Management Accounting and Budget Analysis

This assignment delves into the crucial role of management accounting within budgeting processes. Students are tasked with examining diverse budgeting methods, financial planning strategies, and their influence on organizational decision-making. The analysis should encompass various aspects such as forecasting, cost allocation, and performance evaluation, highlighting the significance of accurate and timely information for effective financial management.

Management
Accounting
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Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1) Management accounting and its requirements for different types........................................3
P2) Various methods used for management accounting reporting..............................................5
TASK 2............................................................................................................................................7
P3) Costing methods and comparison between marginal and absorption costing.......................7
TASK 3..........................................................................................................................................11
P4) Merits and drawbacks of budgetary control system ...........................................................11
P5) Management accounting systems to solve out financial problems.....................................13
CONCLUSION..............................................................................................................................15
REFERENCE.................................................................................................................................16
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INTRODUCTION
Management accounting is multidisciplinary approach for effective business operations
and increasing efficiency of organization. It includes costing, budgeting, financial statements and
overall management. The present report is based on understanding different management
accounting tools for expansion of entity and improving service qualities of Nisa. It is small scale
retail sector organization of UK that provides groceries and food products. In this regard, various
tools and systems of management accounting can be described through this assignment. In
addition to this, forecasting and decision making for further business operations and its
implementation. Moreover, several costing methods and preparation of income statement is to
expressed. Along with this, advantages and limitations of budgetary control system can be
explained. Thus, through this study, learners are able to learn several management accounting
systems for sustaining entity position in market for long term sustainability.
TASK 1
P1) Management accounting and its requirements for different types
Management accounting is one of great tool to manage business operations and
expansion of small business unit enhancing its quality services. It includes different systems for
price determination and decision making related to strategic and risk management. Including
this, it is key component to build up relationship between employee and employer of the firm
(Beatty and Liao, 2014). Therefore, effectiveness of organization can be gained at high level. In
this regard, management accounting is composition of financial, inventory, production and
performance management. It influences efficiency and market value of organization to make
place for long term sustainability. However, management accountant of small scale enterprise
recognizes business performance through different tools such as financial statements, costing,
performance of employees and entity etc. It focuses on various aspects for critical evaluation of
business operations and expansion of small business unit through proper planning procedure and
decision making regarding to implementing strategies for enlargement of firm and sustaining its
market position for long time periodicity. Apart from this, it is multidisciplinary unit that is
useful for forecasting and decision making by several components for example; costing and
budgeting. These are useful for optimum allocation of resources and fund therefore, all business
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operations can be managed effectively. However, increasing in quality services of goods and
services provided by enterprise can be managed efficiently (Blaikie and et.al., 2014). In
accordance to this, various tools and techniques are applied for enlargement of entity and
improving quality services at large scale. In accordance tot his, systematic management and
balance between production and distribution of products can be created. In this way, it is useful
for reporting and forecasting for further years operations effectively. Hence, several kinds of
ideas are generated through this system to manage entire business operations by decision making
process. Under this process, different management accounting systems can be described as
below:- Job order costing:- In this method, expenses incurred for manufacturing products are
measured. However, several ideas are generated for price determination and effective
allocation of resources in systematic manner. Including this, job order costing including
manufacturing, labor and overhead cost are evaluated that is useful for further
expenditures for example; production and proper price determination (Bogsnes, 2016). In
this process, an adequate idea is created that is helpful for balance of expenses and
income. Thus, through job order costing, strategy is prepared related to pricing and
preparing income statement for expenditure and income balance. Processing costing:- Under this system, management accountant of Nisa Ltd determines
price of goods according to segregated work divisions. Therefore, pricing is determined
in different segmentation such as production, labor and expenditure incurred on addition
spending. Thus, pricing in processing includes stages of production and further expenses
charged in several stages are reported. Hence, processing costing is interrelated with
several planning systems for further expansion and increasing effectiveness of
organization for required essentials. It is decision making tool for price determination and
maintaining product value for long term sustainability (Chenhall and Moers, 2015).
