(Doc) Unit 5 Management Accounting - Assignment

Unit 5. Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and essential requirements of management accounting systems...1
M1 benefits of management Accounting systems......................................................................3
D1 Integration of management accounting system and report within organisational process....4
P2 Different methods of management accounting reports .........................................................4
TASK 2............................................................................................................................................6
P3 Usage of the techniques of cost analysis to prepare income statement by using marginal
and absorption costing.................................................................................................................6
M2 Applying range of management accounting techniques.......................................................8
D2 Interpretation of above data...................................................................................................8
TASK 3............................................................................................................................................9
P4 Advantages of different planning tools used for budgetary control......................................9
M3 Analyse the use of different planning tools and their application for preparing and
forecasting budgets ..................................................................................................................10
TASK 4..........................................................................................................................................10
P5 Adoption of management accounting systems to respond financial problems ...................10
M4 Contribution of management accounting in sustainable success of the organisation while
responding financial problems..................................................................................................12
D3 Application of planning tools to respond financial issue along with attainment of
sustainable success ...................................................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is the concept which includes analysis of business activities of
the internal management that facilitate in better decision making. This will includes the usage of
provisions of accounting to ascertain the financial and statistical information which further aid
effective controlling of business functions which results in accomplishment of organisational
objectives within stipulated period of time (Seal and Mattimoe, 2014). These will also know as
cost accounting which aid to analyse business costs that further aid in preparation of financial
reports that depicts the functioning of internal departments of the organisations. This will allows
the internal stakeholders of the organisations to perfectly align their interests with the procedures
of the organisation to bring efficiency in their own working. Oshodi Plc is a manufacturing
company which have specialisation in production of JOJO fruit juice across all age brackets. The
main objective behind the preparation of this report is to provide information to the internal
stakeholders of the organisation about the relation and functioning of the internal departments for
better decision making.
This report covers the concept of management accounting and the essential requirement
of different management accounting systems, different methods of management accounting
reports and usage of the appropriate techniques of cost analysis in preparation of income
statement using marginal and absorption costing. Also, analyse the advantages and disadvantages
of planning tools for budgetary control and adaptation of the management accounting systems to
respond financial problems is covered in the report.
TASK 1
P1 Management accounting and essential requirements of management accounting systems
Introduction: Management accounting system includes the preparation of different kind
of accounts which help to ascertain the information about the performance of internal
departments. The different systems which are prepared named as Cost accounting, job costing
etc. Oshodi is manufacturing organisation and operate their operations in respect of the
preparation of JOJO fruit juice. Through effective adoption of the management accounting and
its systems, organisation wants to improve their decision-making to get predetermined results.
This part covers concept of management accounting and requirement of different type of systems
(Al-Mawali, Zainuddin and Nasir Kader Ali, 2012).
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Management Accounting: This is the process of formulating accounts that provide
accurate statistical and financial information which is required by the mangers of the
organisation to made day to decisions (Management Accounting, 2018).
It is totally different from financial accounting where annual reports are prepared for the
use of external stakeholders. This will only include about the preparation of monthly and weekly
accounts for internal stakeholders of the organisation. The different kind of systems provides the
information in respect of the various terms like sales revenue generated, cash, B/R, B/P etc.
Management accounting systems: These are the systems which are prepared by the
management accountant to grab the information about the actual working ability of the different
departments of the organisations. The different type of systems which are generally formulated
by the accountant of the organisation includes cost accounting, job costing, price optimisation,
inventory management systems etc. The basic function which is further performing by the
management of the organisation through analysis of the information gathered from the different
accounts includes planning, organising, controlling and decision-making. All these accounts
have their own different aspect and advantage towards the organisation. The different kind of
benefits which are gathered by the management of Oshodi from consideration of these systems is
about effective decision-making, cost cutting, building higher profit margin etc. The essential
requirement of the different management accounting systems to Oshodi is understood from the
below description:-
Cost accounting system: It is an accounting method which is used by Oshodi to
ascertain the amount of total cost of production with the help of the analysis of input costs of
each step which indulge in production process. The same is used by Oshodi to analyse the cost
behind the preparation of JOJO fruit juice. In this regard, accountant first analyses and record
these costs individually and then after compare the input results with actual to ascertain the
financial performance (Chiu, Teoh and Tian, 2012). This will help an organisation get the
information about the contribution of the fruit juice in profit generation of company.
