Management Accounting: Techniques and Tools for Financial Planning and Problem Solving

This report explores the techniques and tools of management accounting for financial planning and problem solving. It covers topics like marginal and absorption costing, budgetary control, and the use of planning tools. It also discusses how management accounting methods can help organizations respond to financial problems and achieve sustainable success.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
TASK 1............................................................................................................................................1
Covered In PPT............................................................................................................................1
TASK 2............................................................................................................................................1
P3. Calculation of costs and preparation of financial statements under marginal and absorption
costing method.............................................................................................................................1
TASK 3............................................................................................................................................4
P4. Limitations and benefits of planning tools of budgetary control..........................................4
M3. Use of different planning tools and their application for preparing and forecasting
budgets.........................................................................................................................................5
TASK 4............................................................................................................................................5
P5. Analysis of ways in which management accounting methods help organisation to respond
to financial problems that will have sustainable success.............................................................5
M4. MAS to solve financial issue................................................................................................7
D3. Importance of financial plans for planning and managing monetary sources which can
contribute in overcoming problems regards to finance...............................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Management accounting is undertaken as the way of developing internal report through
assistance of monetary as well as non monetary data. Moreover, there is board range of
techniques like marginal, absorption for formulating financial statement (Abdusalomova, 2020).
For this report, the chosen firm is Prime furniture Ltd. which is a leading East London based
firm. The topics which are going to be discussed in this report are computation of financial
statement and various planning tools utilised for budgetary control along with their advantage
and disadvantage. Moreover, various MAS are also discussed in this report.
MAIN BODY
TASK 1
Covered In PPT.
TASK 2
P3. Calculation of costs and preparation of financial statements under marginal and absorption
costing method.
Micro economic techniques:
Cost: It is considered as whole amount of expenditures which incurs for accomplishing
various forms of practices as well as operations. Moreover, there are several cost kinds like
fixed, direct and other costs (Berg and Madsen, 2020).
.
Cost variance: It is described as the procedures of computing the differences among
anticipated as well as actual cost. Moreover, this represented optimistic as well as pessimistic
aspects.
There are essential approaches like marginal as well as absorption methods into areas of
financial reports planning (Bhimani, 2020). Additionally, it is utilised for preparing financial
statements for firm. Therefore these costing techniques are discussed below:
 Absorption costing: It is considered as kinds of costing technique which describes as well
as broadly allocated the expenditures of several practices. Moreover, the expenditure of
those items is undertaken as non- fixed and fixed costs.
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 Marginal costing method: This may be acknowledged as the way of determining
expenditures incorporated with several practices. Moreover, the fixed costs are regarded
time cost as well as unit cost are undertaken variable cost.
Quarter 1
Particulars Amount (in ￡)
Sales 66000
Less: Cost of sales
Opening inventory 0
… ….production cost (78000*0.65) 50700
Less: Closing stock (12000*0.65) 7800
42900 42900
Contribution 23100
Less:
… ….Fixed overhead 16000
…. ….Fixed & selling expenses 5200
21200
Net profit 1900
Quarter- 2
Particulars Amount (in ￡)
…. ….Sales 74000
Less: Cost of sales
Opening inventory (12000*0.65) 7800
….. ….production cost (66000*0.65) 42900
Less: Closing stock (4000*0.65) 2600
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48100
Contribution 25900
Less:
…. ….Fixed overhead 16000
…. ….Fixed & selling expenses 5200
21200
Net profit 4700
… ...Reconciliation
… ...Working note Q1 Q2
… ...Variable costing profit 1900 4700
… ...Opening inventory 0 7800
… ...Closing stock 7800 2600
Absorption costing profit 4300 3100
… …Opening inventory 0 10200
…. …Closing stock 10200 3400
M2. Accounting techniques to produce financial statements.
Various income statements are formed based upon marginal as well as absorption costing
system within financial accounting area (Căpușneanu and et. al., 2020). As into Prime furniture
Ltd., the profitability statements are developed utilising incremental and absorption costing
strategies. In addition to this, several methods beside these techniques, incorporates forming
financial statement like as standard costing system, activity based costing and others. Therefore,
in respect of standard costing, it may be observed to be associated with anticipation of future cost
utilised for comparison. Additionally, costing based upon the practices is distributed as well as
determined through enhancing behaviours for several kinds of practices.
D2. Interpretation of prepared financial statements.
