Evaluating Budgetary Control Tools & Financial Problem Management

This report examines budgetary control as a method for comparing actual outcomes with predefined budgets, highlighting variances and allocating them to responsibility centers for corrective action. It details various planning tools used for budgetary control, including variance analysis, adjustment of funds, zero-based budgeting, and responsibility accounting, outlining their respective benefits and drawbacks. The report further specifies how organizations adapt their accounting systems to manage financial problems, such as changes in government policies and unreasonable costs, by comparing the management accounting tools used by Synergy Manufacturing Company Ltd. and Jaguar Land Rover. The analysis concludes that effective use of budgetary control tools can enhance coordination, motivate employees, and optimize resource utilization, while tailored management accounting systems can address specific financial challenges and maintain optimal inventory levels.

Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK-..............................................................................................................................................1
P4:-Benefits and drawbacks of several types of tools used for budgetary control.....................1
P5:- Specify how organisations are conforming accounting system to manage financial
problems......................................................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES ...............................................................................................................................5

INTRODUCTION
Budgetary control is the process of controlling and monitoring the budgets maintained by
comparing actual and standard performance. Budgetary planning is a term used to prepare a
budget and utilising the same for reduce the risk of an enterprise. Co-ordination and
maximisation of profit is gained through proper planning of budget. By finding out
deviations,firm can take remedial measures to correct the actual performance. This report will
contain advantages and disadvantages of different planning tools used for controlling budget in
P4 and comparison of distinct accounting systems needed to tackle various financial problems in
P5.
TASK
P4:-Benefits and drawbacks of several types of tools used for budgetary control
Budgetary control is a technique through which actual outcomes are compared with
predefined budgets. Differences in the performance which is known as variances are allotted to
various responsibility centres which either take corrective actions or modify the actual
budget(Englund and Gerdin, 2018). There are various planning tools used for budgetary control
can be explained as given below-
1. Variance analysis-Every department is required to maintain budget and while comparing
actual and standard performance deviation are to be find out. Variances can be further
classified as favourable or unfavourable.
Advantages of variance analysis-
 By adopting variance approach an organisation can easily identify risk and work in a
proactive manner which distinguish it from its competitors.
Disadvantage of variance-
 It is a complex process because it requires a lot of activities to be performed such as
inspecting variance and taking measures to correct it. There is lot of cost incurred to
conduct the tasks of this planning tool.
2. Adjustment of funds-It is a planning tool used in proper allocation of funds from one
project to another project. This techniques is commonly used by top level
managers(Hanrahan and et.al., 2018).
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Merits of adjustment of funds-
 It is used to manage the processes of business in an efficient manner and by diversifying
funds to another project will result in increased product range of an organisation.
Demerit of adjustment of funds-
 To adhere this tool it demands a separate functional department which requires highly
qualified professionals. Recruiting those personnel also results in deployment of high cost
(Seidl, Wheeler and Zuo, 2020).
3. Zero based budgeting- As its name suggests,this budget is framed from zero base for
each new time period. It is developed by considering present expenses by not taking
into consideration what was the previous allocated budget.
◦ Pros of ZBD-
It builds on the cost benefit analysis which simply means that it takes into account every single
item and remove those which are not delivering expected return on investment.
◦ Cons of ZBD-
Applying changes to budget can create trouble because it can disrupt all the operations of the
business and creates ambiguity among various departments as well.
4. Responsibility accounting- In this separate centres named as cost, profit and
investment centre are maintained. Each employee records regarding its capability
is recorded and on the basis its skills decision related to promotion and demotion
is taken.
 Benefits of responsibility accounting
 It aids in creating a well defined structure by implying accountability and
responsibilities of each employee (Shehata and et.al., 2020).
 Limitations of responsibility accounting-
It may also result in conflict of interest between employer and employee organisational and
individual goals.
P5:- Specify how organisations are conforming accounting system to manage financial problems
Financial problems- It is a situation when firm is not able to pay its debts and liabilities
and stuck with the shortage of funds. There are many circumstances which leads to problem of
finance such as-
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 Change in policies of government- For every economy all the policies are framed by
government so changes in it can impact financial performance of an organisation.
 Unreasonable cost- There are various types of costs but some of costs are uncontrollable
and it increases the financial burden of an enterprise (Tan, 2019).
Differences between Synergy manufacturing company Ltd. And Jaguar company
management accounting tools to respond financial trouble-
Particular Synergy manufacturing company Jaguar Land Rover
Financial problem Major financial problem this
manufacturing concern is facing that
it is incurring huge amount on the
expenses which increases its cost and
reduces the overall profitability of an
organisation.
Change in technology and
inflation increases the price of
parts of auto-mobile and raw
material cost also shows a sharp
rise in amount. It requires more
liquidity in a business which
creates trouble to arrange new
resources for the updated
technology.
Management
accounting system
used
Cost accounting system should be
adopted by this concern to eliminate
the unnecessary cost involved and
keep track on the company's cost. It
includes process,job and direct
costing.
Inventory management system is
used to analyse the inventory level
required in a business. It involves
just in time, economic order
quantity techniques to evaluate
the actual stock necessary to run
its operation.
Applicability of
management
accounting system
By applying cost accounting system,
it gives better understanding of the
cost of each component of operating
cycle such as work in progress,raw
material and finished goods.
Due to application of management
system of inventory ideal stock or
excess stock issues can be solved
and results in proper availability
of stock according to the varied
situations.
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CONCLUSION
From the above report it can be concluded that by using the tools of budgetary control,
coordination can be gained through following a uniform budget and motivate employees to stick
upon its goals which eventually results in increasing efficiency of an organisation. Optimum
utilisation of resources can be gained because there will be no overlapping in carrying activities
of a business. Comparing Land Rover and synergy manufacturing company adoption to
management accounting system helps to interpret the differences between various financial
problem faced by them and remedial measures can be taken by them to reduce its cost and
maintaining inventory levels.
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REFERENCES
Books and Journals
Englund, H. and Gerdin, J., 2018. Management accounting and the paradox of embedded
agency: A framework for analyzing sources of structural change. Management
Accounting Research, 38.pp.1-11.
Hanrahan, B.,et.al., 2018. Accounting for the various contributions to pyroelectricity in lead
zirconate titanate thin films. Journal of Applied Physics, 123(12). p.124104.
Seidl, C., Wheeler, S.A. and Zuo, A., 2020. High turbidity: Water valuation and accounting in
the Murray-Darling Basin. Agricultural Water Management, 230, p.105929.
Shehata, N.,et.al., 2020. Incorporating Nearpod in undergraduate financial accounting classes in
Egypt. Accounting Education, 29(2). pp.137-152.
Tan, H.C., 2019. Using a structured collaborative learning approach in a case-based management
accounting course. Journal of Accounting education, 49. p.100638.
(Englund and Gerdin, 2018.)(Hanrahan and et.al., 2018)(Seidl, Wheeler and Zuo, 2020)(Shehata
and et.al., 2020)(Tan, 2019)
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