Inventory management system: This is the important account which is used by the
Oshodi to analyse and track the level of inventory, orders, sales and deliveries. The information
gathered from the usage of this accounting system is further used by the organisation in
formulation of work order, bill of materials and other production documents which indulge in the
process of the preparation of JOJO fruit juice. This is used by the management of Oshodi is
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about tracking of the entire supply chain that covers everything from production to retail. This
will further aid in better decision making about the availability of the raw material and
continuous production of JOJO fruit juice. The different kind of methods which can be used in
the process of effective inventory calculation is about LIFO, FIFO and AVCO. At present, EOQ
is used by the organisation to analyse the time period about when they have to make re-order of
the raw material to continue their production activities without any infringements (DRURY,
2013).
Price optimisation system: This system is used by the accountant of the Oshodi to
analyse the behaviour of consumers to different price of their offerings. At present, this system is
used to ascertain the impact over the sales of JOJO fruit juice when management increase or
decrease the price of the same. This will help the management of the organisation to determine
the proper retail value of their fruit juice which they have to ask from their consumers in market
which results in ascertainment of maximum output in terms of sales revenue.
Job costing system: This system is used by the manufacturing organisation which has
different production activities and jobs. This will used normally use by the accountants to
analyse and track the cost and revenue generated by particular job. This will further aid in
ascertainment of the amount of profit that can be gathered from the effective performance of the
job. The same is used by the Oshodi in case of their JOJO fruit juice to ascertain the cost and
revenue from its production. Here, different job numbers are assigned to individual items of
expenses and revenues. This will provides an opportunity to the management to keep track over
the expenses and take necessary steps to improve their profit margin through reduction in cost.
Summary: It is concluded from this part that management accounting is important
concept which help in building effective relation in between the different departments of the
organisation. Also, different accounting systems provides the information about the different
aspects like expenses, sales and revenue which further improves the decision-making of the
management to improve profitability (Eierle and Schultze, 2013).
M1 benefits of management Accounting systems
Type of management accounting system Benefits
Cost accounting system It is linked with the controlling cost under
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standards. This system helps Oshodi to
measure the efficiency of different processes as
well as assist to bring further improvements.
Inventory management system This system is associated with tracking the
record of availability of materials in
warehouses. In above Oshodi company, it is
helping in improving accuracy of its inventory
order. As well as it is beneficial in effective
production of JOJO fruit juice
Price optimisation system It is related with the setting prices on an
effective level so that customers can afford. In
the above company, it is helping to ascertain
the behaviour of consumers based on different
prices of JOJO fruit juice. Along with, it is
helping to Oshodi to maximise its operating
profit with adoption of best prices
Job costing system
This is related to assigning cost to each job
separately. In the Oshodi company, it is
helping in estimation of all type of costs in
process of preparation of JOJO fruit juice. As
well as it is also helping in reduction of
duplication of efforts in Oshodi (Granlund and
Lukka, 2017).
D1 Integration of management accounting system and report within organisational process
Type of reporting & Systems Integration with organisational process
Inventory management report: This report
is prepared on the basis of the integration of
the information gathered from system.
Integration of report in organisational process is
understood from the point that it help Oshodi to
manage raw materials of JOJO fruit juice and
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estimation of required level of purchase orders
Performance report: This report is
prepared on the basis of the information
ascertained from contribution of different
systems. This will includes about the actual
performance of different departments of
Oshodi
The integration of this report in process is
ascertain from the fact that this will help in
getting specialisation in production of JOJO fruit
juice as all the deviations and misalliances are
removed with the contribution of this report.
P2 Different methods of management accounting reports
Introduction: Management accounting report is a document which includes the
information about departmental functioning analysed from systems. This part covers about
different of accounting reports and their importance to an organisation.
