Management Accounting Practices in a Changing Business Environment
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Essay
AI Summary
The provided content comprises a collection of academic articles and studies related to management accounting, its innovations, and their societal relevance. The papers explore various aspects of management accounting, including economic value added, institutional work in state-owned enterprises, job advertisements, managerial accounting practices, environmental management accounting, lean implementation, budgeting practices, and total quality management. The studies employed different research approaches, such as interpretive and quantitative methods, to investigate the impact of management accounting on organizational change, sustainability, and innovation. Overall, the content highlights the importance of management accounting in organizations, particularly in the context of economic development, institutional changes, and environmental concerns.
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MANAGEMENT ACCOUNTING
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1Explain management accounting and give the essential requirements of different types of
management accounting systems.................................................................................................3
P2 Explain different methods used for management accounting reporting.................................5
P3 Techniques of cost for preparing income statement...............................................................8
P4 Advantages and disadvantages of different types of planning tools used for budgetary
control........................................................................................................................................10
Budgetary Control......................................................................................................................10
P5 Adoption of management accounting system to respond to the financial problem by the
Unicorn Grocery........................................................................................................................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1Explain management accounting and give the essential requirements of different types of
management accounting systems.................................................................................................3
P2 Explain different methods used for management accounting reporting.................................5
P3 Techniques of cost for preparing income statement...............................................................8
P4 Advantages and disadvantages of different types of planning tools used for budgetary
control........................................................................................................................................10
Budgetary Control......................................................................................................................10
P5 Adoption of management accounting system to respond to the financial problem by the
Unicorn Grocery........................................................................................................................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15
INTRODUCTION
Day to day record of the data and information is an essential element for an organisation
which facilitate and increase chances of profitability. It helps to managers to take decision on
daily basis or in short term. Unlike the financial accounting which helps in the stakeholders
welfare it is mainly for the internal audiences which are department managers etc. this report
typically shows the cash availability, sales revenue generation and many more things. Along
with this it also includes the trend charts, variance analysis and other statistical details
(Macintosh and Quattrone, 2010). This assignment is prepared for Unicorn Grocery by applying
various management accounting concepts into it. Furthermore company wants to create their
income statement for that concern cost analysis is taken into account through which cost can be
found out. Advantages and disadvantages are several essential factors which have to get
determine by management for budget and its planning and controlling.
TASK 1
P1. Uses and benefits of various managerial accounting systems
From: Management Accounting Officer
To: General Manager of Unicorn Grocery
Subject: Report on MAS benefits
According to Unicorn grocery, managerial accounting is a process which facilitate the managers
to take some adequate steps which enable them in their long term context. These are such
statement which are framed on the basis of short term basis which increase chances of
sustainability for a business organisation.
These are certain benefits which a firm can gain by adopting this methodology in
business. Unicorn grocery have to determine this fact in business and gain advantages of using
MA. By applying this concept in business, profitability and productivity get rises.
Majorly, there are certain number of MA systems identified which support in increasing
the profitability of business. Systematic working enable an entity to grab many market
opportunities and make production according to requirement as well. There are several number
of managerial accounting system are identify which are:
Job costing system: This process is applied on business at the time when an entity is dealing
with variety number of products. Unicorn grocery is dealing with distinct number of products as
Day to day record of the data and information is an essential element for an organisation
which facilitate and increase chances of profitability. It helps to managers to take decision on
daily basis or in short term. Unlike the financial accounting which helps in the stakeholders
welfare it is mainly for the internal audiences which are department managers etc. this report
typically shows the cash availability, sales revenue generation and many more things. Along
with this it also includes the trend charts, variance analysis and other statistical details
(Macintosh and Quattrone, 2010). This assignment is prepared for Unicorn Grocery by applying
various management accounting concepts into it. Furthermore company wants to create their
income statement for that concern cost analysis is taken into account through which cost can be
found out. Advantages and disadvantages are several essential factors which have to get
determine by management for budget and its planning and controlling.
TASK 1
P1. Uses and benefits of various managerial accounting systems
From: Management Accounting Officer
To: General Manager of Unicorn Grocery
Subject: Report on MAS benefits
According to Unicorn grocery, managerial accounting is a process which facilitate the managers
to take some adequate steps which enable them in their long term context. These are such
statement which are framed on the basis of short term basis which increase chances of
sustainability for a business organisation.
These are certain benefits which a firm can gain by adopting this methodology in
business. Unicorn grocery have to determine this fact in business and gain advantages of using
MA. By applying this concept in business, profitability and productivity get rises.
Majorly, there are certain number of MA systems identified which support in increasing
the profitability of business. Systematic working enable an entity to grab many market
opportunities and make production according to requirement as well. There are several number
of managerial accounting system are identify which are:
Job costing system: This process is applied on business at the time when an entity is dealing
with variety number of products. Unicorn grocery is dealing with distinct number of products as
they have to identify the appropriate inventory of products and services. This enable them in
gaining more satisfaction level of their users and increase profit margin as well.
Inventory management system: Inventory is a part of business whose maintenance is must.
Inventory management system facilitate an organisation to manage all the stock of a company
through which they become more capable to provide goods and services according to time
frame. Unicorn grocery have to update their inventory management system according to time
frame through which procurement of goods and availability of products will take place at right
time to right person.
Price optimising: At different price level every person respond to wards it in distinct manner.
Management have to determine the response of every user at different price level which get
facilitate through various channel of distribution. Thus, management have to determine the
optimum price level at which their company can ascertain maximum profit margin.