 Throughput costing:- Management accountant of organization uses this costing for cost
control system. Through this system, cost effectiveness is gained in efficient manner that
affects price determination and several aspects related to presenting business performance
including productivity and profitability of firm. In this regard, different ideas are
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generated related to business performance for advertising and expenses related to
business operations and increasing profit earning capacity of entity at high level.
Management accounting systems are related to expansion of business entity and increasing
efficiencies of firm related to productivity and profitability of entity efficiently (Costanza and
et.al., 2016).
P2) Various methods used for management accounting reporting
Management accountant of small scale enterprise prepares report and maintain record for
generating ideas related to decision making for proper management of business operations. In
accordance to this, forecasting for business operations is implemented to create idea for business
activities (Draper and Smith, 2014). Moreover, several methods are used for systematic
management and increasing efficiency of firm at high level can be expressed as below:- Cost allocation:- Management accounting is key component for effective cost allocation.
In this regard, a systematic idea is generated for using costing methods. There are
different costing methods applied in management accounting process tool that leads to
prepare income statement. It presents financial position of Nisa as per which several ideas
are created for further expenditures. In addition to this, through this planning procedure,
cost allocation is recognized that is appropriate for price determination. Including this,
balance of expenses incurred and gained revenue is obtained through this tool. It affects
other segmented business operations for instance; production of goods and sustaining
customer interest towards market value of entity (Ferry and Eckersley, 2015). Therefore,
it is presented that cost allocation as management accounting system is helpful for setting
price of products and attracting customers through adequate pricing system. Hence, by
using this tool, effective financial performance of business organization can be gained
that impacts on productivity and profitability of firm. Business segmenting report:- Under this system, reports are prepared related to
segmentation of organizational functions (Grob, 2013). It is interrelated with
management of overall business operations and increasing quality services of groceries to
pull customers. In accordance tot this, business segmentation process includes launching
and promoting products in market, preparing financial statements, cost structure and
applying different techniques for planning procedure to implement action plans.
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However, reporting is proceed to present actual business performance and expansion of
small scale enterprise and enhancing efficiency of firm at large scale. Along with this,
different business activities are presented for enlargement of entity and a systematic
schedule and preparing strategy for further business operations. In this regard, business
segmenting reports are prepared for effective expenditures and increasing profit earning
capacity that affects effectiveness of small size entity related to sustainability in market
and puling customers at large scale. However, business segmenting report is prepared and
maintained to present business performance and its several activities (Kihn and Ihantola,
2015). Cost control system:- For gaining cost effectiveness, management accountant of entity
creates plan to manage overall systems of costing. In this process, control over excess of
expenses and wastage of resources can be reduced. Therefore, cost control system is
beneficial to get effectiveness. In addition to this, different ideas are generated for price
determination and increasing profit earning capacity of organization. Moreover, best use
of all economic tools and proper income statement is prepared for creating balance
between expenses and revenue of small scale enterprise. Including this, different control
systems are applied for pricing and effective profitability of Nisa (LaBarge and Stinson,
2014). Therefore, systematic financial management and fund allocation can be
determined through this management accounting method. It influences varieties of tools
and techniques for controlling and evaluation over entire business operations. In
accordance to this system, handling over planning procedures in decided schedules is
obtained. Thus, cost control system is valuable to create balance of payment and creating
various ideas for cost effectiveness in systematic manner.
 Business plan and budgeting:- By analyzing all business operations critically, it is
essential for management accountant to prepare business plan and budget for expansion
of small business unit and sustaining its value in market for long time period. Therefore,
budgeting is considered as forecasting and decision making tool for operating further
business activities. In addition to this, through budgeting and controlling components,
varieties of substances are prepared to balance of production and distribution of goods,
performance management and strategies for implementation at large scale (Lowe and
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Tinker, 2015). Thus, budgeting is process tool for predictions and preparing planning
procedure related to effectiveness of Nisa. However, under this system, planning is
prepared as per customer and organization's requirements. Further, activities are
generated to meet their expectations. Therefore, it is considered as best component for
decision making related to systematic management of entire business operations and its
enlargement that affects market position and sustainability level to make place in cut
throat competitive market. Moreover, budgeting and budgetary control system are best
appropriate tools for optimum utilization of resources and fund for operating small scale
enterprise with proper planning procedure. Hence, management accountant of the
organization uses this element that considered as best appropriate for enlargement of
small business unit and increasing efficiency at high level. In this process, several kinds
of ideas are cratered for decision making process and processing to implementation
through effective environment of organization (Mistry, Sharma and Low, 2014). Thus,
budgeting is management accounting tool that is useful for further business operations
and enhancing its quality services at large scale to sustain company's market position for
long time periodicity.