Management Accounting Report: Accounting reports are important in nature and
provide clear insight that how business is performing (Ittner, 2014.Lääts and Haldma, 2012). In
the present report, different reports are formulated by the management of the Oshodi to bring
interrelation in between functioning of the departments of the organisation to grab desired
results. These reports are prepared every quarter which provide holistic view of business
finances. The different kind of reports which are prepared includes Inventory management
report, Accounts receivable report etc. All these reports have their own different importance
towards an organisation. The basic kind of benefits that can be seen over Oshodi is about high
amount of productivity, profitability etc.
Inventory management report: This is the report which includes the information about
inventories. The main objective of this report is about bringing balance between inventory
investment and customer service. This report provides the information to Oshodi is about the
level of raw materials they have in proper preparation of JOJO fruit juice. The main benefit of
this report to the organisation is about the maintaining the level of stock and raw material and
have control over the unnecessary costs and expenses which ultimate results in improvement of
profit margin (Morden, 2016).
Accounts receivable report: It is the report which provides the information about unpaid
customer services invoices and unused credit memos by date range. This report is used by the
Oshodi to analyse the overdue payment of their different consumers or debtors. Further, this
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report also help to look the credit period given to them and compare how much time is passed
from which the payment is due from such consumers or debtors. The importance of this report is
ascertained from the fact that this will help to tighten the credit policies and recover their due
amount within the time period which results to make the organisation financially sound.
Performance report: This report includes the information in respect of the performance
of something. This report is used by the management of Oshodi to analyse the performance of
their employees and working of the different departments that from their current performance
organisation is able to accomplish their desired targets or not. The main benefit which is
associated with this report is about ascertainment of the deviation in the performance in
comparison to the standards and takes appropriate corrective action. Such action allows
improving the performance and attainment of objective (Mussnig, 2013).
Conclusion: It has been concluded from the above part that reports have their own
contribution in success of the organisation as these will allows getting the information and taking
appropriate corrective action.
TASK 2
P3 Usage of the techniques of cost analysis to prepare income statement by using marginal and
absorption costing
Introduction: Cost accounting techniques are the tools which helps an organisation like
Oshodi Plc. To ascertain the costs which are incurred by them and calculate their profitability. In
these tasks, profits of the selected organisation are calculated for two moths using marginal and
absorption costing along with their interpretation.
Marginal Costing: This costing system is a tool which charges only variable costs against
the sales revenue while fixed costs is charged and written off completely against contribution but
only for that particular period (Myers, 2013).
Calculation of marginal costs and profitability of Oshodi Plc. is depicted below:
Marginal cost
Direct material cost 18
Direct Wages 4
Variable production overhead 3
Total variable production cost 25
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Income statement using Marginal costing
November December
Units Amount Amount Units Amount Amount
Sales @ 50 10000 500000 12000 600000
Less: Cost of sales
Opening stock @ 25 2000 50000
Variable cost of production @ 25 12000 300000 10000 250000
Less: Closing stock @ 25 2000 50000
250000 300000
Variable selling overhead 50000 60000
Total variable cost of sales 300000 360000
Contribution 200000 240000
Fixed overheads:
Production 99000 99000
Selling 14000 14000
Administration 26000 139000 26000 139000
Net profit 61000 101000
Absorption Costing: This is a costing method which considers all the expenses whether
variable or fixed and charges against sales revenue. In this all the direct charges of production
and charged from sales and all the indirect expenses which are selling and distribution charges
are charged against gross profit in order to ascertain net profitability (Namakonzi and Inanga,
2014).