Thank You
XYZ
P2. Different methods of MA
From: Management Accounting Officer
To: General Manager of Unicorn Grocery
Subject: Different methods of Management Accounting
Management accounting system requires several number of reporting methods which enable an
organisation to prepare their strategies according to them. Reports are framed on regular basis
with an aim to ascertain all targets and objectives within specified time frame. On the basis of
various MA reporting, beneficial judgements get derived. Certain number of managerial
accounting reports are:
Budget report
Inventory and manufacturing report
Account receivable aging report
Job order cost report
A business report is an orderly and objective communication of factual information that
serves some business purpose. It a written form of communication, it’s an important instrument
to the communicative need of all types of organization. They contribute to the decision making
gaining more satisfaction level of their users and increase profit margin as well.
Inventory management system: Inventory is a part of business whose maintenance is must.
Inventory management system facilitate an organisation to manage all the stock of a company
through which they become more capable to provide goods and services according to time
frame. Unicorn grocery have to update their inventory management system according to time
frame through which procurement of goods and availability of products will take place at right
time to right person.
Price optimising: At different price level every person respond to wards it in distinct manner.
Management have to determine the response of every user at different price level which get
facilitate through various channel of distribution. Thus, management have to determine the
optimum price level at which their company can ascertain maximum profit margin.
Thank You
XYZ
P2. Different methods of MA
From: Management Accounting Officer
To: General Manager of Unicorn Grocery
Subject: Different methods of Management Accounting
Management accounting system requires several number of reporting methods which enable an
organisation to prepare their strategies according to them. Reports are framed on regular basis
with an aim to ascertain all targets and objectives within specified time frame. On the basis of
various MA reporting, beneficial judgements get derived. Certain number of managerial
accounting reports are:
Budget report
Inventory and manufacturing report
Account receivable aging report
Job order cost report
A business report is an orderly and objective communication of factual information that
serves some business purpose. It a written form of communication, it’s an important instrument
to the communicative need of all types of organization. They contribute to the decision making
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process at all organizational levels. The total communication through business reports is depend
on the organization on the basis of complex problems and planning and presentation of the
factual. It is the body of systematized information for demonstration or conveying others.
The basic objectives of reporting are assessing or evaluating decision-making
enactment. It helps in struggling changes, reports generally aims at analysing the influences of
business subtleties and how best changes can be used to the benefit of the firm. It provides
information about a company’s activities, progress, plans and problems. Reports are prepared to
help the process of planning in an organization.
Example these types of reports are generally prepared by directors or secretary of a
company for submission to the registrar of joint stock companies in accordance with the
provisions of the Indian act. Non statutory reports are formal reports which are not required
under any law. These reports are generally used by the management in framing policies or
decision making.
On the basis of formality reports are of two types that is formal reports and informal
reports. Formal reports are prepared in the arranged or acknowledged form and described
according to the established procedure through proper channel. Informal reports do not possess
any uniform structure. They are prepared according to the convenience and requirements of the
organization. They may be informative or recommendatory. They are prepared in the form of
letter form. They required detailed information to investigate a given situation in order to report
on an event. For suggestions and commenting purpose these reports are generally used.
On the basis of functions reports are classified as informational reports and interpretive
reports. An informational report contains collected data and organized facts. It presents the real
situation. Not contains any conclusions or recommendations. It is useful in making relevant data
helpful in management decision making. Interpretive report is a type of informal report usually
called as recommendatory report. It consists of conclusion, interpretation and data analysis.
There are various type of reports are prepared by management of Unicorn grocery
through which proper decision taking will be take place in an entity. Reports provide a brief
overview of all the activities and operations which are taking place on regular basis. As these
are highly advisable to a business firm in relation to take adequate decision which support and
facilitate future growth and prospective. Thus, various kinds of reporting which can use by
Unicorn Grocery are as follow:
on the organization on the basis of complex problems and planning and presentation of the
factual. It is the body of systematized information for demonstration or conveying others.
The basic objectives of reporting are assessing or evaluating decision-making
enactment. It helps in struggling changes, reports generally aims at analysing the influences of
business subtleties and how best changes can be used to the benefit of the firm. It provides
information about a company’s activities, progress, plans and problems. Reports are prepared to
help the process of planning in an organization.
Example these types of reports are generally prepared by directors or secretary of a
company for submission to the registrar of joint stock companies in accordance with the
provisions of the Indian act. Non statutory reports are formal reports which are not required
under any law. These reports are generally used by the management in framing policies or
decision making.
On the basis of formality reports are of two types that is formal reports and informal
reports. Formal reports are prepared in the arranged or acknowledged form and described
according to the established procedure through proper channel. Informal reports do not possess
any uniform structure. They are prepared according to the convenience and requirements of the
organization. They may be informative or recommendatory. They are prepared in the form of
letter form. They required detailed information to investigate a given situation in order to report
on an event. For suggestions and commenting purpose these reports are generally used.
On the basis of functions reports are classified as informational reports and interpretive
reports. An informational report contains collected data and organized facts. It presents the real
situation. Not contains any conclusions or recommendations. It is useful in making relevant data
helpful in management decision making. Interpretive report is a type of informal report usually
called as recommendatory report. It consists of conclusion, interpretation and data analysis.
There are various type of reports are prepared by management of Unicorn grocery
through which proper decision taking will be take place in an entity. Reports provide a brief
overview of all the activities and operations which are taking place on regular basis. As these
are highly advisable to a business firm in relation to take adequate decision which support and
facilitate future growth and prospective. Thus, various kinds of reporting which can use by
Unicorn Grocery are as follow:
Budget report: Budget is an essential thing or factor in a business which provide a
framework on which each and every task get done in an appropriate manner.