Hence, above mentioned all management accounting systems and methods are useful for
effectiveness of small business entity and formulating strategies related to efficiency and
planning procedure for enhancement. Therefore, it has been presented that management
accounting tools are best appropriate for overall management of entire business operations.
Including this, forecasting and decision making is processes to meet customer expectations
therefore long term sustainability of organization can be gained. Therefore, increasing in
efficiency of entity is able to gained effectively. In this regard, management accounting systems
are interrelated with all business operations related to enlargement of small business unit
efficiently (Montgomery, Peck and Vining, 2015).
TASK 2
P3) Costing methods and comparison between marginal and absorption costing
Costing is considered as price determination tool as per customer requirements. In this
process, management accountant of organization sets pricing for manufacturing, production and
advertising of products. Therefore, ideas are created for balancing between production and
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distribution of goods effectively. In this regard, costing leads to prepare income statement that
presents financial position of company (Noordin, 2016). In accordance to this, price
determination is done on the basis of market demand, competition and different factors. Some of
the costing methods can be described as below:-
Marginal costing:- For calculating net profit margin through this process, gross profit is
deducted from variable expenses. It is simple method to determine costing and presenting
income statement. In this regard, several ideas are generated for effective price determination.
However, marginal costing is useful for short term planning procedure (Richards and Rodgers,
2014). It is interlinked with decision-making process for short time period strategies. It affects
environment of organization effectively to present monetary position and implementation of
business strategies. Thus, marginal costing is valuable for price determination and increasing
profitability of firm efficiently.
Interpretation:- It is simple method to determine net profit margin therefore different
ideas are generated to increase profitability in systematic manner. However, through this
interpretation, it is evaluated that company has incurred 6600 as expenditure and further on this
expense, gained revenue is 21000. Therefore, gross profit margin is determined as 14400.
Furthermore, net profit margin is calculated by deducting gross profit to variable expenses as
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1800. In this regard, it is determined that through marginal costing, organization earned 12600 as
net profit. On the basis of this data interpretation, it can be foretasted that small business unit can
expand its business by using different strategies at high level. Including this, as per evaluation,
organization can increase its profitability to make position in market for long term sustainability.
Therefore, by recognizing this income statement, expenditure and gained revenue are balanced.
It affects productivity and profitability of firm to gain customer satisfaction at maximum level.
Absorption costing:- In comparison to marginal costing, absorption is useful for long
term decision-making process. Under this process, for evaluating net profit margin, gross profit
is deducted from total overhead including fixed and variable. Therefore, innovative ideas and
long term efficiency of Nisa can be determined through this process. In addition to this, different
variables are defined for preparing planning procedure related to getting adjusted towards
changes occur at workplace (Ryu, 2015). It is one of the most usable tool for forecasting and
decision-making that impacts on price determination and preparing strategies for further
implementation. Including this, absorption costing is beneficial for preparing strategies related to
competitive advantages and using innovative ideas for further business operations. Moreover,
absorption costing is able to take decisions regarding long term sustainability of small scale
enterprise. Including this, various tools and techniques can be obtained for expansion of entity
and increasing efficiency to face competition efficiently.
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Interpretation:- For calculating net profit, management accountant of organization
measures through deducting gross profit as 14400 to total overhead as measured to 5100.
Therefore, net profit margin is measured as 9300. As per brief analysis of calculated data, gross
profit is determined by deducting gained income (21000) to expenditure incurred (6600).