Calculation of net profit using absorption costing along with ascertainment of over
(under) absorption cost:
Income statement using Absorption costing
November December
Units Amount Amount Units Amount
Amou
nt
Sales @ 50 10000 500000 12000
60000
0
Less: Cost of sales
Opening stock @ 34 2000 68000
Variable cost of production @ 34 12000 408000 10000 340000
Less: Closing stock @ 34 2000 68000
340000
40800
0
Gross profit 160000
19200
0
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Adjustment for over / under
absorption of overheads 9000 9000
169000
18300
0
Fixed overheads:
Variable selling overhead 50000 60000
Fixed selling overhead 14000 14000
Fixed Administration overhead 26000 90000 26000
10000
0
Net profit 79000 83000
Working Notes:
Fixed production overhead absorption rate 99000/11000 9
Full production cost for one unit to be used in stock valuation
is: 29
Variable cost 25
Fixed production overhead 4
Calculation of over/ under absorption of fixed production overheads
Production
Overhead
absorbed
per unit
Total
overhead
absorbed
Overhead
incurred
Over (Under)
absorption
Units Amount Amount Amount Amount
Novemb
er 12000 9 108000 99000 9000
Decemb
er 10000 9 90000 99000 -9000
Conclusion: From the above content, it has been concluded that both the costing methods
results in different net profits due to variation in opening and closing stock. For the selected
company, absorption costing is more recommended as it can help in bifurcating different costs.
M2 Applying range of management accounting techniques
Management accounting techniques are the methods which help in calculating the costs
and profits by developing financial reporting documents. These documents are developed above
by using two costing techniques which are marginal and absorption. These techniques are
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applied in order to determine profitability of a business organisation (Qian,Burritt and Chen,
2015).
D2 Interpretation of above data
By developing income statements, it has been interpreted that profits for the month of
November and December using marginal costing method is 61000 and 101000. Whereas, profits
using absorption costing is 79000 and 83000 for the month of November and December.
Profitability in December is more as sales revenue in this month is higher. The difference in the
profits in both the method is due to consideration of cost in different manner. Such as in the
absorption costing, fixed and variable costs are taken as unit cost. While in the marginal costing ,
fixed cost is taken as period cost and variable cost as unit cost. It is recommended to Oshodi that
they should adopt absorption costing over marginal as it includes proper allocation of all direct
and indirect costs.
TASK 3
P4 Advantages of different planning tools used for budgetary control
Introduction: Budget and budgetary control are the tools by which an organisation can
forecast their future expenses and revenues in order to grow sustainably. In below tasks, various
planning tools are analysed along with their merits and demerits.
Budget and Budgetary control: Budget is the tool which is developed an organisation in
order to predict future costs from past experiences. This technique helps in ascertaining future
circumstances and makes appropriate strategies (Schuster, 2015).
Budgetary control is a technique which ensures that the budget must be prepared in a way
that most accurate budgets can be prepared. It is a technique by which budgets are compared
with actual performances in order to find variations.
Various planning tools used for budgetary control:
1. PRODUCTION BUDGET: A production budget introduces as an effective financial plan that
includes lists of units to be manufactured during a time period. It is important budget which will
help an organisation by providing accurate data about the raw material. Such as in the above
Oshodi plc they use this budget for management of materials in an effective manner.
Advantages Disadvantages
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It supports to overcome production expenditure
as there is uniform production. It is sufficient
to manage minimum stock of products. Like
the above company they manage the quantity
of their material for production of juice with
help of this budget.
One of the main disadvantages of production
budget is It take more time and cost of an
organisation.
Illustration 1: Generate a Production Budget as Part of Your Master Budget
(Source: Generate a Production Budget as Part of Your Master Budget, 2013)
Illustration 2: Average cost of production
(Source: Average cost of production, 2018)
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2. OPERATIONAL BUDGET: An operating budget records all day to day activities in a
business organisation. The selected organisation Oshodi plc can use this planning tool to control
their operational expenses and can enhance their working capital (Storey, 2014).
Advantages Disadvantages
This budget helps organisation in keeping an
eye on all expenses by which expenses are
effectively managed and financial reserves
are build. Like the above Oshodi plc is using
this budget for managing their various kind of
operational expenditures.
This budget does not account capital expenses
which sometimes reflect manipulated image of
company’s effectiveness.
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Illustration 3: Operation budget
(Source: Operation budget. 2018)
Illustration 4: Operation budget
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Source: Operation budget, 2019
Conclusion: From the above task, it had been observed that various budgets can be used
by an organisation in order to forecast their future expenses and profitability. It is concluded and
recommended that the selected organisation should use Zero based budget which can help them
in improving their procedure of budgetary control.