Management have to prepare budget report in which authority divide their working into
smaller groups and strength company to attain all objectives. Along with this, it also
enable managers and owners to take decision which are related with incentives.
Account receivable aging report: It is a duty of managers to ascertain that all things are
getting done in right direction or all debtors pay their amount on time as well. Account
receivable aging report signifies the detail about all creditors and debtors of a company.
This enable them in estimating the cash inflow and outflow and make policies for those
debtors who are getting failed in meeting with their obligations.
Job cost report: Job profitability analysis is an essential tool for a business which
facilitate the growth and development. Before taking any beneficial decision
management have to determine the suitability and feasibility of project and then take
some actions for that. Hence, authority will become able to focus on such areas which
are highly profitable in nature.
Inventory and manufacturing report: Managers have to determine their stock in advance
and then make appropriate modification according to that. This report facilitate the
Unicorn Grocery to increase satisfaction level of their customers.
Unicorn grocery has to prepare these reports and identify the advantages which they
gain by using them. Budget report aid them in identify all expenses and saving in a proper
manner. Thus, on the basis of this division of work get done so that long term targets get
ascertain properly. Along with this, they are dealing in physical products which require more
and more maintenance of stock and inventory. This support them in manage all factors and
things in a proper manner. Also, they have to take in account account receivable aging report,
through which management become able to measure their debts and creditors properly and pay
them on time as well.
Thank You
XYZ
framework on which each and every task get done in an appropriate manner.
Management have to prepare budget report in which authority divide their working into
smaller groups and strength company to attain all objectives. Along with this, it also
enable managers and owners to take decision which are related with incentives.
Account receivable aging report: It is a duty of managers to ascertain that all things are
getting done in right direction or all debtors pay their amount on time as well. Account
receivable aging report signifies the detail about all creditors and debtors of a company.
This enable them in estimating the cash inflow and outflow and make policies for those
debtors who are getting failed in meeting with their obligations.
Job cost report: Job profitability analysis is an essential tool for a business which
facilitate the growth and development. Before taking any beneficial decision
management have to determine the suitability and feasibility of project and then take
some actions for that. Hence, authority will become able to focus on such areas which
are highly profitable in nature.
Inventory and manufacturing report: Managers have to determine their stock in advance
and then make appropriate modification according to that. This report facilitate the
Unicorn Grocery to increase satisfaction level of their customers.
Unicorn grocery has to prepare these reports and identify the advantages which they
gain by using them. Budget report aid them in identify all expenses and saving in a proper
manner. Thus, on the basis of this division of work get done so that long term targets get
ascertain properly. Along with this, they are dealing in physical products which require more
and more maintenance of stock and inventory. This support them in manage all factors and
things in a proper manner. Also, they have to take in account account receivable aging report,
through which management become able to measure their debts and creditors properly and pay
them on time as well.
Thank You
XYZ
M1. Benefits of management accounting system
There are various advantages of using management accounting systems which facilitate
and provide growth to an entity so that they are going to attain all targets and objectives in an
appropriate manner. Benefits of MA are described below as: Increase chances of remove differences from business - It is very useful task in order to
remove all differences which may arise from their overall business operations. Increase sustainability and ability to grow and development - They are beneficial for
firms in order to sustain themselves for long term at market areas and increase
profitability ratios.
Make firm strengthened to do all objectives in an appropriate manner - By adopting
effective management systems firms can easily gain all their desired aims and business
objectives.
These are certain benefits which a firm can gain by adopting this methodology in
business. Unicorn grocery have to determine this fact in business and gain advantages of using
MA. By applying this concept in business, profitability and productivity get rises. This enable
management to do all the things in an appropriate manner.
P3. Techniques of cost for preparing income statement
For performing each and every task, there is a well-defined manner identified. Thus,
management accounting also has several specified manner through which cost gets determined in
a proper manner. Thus, mainly there are two kinds of costs which are:
Absorption costing: With the help of this approach the calculation of cost of a product or
service is get calculated while taking into account the overheads and direct expenses (Otley and
Emmanuel, 2013). The other name of this technique is full costing method or full absorption
method. In other words, it gets identifies that every cost which is associated with production is
included in the project. However, absorption costing helps an organisation to prepare their
external financial reporting and for income tax reporting which leads in avoiding the miss -
happens in Unicorn grocery.
Income statement for absorption costing method:
Selling Price £35
Unit costs
There are various advantages of using management accounting systems which facilitate
and provide growth to an entity so that they are going to attain all targets and objectives in an
appropriate manner. Benefits of MA are described below as: Increase chances of remove differences from business - It is very useful task in order to
remove all differences which may arise from their overall business operations. Increase sustainability and ability to grow and development - They are beneficial for
firms in order to sustain themselves for long term at market areas and increase
profitability ratios.
Make firm strengthened to do all objectives in an appropriate manner - By adopting
effective management systems firms can easily gain all their desired aims and business
objectives.
These are certain benefits which a firm can gain by adopting this methodology in
business. Unicorn grocery have to determine this fact in business and gain advantages of using
MA. By applying this concept in business, profitability and productivity get rises. This enable
management to do all the things in an appropriate manner.
P3. Techniques of cost for preparing income statement
For performing each and every task, there is a well-defined manner identified. Thus,
management accounting also has several specified manner through which cost gets determined in
a proper manner. Thus, mainly there are two kinds of costs which are:
Absorption costing: With the help of this approach the calculation of cost of a product or
service is get calculated while taking into account the overheads and direct expenses (Otley and
Emmanuel, 2013). The other name of this technique is full costing method or full absorption
method. In other words, it gets identifies that every cost which is associated with production is
included in the project. However, absorption costing helps an organisation to prepare their
external financial reporting and for income tax reporting which leads in avoiding the miss -
happens in Unicorn grocery.
