Analysis of Key Performance Indicators and Accounting Information

The given assignment requires students to analyze the importance of key performance indicators (KPIs) and their relationship with accounting information systems. It involves examining case studies, research papers, and articles related to KPIs, activity-based budgeting, and public-private partnerships. The assignment aims to understand how KPIs can be used to improve business decision-making and organizational performance.

Management
Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Determining different kinds of management accounting systems used by Toyota..........1
P 2. Different techniques used by Toyota for management accounting reporting.................3
M1. Analysing the importance of management accounting systems and its application in
Toyota.....................................................................................................................................5
D1. Integration of management accounting reporting in the business process of Toyota.....5
TASK 2............................................................................................................................................5
P3. Providing income statements on the basis of absorption and marginal costing techniques
................................................................................................................................................5
M 2 Application of management accounting techniques and facilitating the financial reporting
documents...............................................................................................................................8
D 2 Interpretation of the data for the range of industrial operations......................................8
TASK 3............................................................................................................................................8
P4. Determining various kinds of planning tools and budgetary control systems with their pros
and cons..................................................................................................................................8
P5. Adoption of management accounting systems to resolve the financial obstacles..........10
M3 Determining the use of planning tools as well as producing the forecasting budgets...11
M4 Resolving the financial issues through management accounting will help in sustainable
success of business...............................................................................................................11
D3 Implementation of planning tools which helps in solving financial problems for
sustainable success of Toyota...............................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
To have successful business in the long run, there is the need to implement appropriate
management accounting systems in organisation. Thus, with the help of such reporting
techniques, business will be beneficial in making appropriate changes in the industrial activities,
decision making as well as in budgeting a planning for the future operations. In the present
report, there will be discussion based on the management accounting systems, reporting systems
as well as various planning tools for improving the industrial operations of Toyota Inc. The
report will also shed some light over performance appraisals on which they can make appropriate
changes as well as bring innovative ideas to enhance or motivate the workforce.
TASK 1
P1. Determining different kinds of management accounting systems used by Toyota
To improve the operational and financial efficiency of Toyota Inc., managers need to
implement various management accounting techniques. Hence, with the help of such techniques,
business operations will be very effective and produce the profitable returns. However, there
have been various kinds of accounting methods which are being used by the professionals such
as:
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Financial accounting: This accounting system refers to organisation's financial
transactions during the period which in turn reflects outcomes in various reports such as income
statement, financial position and cash statements (Introduction to Financial Accounting, 2017).
Thus, such information is being used by internal or external stakeholders which in turn affects
the investment decisions. Hence, these accounting techniques were facilitated under the
authenticated framework and guidelines which are produced by GAAP, IFRS and IASB.
Cost accounting: In order to control the expenses and requirements of funds for business
operations, there is need to make appropriate analysis of business operations as well as bring
costing techniques which in turn helps in operational expenses of business. Thus, the costs which
are relevant with job, activity and batch costing (Zhou, 2017). Thus, it covers all the expenses or
costs incurred in the pieces of work such as labour, requirements of matriculate, selling as well as
duration of work.
Auditing: Management of accounting requires regular inspection which is known as
auditing of accounts. Thus, Toyota will be beneficial if they make regular auditing of financial
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reports with the help of accounting professionals as well as auditors of industry (Noordin,
Zainuddin and Mail, 2017). Hence, such operational techniques will help business in making
proper changes as well as suggesting effectual solutions to improves business operations.
Taxation: While planning operating business activities and earning adequate amount of
profitability, it is the prime responsibility of firm to make tax returns. However, in the UK, there
has been taxes levied over industries which are corporate taxes, custom duties and other
transactional taxes such as transportation and various central or state level taxes (Yudi and et.al.,
2016). Hence, these taxes are being collected by HMRC and legal authority of UK.
Budgets: To set an adequate amount of limit over the operational activities of
organisation, budgeting tools will be beneficial such as cash budget, sales and purchase as well
as various operational budgets. Thus, Toyota needs to implement prefect use of such managerial
accounting techniques that will help in the utilisation of resources as well as lower down the
wastage due to such business operations.
Job costing system: This technique will help the managerial professionals in making
proper estimation in relation with improving efficiency of business. However, there can be
analysis which is based on the use of laborious efforts, material and duration in producing the
single unit as well as cost required for the completion of such business operations (Laudon and
Laudon, 2016).