3. LABOR BUDGET: The labour budget is applied to measure the number of labour hours that
will be required to produce the accurate unit which is itemized in the production budget.
Production manager is responsible for labour budget.
Advantages Disadvantages
Automatic consideration is provided to the
time factor as salaried paid are usually
proportional to the time worked. In the aspect
of above company, their managers pay the
payment to their labours with the help of this
budget.
No distinction is drawn between
knowledgeable and unknowledgeable labour
and differences in rates of pay.
Illustration 5: Establish a Direct Labor Budget as Part of Your Master Budget
(Source: Establish a Direct Labor Budget as Part of Your Master Budget, 2013)
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Illustration 6: The Labor-Leisure Budget Constraint
(Source: The Labor-Leisure Budget Constraint, 2018)
4. CAPITAL BUDGET: Capital budgeting is an effective process in which an organisation
determines as well as evaluates potential large investments or expenses. These expenditures as
well as investments consider projects such as constricting a new plant and investing in a long-
term venture. Finance manager is responsible for capital budget.
Advantages Disadvantages
Capital budget supports and organisation to
measure which investment choice would yield
the best possible return. The Oshodi plc makes
investment wisely with help of this budget.
Capital budget determination is for long-term
and is completely irreversible in nature.
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Illustration 7: Net Working Capital for Project A and Project B
(Source: Net Working Capital for Project A and Project B, 2017)
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Illustration 8: Capital Budget
(Source: Capital Budget, 2017)
5. MARKETING/DISTRIBUTION BUDGET: Distribution cost budget is another budget which
forecasts the distributing the products and cost of selling. This type of budget mainly relay on the
sales budget. This expenditure will vary with the anticipated sales figures during the time period.
For this budget, marketing manager of Oshodi Plc has responsible to make marketing or
distribution budget.
Advantages Disadvantages
Marketing budget help an organisation by
providing accurate information about the
expenses of marketing tools and techniques.
With the help of this budget the above
company, manage the expenditure of
marketing effectively.
This budget takes more time and cost of an
organisation which is main disadvantages of
marketing budget.
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Illustration 9: Discover ideas about Marketing Budget
Source: Discover ideas about Marketing Budget
Illustration 10: Budget For Marketing
(Source: Budget For Marketing In 2019)
Sales budget: The main purpose behind development of this budget is about
estimation of sales for a future financial period. The different type of purposes for this
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budget is used by Oshodi includes setting of the department goals, estimation of earnings
and forecasting of production requirements. The main important of this budget is that help
to improve sales and revenue.
Advantages Disadvantages
It help in determination of departmental goals Time consuming in process
Help to improve overall earnings. For example
in the above company, they estimate the future
sales by this budget.
Difficult to predict
Illustration 11: Sales Budget
Source: Sales Budget. 2019.
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Illustration 12: Sales Budget
Material budget: This will also known as purchase budget which help in
determination of the money value of materials which are availed in specific period of time.
The main importance behind the usage of this budget by Oshodi is about ascertainment of
material prices over specific period of time.
Advantages Disadvantages
It help in determination of material
requirements. Such as the above company,
assess the need of material for production of
juice with the help of this budget.
Not able to ascertain actual amount of material
Help to ascertain material prices Difficult to predict time period
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Illustration 13: Material Budget
Illustration 14: Material Budget
(Source: Material budget, 2018)
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Cash Budget: Cash budget provides the information about the availability of cash, sales
budget provides the information which helps to get sales figure and purchase budget help to
identify the amount of raw material purchased in a year. The importance of this budget to Oshodi
is help in maintaining effective amount of cash.
Advantages Disadvantages
This budget facilitates organisation like
Oshodi Plc in providing the summary of sales
figure, cash availability and purchase amount
of raw materials of a particular division.
These budgets are rigid tool and cannot be
altered rapidly.
Illustration 15: Cash Budget
(Source: Cash Budget, 2018)
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Illustration 16: Financial Forecasting
(Source: Financial Forecasting, 2018)
Zero based budgets: This is a tool which is developed by assuming that there are no
expenses in last year and all the elements have a set base of zero. Oshodi Plc can use this budget
when they want to prepare budget for their specific activities which are newly introduced.
