Management Accounting and Control Systems

This assignment provides a detailed analysis of management accounting practices within the Toyota automotive business. It calculates costs using absorption and marginal costing approaches and discusses the advantages and disadvantages of different types of tools and technologies used for budgeting control. The assignment also explores how organizations are adopting various management accounting systems to effectively solve financial issues within their businesses.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P.1. Explain the management accounting and essential requirement of different kind of
management accounting system in Toyota firm.........................................................................1
P.2. Different methodologies used for management accounting reporting.................................3
TASK 2............................................................................................................................................4
P.3. Marginal and absorption costing methodology....................................................................4
TASK 3............................................................................................................................................6
P.4. Advantage and disadvantage of using different planning tools that could be utilised for
budgeting control at workplace...................................................................................................6
P.5. Adoption of management accounting system to respond to financial management............8
REFERENCES..............................................................................................................................10

INTRODUCTION
In this research, we would critically discuss about to management accounting tools and
methods for Toyota automotive business to improve their financial performances and
requirements of different kinds of management accounting system which can be utilised within
Toyota automotive business and explain about to different methods used for management
accounting reporting in the firm as well. We would discuss in this investigation about to using
appropriate techniques of cost analysis to prepare income statement using marginal and
absorption method by using both costing techniques. Furthermore, we would explain the
advantages and disadvantage of different kinds of planning tools used for budgetary control for
Toyota automotive business. Ultimately, we will compare how Toyota firm are adopting
management accounting systems to effectively solve all financial issues within Toyota
automotive corporation.
TASK 1
P.1. Explain the management accounting and essential requirement of different kind of
management accounting system in Toyota firm
To
The general manager of the Toyota automotive, japan, Date 2-2-2018
Sub: Management accounting process and their significant
Management accounting is a methodology in which financial data and information are
measuring, analysing, interpreting and communicate them towards the Toyota business goals
and objectives effectively. This is also concern about to utlise this process as cost accounting in
the firm. The main difference between management accounting and financial accounting is that
data analysis of management accounting assist the company's manager in order to decision
making in right way, whereas financial accounting is the process which furnish external parties
offering information effectively(Wu and Boateng, 2010). The methodology of management
accounting and report provides the information about day to day financial report and static
analyst of financial data are required to manager to make their decision towards company's
short terms and long term goal and also helps in their day to day operation within the business.
There are several types of tools and techniques which are used in the Toyota business in terms
of accomplish their managerial goals and company's financial objectives as well. There are
various type of management accounting which are inventory management, price optimisation,
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cost accounting system, job costing system and process costing system as well. All these
accounting systems benefits provide the basic factor about to formulate standardise format in
terms of data analysed, identified and communicate in better way. These all management
accounting methodologies would help the Toyota business in respect of reducing their
manufacturing and other irrelevant cost within the corporation. Job costing system: This approach which is widely used by those businesses which are
doing their business in manufacturing industry. Several times, it could have been seen
that there are wide amounts of customised product acquired to deliver them sufficient
product demanded by their customers(Cokins, 2013). Due to several specifications of
Toyota company's products and services so that there are several types of costing are
available for them to give each particular product to their fixed and specified rate which
must provide to every product and services. Toyota business need to fix their rate of
each customised product and services to manage their costing rate of essential
instruments within the firm which are required to control their essential material cost
within the firm which are unnecessary. Job costing methodology provides the techniques
of maintaining their separate books of accounts of every product and services and
addition of this, various kind of expenses are calculated in them. Toyota business must
use job costing system in the business to specify each product and service cost of the
company which are using while manufacturing automobile vehicles at the workplace so
that their direct material cost and labor cost which are given to their workers and
employees can be reduced and fixed.
 Process costing system: This is the approach which are used when there is mass
production of similar product within the business so that where price are concerned with
them could not be differentiated to each other. In this process cost of each
manufacturing product are as same as another product costing in the firm. Costing of
whole mass production are computed and appropriate cost is recognised in term to
understand whole product line within the business(Shields, 2015). This process must
follow by Toyota automotive business to get advantage of which manufacturing process
in the firm are making high cost at the workplace and essential to reduce and manage
their cost effectively by their managerial activities of management accounting within the
business. In this process it could be stated that mass amount of manufacturing costing
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data are gathered and analysed with the help of process costing system and according to
Toyota firm's manager reduce their costing in favor of business profitability and these
process must give advantage in order to accomplish their desired goals and objectives
efficiently.
