Implementing Balanced Scorecard and Budgetary Targets

The given assignment compares two different approaches to managing financial issues - Balanced Scorecard (BSC) used by Tech Limited and Budgetary Targets employed by Thomsons Online Benefits. It explores the benefits of BSC in assessing financial performance and identifies areas for improvement. Additionally, it discusses the use of budgetary targets as a means to eliminate financial obstacles. The assignment concludes that both approaches are effective in managing financial issues, with BSC being used by Tech Limited and Budgetary Targets being used by Thomsons Online Benefits.

MANAGEMENT
ACCOUNTING

INTRODUCTION
A branch of study which helps to make an effective schedule related to financials in the
workplace and then implement, monitor and execute it is known as management accounting
(MA). The present study focuses on various systems and methods involved in the MA concept
with explaining their key needs. Tech (UK) Limited enterprise is taken as a base throughout the
project which has presence in the electronic industry of UK. Apart from this, in the current
assignment income statements are prepared for selected entity with the help of marginal and
absorption costing techniques. Further, different explanations related to budgets like benefits and
limitations, procedure for preparing it and significance is mentioned in this project of MA. At the
end of assignment, Balanced Scorecard (BSC) approach is taken into consideration which helps
to respond various financial issues incurred in the business of Tech Ltd.
TASK 1
A. Explanation of management accounting along with its basic needs
At the environment of an entity when financial plan is required to prepare, implement,
monitor and evaluate then MA is considered. It is useful for taking effectual business decisions
for internal operations and enhance its growth rate in the industry of electronics. Apart from this,
wide range of decisions are also taken with the help of MA and its several systems. It consists
with budget statements, forecast of financials, analysing business performance, applying several
strategies etc. (Hald and Thrane, 2016). Therefore, key need of MA is for making effective and
profitable decisions in Tech Limited entity.
I. Segregate two terms i.e. MA as well as financial accounting (FA)
Management accounting Financial accounting
It consists with internal aspects of an
organisation only where external elements are
totally ignored.
On the other side, FA associated with all the
external factors incurred in the company
which are created by customers majorly.
It helps to make only internal decisions of
Tech (UK) Limited
When business decisions related to external
environment are required to be taken then FA
considered.
At the time of using this aspect, the Tech Ltd is When using FA then it is mandatory to prepare
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not required to use all the statements of
financials in legal manner.
all the financial statements using provided
structure or format in legal manner.
Reports under this are framed for assessing
internal business positions in terms of liquidity,
efficiency and profitability (Joshi and Li,
2016).
Accounts of FA are prepared in order to track
performance of Tech Ltd in the industry and
comparing with rivals as well.
Further, auditing as well as publishing of
statements is not required of these reports.
On the other side, statements like B/S, I/S etc.
are necessary to be published after completion
of auditing process in legal manner.
II. Value of MA to make effectual business decisions
MA is an area of study which applied in the workplace for taking internal business
decisions basically. It helps to analyse cash position using the cash budget through which level of
fund availability in the workplace is determined. Along with this, profitability of the Tech
Limited is also analysed with the help of MA. On the basis of these both the aspects, decisions
related to fund raising and investment in profitable alternative is taken respectively. It consists
with capital budgeting techniques also which is supportive method to evaluate different aspects
of the investment. In addition to this, stock availability condition is analysed from the tools of
management accounting (Nuhu and et.al., 2017). By using this, Tech Ltd become highly able for
reducing as well as managing the overall inventory properly. Hence, it can be said that MA is a
technique through which proper and profitable decisions can be taken related to investment,
expending, fund raising, costing etc.
III. Cost accounting system
A method through which an organisation able to analyse overall expenses associated with
it in proper way is known as cost accounting system. It gives information related to actual,
normal and standard costs. Under this, all expenditures are recorded after classifying in variable,
fixed and semi-variable. Basic reason for which this system used by Tech Limited is to track and
assess total cost of production. Therefore, effectual pricing decisions can be taken which support
to attract customers and raise market share in the electronic industry of UK.
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IV. Inventory management system
This approach is undertaken in the workplace for managing total stock along with decline
it in the Tech Limited firm. The reason is that, until and unless if firm nor administers and reduce
inventory then cannot generate huge sales revenue at the end of year (Otley, 2016). Along with
this, higher the stock level is basic reason for affecting inventory turnover ratio in a negative
direction up to the greater level. By applying this method cited management able to manage this
aspect and raise amount of total margin at the FY ending. Moreover, for valuing stock generally
three types of the methods or approaches used by Tech Limited which are LIFO, weighted
average as well as the FIFO.
V. Job costing system
Other than cost accounting and stock management, job costing is another system of MA
which is essentially used in those firms which produce products of different types. As per the
current case, Tech UK Ltd enterprise manufactures special chargers along with electronic
gadgets. Moreover, this system is incorporated for analysing cost or expenses involved in each
job or batch product (The job costing system, 2015). Ultimately, decision to charge amount from
consumers is taken of that specific gadget or charger.