Income statement for absorption costing method:
Selling Price £35
Unit costs
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Direct Labour £5
Direct material £6
Variable sales overhead £1
Variable Production overhead £2
Production budgeted for the period is 600
units
Administration Cost: In this budgeted cost is £800 and Actual cost is £700
Production overhead: In this budgeted cost is £1,800 and Actual cost is £2,000
Selling cost: In this budgeted cost is £400 and Actual cost is £600
Income statement as per absorption costing:
Amount
Sales value (35*600) 21000
less:
Cost of Production 9600
Gross Profit 11400
LESS:
Fixed and variable cost:
variable sales overheads (600*1) 600
Admin & selling cost (700+600) 1300
Less: over absorbed fixed production overheads -100 -1800
Net profit 9600
Marginal costing: The marginal cost of an item is its variable cost. The marginal cost of
production includes the direct material cost, direct labour cost and direct expenses cost and
variable production overhead cost. It is also a key principle while making the decision for the
company. Because with the help of this management attention focused on such changes which
are taking place due to their decisions (Otley and Emmanuel, 2013).
Marginal costing = Change in consumption/ Change in quantity of the product
Direct material £6
Variable sales overhead £1
Variable Production overhead £2
Production budgeted for the period is 600
units
Administration Cost: In this budgeted cost is £800 and Actual cost is £700
Production overhead: In this budgeted cost is £1,800 and Actual cost is £2,000
Selling cost: In this budgeted cost is £400 and Actual cost is £600
Income statement as per absorption costing:
Amount
Sales value (35*600) 21000
less:
Cost of Production 9600
Gross Profit 11400
LESS:
Fixed and variable cost:
variable sales overheads (600*1) 600
Admin & selling cost (700+600) 1300
Less: over absorbed fixed production overheads -100 -1800
Net profit 9600
Marginal costing: The marginal cost of an item is its variable cost. The marginal cost of
production includes the direct material cost, direct labour cost and direct expenses cost and
variable production overhead cost. It is also a key principle while making the decision for the
company. Because with the help of this management attention focused on such changes which
are taking place due to their decisions (Otley and Emmanuel, 2013).
Marginal costing = Change in consumption/ Change in quantity of the product
If marginal cost of any product is high then the situation for producing the merchandise is
better for the business entity.
Income statement for marginal costing
Income statement as per marginal costing
Amount
Sales value (35*600) 21000
less:
Cost of Production (6+5+2) -9100
closing stock (100*13) -1300
variable overheads -7800
Contribution 13200
less:
variable sales overheads (600*1) -600
fixed cost -2000
Admin & selling cost (700+600) -1300
-3900
Total 9300
The major differences between the two of the management accounting techniques are as follow:
Based on financial accounting Based on future information
It gets calculated with the help of ratio
analysis.
According to future scenario, the whole targets
are formulated after preparing of budget.
It get analyse with the help of different trends,
graphs etc.
Different variances are get calculated or can
say that the whole decisions are under the
budgetary control segment.
The decisions are taken on the basis of cash
flow of the company.
Business forecasting means the new plans and
developments in which the more cash is
better for the business entity.
Income statement for marginal costing
Income statement as per marginal costing
Amount
Sales value (35*600) 21000
less:
Cost of Production (6+5+2) -9100
closing stock (100*13) -1300
variable overheads -7800
Contribution 13200
less:
variable sales overheads (600*1) -600
fixed cost -2000
Admin & selling cost (700+600) -1300
-3900
Total 9300
The major differences between the two of the management accounting techniques are as follow:
Based on financial accounting Based on future information
It gets calculated with the help of ratio
analysis.
According to future scenario, the whole targets
are formulated after preparing of budget.
It get analyse with the help of different trends,
graphs etc.
Different variances are get calculated or can
say that the whole decisions are under the
budgetary control segment.
The decisions are taken on the basis of cash
flow of the company.
Business forecasting means the new plans and
developments in which the more cash is
required.
It is based on financial accounting, so there is
lack of proper evaluation of project success.
For making the decision effective project
evaluation is necessary.
M2. Applicability of various management accounting techniques
There are different tools and techniques used for management are described below as:
Marginal costing: The marginal cost of an item is its variable cost. The marginal cost of
production includes the direct material cost, direct labour cost and direct expenses cost and
variable production overhead cost. It is also a key principle while making the decision for the
company. Because with the help of this management attention focused on such changes which
are taking place due to their decisions
Absorption costing helps an organisation to prepare their external financial reporting and for
income tax reporting which leads in avoiding the miss - happens in Unicorn grocery. This is
beneficial method adopted by firms as they are having records of all their financial statements.
P4. Pros and cons of various budgetary control systems
Budgetary control is a process to evaluate and monitor all expenses which are taking
place during an accounting year under a keen focus of managers. The control is required to make
comparison to find out the variance so that better techniques can be achieved to make success of
the budget that is prepared. The comparison of budgetary data with actual data took place by the
management to find out the way and the reason to fall in the value and to take correct actions in
this regard (Li and et. al., 2012).
The objective of budgetary control is to define the objective of the enterprises, providing
plans for achieving the objective of the organisation, coordination of various activity of various
departments, increasing the productivity and the profitability.
Following are the advantages of the budgetary control-
Budgetary control help the organisation to increase the profitability of the organisation
and to reduce the cost that is arise for the production. Several advantages which are associated
with budgetary control for Unicorn grocery are as follows:1. It helps the organisation in defining goals and the objective of the organisation. It sets
measure that helps the organisation to achieve the objective and the goal of the
organisation.