Price optimisation: Rates levied over the commodities produced by organisation are
needed to have appropriate prices which in turn bring profitable returns as well as must be more
than the costs incurred while producing such units. Hence, Toyota as the manufacturing unit can
be beneficial if they optimise the process over vehicle which must be effective.
Inventory management: The initial requirement in order to satisfy the consumer needs is
having proper inventory management (Hopper and Bui, 2016). Thus, Toyota needs to analyse the
market requirements as well as produce commodities which are desired by their consumers.
Hence, this will help in improving the brand image as well as increase industrial efficiency to
meet demands on time.
P2. Different techniques used by Toyota for management accounting reporting
1. Budget report - This report based on company's budget. In this report they define the
budget of organisation then increase their budget will set in effective department. In Toyota,
many employees are working and there are a lot of departments for different tasks. But so some
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department cannot be able to complete the target of the organisation and some units will get the
entire target of the company and they can be able to give their best. Company's half profit is
based on that department's employees who gives their best at workplace (Flynn, 2015). So this all
consideration by the company and set the budget according to department. If the departments
who give their best then next year budget will increase for them, and the department who cannot
be able to get the goals of the company, they will not get the budget. Company can decrease their
budget compare than present budget. So budget report is based on the department who doing well
and who doing not as well as according company.
2. Account receivable aging - This report is based on company’s cash flow and credit of
customers. Company provides credit services to their customers. Their customers getting the
services of credit and company collect the entire data of that customers and make an accounting
report. Some customers can pay their outstanding amount on time and then company mentioned
that information in their record but some time some customers can not be able to pay their
outstanding on time (Das, 2014). Then company send notice to them, but customers will not pay
the credit on that time as well. Further, company can take serious action for their customers who
cannot pay the outstanding amount. Through that action company will borrow the refund of their
credit fund and get the outstanding which not payable by the customers. So this report is based
on cash flow and credit service which given by the company. Toyota company sale cars to their
customers with instalment services. But some time customers can not be able to pay that
instalment on time. Then company can borrow the car in action of company policy.
3. Job cost report - This report shows specific project's expenses. They estimated the
revenue of entire department and then they evaluate the profitability and productivity which
provide by the employees. This report helps identifies higher earning areas and low earning areas
of the company (Wu, and Wang, 2016.). Further, they will stop wasting time on lower earning
areas and start focus on higher earning areas for increasing their strength and get the more profit.
Inventory and manufacturing - When company sale their product and purchase the raw
material then they need to keep record of this entire works. So company can make an inventory
for the data as sales, purchase, sales return, purchase return, profit, loss, delivery report etc. This
report shows the all data to the company when organisation require the most.
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M1. Analysing the importance of management accounting systems and its application in Toyota
Toyota as the multinational brand has huge business operations. It has many
manufacturing units, showrooms etc. which in turn have wide operational activities. Thus, there
is the need to have appropriate recording of all transactions as well as regular inspection of
accounts which in turn help business in making adequate cost controlling techniques. However,
application of Budgetary and costing techniques as well as various management accounting
methods will help them in making effectual business operations as well as bring adequate
outcomes. Thus, with the help of job costing business will be beneficial in making the adequate
changes in business operations such as improving the efficiency of workforce, optimum
utilisation of resources as well as bring innovative improvements in production, selling,
marketing etc. activities of industry.
D1. Integration of management accounting reporting in the business process of Toyota
To have appropriate outcomes, there is the need to implement reporting techniques in
organisation. Thus, managers or accounting professionals of Toyota will be beneficial in
producing the reports and communicating in internal or external environment of industry. Hence,
it will be beneficial for planning and decision making as well as bringing proper solutions for
business forecasts. Thus, such results are being disclosed in the external environment which are
in turn helpful for business in improving the capital structure as well as revenue gathering. In
terms of having better investment for operational activities of business, this disclosure will be
fruitful for business in terms of inviting investors to analyse profitability of firm as well as take
benefits form dividends.
TASK 2
P3. Providing income statements on the basis of absorption and marginal costing techniques
Marginal costing technique:
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Absorption costing technique:
6

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M2 Application of management accounting techniques and facilitating the financial reporting
documents
The management accounting techniques are used to analyse the financial profitability of
the firm. They maximize the amount of the profit which need to be earned by the company. On
the basis of marginal cost and absorption cost they need to calculate the income or total revenue
of the firm.
