Comprehensive Analysis of Management Accounting Principles and Role

This report provides a comprehensive analysis of management accounting, dividing it into two main parts. The first part elucidates the principles, roles, methods, and tools of management accounting, along with an evaluation of its various benefits within an organization. Key principles such as designing and compiling financial data, controlling costs, managing exceptions, and accounting for inflation are discussed in detail, using AstraZeneca as a practical example. The role of management accounting in targeting markets, analyzing relevant costs, and defining budgets is also explored. Furthermore, the report outlines methods and techniques like inventory costing management, constraint analysis, cash flow analysis, and total quality management. The discussion extends to how financial statements and reporting contribute to business growth and success. The second part compares different effective planning tools used by management and assesses the effectiveness of managerial accounting in solving financial issues and eliminating problems within an enterprise, concluding with recommendations for improved financial management. This assignment is available on Desklib, a platform offering a wide range of study tools and resources for students.

Management
Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................3
PART 1............................................................................................................................................3
1. An Explanation of Management Accounting Principles ........................................................3
2. Role of management accounting and management accounting system .................................4
3. Methods and techniques of Management Accounting ...........................................................5
How Financial statements and reporting helps the business in growth and success...................6
4. Evaluation and Integration of management accounting within organisation..........................7
5. Benefits of management accounting in an organisation.........................................................7
6. CONCLUSION ......................................................................................................................8
PART 2............................................................................................................................................8
1. Comparison among different effective planning tools that are used by management............8
2. The effectiveness of managerial accounting while solving the financial issues and
elimination financial problems in the enterprise.......................................................................11
3. Conclusion and recommendations........................................................................................12
CONCLUSION .............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is a structure that involves financial data related to the resources
that can help in decision making process. This data is useful for insiders, such activities that will
occur within workplace of organisation (Aleksandrova and Mironova, 2019). This report
highlights, the concepts of management accounting, by classifying it into two parts in which the
first part, talks about principles, role, tools and methods of managerial accounting, along with
explanation of evaluation of various pros of management accounting. Afterwards, in the second
part, planning tools and their corporation are described by considering its effectiveness and
application of management accounting.
PART 1
1. An Explanation of Management Accounting Principles
It refers to the branch of Management accounting, which analyse and determine the
financial accounting with the main aim of effectively performing the managerial functions and
operations, for the fulfilment of operational requirements it is basically concern about
interpretation and analysis of accounting information in management. In management if the
manager takes decision by considering all the finance aspects, data then it will minimized the
liquidity risk level. In relation to AstraZeneca if the manager of company takes effective and
efficient decision by considering all factors related with finance that they easy achieve their
goals.
 Designing and Compiling: It refers that if the information of accounting which can
extracted with different reports, records and from other current and previous data must be
add in order to forecast or predicts outcomes of future or originate all these outcomes in
efficient terms, but this possible only when the management effectively specify problems
that can creates threats in the decision making process. In relation to AstraZeneca if the
company effectively manage their data only then on the basis of that data they can
predicts future outcomes and issues (Arnold, 2018).
 Control over Cost: It refers that control over the cost essential when it is arise, it doesn't
matter whether it is workers performance, utilization of resources or can be services like,
repairing of vehicles, machinery, should be maintained in an effective manner which
minimize the cost. In relation to AstraZeneca if company maintain control over the