Advantages Disadvantages
It helps organisation to keep an eye on every
penny which is spent which leads to low
irrelevant costs. In the Oshodi plc, this budget
can bring accuracy because in it each activity
is justified.
This budget is not appropriate for long term
investments and plans.
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Illustration 17: Zero based Budget
(Source: Zero based Budget, 2018)
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Illustration 18: Zero based Budget
(Source: Zero based Budget)
M3 Analyse the use of different planning tools and their application for preparing and
forecasting budgets
Various planning tools such as operating budget, zero based budget and cash budget are
used and applied by organisation and these tools can be applied in Oshodi Plc in order to suitably
grow in market (Ter Bogt and Scapens,2014). Application of cash budget in selected
organisation is mentioned below:
Receipts £
Cash sales 250
Credit sale receipts from
debtors 320
Other income received 415
Total receipts (a) 985
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Payments
Purchases 215
Wages- Labour and overheads 115
Fixed costs 200
Capital expenditure - Plant 650
Advertising 20
Total Payments (b) 1200
Surplus/Deficit (a) – (b) -215
TASK 4
P5 Adoption of management accounting systems to respond financial problems
Introduction: Management accounting tools have contribution to analyse the issues and
to overcome the same through the application of effective solutions and techniques. This part
covers about usage of different management accounting systems to overcome the financial issues
faced by the organisation.
Oshodi is manufacturing organisation and having their specialisation in production of
JOJO fruit juice. Ever after having specialisation in production organisation face the issues in
respect finance. The basic reason behind this is an inappropriate knowledge about the usage of
accounting tools. The different type of financial issues present in the organisation and along with
that the tools which are used to identify the same are defined below:
KPI: This is also known as Key performance indicators. This is of two types financial
and non-financial. Financial one will help to know the issues present in financial aspect of the
organisation and non-financial one help in identification of issues present in human relations.
Right now, financial KPI is used by the accountant of Oshodi to analyse financial issues. This
will includes proper study of the financial statements of the organisation and their comparison
with the past records. To identify the reason behind the loss, expenses of current year is
compared with the last one and find the cost of production is increased by 20% which results in
loss within the organisation. The basic reason behind this about large number of transactions in
credit due to inappropriate flow of cash. This will results in increase in the amount of
unnecessary expenses.
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Benchmarking: It is the technique this will includes about setting the standards and
compares the actual outcomes with the same. This will help in identification of the deviations
and the reason behind them. Oshodi, identifies the same issue with the help of this tool that due
to inappropriate flow of cash there is huge usage of credit to carry on their business activities
which results in loss and increase in the amount of unnecessary expenses.
The method which is used by the Oshodi to overcome the above defined financial issue is
named as Financial governance. The application of tool is defined below:
Financial governance: This is the important method in emphasis is provides upon
collection, management and control of financial information. Application of this method by the
accountant of the organisation to know the amount of cash available and recover in future period
of time. This information is applied to carry on further purchase transactions to avoid the use of
credit facilities which results in reduction in amount of unnecessary expenses and help to
improve the profit margin (Van Dooren, Bouckaert and Halligan, 2015).
Financial problem are those which are faced by the organisation due to availability of less
amount of cash. This situation is faced by the organisation in situation when not able to perform
functions properly which results in creation of business loss. The different of financial problems
faced by Oshodi are defined below:
Inability to achieve target- This is a kind of financial issue which occurs when
companies fail to achieve the target as per the set standards. Mainly, if companies do not achieve
the profitability target according to their standards then it raise as financial issue. Like the above
Oshodi plc is facing this financial issue because their actual profit level is not matching with
estimated level.
Inappropriate decision making: This is the issue which is present in management
which results in usage of the credit facilities in high amount. In future unable to pay the interest
amount and expenses shows high in nature. These will results into the loss. In the above
company, they are not able to take decision related to material purchase as well as about
production that is impacting their profits.