Further, total cost is obtained as summation of variable (1800) and fixed (3300). it is useful for
measuring data and presenting income statement and facing competition effectively. Thus, long
term planning procedure can be obtained to represent financial statement of small scale
enterprise.
Marginal vs. Absorption costing methods:- The main difference between marginal and
absorption costing is profit variation. It is because for calculating net profit margin through
marginal costing, earned gross profit is deducted with variable expenses incurred on business
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operations. While, on the other side, for evaluating net profit through absorption costing, gross
profit is deducted with total cost incurred on expenses such as variable and fixed. Including this,
in terms of decision-making process, it is determined that marginal costing is useful for short
term planning while absorption is valuable for long term decision making process. In this regard,
it has been evaluated that preparation of income statement is done in different forms for planning
procedures and increasing business as well competitive strategies of small business enterprise
(Suomala, Lyly-Yrjänäinen and Lukka, 2014). Therefore, marginal and absorption costing
methods are different from each other that affects productivity and profitability of firm for
competitive advantages.
TASK 3
P4) Merits and drawbacks of budgetary control system
Budgetary control system is useful term for systematic allocation of resources and fund.
It is considered as planning including forecasting and decision making related to expansion of
Nisa and enhancing its efficiency. However, through this system, various tools are implemented
for management of entire business operations and increasing quality services. In this regard,
several ideas are generated for preparing strategies related to production and supplement of
goods, risk and strategic management, effective performance of organization and workers of the
entity. In this process, multiple systems are applied for cost effectiveness, increasing quality
services, using innovative ideas and so on (Swain and Reed, 2014). As per critical evaluation,
there is positive and negative aspect of budgeting is determined that can be described as below:-
Advantages of budgetary control system:- In budgetary control system, management
accountant of Nisa identifies all business performance tools as operations that affects market
position and its implementation. It is useful to present actual business performance and creating
several ideas for further development. Hence, positive aspects of budgeting is to be described as
below:-
 Useful to present actual business performance.
 Generates different ideas for further business operations
 Helpful in increasing productivity and profitability of firm
 Best tool for optimum utilization of resources and fund
 Increases strength to face competition
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 Improving service qualities of products produces by organization
 Planning strategy for expansion of small scale enterprise
 Innovative techniques are generated for getting adjusted according to changes occur at
workplace
 Helpful to create positive and peaceful environment of entity
Therefore, budgeting is an important tool for forecasting and decision making related to
further business operations and increasing quality services of firm. In this regard, different
planning procedure is applied for systematic management of entire business operations including
preparing strategies for development of small scale enterprise (Weil, Schipper and Francis,
2013). Moreover, through using budgeting, forecasting and decision making is applied for
operating further business activities.
Limitations of budgetary control system:- Wrong prediction over business performance
is unable to gain organization's effectiveness. In accordance to this, analyses of inaccurate
financial statement disturbs further business operations. However, it affects on planning strategy
for productivity and profitability of organization. In addition to this, lack of coordination among
organizational functions is determined to implement quality services of entity. Moreover, as per
critical evaluation, budgeting is expensive because for analyzing present business performance
and preparing agenda, high level of expenses are to be incurred. Along with this, inefficient
resources and fund is risky to process production and distribution of goods. Thus, management
accountant faces these obstacles for preparing budget and forecasting for further business
operations efficiently. However, budgeting is time consuming and costly to be implemented for
further business operations. Hence, management accountant of Nisa is required to understand
proper sense of budgeting and it entire tools (Nisa, 2016). In this regard, it is necessary to
recognize business performance and preparing planning including forecasting and decision-
making regarding further business operations.
Budgeting and budgetary control system should be utilized to increase efficiency of firm
through different planning procedures. In accordance to this, it is needed for small scale entity to
prepare strategies and making decisions related to marketing and competitive strategies of firm.