P.2. Different methodologies used for management accounting reporting
Several kinds of management accounting reporting methodologies are used within the
business because of different type of operational activities are running in Toyota automotive
business so that in these following kind of management accounting reporting company financial
performance are assessed and analysed at various level within the corporation(Abdel-Kader, ed.,
2011). Different kind of management accounting reporting are as below: Budget reporting: This budget reporting defines about to several kinds of financial data
are formulated and gathered and set to be their standard level which is required to achieve
by the firm within assumed time period. In the firm Toyota automotive business there are
several kinds of financial data are generated in this budgeting report by their accounting
managers and management accounting officer of Toyota company. This budgeting report
not only help in assessment of their financial performance as standard set by their
management accounting officers within the business but also helps to examine its
financial progress and achievements from their previous year financial report of the firm.
Toyota business need to develop their budgeting reports by hiring some management
accounting officers with in the business to formulate a proper budgeting report at yearly
basis and quarterly basis to examine their financial reports and it also assists Toyota
automotive company's manager to make their decision towards company more
profitability gaining so that they would be able to accomplish their goals and objectives
more effectively. Job cost report: This is also an essential another budget reporting in this reporting system
different kind of business project are made in various type of accounts books. Nowadays
this is most useful reporting for each business and they are using in their business to
know their financial fluctuation within the business frequently(Quattrone, 2016). Job
costing report are associated with this all financial data which are expenses, cost and
profitability of every specific business exercises which are being done in the business.
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Toyota automotive business also evaluate this reporting system in the business towards
earning sector of the project and implement their effort in terms of accomplish success of
their business effectively.
 Inventory and manufacturing report: Toyota automotive business can formulate these
kinds of reports becoming their manufacturing and inventory management more efficient
within the business(Bennett and James, eds., 2017). This report conducts some costs
which are labour cost, per unit overhead cost and wastage related cost at the company's
manufacturing plant and also inventory report provides information about to available
stock in the firm and also find out investment opportunities within the business so that
would help to organisation to enhance their manufacture volume and expand their
business to gain more profitability and productivity with the corporation.
TASK 2
P.3. Marginal and absorption costing methodology
Marginal costing approach in Toyota automobile corporation
PARTICULAR AMOUNT
Sales 155*200 300000
Less: variable costs of goods sold 1500*12 18000
Less: closing stock 500*12 6000
Add: cost of production 2000*12 24000
Production contribution 300000
Less: variable non-manufacturing costs
Packing boxes 0.50/2000 1000
Total contribution expenses 299000
Less:expenses
Fixed manufacturing cost 100*7*5 3500
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Finishing department 2500
Dispatching department 1000
Net profit 292000
Absorption costing approach in Toyota automotive corporation
PARTICULAR AMOUNT
Sales 1500*200 300000
Cost of production 13*2000 26000
Less: Closing stock 500*13 6500
Less fixed production overheads
Machine department 100*5*7 3500
Finishing department 5*20*4/6 150
Dispatch department 1*2081/5 4
GROSS PROFIT 315846
Less: packing box 0.50*2000 1000
Net profit 314846
From the all financial data analysis in the firm it could be stated that company's net profit
amount is 292000 in absorption costing process and net profit are different which is 314846.
Both are showing different volume in the above both table. It could be seen that there is high
amount of profit in absorption costing pricing methodology in Toyota automotive business.
Computing approach are little different from marginal and absorption costing report(Suomala
and Lyly-Yrjänäinen, 2012). Major point which are essential to noticed is that in that marginal
costing techniques only variable expenses are calculated in the accounting report to compute
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overall costing report within Toyota corporation. Moreover, absorption costing techniques are
totally different from marginal costing method and in this technique both fixed and variable
expenses are calculated in the accounting report due to involvement of fixed expenses in these
businesses. Thus, with the help of both these techniques' outcome of these expenses both these
approaches revenue is calculated by their management accounting officers and this reports assist
them to make their decision towards proper form of the business. With the help of above analysis
in this investigation, both techniques are needed to implement in Toyota automotive business and
an appropriate report and judgment of fixed and variable expenses are must be taken in proper
manner so that cost effective decision could be made in respect of Toyota business and their
proper operational activities can be made in reliable manner so that these activities would help
the Toyota automotive business to accomplish their goals and objectives more effectively and
improve their financial performances in better form.
