Unit 5: Analysis of Effective Planning Tools for Managing Accounts

This report examines effective planning tools used in management accounting, focusing on the Marks and Spencer case study. It introduces management accounting, defining its role in managing financial statements. The report details various tools such as zero-based budgeting, variance analysis, and responsibility accounting, explaining their advantages and disadvantages. It further explores how management accounting is applied in areas like risk management, negotiation, and project management. The conclusion emphasizes the importance of these tools in improving decision-making and overcoming financial challenges, ultimately enhancing a company's financial performance.

Unit 5 - Effective
Planning Tools for
Managing Accounts-
A2

Table of Content
 INTRODUCTION
 Tools of management accounting
 Compare ways in which management accounting is used and applied
 CONCLUSION
 REFERENCES

INTRODUCTION
 Management accounting is defined as managing financial statements of business entity.
 This report is based on the case study of Marks and Spencer Company in respect to manage the financial accounts and records of business entity.
 The organisation is associated with retail sector and establish in the year 1884 by Michael Marks and Thomas Spencer.
 This report will demonstrate different techniques and tools used under management accounting to demonstrate about the financial position of business entity.
 Furthermore, report will demonstrate about different accounting practices that overcome different challenges related to management accounting.

Tools of management accounting
Zero based budgeting
 Zero based budgeting is a budgetary tool used in management accounting.
 This budgetary tool start from zero as it does not involve any previous experience
while preparing budget.
 Under this technique every expenditure involved in budget justified through suitable
reason behind entertaining such an expense.
 This budgeting technique form budget based on current need and requirement of
business entity.
Advantage of zero based budgeting
 This budgeting technique provide cost based analysis to business entity.
 It prioritises resource allocation efficiency.
Disadvantage of zero based budgeting
 It is complex as compare to other budgeting techniques.
 Its linked to tangibility

Cont..
Variance Analysis
 Variance analysis is a technique used in budgetary planning.
 This technique denotes the difference between budget and actual figures.
 This basically denote the difference between planned elements and actual figures in the financial records.
 Variance is further segregated into different types' category such as material, labour, overhead and fixed overhead.
Advantage of variance analysis
 This tool is effective as it draws an attention over significant differences between planned estimates and actual figures
generated.
 This tool further provide a significant benefit to management by identifying the areas where assets of company are not
utilising properly.
Disadvantage of variance analysis
 Variance analysis contain significant disadvantage that resist the use of this tool in management accounting practice.
 The major drawback attached with this tool is this it takes long time to examine the impacts.

Cont..
Responsibility accounting
 Budget control contain many techniques.
 Responsibility accounting is another crucial technique that management at Marks and Spencer Company used to achieve the best level of management of funds and financial resources.
 This technique contains various centres like cost centre, profit centre and investment centre.
 All different centres part of management accounting technique is segregated into department under organisation hierarchy of Marks and Spencer Company and employees are deputed
under such departments.
Advantage of responsibility accounting
 It provides a sound mechanism to control all the responsibilities attached with the organisation.
 It allows company to improve the organisation structure and also to examine about the individual responsibility of employees in entity.
Disadvantage of responsibility accounting
 This technique is confusing and time confusing at the same time.
 In order to achieve success under this technique proper system for management accounting need to maintain by company in case of absence of any proper system this technique is
completely ineffective.

Compare ways in which management accounting is used and applied
Risk management
 It is the prominent area where management accounting system is used.
 This is among the core function associated with management accounting.
 Risk is always a part of business organisation and this system help in understanding potential level of
impacts company needed to address in against to channelize business practices.
Negotiation and influencing
 This is another possible area where management accounting is used.
 Decision related to negotiation in context to all professional and working direction attached with the
company is a part of management accounting system.
 This practice allow company to maximises its return involve under every deal Marks and Spencer
Company undertake.

Cont..
Project and relationship management
 Project management is one of the core business area under management accounting.
 The responsibility of finance department is to mange every single project company
undertake as a part of functional direction.
 Project management is about to manage the financial aspect of every project.
Effectiveness of management accounting
 Management accounting technique help in managing risk inherent under driving cost
competitiveness.
 This system allow company to connect products with profitability.
 This system also allow business entity to generate maximum level of value through
new products.

CONCLUSION
 Management accounting provide financial information to management of company so that best level of financial decisions can be taken in
the organisation.
 This provides various system or tools like relationship management, budgetary control, variance analysis and such related tools that allow
business entity taking bets level of decision in favour of company.
 The key advantage management accounting system provide to business entity is that it improve the decision-making ability of business
by overcoming all restrictions attached with decision.
 This entire concept effective enough to address all kinds of financial problem company get to face in against to usual business operation.
 Project management is one of the key functional direction attached with management accounting.

REFERENCES
 Arunruangsirilert, T. and Chonglerttham, S., 2017. Effect of corporate governance characteristics on strategic management accounting in
Thailand. Asian review of Accounting.
 Cooper, D. J., Ezzamel, M. and Qu, S. Q., 2017. Popularizing a management accounting idea: The case of the balanced
scorecard. Contemporary Accounting Research. 34(2). pp.991-1025.
 Möller, K., Schäffer, U. and Verbeeten, F., 2020. Digitalization in management accounting and control: an editorial.
 Petera, P. and Šoljaková, L., 2020. Use of strategic management accounting techniques by companies in the Czech Republic. Economic
research-ekonomska istraživanja. 33(1). pp.46-67.
 Samuel, S., 2018. A conceptual framework for teaching management accounting. Journal of Accounting Education. 44. pp.25-34.