D2 Interpretation of the data for the range of industrial operations
The net profit of the firm is calculated as 314846 and the gross profit is about 315846 of
the firm. The company is selling about 1500 units at the price of 200 and then total revenue of
30000. The and total contribution expense is about 299000 and the net profit earned by the firm
is about 292000.
TASK 3
P4. Determining various kinds of planning tools and budgetary control systems with their pros
and cons
Activity based budgeting: In this budgeting method, manager allocates cost on the basis
of cost driver. In this, all the overhead expenses incurred by the firm are highly associated with
the activities performed (Downes, von Trapp and Nicol, 2017). Hence, such modern technique of
budgeting provides high level of assistance in allocating financial expenses in an appropriate
manner. Such method of budgeting has following advantages and disadvantages such as:
Advantages
 ABB tool of budgeting provides assistance in identifying redundant activities. Hence, by
undertaking such technique Toyota can control wastage and would become to generate
high margin.
 It facilitates optimal allocation of financial resources and helps in attaining higher
margin (Activity Based Budgeting: advantages and disadvantages, 2017).
 By using such technique, business unit can enhance operational efficiency to a great
extent.
Disadvantages:
Along with the benefits, there are some cons that affect significance of ABB. On the basis
of ABB, to set competent budgeting framework firm requires highly skilled and talented
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personnel (Sperfeld and et.al., 2016). In the absence of having talented personnel Toyota would
not become able to set budget in accordance with ABB. Along with this, high time intensity is
considered as another main limitations of activity based budgeting.
Zero based budgeting: Under ZBB, manager of the business unit starts with zero base for
preparing new budget. It may be served as a reform over the traditional tools because in this
manager completely avoids past financial plan or framework. In accordance with such technique,
by taking zero base, finding and justifying all the cost effective ways of performing activities
manager sets new plan (McCartney, Pierce and Mackie, 2016). Hence, manager of Toyota should
consider following advantages and drawbacks while preparing budgeting framework as per ZBB.
Advantages
 ZBB method helps in developing appropriate work and making optimal allocation of
financial resources.
 It improves co-ordination among different departments to a great extent.
ZBB helps in avoiding wastage and enhances profit margin significantly.
Disadvantages
 In the case of having lack of expertise among the personnel Toyota would not become
able to develop suitable financial plan (Zero Based Budgeting Disadvantages, 2017). \ For preparing budget as per ZBB, business unit requires high manpower as well as time.
Responsibility budgeting: On the basis of responsibility budgeting, by preparing various
responsibility centre such as cost, profit, sales etc. In accordance with such technique,
management team takes input from the managers of each responsibility centre. Considering such
input manager can develop suitable framework for the upcoming time period. Along with this,
responsibility manager also gives specific reasons due to which they failed to get the desired
level of outcome or success (Oyigbo and Ugwu, 2017). This in turn helps firm in developing
suitable framework for the upcoming time period.
Advantages
 Helps in taking suitable decision about funds as manager provides their suggestions
regarding the same
 Facilitates delegation of roles as well as responsibilities and encourage personnel in
relation to making their best efforts.
Disadvantages
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 It is highly time consuming process because in this high involvement of personnel are
required.
 It also places negatively impacts employee motivation.
Incremental budgeting: This is stated to be yet another well-known method of budgeting as a
planning tool in which, the previous year’s budget is taken into consideration for making the
present year’s budget. It thereby works as a base to plan for the current year to avoid any
mistakes of previous year. This involves making small rectifications in the current year’s budget
where it is assistive in terms of reducing any state of uncertainty in the successive year’s budget.
Although, it is also associated with some major pros and cons, that are as listed below-
 Advantages-
o A foremost benefit of this method is its simplicity where it is also easy to prepare
in no time in comparison to other identified methods.
o Apart from this, it is also referred to be one of the easiest method for the
allocation of budget and by together responding to any required change.
o As a result, to which, this particular method of budgeting assists in funding, as
and when required. Disadvantages-
o This method also consists of some major drawbacks which includes non-
identification of any ineffective resource.
o It is sometimes considered to be a non-economical measure that requires spending
huge amount for the preparation of budget using this particular tool.