It is based on financial accounting, so there is
lack of proper evaluation of project success.
For making the decision effective project
evaluation is necessary.
M2. Applicability of various management accounting techniques
There are different tools and techniques used for management are described below as:
Marginal costing: The marginal cost of an item is its variable cost. The marginal cost of
production includes the direct material cost, direct labour cost and direct expenses cost and
variable production overhead cost. It is also a key principle while making the decision for the
company. Because with the help of this management attention focused on such changes which
are taking place due to their decisions
Absorption costing helps an organisation to prepare their external financial reporting and for
income tax reporting which leads in avoiding the miss - happens in Unicorn grocery. This is
beneficial method adopted by firms as they are having records of all their financial statements.
P4. Pros and cons of various budgetary control systems
Budgetary control is a process to evaluate and monitor all expenses which are taking
place during an accounting year under a keen focus of managers. The control is required to make
comparison to find out the variance so that better techniques can be achieved to make success of
the budget that is prepared. The comparison of budgetary data with actual data took place by the
management to find out the way and the reason to fall in the value and to take correct actions in
this regard (Li and et. al., 2012).
The objective of budgetary control is to define the objective of the enterprises, providing
plans for achieving the objective of the organisation, coordination of various activity of various
departments, increasing the productivity and the profitability.
Following are the advantages of the budgetary control-
Budgetary control help the organisation to increase the profitability of the organisation
and to reduce the cost that is arise for the production. Several advantages which are associated
with budgetary control for Unicorn grocery are as follows:1. It helps the organisation in defining goals and the objective of the organisation. It sets
measure that helps the organisation to achieve the objective and the goal of the
organisation.
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2. Budgetary control fixes the goal for each department so that each department can work
on that to achieve the objective of the organisation.3. It is the method to control the activities of various departments.4. It helps the organisation to establish coordination among the various departments of the
organisation (Herzig and et. al., 2012).5. It promotes cost consciousness and brings efficiency in economy.6. Where the decentralized activities took place, budgetary control help in to establish
centralised control among the various departments.7. It has advance plan which help the employees to work as per the established plans and
procedure.8. Everything is planned so it helps in smooth running of the business.9. It helps the management in taking actions where the problem arises so that adequate
actions can be taken up by the management.
Following are the disadvantages or limitations of the budgetary control-1. Where the inflation took place in the economy then it is very difficult for the organisation
to prepare budgets accurately (Garrison and et. al., 2010).2. Budgetary control took place with the help of various departments so it is very difficult
for the top management to take decision on the need of budget of various departments in
the organisation.3. To prepare budget it is required to expend huge amount so it is very difficult for the small
business to have budget.4. The success of budget depends on the top management, so if it does not have support
then the budgetary control measures failed.
There are several number of budgetary tools are identify which have to implement by an
organisation in their regular operations. As it support them in doing all the things in an
appropriate manner. Several number of budgetary control measures are as follow:
Cash budget: For maintain all expenses which are related with cash, Unicorn grocery
have to prepare cash budget which aid them in maintain all cash related expenditure
properly.
on that to achieve the objective of the organisation.3. It is the method to control the activities of various departments.4. It helps the organisation to establish coordination among the various departments of the
organisation (Herzig and et. al., 2012).5. It promotes cost consciousness and brings efficiency in economy.6. Where the decentralized activities took place, budgetary control help in to establish
centralised control among the various departments.7. It has advance plan which help the employees to work as per the established plans and
procedure.8. Everything is planned so it helps in smooth running of the business.9. It helps the management in taking actions where the problem arises so that adequate
actions can be taken up by the management.
Following are the disadvantages or limitations of the budgetary control-1. Where the inflation took place in the economy then it is very difficult for the organisation
to prepare budgets accurately (Garrison and et. al., 2010).2. Budgetary control took place with the help of various departments so it is very difficult
for the top management to take decision on the need of budget of various departments in
the organisation.3. To prepare budget it is required to expend huge amount so it is very difficult for the small
business to have budget.4. The success of budget depends on the top management, so if it does not have support
then the budgetary control measures failed.
There are several number of budgetary tools are identify which have to implement by an
organisation in their regular operations. As it support them in doing all the things in an
appropriate manner. Several number of budgetary control measures are as follow:
Cash budget: For maintain all expenses which are related with cash, Unicorn grocery
have to prepare cash budget which aid them in maintain all cash related expenditure
properly.
Capital expenditure budget: To invest in long term projects, many organisation use
capital expenditure budget. But in near future course, Unicorn grocery will not going to
start another project thus, management do not require to prepare it.
Thus, management have to adopt either two of the approaches and use them in business
context. This will support in removing deviations from business and respond to financial
problems in an easy manner as well.
Cash budget:
Enable to control the flow of cash which is
present according to operations. Company
incur expenses on regular basis thus, Unicorn
grocery have to apply this tool in business for
making successful project.
Assume everything in advance which increase
chances of risk. This create problem for
Unicorn grocery as the assumptions are not
right all time.
Cutting down all expenses according to time
frame with respect to cost. This enable
managers to cut unnecessary cost of purchase
which increase the product price as well.
Restrict everyone to use the cash in an
appropriate manner. Managers are not become
long able to utilise more cash as management
of Unicorn grocery already allotted them.
Capital expenditure:
Based on long term projects which makes
future context easy and healthy.
Future prediction is not always right and this is
a major limitation for an entity.
Enable a firm to increase more money by
future investment in projects
Long term projects cannot be converted large
projects into cash in an easy manner.