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In context of above income statements, it may be determined that net profit value is of 1900
pounds within absorption costing (Endenich and Trapp, 2020). Additionally, within marginal
costing, net profitability of 4700 pounds. In addition to this, the reason behind variation into
profit is undertaking cost within various ways within both methods.
TASK 3
P4. Limitations and benefits of planning tools of budgetary control.
Budgetary control is considered as forms of approach as well as tries to regulate financial as
well as anti- monetary outcomes through aids of several forms of budgets. Within respective
kinds of budgets is vital as through assistance of this financial tactics firm’s management
undertakes effective actions for gaining profitable results (Fleischman and McLean, 2020). So,
various budgetary planning tools that can be utilised by Primer furniture ltd. are discussed below:
Operational budget: This is undertakes as the kinds of budgets with assistance of tit
management may anticipates material quantity essential for accomplishment of several
operations for specific time duration. Moreover, with aids of respective budgetary control
planning tools the management of Primer furniture ltd. may undertakes effective measures
related its several operations.
 Advantage: Respective budget is helpful for firm for tracking uses of various kinds of
resources available into business.
 Disadvantage: They main drawback of respective budget is that this is time consuming
and cost for allocation of expenditures.
Capital budget: Any section or low budget facilitates accomplish budget of firm. Moreover,
this determines that recording the potential sales, levels of production, expenses into resources
and others to be obtained as well as repayable is an expensive business strategy (Knauer,
Nikiforow and Wagener, 2020). In context of Primer furniture ltd., the income statement and
balance sheet is identified based upon the schedule.
 Advantage: With explained budgeted summary of respective firm monetary
circumstances is determined.
 Disadvantage: The key problem of respective budget is that this is tough for doing
changes within it.
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M3. Use of different planning tools and their application for preparing and forecasting budgets.
There are several forms of budget that are utilised through firms for effective financial
decision taking. Moreover, its reports incorporate various budgets like cash, capital and operative
budget in respect of Prime furniture. In addition to this, whole this anticipates may be utilised
into appropriate management of its funds assets as well as for relevant planning of several
practices. In accurate income as well as expenditures computation, whole these expenses plays
vital role (Le and et. al., 2020). Also, it is likely as management of respective firm identifies
explained calculations into last years for predicting new practices. Along with this, they may
therefore been consider that budgetary management forecasting tools are much essential to be
reliable project of several forms of monetary practices. Such as operating finances allows to the
above employer with a view to smooth undertaking monetary and non-economic sports. as well
as capital price range contributes to deciding on the monetary venture by using making the right
assessment. This is likely because the management of the subsequent agency compares data
from preceding years for forecasting future operations. Accordingly may be said that planning
equipment of budgetary management is critical for making correct forecasting which results in
company fulfilment.
TASK 4
P5. Analysis of ways in which management accounting methods help organisation to respond to
financial problems that will have sustainable success.
Financial problems: The competitors into today’s business scenarios are enhancing that
drives towards financial issues. Moreover, the ineffective development as well as formation of
policy formed such problems (Mahmoudian and et. al., 2021). Generally, monetary problems
emerge from shortage of income outlets, by that business face to perform various practices. In
this, there are few particular monetary challenges which most of the firm goes through into this
manner:
 Ineffective monetary assets protection: The threat of loosing investment is form of
investment problems. Also, the dilemma exists due to loss of fixed s well as unfixed
assets management. As an outcome, business experiences other issues incorporating
absence of resource and others.
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 Errors into accounting records: It may be explained as kinds of monetary issues related
with deliberate distortion of figures that contributes towards inappropriate accounts
preparation (Ostaev and et. al., 2020). As consequences, business may not determined
exact revenues, acquisitions and others owing to respective monetary problems. In
respect of Prime furniture, it faces particular issues which impacts financial statements
that it developed.
Various management accounting methods for responding towards financial issues
 Key performance indicators: This is considered as the methodology related to appropriate
assessment of financial as well as non-financial aspects (Pedroso and Gomes, 2020).
Moreover, the monetary dimension undertakes productivity of firm, the cost and others.
While the staff stress level, relationship and many more is involved within non monetary
aspects.
 Benchmarking: Respective method associates to monetary prospects of firm to compete
business with intent of objectives determining the adverse variances. Moreover, as a
issues, business may determine factors that drives towards monetary issues. In addition to
this, it utilise respective method in Prime furniture for evaluating its specific financial
issues. The monetary aspects is compared with various others entities.