excess cost which spends on services, maintenance of machinery can helps the
management to utilize these cost on important financial functions and operations.
 Exception in Management: Management accounting exceptions is essential in
management for showing the financial information. This is mainly deals in technique of
costing or budgetary control. It helps in comparing the expected results with the actual
results for finding the reason where the company operations and functions are lack, and if
the results are not matched then there is some mistakes in the plans and if the result
matches then the plans and strategies were effectively sets. In relation to AstraZeneca if
the company use costing and budgetary techniques then they find out which in which area
they are lacking then accordingly they can make strategies and plans (Baatwah, Al-
Qadasi and Al-Ebel, 2020).
 Inflation: It refers that company are not considered to account their profit in books of
accounting either they are not able prevent their initial capital. Inflation in this state that
money worth or other things are not always same, it will change over a period of time. In
relation to AstraZeneca it is important to evaluate the real capital value that invested by
the organisation owner in relation of real money worth by revaluing the overall assets,
which useful in retaining the whole capital of organisation that can beat the inflation rate.
2. Role of management accounting and management accounting system
It refers to the process of analysing, recognizing, identifying, communicating and
interpretation of financial information which supports the business to achieve their goals in an
effective and efficient manner. It mainly focuses on the business functions by analysing and
recognising of accounting information in terms of supporting the management which is at top
level in their decision making process. All this accounting data manages the financial
information which helps the decision makers to take effective decisions related to the utilization
of raw material, production process. It is the duty of Finance manager to effectively use budget
for analyse the operational plans. Bookkeeping module indicates the cost controlling strategy
which are essential to determine the results, as well as it is essential to maintain accuracy and
consistency in cash flow to predict the future operations (Stikeleather and Waddoups, 2019).
 Targeting the market: It refers that companies manufacturing process done successfully
when they fulfils their targeted customer's desire and needs. Firstly company have to
analyse their targeted market, and then produce the required product and services

according to the needs and wants of their targeted customer. In relation to AstraZeneca if
the company manufacture products by considering the needs and wants of their targeted
customer then they can quickly and effectively achieve their goals.
 Analysis of cost relevant: It states that decisions which are related with the expenditure
directly effects the business bottom line, If company wants to raise their profit margin
then they have to do analysis of cost to avoid the unnecessary expenses, and utilize that
rest of the cost in future. When the effective comparison between the amount done of
previous data or current data then became easier for the company to identify which plant
and machinery, supplier are beneficial for the company. There are also some of the other
basic elements like accuracy, quality, reliability which must considered while doing the
analysis of cost of production. In relation to AstraZeneca it became essential for the
company to analyse their production cost to avoid the useless expenses and utilize that
rest of the cost in other operation (Cool and Rossing, 2021).
 Budget Defining: A well manage budget play essential role in management. Budget
making is an exclusive process, budget are not prepared on random basis, if company do
that than they may face issues regarding the lack of proper finance, resources. To avoid
this kinds of issues management needs to prepare their budget in an effective and
efficient manner by considering all the factors which can effect the budget. Company can
effectively make the budget by analysing the demand and supply in the market, pervious
year data or inflation rate. In relation to AstraZeneca if company wanted to survive for
long-term in the market than they have to make proper budget by considering all the
factors which can effects the financing of business (Golden, Kohlbeck and Rezaee,
2020).
3. Methods and techniques of Management Accounting
There are many techniques and method company can use for analysing their
organisational performance. Some of the methods and techniques are mentioned below
 Inventory Costing Management: It refers that inventory plays an essential role and also
the assets of the company. Cost of inventory indicates the procedure valuing inventory in
monetary terms. This procedure involves all finished and unfinished goods, raw material.
It indicates that how much cost of inventory business have, which involves cost of
overheads such as storage and administration cost. In relation to AstraZeneca if company