M3. Use of different planning tools
There are several number of budgetary tools are identify which have to implement by an
organisation in their regular operations. As it support them in doing all the things in an
appropriate manner. Several number of budgetary control measures are as follow: Cash budget: It is used by firms in order to maintain record of all cash expenditure made
by them thus there future expenses can be easily managed.
capital expenditure budget. But in near future course, Unicorn grocery will not going to
start another project thus, management do not require to prepare it.
Thus, management have to adopt either two of the approaches and use them in business
context. This will support in removing deviations from business and respond to financial
problems in an easy manner as well.
Cash budget:
Enable to control the flow of cash which is
present according to operations. Company
incur expenses on regular basis thus, Unicorn
grocery have to apply this tool in business for
making successful project.
Assume everything in advance which increase
chances of risk. This create problem for
Unicorn grocery as the assumptions are not
right all time.
Cutting down all expenses according to time
frame with respect to cost. This enable
managers to cut unnecessary cost of purchase
which increase the product price as well.
Restrict everyone to use the cash in an
appropriate manner. Managers are not become
long able to utilise more cash as management
of Unicorn grocery already allotted them.
Capital expenditure:
Based on long term projects which makes
future context easy and healthy.
Future prediction is not always right and this is
a major limitation for an entity.
Enable a firm to increase more money by
future investment in projects
Long term projects cannot be converted large
projects into cash in an easy manner.
M3. Use of different planning tools
There are several number of budgetary tools are identify which have to implement by an
organisation in their regular operations. As it support them in doing all the things in an
appropriate manner. Several number of budgetary control measures are as follow: Cash budget: It is used by firms in order to maintain record of all cash expenditure made
by them thus there future expenses can be easily managed.
Capital expenditure budget: It is always based on those projects which are executed for
long time durations thus firms can make more money by making plans to invest their
money effectively in future time. Cost plus pricing: It is based on high risk factors thus they are not able to spend their
money in any business activities.
Market led pricing: The assumptions which are based on future aspects are not always
correct because the projects which are running for long time are not able to easily
generate cash.
Thus, management have to adopt either two of the approaches and use them in business
context. This will support in removing deviations from business and respond to financial
problems in an easy manner as well.
P5. Adoption of management accounting system to respond to the financial problem by the
Unicorn Grocery
Management accounting help the organisation to overcome the problems of finance
because management accounting covers the preparation of the budget of every department of the
organisation which overall help the organisation to achieve the goal and the objective of the
organisation (Burritt and et. al., 2011). Management accounting tools can be adopted to remove
the financial barrier and to establish healthy mechanism of finance in the organisation.
Following are the principle of management accounting that can be adopted to respond to the
financial problem as-
1. Influences-
Management accounting begins and ends with the conversion and the decision making
can be improved by the conversation. Healthy communication provides the solution to the
problem that was of financial problem. Management accounting influences the various factors
with help in to overcome the financial problems that are faced by the organisation. With the
discussion of needs of decision maker, the important information can be gathered. The
recommendations can be used to the decision making and achieve influences.
2. Relevance-
Management accounting gives the best information that is relevant for the decision
making. By understanding the needs and wants of the shareholder, the beat available information
can be gathered from them to identify, collect and prepared for analysis (Bodie, 2013).
long time durations thus firms can make more money by making plans to invest their
money effectively in future time. Cost plus pricing: It is based on high risk factors thus they are not able to spend their
money in any business activities.
Market led pricing: The assumptions which are based on future aspects are not always
correct because the projects which are running for long time are not able to easily
generate cash.
Thus, management have to adopt either two of the approaches and use them in business
context. This will support in removing deviations from business and respond to financial
problems in an easy manner as well.
P5. Adoption of management accounting system to respond to the financial problem by the
Unicorn Grocery
Management accounting help the organisation to overcome the problems of finance
because management accounting covers the preparation of the budget of every department of the
organisation which overall help the organisation to achieve the goal and the objective of the
organisation (Burritt and et. al., 2011). Management accounting tools can be adopted to remove
the financial barrier and to establish healthy mechanism of finance in the organisation.
Following are the principle of management accounting that can be adopted to respond to the
financial problem as-
1. Influences-
Management accounting begins and ends with the conversion and the decision making
can be improved by the conversation. Healthy communication provides the solution to the
problem that was of financial problem. Management accounting influences the various factors
with help in to overcome the financial problems that are faced by the organisation. With the
discussion of needs of decision maker, the important information can be gathered. The
recommendations can be used to the decision making and achieve influences.
2. Relevance-
Management accounting gives the best information that is relevant for the decision
making. By understanding the needs and wants of the shareholder, the beat available information
can be gathered from them to identify, collect and prepared for analysis (Bodie, 2013).
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It helps the organisation in achieving balance between-
Information of past, present and future.
Internal and external information.
Financial and non-financial information
Consideration of social and environmental issues.
3. Value-
The impact on the value is analysed. Management accounting needs to understand the
macroeconomic environment. It helps the organisations to connect its strategy with business
model. It required analysing the information with the value generation path, opportunities, risk
and the cost and valuing generated potential of opportunities (Lukka and Modell, 2010).
4. Trust-
Financial problems are the major thing which affect business and its working
professionals as well. Management have to use adequate steps which enable them to deal with
such issues in a relevant context. Finance is termed as backbone of every organisation and
managers have to use whole money in an appropriate manner.
Unicorn grocery is suffering from lack of finance due to delivering less quality products
to their ultimate users. Thus, authority have to determine the various management accounting
system which support them in removing this from business.
Key performance indicator: There are several factors or elements present in a business
which enable them in performing operations properly. These are define as KPI of
business which support in doing things in a corrective manner. Unicorn Grocery have to
analyse all these aspects, and then maintain their performance according to that.