Comparison among firms for solving monetary problems through assistance of
management accounting systems.
Basis of
difference
Primer furniture ltd. Talsma Furniture
Monetary issue A financial problem is associated with
accounting errors into respective firm.
Also, this prohibits them from
understanding exact descriptions.
The financial issues that this firm
faces in absence of assets protection.
Also, as an outcomes properties
valuation may not be observed as well
as evaluated.
Techniques to
solve issues
Respective entity utilised
benchmarking for solving monetary
issues. Additionally, it contrasted its
financial statements with assistance of
It also utilised key performance
indicator for outcomes. Moreover, it
determined monetary implications of
respective methods as well as
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particular methods for identifying
mistakes as well as therefore solved its
issues.
addressed its problems. This was
developed possible through
determining true value of properties
as well as through matching them
with nominal value.
M4. MAS to solve financial issue.
The only manner for resolving financial issues is into lesser time which is to enforce
management accounting system. Such as in respect of prime furniture, its issues was solved
effectively through means of price optimisation system. As the income was insufficient with
introducing above described costing method it checked its pricing policy as well s monetary
dilemma of respective business was resolved. Therefore, Respective entity utilised benchmarking
for solving monetary issues. Additionally, it contrasted its financial statements with assistance of
particular methods for identifying mistakes as well as therefore solved its issues.
D3. Importance of financial plans for planning and managing monetary sources which can
contribute in overcoming problems regards to finance.
The budgets may be explained as monetary plans which are associated with appropriate
monetary appraisal procedures (Taschner and Charifzadeh, 2020). Additionally, various forms of
budgets like operation and others in context of Prime furniture. Furthermore, whole these
resources are vital for them while determining variances which aids in solving issues. Also,
every planning device is linked to every branch’s overall performance. such as working price
range helps in fixing issues regards to operational activities. in addition to capital, finances
enable fixing troubles related to monetary factors. they all want these budgets to monitor the
variances and permit them to take the proactive movement to repair problems. This suggests that
planning tools contribute massively to reap success.
CONCLUSION
Based upon the above report, it has been concluded that management accounting is helpful
for business for managing several prospects. Moreover, there are various techniques of
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developing income statements like marginal and absorption costing. In addition to this, several
planning tools are applied for resolving the various monetary problems.
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REFERENCES
Books and Journal
Abdusalomova, N., 2020. Principles of ties of internal control and management accounting
systems at the enterprises of black metallurgy. Архив научных исследований, (2).
Berg, T. and Madsen, D.Ø., 2020. The historical evolution and popularity of activity-based
thinking in management accounting. Journal of Accounting & Organizational Change.
Bhimani, A., 2020. Digital data and management accounting: why we need to rethink research
methods. Journal of Management Control, pp.1-15.
Căpușneanu, S. and et. al., 2020. Management accounting in the digital economy: evolution and
perspectives. In Improving business performance through innovation in the digital
economy (pp. 156-176). IGI Global.
Endenich, C. and Trapp, R., 2020. Ethical implications of management accounting and control:
A systematic review of the contributions from the Journal of Business Ethics. Journal of
Business Ethics, 163(2), pp.309-328.
Fleischman, R. and McLean, T., 2020. Management accounting: theory and practice. Routledge.
Knauer, T., Nikiforow, N. and Wagener, S., 2020. Determinants of information system quality
and data quality in management accounting. Journal of Management Control, pp.1-25.
Le, T. and et. al., 2020. Factors affecting the application of management accounting in
Vietnamese enterprises. Uncertain Supply Chain Management, 8(2), pp.403-422.
Mahmoudian, F., and et. al., 2021. Inter-and intra-organizational stakeholder arrangements in
carbon management accounting. The British Accounting Review, 53(1), p.100933.
Ostaev, G.Y., and et. al., 2020. Assessment of the effectiveness of the management of
agricultural organizations in management accounting. Amazonia Investiga, 9(28), pp.260-
271.
Pedroso, E. and Gomes, C.F., 2020. The effectiveness of management accounting systems in
SMEs: a multidimensional measurement approach. Journal of Applied Accounting
Research.
Taschner, A. and Charifzadeh, M., 2020. Management accounting in supply chains–what we
know and what we teach. Journal of Accounting & Organizational Change.
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