B) Presenting the financial data or information
I. Different reports of MA
Those types of the reports which are prepared and used in the managerial reporting
system in Tech (UK) Limited firm are stated below:
 Budget report: A tool in which targets or goals are recorded which necessary to achieve
in the upcoming period of firm is known as budget report. Further, it includes revenue
amount which must earn, units which are mandatory to manufacture and cash position of
the Tech Limited enterprise.
 Performance report: Second method of reporting is performance where capacity of the
company is involved in order to meet targets which are prepared. Apart from this,
comparison of generally two values is recorded which are like expected or predetermined
in budget and actual which are generated at the end of year (Takeda and Boyns, 2014).
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 Account receivable report: As per this, amount which will be received by firm in the
next year is recorded. In short, credit sales are involved in the report of account
receivables which must be lower in Tech Limited. Sum of this specific report is treated as
debtors in books of financial position.
II. Value of present the information in proper and understandable way
Each and every financial report must be prepared using appropriate structure or format in
the workplace. The reason is that, all the statements are utilised by all stakeholders whether they
are internally associated with firm or externally. If these are prepared in the proper manner then
people can analyse or track business performance related to financials in effectual way. When
looking at the understandable aspect then the reports should be of this nature. Basic reason of
this is that, all stakeholders are not literate in accounting and finance where cannot create proper
understanding. On the other side, if they belong from the accounting and financing background
then can create broad understanding and take decisions (Chan, 2015). Moreover, importance of
presenting the reports properly is that it helps stakeholders to make better and favourable
decisions towards the Tech (UK) Limited enterprise.
TASK 2
I. P&L using absorption costing
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On the basis of the above statement it can be interpreted that, Tech (UK) Limited is not
capable for earning positive income due to huge expenses. Further, it generates revenue in proper
manner but due to lack of managing costs, suffers from net loss worth of -5375 GBP. The stated
income statement is prepared with the help of absorption costing where all the expenditures are
included. This is another reason for which profit of the Tech Limited goes in negative directions.
II. P&L using marginal costing
Looking at another income statement which is prepared using marginal costing method it
can be analysed that Tech Limited is highly capable in order to earn positive profit i.e. worth of
4526 GBP. The reason due to which here firm generates net profit is that, marginal costing
covers only those expenditures which are of variable nature. Due to this, total cost of production
declines and help to generate high level of the profit. Majority of the enterprises avoid this
specific method because it not supports to recover fixed costs associated with the company
(Bryer, 2013).
TASK 3
A) Some budgets along with pros and cons
In an entity, various budgets are to be prepared for forecasting different financial
information in the workplace. Some mandatory budgets are like cash, production, sales, direct
labour overhead, material etc. In the present section, cash as well as sales budgets are considered
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which formatted by Tech Limited at every year. Further, pros and cons of these both budgets are
mentioned below:
Sales Budget
A statement of estimation through which sales is predetermined which is necessary for
the firm to generate in next year is known as sales budget. Under this, units of the sales in
accordance to market situations and price of each is unit determined. Further, multiplication of
these both the aspects is considered as revenue for upcoming period (Khodzytska and Ivchenko,
2014). Its benefits and disadvantages are such as follows:
Benefits:
 Sales budget provides estimation or target to Tech Limited that specific amount is
mandatory to generate in next year. Therefore, it is supportive for achieving sales or
revenue targets in effectual direction.
 For allocating the financial resources in every function of the whole business this budget
is highly supportive.
 To prepare strategies and tactics for fulfilling the revenue targets in proper and smooth
manner it is helpful. Further, reduce total costs and expenditures in the whole Tech Limited workplace budget
of revenue supports up to the larger extent.
Drawbacks:
 Key issue associated with sales budget is that it is prepared using base of the estimations
and market research. Further, if market responds in negative way in the future then Tech
Limited cannot generate targeted sales (Bertz and Quinn, 2014).
 At the working environment if all the members or subordinates not accept sales plan or
program then budgeted data cannot achieve.
 Sales budget consumes huge time of the managers and involved other organisational
people which influence on the efficiency.
Cash Budget
Other than sales, this stated budget includes major two factors which are such as cash
inflows and outflows of the financials. On the basis of this, availability of cash in the business
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environment is evaluated for the next FY. Further, its limitations and benefits for Tech Ltd are
stated below:
Advantages:
 In order to predetermine incomes along with payments for the next year the budget is
helpful.
 On the basis of this, strategies to reduce those type of costs which are of the unproductive
nature it is important. Ultimately, sales can be enhanced and profit maximisation
objective is also fulfilled. For establishing highly effectual coordination among various business departments of
Tech Limited it is supportive (Cooper, Ezzamel and Qu, 2017).
Limitations:
 It has major focus on the subjective estimations where another kind of forecasted are
totally ignored.
 Major limitation associated with budget is that, it consumes high time along with
imposing huge costs for implementation in the Tech Limited.
 Moreover, if all the functions are not properly coordinated then estimated firm cannot
achieve the predetermined cash.
B) Budget preparation process
When a firm is going to frame budgets in workplace then always go through particular
technique of procedure. The reason is that it helps to make budget in proper and smooth
direction. Further, process of budget preparation with basic five steps is mentioned below:
 At the first step, the information and data which needed for preparing the budget are
obtained along with proper estimations (Figge and Hahn, 2013).