Budget targeting: Targets and objectives have to frame according to budget so that
target ascertainment become easy and appropriate. Budget targeting facilitate the growth
and maintain performance of a business in an appropriate manner.
The major reason behind this inability of business is raising less profit and poor quality
products. Along with this, demand and requirement are also not getting fulfil according to time
frame.
Profit level: Company is generating less and less profit which creates this situation into
a firm. As they have to identify a major reason behind this perspective otherwise they are
going to incur heavy loss in their image as well as shares price as well.
Information of past, present and future.
Internal and external information.
Financial and non-financial information
Consideration of social and environmental issues.
3. Value-
The impact on the value is analysed. Management accounting needs to understand the
macroeconomic environment. It helps the organisations to connect its strategy with business
model. It required analysing the information with the value generation path, opportunities, risk
and the cost and valuing generated potential of opportunities (Lukka and Modell, 2010).
4. Trust-
Financial problems are the major thing which affect business and its working
professionals as well. Management have to use adequate steps which enable them to deal with
such issues in a relevant context. Finance is termed as backbone of every organisation and
managers have to use whole money in an appropriate manner.
Unicorn grocery is suffering from lack of finance due to delivering less quality products
to their ultimate users. Thus, authority have to determine the various management accounting
system which support them in removing this from business.
Key performance indicator: There are several factors or elements present in a business
which enable them in performing operations properly. These are define as KPI of
business which support in doing things in a corrective manner. Unicorn Grocery have to
analyse all these aspects, and then maintain their performance according to that.
Budget targeting: Targets and objectives have to frame according to budget so that
target ascertainment become easy and appropriate. Budget targeting facilitate the growth
and maintain performance of a business in an appropriate manner.
The major reason behind this inability of business is raising less profit and poor quality
products. Along with this, demand and requirement are also not getting fulfil according to time
frame.
Profit level: Company is generating less and less profit which creates this situation into
a firm. As they have to identify a major reason behind this perspective otherwise they are
going to incur heavy loss in their image as well as shares price as well.
Product or service quality: Unicorn grocery managers analyse that the major reason
behind this situation is poor quality products and services. Management have to start
selling better and effective quality based goods to their customer through which this
situation will get decline.
Company can use variety of techniques in their management which is helpful for them in
maximise their profitability and productivity. Unicorn grocery is suffering from financial issue
which is not appropriate for long term purpose of business. The major reason behind this
consent, is delivering of poor quality products and its manufacturing. Hence, company have to
analyse key performance indicator in an organisation and formulate appropriate budget plan
which is helpful in keeping the productivity on track. This will aid them in render good quality
products and services at appropriate price level with incurring more and more profit margin.
CONCLUSION
It can be concluded from above report that management accounting is an important factor
which has to be utilised by an organisation to reduce uncertainty from business. This includes
various number of accounting systems which enable in making all the projects successful by
removing deviations from business. On the basis of managerial accounting reporting, an
organisation become able to maintain flow of inventory, budget and account receivable properly.
Moreover, on the basis of income statement, profit and loss gets ascertained as well. Various
planning tools have to be used at the time for preparing budgetary control process. Thus, it is
beneficial for analysing and monitoring all expenditure in a proper manner. It has been assessed
that for controlling every financial problem, management has to adopt beneficial steps which
support them in long term.
behind this situation is poor quality products and services. Management have to start
selling better and effective quality based goods to their customer through which this
situation will get decline.
Company can use variety of techniques in their management which is helpful for them in
maximise their profitability and productivity. Unicorn grocery is suffering from financial issue
which is not appropriate for long term purpose of business. The major reason behind this
consent, is delivering of poor quality products and its manufacturing. Hence, company have to
analyse key performance indicator in an organisation and formulate appropriate budget plan
which is helpful in keeping the productivity on track. This will aid them in render good quality
products and services at appropriate price level with incurring more and more profit margin.
CONCLUSION
It can be concluded from above report that management accounting is an important factor
which has to be utilised by an organisation to reduce uncertainty from business. This includes
various number of accounting systems which enable in making all the projects successful by
removing deviations from business. On the basis of managerial accounting reporting, an
organisation become able to maintain flow of inventory, budget and account receivable properly.
Moreover, on the basis of income statement, profit and loss gets ascertained as well. Various
planning tools have to be used at the time for preparing budgetary control process. Thus, it is
beneficial for analysing and monitoring all expenditure in a proper manner. It has been assessed
that for controlling every financial problem, management has to adopt beneficial steps which
support them in long term.
REFERENCES
Books and Journals
Baldvinsdottir, G., Mitchell, F. and Nørreklit, H., 2010. Issues in the relationship between theory
and practice in management accounting. Management Accounting Research. 21(2).
pp.79-82.
Bodie, Z., 2013. Investments. McGraw-Hill.
Brandau, M. and et. al., 2013. Institutional drivers of conformity–Evidence for management
accounting from Brazil and Germany. International Business Review. 22(2). pp.466-479.
Burritt, R. L. and et. al., 2011. Environmental management accounting and supply chain
management (Vol. 27). Springer Science & Business Media.
Chiwamit, P., Modell, S and Yang, C. L., 2014. The societal relevance of management
accounting innovations: economic value added and institutional work in the fields of
Chinese and Thai state-owned enterprises. Accounting and Business Research. 44(2).
pp.144-180.
France, A., 2010. Management accounting practices reflected in job advertisements. Journal of
new business ideas & trends. 8(2). pp.41-57.
Garrison, R. H. and et. al., 2010. Managerial accounting. Issues in Accounting Education. 25(4).
pp.792-793.