Thus, it has been expressed that budgeting is the best tool for proper management of resources
and fund that affects productivity and profit earning capacity of firm. In this process, several
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kinds of ideas can be created for reducing risks occur at workplace and proper planning
procedure is recognized for expansion of entity and increasing quality services of small scale
entity. Thus, positive and negative aspects of budgeting is understand through this process and
different determinants to be focused for effectiveness of Nisa at high level. A critical evaluation
on budgetary control system is recognized for increasing management accounting tool efficiency
that affects various variables of entity to make place in market for long time period (Costanza
and et.al., 2016). In this way, budgeting and budgetary control system is determined to improve
service qualities of firm and expansion of business unit. It is useful to gain customer satisfaction
that affects high level of demand impacts on productivity and profitability of small scale
enterprise to sustain its good reputation. Therefore, outcome is obtained related to budgeting for
forecasting and decision-making related to further business operations. It is interrelated with
different management systems such as risk, strategic and performance. Hence, management
accountant of small size enterprise prepares budget for its expansion and different tools to sustain
its position for long time period through proper planning procedures.
P5) Management accounting systems to solve out financial problems
There are various management accounting tools presented that affects management of
overall business operations. In this process, costing, budgeting, strategic and performance
management of Nisa is included. Including this, it has been determined that management
accounting tool is useful for effectiveness of enterprise through implementing proper planning
procedure and decision-making related to implementation. In accordance to this, management
accounting is multidisciplinary approach that includes financial, cost, inventory and performance
management (Draper and Smith, 2014). However, management accountant of organization
identifies current business performance including economic and overall operations. Including
this, it is helpful for building up relationship between employee and employer of the firm that
impacts on efficiency of organization. In this process, time schedules and planning procedures
are implemented for expansion of small business enterprise and increasing efficiency of firm. By
identifying current business operations, various tools and techniques can be applied in further
years for adequate production of goods. It influences customer satisfaction and profit earning
capacity of organization to enhance its strength for facing capacity effectively. In this regard,
several management accounting systems can be expressed as:-
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 Financial accounting:- There are several financial statements including profit and loss,
balance sheet, cash flow, fund flow and income statements are analyzed that presents
current business performance. Therefore, by analyzing all of these tools, expenditure and
revenue position of organization is gained through which different ideas are generated for
further expansion. Including this, techniques are obtained to increase profitability of firm.
Moreover, on the basis of financial accounting tools, further implementation is obtained
that affects business environment as well different components regarding performance
(Montgomery, Peck and Vining, 2015). In this regard, adequate costing and planning
procedures for further business implementation is gained by which efficient tools are
obtained. Thus, financial accounting is valuable for costing, preparing income statement
and making decisions related to reducing economic problem of firm at high level. Inventory management:- Under this management accounting system, inventories to keep
goods safe are managed effectively. It affects productivity and profitability of Nisa for
effectiveness at large scale. In this process, management accountant of organization looks
at storing goods in different warehouses, stores and entities. Therefore, several ideas are
generated for managing goods and resources efficiently. Including this, it is useful for
optimum utilization of resources that affects production and supplement of grocery items.
In accordance to this management accounting system, inventories to keep goods safe and
increasing productivity of entity is gained effectively (Ryu, 2015). Hence, it is
management accounting tool that impacts on organization's performance for forecasting
and decision making related to expansion of small business unit and increasing efficiency
for further business operations. Performance management:- As management accounting is multidisciplinary approach
therefore accountant of Nisa recognizes business and employees performance who
perform their work. However, it is interrelated with increasing working efficiency and
improving skills of workers at high level (Grob, 2013). In this process, it is valuable for
effectiveness of entity and enhancing quality services of firm at large scale. Therefore,
through this process system, varieties of tools and techniques are obtained to get better
performance of organization. Thus, management accounting tool as performance is
interrelated with overall business operations. In this regard, various strategies are
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obtained for creating positive environment of small scale enterprise. Including this, it is
useful for further business operations and implementing action plans and preparing
strategies for improving service qualities of firm at large scale.
 Ratio analysis:- It is one of the great financial performance presenting tool that
represents economic profile of Nisa. It includes different kinds of ratios such as liquidity,
solvency, debt equity and different ratios. Including this, comparison of last years'
performance is determined through this system tool. Including this, under this analysis
monetary position of organization is recognized (Lowe and Tinker, 2015). On the basis of
which, different ideas are generated for further business operations. Including this, it
generates different ideas for expansion of small scale enterprise and increasing its
efficiency can be generated at high level. Thus, ratio analysis creates different ideas for
increasing profit earning capacity of organization. Moreover, through this ratio analysis,
various tools and techniques are determined that affects monetary structure of entity to its
efficiency and enhancing service qualities related to business performance.