TASK 3
P.4. Advantage and disadvantage of using different planning tools that could be utilised for
budgeting control at workplace
Several kinds of tools and techniques are using by different-different business in terms of
budgeting controlling at their workplaces. These techniques and tools contains some advantage
and disadvantages(Chenhall, 2012). Various type of budgeting planning tools are using in Toyota
business are as below:
 Cash Budgeting: Cash budgeting is a most vital tool for planning towards budgeting
control within the business. In Toyota automotive firm, cash budgeting make estimation
about to all cash inflow and outflow financial statements within the business and then net
available cash is identified within the business as well. With the help of all expenses
statements budget planning is made in the firm. Nevertheless, it can be stated that all
expenditure statements are made with assuming of ascertaining limits of cash budgeting
in the corporation so that according to this activities budget are planned in the Toyota
automotive business. There are various advantage and disadvantage of cash budgeting are
as below:
Advantage:
 Main advantage of this approach is all cash expenditure within Toyota automotive
business can be identified easily and with the assistance of effective tools and techniques
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of cash budgeting management accounting officer of the firm effectively manage
them(Bebbington, Unerman and O'Dwyer, eds., 2014). This would help the business to
raise their profitability within the Toyota corporation.
 Other main advantage of this firm to develop this planning is more easy than other tools
presented there and there is no need to special hire person to prepared this report,
companies management accounting officers also can prepare this type of reports in better
manner.
Disadvantage: Main disadvantage of this planing tools is that it is totally made upon assumption and
approximation within the business so that there are many time approximation goes wrong
in the business so it could make negative effect on Toyota automotive business.
 Fixed budget: This is another alternative which are presented to implement in Toyota
automotive corporation. This is unique process from the cash budgeting in terms of
measuring of all budget factors within the business in different manner(Moser, 2012). In
the cash budgeting process there are some deviation of merit and demerit of fixed
budgeting in the firm.
Advantage:
 The major advantage of this approach is its value always same in remaining and it will
never change within the business. Hence, Toyota automobile corporation's management
accounting officer are needed to formulate it with full dedication and support of their
efforts.
 Other advantages of this approach is that management accounting officer for the Toyota
firm must ensure that implementation of budgeting planning tool is implementing
properly either business climate change continuously.
Disadvantage: The major disadvantage of this approach is that in Toyota business, corporation
circumstance are rapidly change and there is possibility of making not effective result and
implementation within the business so that there is always chances of formulation wrong
decision through utilising this approach within the firm. Zero based budgeting: This is the approach in which all expenses within the business
should be identified properly within each new financial period of firm. This budgeting
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report also start from zero base within the business and its function also analysed for its
requirements and prices in the corporation(RW Hiebl, 2013). Toyota needs of this
approach in order to check out their previous result and current expenditure measurement
within the firm.
Advantage: This is the approach in which a systematic way are followed while implementation of this
approach within the business and several reliable tools and techniques are using by their
expertise in the firm. Hence, it can define that effective advantages of Toyota firm can be
gained with the help of this approach.
Disadvantage: The major disadvantage of this methodology is that, it takes long process to prepare so
that which can consumer more quality of time of Toyota automotive business.
 Capital budgeting method: Capital budgeting method is a long terms investment
planning process such as land, machinery, equipment and building in the business. This
process define about to fixed asset investment within the business in respect to
accomplish goals and objectives effectively(Tessier and Otley, 2012). Toyota automotive
business need to make sure about all the elements of capital budgeting are properly
formulated and it is properly implemented on the business because it needs large amount
of investment to expand their business capital.
Advantage: The main advantage of this approach about it increase business enhancement quality and
their market value of the firm. This is prepared by many of management accounting
experts and manager within Toyota because it makes huge changes within the business
expansion.