manages their inventory cost by analysing or considering all the other cost factor like
storage cost, administrative cost, overhead cost then they can effectively value their
inventory cost in business.
 Constraint analysis: It refers that this approach works as a bottom line for different
functions and operations, instead of determining or analysing the whole procedure of
operations. This approach helps in identifying and determining the basics and help in
areas which are difficult for the customers in production process. In relation to
AstraZeneca if company use this constraint analysis technique then they effectively find
out which area of operation is lacking instead of find out whole operation procedure
which consumes the cost as well as time (Gunarathne and Lee, 2019).
 Analysis of cash flow: It refers that the analysis of cash flow helps the company to find
out cash inflow and outflow from the business. It helps in identify how much amount or
cash company makes during a particular period of accounting, for maintain stability in
finance, the company manager must know about their cash sources like in which area
cash utilize, from which area cash goes. In relation to AstraZeneca if the company
manages or analyse their cash inflows and outflows than they effectively manages their
all other operations because cash is the basis of all other functions and operations without
cash company not able to survive in the market.
 Total quality management: It states that total quality management helps in analysing
and majorly focuses on systematic improvement of quality goods by ensuring the
effective production and costing process, which helps in reducing the errors or mistakes
in manufacturing enhance the experience of customer, and ensures the effective training
and development of employees. In relation to AstraZeneca if company use this technique
then they can improves their overall goods and services quality, because this technique
major aim is to analyse the overall quality of management (Huber, 2022).
How Financial statements and reporting helps the business in growth and success
Planning of finance are made by the effective analysis of reports of book keeping. It
forecast and estimates the decision which are taken in future, records of purchase and sales are
useful in analysing and determining the debit and credit amount in the end of the financial year.
All these records are helpful in analysing the discounted defaulters and faults. In relation to
AstraZeneca if the company maintain proper records of finance like book keeping then it became

easier for taking decisions for the manager to take decision for future by analysing the financial
reports.
4. Evaluation and Integration of management accounting within organisation
Accounting management statements helps the organisation in selecting the various
available options by considering the monetary terms. To maintain sustainability in short and long
term operation company's owner should set's one choice for the operations of the business. It also
gives assistance and give indication to top management level of the business by considering that
the administration operations and functions are related with the financial information, or deals in
monetary terms for the smooth going of business. Financial reports shows various ways to
overcome from problems and set effective measures which are useful to correct these issues and
future finance. There are also some of the emergency assets reserved for the issues so, at that
time business would not face insolvency or any kind of a business loss. It also indicates business
about the areas which are lacking, which functions needs to be renew or update, and what new
trends, procedures, services company needs to adopt. At which area company should change
their planning, strategies with the main aim of achieving their targets in an effective and efficient
manner (Jin and Wu, 2021).
5. Benefits of management accounting in an organisation
 Planning: It states that planning plays an essential role in management accounting
functions. System of Management accounting sets as that analyse or record all cost
standards, allocation of resources, production planning, budgeting which helps in
effective and efficient functioning of all other operations in management. In relation to
AstraZeneca if there is lack of planning in any function of finance than the company may
face hurdles because without proper planning the functions goes wrong that adversely
effects the overall functions that's why planning is essential.
 Controlling: Controlling over all the operations and function helps the business to make
corrective decision. Management at top level analyse the actual results after that compare
with the expected results which help in measuring that the performance or result is up to
mark or not, control over all the activity help in sustainable growth. In relation to
AstraZeneca if the manager control regulates all the activities, operations in an effective
way that helps the management to achieve there goals on time (Kablan, 2020).

 Co-ordinating: In management accounting all the business operations and functions
require coordination without coordination a single function can not done. In order to
execute all the functions effectively coordination requires. In relation to AstraZeneca, in
organisation if there is an effective coordination between the employees, as well as in the
functions and operations, company can effectively achieve their goals.
6. CONCLUSION
From the above report-1 it is concluded that management accounting plays an essential
role in management as helps in making the decisions, setting up an effective strategies and
planning for the smooth and effective functioning of the organisation. This report also includes
the multiple elements of management accounting, and how these are beneficial\ for the
organisation. Management accounting also useful in determining and analysing the respected
goals and objects of the business.
PART 2
1. Comparison among different effective planning tools that are used by management
Management accounting have various techniques and tools which provide a insight to the
management for efficiently utilizing different tools of planning in accounting management, these
tools also provides support to the businesses for managing the finance efficiently in business
operations. The three main financial management planning tools that plays an important role in
smooth running of activities are discussed below:
1. Financial Planning: It is the tool that is used for planning the allocation of financial
resources that every business requires to perform as their main function. The procedure in which
goals are analysed and determined as well, budgets, programmes and policies for business
activities are framed. Planning of financial resources includes strategic plans, proper utilization
of resources, ensuring that plans are effective and identifying the accurate resources that are
useful in achieving the pre determined business goals (Ng, 2018).
Pros of financial planning:
 Safety for future: Financial planning gives a direction and vision regarding the
decisions related to funds of business such as from which sources company is
going to arrange funds and others. In AstraZeneca, if the finance manager and
other senior level managers made plans effective and efficiently then it would