CONCLUSION
The report is concluded that management accounting is multidisciplinary approach that
impacts on overall business operations. In this regard, varieties of management accounting tools
and systems are considered for expansion of Nisa and increasing its efficiency at high level.
Including this, significance of accounting systems is presented to analyze actual business
performance and preparing strategies for further implementation. In addition to this, various
costing methods and their differences including marginal and absorption is determine through
this assignment. However, critical evaluation on budgetary control system is understood that is
usable for forecasting and decision-making process. In addition to this, various management
accounting tools such as; financial, inventory, costing and preparing income statement is
considered for implementing service qualities of firm. Moreover, through this study, different
tools and techniques are understood for effectiveness of small scale enterprise to increase its
efficiency for long term periodicity. Hence, systematic approach of multiple factors of
management accounting is described through this report.
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REFERENCE
Books and Journals
Beatty, A. and Liao, S., 2014. Financial accounting in the banking industry: A review of the
empirical literature. Journal of Accounting and Economics. 780(2). pp.339-383.
Blaikie, P. and et.al., 2014. At risk: natural hazards, people's vulnerability and disasters.
Routledge.
Bogsnes, B., 2016. Implementing beyond budgeting: unlocking the performance potential. John
Wiley & Sons.
Chenhall, R.H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, Organizations and
Society. 89(7). pp.1-13.
Costanza, R. and et.al., 2016. The Value of the World’s Ecosystem Services and Natural Capital
(1997). The Globalization and Environment Reader. 8(7). pp.117.
Draper, N.R. and Smith, H., 2014. Applied regression analysis. John Wiley & Sons.
Ferry, L. and Eckersley, P., 2015. Budgeting and governing for deficit reduction in the UK
public sector: act three ‘accountability and audit arrangements’. Public Money &
Management, 35(3). pp.203-210.
Grob, H.L., 2013. Capital budgeting with financial plans: an introduction. Springer-Verlag.
Kihn, L.A. and Ihantola, E.M., 2015. Approaches to validation and evaluation in qualitative
studies of management accounting. Qualitative Research in Accounting & Management.
789(3), pp.230-255.
LaBarge, M.C. and Stinson, J.L., 2014. The Role of Mental Budgeting in Philanthropic
Decision-Making. Nonprofit and Voluntary Sector Quarterly. 780(6), pp.993-1013.
Lowe, T. and Tinker, T., 2015. The short-term business forecasting: an analysis of a firm's sales
budgeting process. International Journal of Critical Accounting. 89(5-6). pp.440-451.
Mistry, V., Sharma, U. and Low, M., 2014. Management accountants' perception of their role in
accounting for sustainable development: An exploratory study. Pacific Accounting
Review. 78(1/2). pp.112-133.
Montgomery, D.C., Peck, E.A. and Vining, G.G., 2015. Introduction to linear regression
analysis. John Wiley & Sons.
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Noordin, R., 2016. Strategic management accounting information elements: Malaysian evidence.
Asia-Pacific Management Accounting Journal. 4(1). pp.90-99.
Richards, J.C. and Rodgers, T.S., 2014. Approaches and methods in language teaching.
Cambridge university press.
Ryu, J.E., 2015. The Public Budgeting and Finance Primer: Key Concepts in Fiscal Choice.
Routledge.
Suomala, P., Lyly-Yrjänäinen, J. and Lukka, K., 2014. Battlefield around interventions: A
reflective analysis of conducting interventionist research in management accounting.
Management Accounting Research. 896(4). pp.304-314.
Swain, J.W. and Reed, B.J., 2014. Budgeting for public managers. Routledge.
Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to
concepts, methods and uses. Cengage Learning.
Online
Nisa. 2016. [Online]. Available through: <https://www.nisaretail.com/>. [Accessed on 29th
March 2017].
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