in the existing credit policies. Accordingly, by tightening credit policies
company can ensure smooth collection process.
 Inventory management report: It furnishes information about stock wastage, per hour
cost and overhead expenses. By undertaking this report, management team can assess
areas where business failed to make optimum use of resources (Sullivan, 2021). In this
way, it helps in finding areas where resources need to be utilized properly for getting the
desired level of outcome or success.
3. Explaining the benefits and drawbacks of different budgetary tools
The budgetary tools are the different types of methods which assist the business in doing
effective planning. For the success of the company it is very important that the effective planning
is being undertaken and this can be done only with help of the budgetary tools. The different
types of the budgetary tool and their benefits and drawbacks are as follows-
Zero based budgeting- this is a type of budgeting tool wherein Eastern Engineering
prepares the budget new for every accounting period (Amran, 2020). This is particularly because
of the reason that under this method the budget is being prepared from scratch that is from new.
In this type of budgeting all the budgets are being prepared from the start and no past data is
being used.
Advantages Disadvantages
 The major advantage of using ZBB by
Eastern Engineering the accuracy of the
 The major drawback of the using the
ZBB by Eastern Engineering is that this

working of company will be managed.
This is particularly because of the
reason that when the budget is prepared
on new then it will include all the
realistic data.
 Further another benefit of using ZBB
by Eastern Engineering is that it will
include all the budget inflation and this
provides a wider and accurate picture of
the company.
is a complex process as it involves
making the budget from start.
 Along with this another drawback of
using the ZBB is that it is very time
consuming as a lot of research relating
to setting up of budget.
 In addition to this, another drawback of
using the zero based budgeting is that
there is requirement of high manpower
as the budget is started from initial and
this involves a lot of research resulting
in optimum utilization of the human
resources.
Activity based costing- this is another type of budget which is prepared by the Eastern
Engineering wherein the all the indirect and overhead cost are being charged to the product or
the service only. This method is used by Eastern Engineering because it increases the knowledge
relating to the overheads and other cost drivers of the company and the manager tries to reduce
the unnecessary cost.
Advantages Disadvantages
 The major benefit of using the activity
based costing by Eastern Engineering is
that it assists the business in accurately
identifying the product cost. This
provides an accurate and reliable
information relating to cost of each and
every product accurately.
 Along with this another benefit of using
 The major drawback of using the
activity based costing by Eastern
Engineering is that this is a very
expensive and complex process
(DeFranco and Schmidgall, 2017). This
is particularly it involves the costing to
different activities and this takes a lot of
time.

this costing method by eastern
engineering is that this assist company
in taking proper decision for the better
working of company.
 Along with this another drawback is
that the selection of drivers causes
some problem and as a result of this
working is affected.
4. Comparing how different organizations undertake MA systems to respond to financial
problems
There are number of problems which are faced by companies while operating in the
manufacturing sector (Bedford and Speklé, 2018). To become competitive in sector it becomes
essential for specified enterprise to pay attention on applying relevant methods so that higher
level of efficiency can be achieved to resolve prevailing barriers.
Key performance indicator
There two types of KPI available for the company which involves financial and non-
monetary which aids in assessing key objectives are achieved or not. The types of key
performance indicator such as customer acquisition cost, revenue per client, return assets,
employee satisfaction, internal process quality, etc. With help of these course of action it can
become possible to highlight prevailing financial problems so that relevant course of action to
remove lacking areas in turn higher productivity can be achieved.
Balance scorecard
This is considered to be metric which has can be taken into implementation for
identifying & improving performance to have greater outcomes (Maheshwari, Maheshwari and
Maheshwari, 2021). From the evaluation it can be specified that having feedback aids in getting
depths insights to make modification. The problems can be overcome through reducing cost, lack
of profit margin, etc. Eastern Engineering Co. Ltd can obtain these benefit.
Bench marking
This is helpful in achieving getting the relevant process through comparing and
implementing proper standard so that planning, analysis, integrating and action so that relevant
outcome can be achieved. Ability to coordinate with standards for having relevant outcome in

form of quality profitability, etc. so that maximum efficiency to deal with prevailing issues ca
become possible for specified enterprise.
Variance analysis
It is basically coordinating with measuring the variance through comparing both actual
and estimated so that proper formulation of the decision can become possible. From the
assessment of this particular technique it acne b articulated that eliminating adverse impact from
performance of the company can be exerted. Variance analysis will be useful in controlling
operational performance.
Financial governance.
It is the way company can collect, manage, monitor and control financial information so
that tracking that financial transaction and controlling information so that compliance &
disclosure can become possible. It can be helpful in overcoming prevailing issues in turn better
results can be derived.
Eastern Engineering Co. Ltd Astra Zeneca
 The major issue faced by the
company while conducting its
manufacturing process involves
ineffective price formulation which is
declining it profitability.
 The specified firm by using price
optimization system can ensure that
higher products are sell to have greater
revenue with maintaining sound profit
margin.
 For resolving monetary issue firm can
apply bench marking and key
 The crucial issue experienced by the
enterprise is to not proper analysis of
job costing which is not allow making
proper cost structure.
 The issue can be resolved by applying
job costing system in turn better
outcome trough evaluation can be
obtained to make relevant
improvement.
 Variance analysis and balance
scorecard lead to have ability to

performance indicator. overcome such adverse impact.
CONCLUSION
In conclusion to this report, it can be presented that MA systems and reporting aspect is
highly associated with each other. It can be seen in the report that MA reports provide Eastern
Engineering Co. Ltd with detailed analysis and evaluation of departmental performance. By
reviewing reports manager can identify areas which require improvement. Along with this, it has
been articulated that budgetary control tools help in eliminating non-profitable operations or
activities. It can be summarized from the evaluation that referring variance analysis and balance
scorecard technique Eastern Engineering can resolve monetary issues prominently.

REFERENCES
Books and Journals
Abdusalomova, N. B., 2019. DIRECTIONS FOR DEVELOPMENT AND IMPROVEMENT OF
A MANAGEMENT ACCOUNTING SYSTEM. Economics and Innovative
Technologies. 2019(3). p.6.
Amran, A., 2020. Influence of Decentralization and Management Accounting System Managerial
Performance Against. ATESTASI: Jurnal Ilmiah Akuntansi. 3(1). pp.63-73.
Bedford, D. S. and Speklé, R. F., 2018. Construct validity in survey-based management
accounting and control research. Journal of Management Accounting Research. 30(2).
pp.23-58.
DeFranco, A. L. and Schmidgall, R. S., 2017. Cash Budgets, Controls, and Management in
Clubs. The Journal of Hospitality Financial Management. 25(2). pp.112-122.
Javed, S. and Malik, M., 2021. The propensity of risk-taking and financial efficiency: Exploring
the role of management accounting system: Evidence from the manufacturing
sector. Cogent Business & Management. 8(1). p.1954490.
Maheshwari, S. N., Maheshwari, S. K. and Maheshwari, M. S. K., 2021. Principles of
Management Accounting. Sultan Chand & Sons.
Online
Types of Managerial Accounting Reports. 2021. Online. Available through: <
https://www.completecontroller.com/types-of-managerial-accounting-reports/ >.
Sullivan, D., 2021. Types of Managerial Accounting Reports. Online. Available through: <
https://smallbusiness.chron.com/role-account-manager-vs-project-manager-37915.html>.