definitely help them in choosing most suitable option for making investments into
the market that could bail out them from various financial problems. Investments
in numerous sources always provide business an extra income for dealing with
expenses and also helps in paying their debts (Nugraheni, Cummings and Kilgore,
2022).
 Reduces Risk: Planning of financial resources helps the business in reducing
various kinds of risk such as liquidity risk, financial risk and also helps in
retaining emergency funds that enables business in dealing with the situations like
insolvency. For ensuring that enough funds are maintained, emergency funds
must be equal to the profit of the previous six months. If AstraZeneca, made plans
according to their performance and market situation then business will never have
to face the issue of lack of funds, management is able to run all their business
operations smoothly that will lead the business in achieving their desired goals.
Cons of financial planning:
 Costly procedure: For maintaining effective financial plans, company needs
highly expertise advices and for that they need to hire professionals, along with
this financial planning also a time consuming process for maintaining accuracy in
it that's the reason it is a expensive process. For small businesses, who did not
have funds it become difficult to do proper planning regarding allocation of funds
due to its cost. AstraZeneca is able in maintaining timely plans for funds but they
lack sometimes due to lack of time.
 Lack of communication: This states that, is there is any gap in communication
channel within workplace of company among individuals, departments that are
allied with the business outcomes in improper strategies of company's funds.
AstraZeneca also faces sometimes the issue in maintaining proper communication
channel among employees and that causes in implementation of established plans
in terms of proper utilization of funds and it become for managers to accomplish
the goals (Ostaev, Khosiev and Klychova, 2018).
 Change in laws and rules by Government: Government and administration of
nation has the power to change the laws and regulations whenever they think that
there is a need for change, these changes are unpredictable and sometimes its

impact financial planning of companies negatively. AstraZeneca is a multinational
organisation, and each countries government has their different rules and
regulations, company plans for the whole accounting period in advance and if in
the middle of the year Government changes any rules such as rate of inflation
rises or may interest rates goes down then enterprise has to suffer with a huge loss
and due to this their operations across the globe will be badly affected.
2. Analysis of financial statements: Financial statements includes cash flow statement,
profit and loss account and balance sheet, analysing these accounting records is essential due to
the data presented in it. Analysis of accounting records of AstraZeneca provides assistance to the
management to perform the functions in order to achieve sustainable growth and continuous
development, that management can make it possible with the help of comparative and ratio
analysis of financial statements (Rummell, DeZoort and Hermanson, 2019).
Pros of analysis of financial statements:
 Review of cash flow statement: In analysis of financial statements, cash flow
statement plays a vital role. It specifies the business that at which point of time
they need to pay their debts and other liabilities. With analysing accounting
statements AstraZeneca is able to know the exact cash inflow and outflow of
business and it is easy for them to assess their financial position.
 Review of company's liability: It includes review of current liabilities that are
presented in the balance sheet. It includes short term debts. If in future
AstraZeneca plans to expand their business and for that they need funds so loan is
a better option for them but before raising debt they first need to review their
earlier liabilities and then analyse the situation whether they will be able to pay
their debts or not along with previous.
Cons of analysing the financial statements:
 Based on historical data: Analysis is always perform on the financial statements
of previous years because past performance can give an idea about future
outcome. If AstraZeneca wants to forecast their future results and situations they
need maintain a budget and its plan (Sheshukova and Mukhina, 2018).
 Comparability issue: It states that volume of transactions and size of business
should cooperate with each other.