The systems which are used to overcome these are defined below:
1.Cost accounting system: Application of cost accounting system provides the
opportunity to analyse the cost of tractions and ascertain the amount of unnecessary expenses.
This will help in deduction of expenses and improve cash in hand. In the aspect of above
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company, their financial issue can be resolve by help of this accounting system because their
issue is related to lower profitability which is raising due to high expenses. By implementation of
this accounting system their expenditures are getting under control and their issue is being
resolved.
2.Inventory management system: This system is needed to be implement is effective
way because this will help to ascertain that how much stock available with organisation when
they needed to place the order. This will help to manage the cash properly and resolve the
situation of financial weakness through improved decision making. It is helping to above
company in solving the issue of inappropriate decision-making because with the help of this
accounting system they are able to track the quantity of material which is leading in better
decision-making.
3. Job costing system: This will help in determination of the cost incurred at different
aspects. By comparing with other resources having an option to made changes and reduce the
expenses which help to improve profit margin.
4. Price optimisation system: This will help to fix the price of product on the basis of its
effectiveness and demand in between the consumers. So, in return help to stick with the targeted
consumers and attract the new one too. In improves sales and profit.
Comparison in between organisation about the use of management accounting systems to
respond financial issues
Issue Oshodi
High amount of
expenses due to
usage of credit
facilities
Financial governance is used to control the credit transactions and focus on
appropriate flow of cash to carry on business transactions in cash.
Inappropriate
standards which
results in effective
utilisation of
Benchmarking is used by the organisation. This will help to setup the
standards and focus on their fulfilled. Such target motivates the employees
and results in optimum utilisation of resources.
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resources and
turns into loss
Inappropriate
cash flow
management
Cost accounting used as this will help to track expenses and further aid to
reduce by finding out its complementary output
Inappropriate
decision making
Price optimisation is used as this will help to determine the price on the
basis of consumers demand
Conclusion: It has been concluded from the part that management accounting systems
have huge contribution to respond financial issues. These will help to identify and overcome the
issues through providence of effective solution which removes the cause.
M4 Contribution of management accounting in sustainable success of the organisation while
responding financial problems
As analysed above, financial governance is used by Oshodi to respond the issue which is
about increase in the amount of unnecessary expenses due to the usage of credit facilities to carry
on business transactions. Application of financial governance helps to manage and control over
the expenses and appropriate amount of cash in all quarters to carry on the business activities
properly. This results in reduction of the usage of credit facilities. The sustainable success is
attained through this move in nature that no interest is needed to pay on purchase which have
direct impact on profit margin. Secondly, non-consideration of credit facilities depicts the
financial strength of the organisation which attracts the new investors towards the organisation.
D3 Application of planning tools to respond financial issue along with attainment of sustainable
success
There are different type of planning tools are used by the Oshodi which are named as
ZBB, operational budget and master budget. All these planning tools have their huge
contribution in the process of budgetary control. These planning tools also have contribution to
respond financial issues. Master budget is the main which is consider by the management of
Oshodi to respond one of the financial issue which is about increase in amount of unnecessary
expenses. Master budget is wide in natures and includes different type of budgets like cash, sales,
purchase budget etc. Cash budget have contribution in ascertainment of the amount of cash an
28

organisation have in all different quarters. This will help to maintain the limit of cash which
provides an opportunity to carry on their transactions in cash reduce the expense of interest.
Also, this will aid to attain sustainable success as help to grab sufficient amount of profit margin.
CONCLUSION
It has been concluded from the above report that there is huge contribution of
management accounting in the success of the organisation as this improve the interrelation in
between the internal departments of the organisation. This is possible because preparation of
different systems help to get the diversified information which improves the understanding and
results in actual improvement in their functioning. Preparation of different kind of reports help to
circulate the information to internal stakeholders and managers which improves decision making
and help to get desired results. There are different planning tools like ZBB and Cash budget.
Each has their own contribution in budgetary control and allows the organisation respond to the
financial issues and improves strength. There is usage of different kind of management tools and
systems like KPI and Benchmarking. Their functioning help to build standards and working
accordingly which results in future to overcome from the financial issues which becomes the
reason of loss in the organisation.
29

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