Disadvantage:
 The main disadvantage of this approach is, it needs wide volume of amount to implement
this strategy in the firm. Toyota need to use many of their resources to formulate this
approach within the firm and it hard to set up within the business and need much time to
implementation of this strategy within the firm.
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P.5. Adoption of management accounting system to respond to financial management
There are several business who are facing their financial issues and problems within the
organisation. Many of management accounting system that can be untilised to solve each
financial issues in better ways(van der Steen, 2011). Various management accounting strategies
and approaches which could be used to solve Toyota automotive business financial issues
effectively are as below: Key performance of indicator: This is one of the major necessary tool for Toyota
automotive corporation to solve their financial issues efficiently. Toyota automotive firm
are recently facing their many of financial issues such as lack availability of capital
budget within the business(Otley and Emmanuel, 2013). In this term, Toyota automotive
corporation can use KPI method and in this approach they can compare their actual
financial performance and differences between their stand arid value in the business and
their actual financial performance and assess how much difference are found between
them so with the help of this they can measure how big financial issues they are facing
and in the future how long they are going to face this issues as well. KPI tool can be used
in terms of solving the financial issues of Toyota automotive business.
 Financial governance: Financial governance is one of vital approach which can used in
the business in terms of solving their financial issues effectively. In this methodology,
Toyota automotive business can use some rules and regulation which are predetermined
within the business and some demands are followed while performing their task within
the business(Banerjee, 2012). Some circumstance in the firm someone performing their
financial activities within Toyota automotive firm and make any kind of mistake which
become a cause of financial issues arises in the business then individual person would be
responsible of those mistake and all financial losses within Toyota automotive firm as
well. This type of financial issues make any person more conscious and aware about
make sure that think properly about take any decision which are concerned about to
financial within Toyota automotive firm and this management accounting system
provides guideline about to solve all the financial issues which are facing by Toyota
automotive business.
CONCLUSION
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Form the above investigation, it has concluded that some management accounting tools
and techniques assist Toyota automotive business to obtain and acquire the information which is
required by the manager of Toyota business for implementation of business function. Toyota
automotive required to implementation and apply of these all management accounting principles
and techniques in terms of better sustainable growth with the business and we have concluded
about to different methods used for management accounting reporting within Toyota firm.
Moreover, we have alaysed some financial data of Toyota business to calculate cost using
absorption and marginal costing approaches and also explained the advantage and disadvantage
of different types of tools and tech which are used for budgeting control within Toyota
automotive business, ultimately, it is also concluded about how organisation are adopting
different management accounting systems to effectively solve their financial issues within the
business.
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REFERENCES
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Cokins, G., 2013. Top 7 trends in management accounting. Strategic Finance. 95. 6. pp. 21-30.
Shields, M. D., 2015. Established management accounting knowledge. Journal of Management
Accounting Research. 27. 1. pp. 123-132.
Abdel-Kader, M. G. ed., 2011. Review of management accounting research. Springer.
Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser?.
Management Accounting Research. 31. pp. 118-122.
Suomala, P. and Lyly-Yrjänäinen, J., 2012. Management accounting research in practice:
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Chenhall, R. H., 2012. Developing an organizational perspective to management accounting.
Journal of Management Accounting Research. 24. 1. pp. 65-76.
Bebbington, J., Unerman, J. and O'Dwyer, B. eds., 2014. Sustainability accounting and
accountability. Routledge.
Moser, D. V., 2012. Is accounting research stagnant?. Accounting Horizons. 26. 4. pp. 845-850.
RW Hiebl, M., 2013. Management accounting in the family business: tipping the balance for
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Tessier, S. and Otley, D., 2012. A conceptual development of Simons’ Levers of Control
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Lee, B., 2012. New public management, accounting, regulators and moral panics. International
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van der Steen, M., 2011. The emergence and change of management accounting routines.
Accounting, Auditing & Accountability Journal. 24. 4. pp.502-547.
Banerjee, B., 2012. Financial policy and management accounting. PHI Learning Pvt. Ltd.
Otley, D. and Emmanuel, K. M. C., 2013. Readings in accounting for management control.
Springer.
Bennett, M. and James, P. eds., 2017. The Green bottom line: environmental accounting for
management: current practice and future trends. Routledge.
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