3. Analysis of fund flow statement: This analysis provides assistance to the business for
analysing the movement in their funds in one period to another period. It helps the business in
understanding that effective use of scare funds is very essential and also show them that how
business uses their funds in previous years.
Pros of Analysing fund flow statement:
 Level of adequacy in working capital: It indicates that fund flow statements
provide support to the business for analysing its working capital efficiency
because working capital has the ability to help in the better management of
business. Working capital helps AstraZeneca in the analysis of their short term
funds that business uses for arranging the long term assets (Caldarelli, Ferri and
Maffei, 2020).
 Image of company: Effective and efficient fund flow statement assists the
management in maintaining good reputation of business in the market that helps
the company in their branding. Board of directors of AstraZeneca are able to
manage their fund flows effectively so that they can maintain company's goodwill
in the market and can retain huge share in market.
Cons of Analysing fund flow statements:
 Use of previous years information: It means that statements of fund flows are
not based on current years data, that's the reason these are not able to present a
accurate picture of company's records. Analysts of AstraZeneca, uses this
technique and found that it is not able to represent the real position of their profit.
 Lack of originality: Many a times businesses avoid to maintain their fund flow
statements due to the level of difficulty as its preparation requires a systematic
arrangements of all accounting records and financial statements. As senior
managers of AstraZeneca also avoid the use of fund flow statements because it
lacks in case of originality (Wijethilake and Ekanayake, 2018).
2. The effectiveness of managerial accounting while solving the financial issues and elimination
financial problems in the enterprise
Management accounting gives businesses information in both qualitative and quantitative
forms for financial and operational performance. Management accounting is used by managers,
employees and other individuals for internal management of business. AstraZeneca's

management accounting system focuses on the those procedures that business install to control
over planning operations and provide effective support for decision making.
Cost Management: A defined manner in which management accounting contribute for
improving the condition of organisation continuously with integration and development of cost
management systems. In place of, controlling and maintaining budgets at departmental level
AstraZeneca do so at the level of activity such as purchase of inventory, receipts of billing and
payment. AstraZeneca observes the input costs and try to prevent or reduce these costs that
ended up adding no value. They also evaluate efficiency of all main operations and enhance
where requires.
Quality management: Systems of management accounting monitors costs that is related
to quality which contribute in improving the operations of business continuous. With the
measurement of quality cost and tying these cost with quality of goods and services. A proper
system always find out the place where changes are required for enhancing the quality. These
small changes and focus on weak areas leads to business achieve sustainable growth in the long
term (Zadorozhnyi and Averkyn, 2019).
3. Conclusion and recommendations
In the part B, it has been shown that if AstraZeneca analyse their position in terms of
funds effectively with the use of numerous methods that were described above like analysis of
cost, analysis of budgets, planning and controlling of scare financial resources by taking the
corrective measures over all business operations and marketing functions as well.
The conclusion can be drawn from the part B, that managerial accounting is very
essential for sourcing the accounting information to management so that, senior managers and
other employees can use this financial information for the well being of internal management and
framing important strategies and decisions related to functions of organisation. It is very
important as it fulfils the requirements of business. It also provides support in determining the
short as well as long term objectives of organisation and shows the path by which business is
able to achieve that specific goals along with fulfilling the objectives of their employees as well.

CONCLUSION
The above report draws the conclusion, that administration accounting sets a coordination
among the various steps involve in the maintenance of accounting reports in terms of ensuring
smooth functioning of business activities within the workplace of an organisation. Management
accounting data affects the organisation internally and helps the managers in framing different
strategies for its functions. For capital expenditure on projects like venture firm requires a proper
budget for maintaining the capital funds after generating the revenue with a objective of
achieving continuous growth and also support the operations in the short as well as long term.
Moreover, organisation can reach the desired position in the market.

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