 Once required information obtained then coordinated with managers of all the
departments like finance, marketing, production, research and development etc. Under
this, if anyone has issue then resolved and then go for next stage.
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 At the third step above coordinated plan is communicated with senior managers or
authorities in the workplace of Tech Limited. During this, if they find any lack then
solution is also made at here.
 When the budget is communicated and approved by authorised managers and seniors
then implemented in the Tech Limited enterprise. This is very significant step where the
managers need to take care in proper direction (Agarwal, 2016). The reason is that, if
implementation is going wrong then chosen firm not able to achieve budgeted data and
targets.
 At the end, reporting or reviewing of the implemented budget is done in which issues are
found out. Further, during the process of evaluation if the managers find that targets are
not achieved properly due to some problems then corrective actions can be taken.
C) Value of budget for planning and control process
Budget is a method which helps to an organisation for make financials at prior year for
the future. Using this tool, a company easily able to know that in upcoming year it will whether
generate profit or loss. Moreover, importance of budget to make effective financial plan is stated
below:
 Budget gives overall outline of the financials where incomes and costs which will
occurred in the workplace are predetermined. Therefore, Tech Limited can prepare highly
effectual type of the plan of financials (Hiebl, 2014).
 It is important for firms to assess cash availability and on the basis of that decisions
regarding to make investment in wide range of alternatives is taken into account.
 Along with this, availability of cash supports to take decision that whether fund will be
needed to raise from external sources or not.
 In order to create a highly appropriate kind of communication channel in the workplace
also budget is significant technique.
 With the help of this tool, Tech Limited able to forecast all the financials in the
workplace and on the basis of that proper plan can be prepared. Further, the information
which predetermined through this are like cash availability, incomes and outcomes,
material purchase, production units, direct labour expenses etc (Kotas, 2014).
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 Besides these all, for ascertaining performance of cited firm in electronic industry of UK
also budget is used. This is taken for comparing with actual data earned by the
management in the period for which budget is prepared. This specific process of
comparing budgeted and real data known as variance analysis.
TASK 4
Method by which BSC is supportive tool for resolving financial issues
At the business place of every firm wide range of problems and obstacles come into
workplace which create negative impact on the whole organisation. Several issues can be related
to financial, human resource, marketing, selling and distribution, production etc. The present
assignment consists with financials only in which cost can enhance, profit decreasing etc.
obstacles arisen. For resolving this aspect, Tech Limited apply balanced scorecard approach in
business environment. BSC framework includes major four types of the perspectives which
include, customer, financial, learning and growth as well as internal business process (What is a
Balanced Scorecard? 2017). Reason due to which auditor recommend about this system is that,
financial perspective represents all the financial transactions and records properly and in
structure format. Under this, firm able to assess that its objectives related to costing, margin,
efficiency etc. are going on the right track or not. If it can be seen that, proper plan is not going
on the profitable track and achievement of goal hampering then causes identified. When reasons
for affecting the financials are tracked then strategies for solving them are applied. Apart from
this, net profit situation is also identified with the help of BSC which is highly beneficial for
Tech Limited organisation. Therefore, BSC is suggested to the selected electronic company to
make proper solution of the financial shortfalls.
Comparison of another approach of MA in other company
In the MA, different systems are involved which help each and every enterprise in
assessing financial issues and resolve them in effectual way. Apart from balanced scorecard, key
performance indicators (KPIs), budgetary targets, financial governance, variance analysis etc. are
associated with MA. As Tech Limited uses BSC but another firm i.e. Thomsons Online Benefits
operates in software industry considers the budgetary targets in order to respond those issues
which are related to the financials. As per this, data estimated in various budgets is used as a base
for assessing performance (Groot and Selto, 2013). Under another approach, predetermined data
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set is compared with actual figures generated by the Thomsons enterprise. While making
comparison to this, if it has been ascertained that management not meets all the budgeted data
then poor performance is considered. Apart from this, basic factors which create or generate
financial problems like reducing profit, increasing cost etc. are identified in the company. By
employing tactics and ways the causes are eliminated which is indication of resolving the issues
in workplace. Moreover, both the approaches like BSC and budgetary are appropriate and
effectual in order to make proper solution of financial issues.
CONCLUSION
By considering the above analysis it can be concluded that, MA is a tool through which
an organisation can easily make those decisions are required to be taken internally. Basic
systems of MA incorporated by Tech (UK) Limited are like inventory management, job costing
and cost accounting at the work place. When the cited company frames profit and loss account
using two different methods like marginal and absorption costing then it generates profit and loss
i.e. -5375 and 4625 GBP respectively. Moreover, all the budgets have some benefits for an
enterprise along with some drawbacks as well. Budgeting is highly effectual technique which
helps to make better plans, strategies and meet the targets of business. At last, it can be
articulated that Tech Limited company uses BSC approach whereas Thomson Online Benefits
considers budgetary targets in order to eliminate financial obstacles from the work place.
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