Gond, J. P. and et. al., 2012. Configuring management control systems: Theorizing the
integration of strategy and sustainability. Management Accounting Research. 23(3).
pp.205-223.
Herzig, C. and et. al., 2012. Environmental management accounting: case studies of South-East
Asian Companies. Routledge.
Jalaludin, D., Sulaiman, M. and Nazli Nik Ahmad, N., 2011. Understanding environmental
management accounting (EMA) adoption: a new institutional sociology perspective.
Social Responsibility Journal. 7(4). pp.540-557.
Li, X. and et. al., 2012. A comparative analysis of management accounting systems’ impact on
lean implementation. International Journal of Technology Management. 57(1/2/3).
pp.33-48.
Libby, T. and Lindsay, R.M., 2010. Beyond budgeting or budgeting reconsidered? A survey of
North-American budgeting practice. Management Accounting Research. 21(1). pp.56-75.
Lukka, K. and Modell, S., 2010. Validation in interpretive management accounting research.
Accounting, Organizations and Society. 35(4). pp.462-477.
Books and Journals
Baldvinsdottir, G., Mitchell, F. and Nørreklit, H., 2010. Issues in the relationship between theory
and practice in management accounting. Management Accounting Research. 21(2).
pp.79-82.
Bodie, Z., 2013. Investments. McGraw-Hill.
Brandau, M. and et. al., 2013. Institutional drivers of conformity–Evidence for management
accounting from Brazil and Germany. International Business Review. 22(2). pp.466-479.
Burritt, R. L. and et. al., 2011. Environmental management accounting and supply chain
management (Vol. 27). Springer Science & Business Media.
Chiwamit, P., Modell, S and Yang, C. L., 2014. The societal relevance of management
accounting innovations: economic value added and institutional work in the fields of
Chinese and Thai state-owned enterprises. Accounting and Business Research. 44(2).
pp.144-180.
France, A., 2010. Management accounting practices reflected in job advertisements. Journal of
new business ideas & trends. 8(2). pp.41-57.
Garrison, R. H. and et. al., 2010. Managerial accounting. Issues in Accounting Education. 25(4).
pp.792-793.
Gond, J. P. and et. al., 2012. Configuring management control systems: Theorizing the
integration of strategy and sustainability. Management Accounting Research. 23(3).
pp.205-223.
Herzig, C. and et. al., 2012. Environmental management accounting: case studies of South-East
Asian Companies. Routledge.
Jalaludin, D., Sulaiman, M. and Nazli Nik Ahmad, N., 2011. Understanding environmental
management accounting (EMA) adoption: a new institutional sociology perspective.
Social Responsibility Journal. 7(4). pp.540-557.
Li, X. and et. al., 2012. A comparative analysis of management accounting systems’ impact on
lean implementation. International Journal of Technology Management. 57(1/2/3).
pp.33-48.
Libby, T. and Lindsay, R.M., 2010. Beyond budgeting or budgeting reconsidered? A survey of
North-American budgeting practice. Management Accounting Research. 21(1). pp.56-75.
Lukka, K. and Modell, S., 2010. Validation in interpretive management accounting research.
Accounting, Organizations and Society. 35(4). pp.462-477.
Secure Best Marks with AI Grader
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Lukka, K. and Vinnari, E., 2014. Domain theory and method theory in management accounting
research. Accounting. Auditing & Accountability Journal. 27(8). pp.1308-1338.
Macintosh, N. B. and Quattrone, P., 2010. Management accounting and control systems: An
organizational and sociological approach. John Wiley & Sons.
Mat, T. Z. T., Smith, M. and Djajadikerta, H., 2010. Management accounting and organisational
change: an exploratory study in Malaysian manufacturing firms. Journal of Applied
Management Accounting Research. 8(2). p.51.
Otley, D. and Emmanuel, K. M. C., 2013. Readings in accounting for management control.
Springer.
Quagli, A., 2011. Goodwill accounting as a missing link between financial and management
accounting: literature review and research agenda. Financial reporting.
Sharma, U., Lawrence, S. and Lowe, A., 2010. Institutional contradiction and management
control innovation: A field study of total quality management practices in a privatized
telecommunication company. Management Accounting Research. 21(4). pp.251-264.
Online
Budgetary control | Meaning | Objectives | Advantages | Disadvantages. 2017. [Online].
Available through: <http://accountlearning.com/budgetary-control-objectives-
advantages-disadvantages/>. [Accessed on 21st April 2017]
research. Accounting. Auditing & Accountability Journal. 27(8). pp.1308-1338.
Macintosh, N. B. and Quattrone, P., 2010. Management accounting and control systems: An
organizational and sociological approach. John Wiley & Sons.
Mat, T. Z. T., Smith, M. and Djajadikerta, H., 2010. Management accounting and organisational
change: an exploratory study in Malaysian manufacturing firms. Journal of Applied
Management Accounting Research. 8(2). p.51.
Otley, D. and Emmanuel, K. M. C., 2013. Readings in accounting for management control.
Springer.
Quagli, A., 2011. Goodwill accounting as a missing link between financial and management
accounting: literature review and research agenda. Financial reporting.
Sharma, U., Lawrence, S. and Lowe, A., 2010. Institutional contradiction and management
control innovation: A field study of total quality management practices in a privatized
telecommunication company. Management Accounting Research. 21(4). pp.251-264.
Online
Budgetary control | Meaning | Objectives | Advantages | Disadvantages. 2017. [Online].
Available through: <http://accountlearning.com/budgetary-control-objectives-
advantages-disadvantages/>. [Accessed on 21st April 2017]
1 out of 17
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