P5. Adoption of management accounting systems to resolve the financial obstacles
While operating in the market, several kinds of issues and obstacles come into
consideration which directly create negative impact on the business. Therefore, it is mandatory to
make solution of such issues in an appropriate manner so that, Toyota able to boost up its
financial performance (Quinn and et.al., 2017). The current section focuses on financial problems
which are like reducing income and profit, declining return on investment, improve cost,
expenses etc., (Dewa and et.al., 2016). Further, management of Toyota is considering different
systems of MA in order to make solution of such financial issue take place at the workplace.
Moreover, these all the systems or approaches are mentioned below:
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 Balanced scorecard: It is one of the best approach for assessing business performance in
the industry. Further, it consists of basically four perspectives which are like financial,
customer, learning & growth as well as internal business procedure. By taking base of the
first perspective, Toyota analysing different financial aspects and on the basis of that
assesses that whether performance improved or not (Givoly and et.al., 2017). If any issue
occurred, then causes behind this are also clearly reflected by BSC approach. Therefore,
incurred financial problems can be easily resolved at the workplace of selected auto-
mobile company. Financial governance: A small part of corporate governance which takes care of all the
financial resources applied within workplace of Toyota is known as financial governance.
It shows that employees and others are utilising financial resources in which manner. If
outcome of them against too considered resources is in unfavourable manner then
possible solutions are to be made by implementing several effectual strategies (Sjoeberg
and et.al., 2016). Due to this, issues related to can be easily as well as adequately resolved
by Toyota by which performance will be improved.
 Variance analysis: Another system of MA is variance analysis where budgeted and
actual both the data are compared with each another. In Toyota able to achieve forecasted
information then it can be said that business performing well in the auto-mobile industry
(Feng and et.al., 2017). On another side, if targets are not achieved then appropriate
actions will be implemented which support to resolve financial shortfalls and boost up
performance in the respective sector.
 Budgetary control- This is stated to be one of the most common measure used to manage
the finance related considerations in Toyota. Herein, the budget is being prepared by the
accountable bodies of the organisation and is continuously being monitored with a
purpose of controlling any deviation from the set target. It is hereby evident to assist
Toyota in managing their expenditures of distinct functions as this method is known to
reduce the chances of overspending. This is being done by specifying a fix amount for all
business related activities and the controlling is being done by assessing the variance
between planned and actual outcomes.
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 Benchmarking- It is yet another well-known strategy used for the management of finical
consideration in Toyota as well as by one of its popular contender called Ford. This is for
having almost similar range of products and services, a comparison is done between their
proposed services to bring necessary improvements. This is basically to assist the
organisations in performing well and attain success in the future. Key performance indicator- This method is used with a purpose of assessing the carried
performance of Toyota as well as Ford and compare among the achievement of their set
business targets. This in turn assists in acknowledging the efficiency level of the
organisations with 2 basic levels of KPI’s, namely low and high levels. The low level of
KPI is known to focus upon the smaller or divided business units including the sales,
marketing and administrative departments. Whereas, the high level KPI tends to measure
the overall performance of the entire business unit.
M3 Determining the use of planning tools as well as producing the forecasting budgets
The planning tools are very useful in determining the various types of budgets and the
producing the forecasted budgets. The outcome of the firm will be positive if they are using this
tools of planning.
M4 Resolving the financial issues through management accounting will help in sustainable
success of business
If the firm is able to resolve the problem of all the financial issue. The sustainable success
of business is also very important. If the firm need to take out the profit of year then they will
business performance in auto mobile industry.
D3 Implementation of planning tools which helps in solving financial problems for sustainable
success of Toyota
After the form the planning tools then they will easily be implementation in solving the
financial problem to sustain in the market and for the success of Toyota. The implementation will
then be regulated by the higher authority to see that there is no wastage of the resources of the
firm
CONCLUSION
On the basis of above report, it can be concluded that there has been evaluation of various
costing and budgeting techniques. Various reporting methods and the performance appraisals
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were evaluated which in turn prove to be helpful for Toyota’s managers to fetch all the relevant
information which are affecting operational performance of business. Further, there have been
calculations which are relevant with the marginal and absorption costing techniques which in
turn represents that absorption costing will be beneficial for managers as it brings the most
appropriate outcomes.
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