Analysis of Management Accounting Systems and Financial Performance
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This report delves into the core concepts of management accounting, differentiating it from financial accounting and exploring various systems like cost accounting, job costing, and inventory management. It analyzes the application of these systems within Khaadi, a case study, highlighting their importance in planning, controlling, decision-making, and problem-solving. The report further examines different methods used for management accounting reporting, including cost reports, performance reports, and budgetary control. It covers essential elements such as fixed costs, variable costs, and variance analysis. Furthermore, the report investigates how organizations adapt managerial accounting systems to address financial problems, emphasizing the use of benchmarks, key performance indicators, and budgetary targets. Finally, it evaluates how accounting planning tools contribute to sustainable success, incorporating strategic planning and various planning tools such as budgeting and costing systems. This analysis provides a comprehensive understanding of management accounting's role in organizational financial health and strategic decision-making, using the case study of Khaadi.
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Table of Contents
DEFINITION:....................................................................................................................................................................... 4
PRINCIPLES OF MANAGEMENT ACCOUNTING..................................................................................................................4
1. DESIGNING AND COMPILING :...................................................................................................................................4
2. MANAGEMENT BY EXCEPTION :................................................................................................................................4
3. INTEGRETION :...........................................................................................................................................................4
4. USE OF RETURN ON INVESTMENT :...........................................................................................................................4
5. CONTROLLABLE AND UNCONTROLLABLE COSTS :.....................................................................................................4
DIFFERENCES BETWEEN FINANCIAL AND MANAGEMENT ACCOUNTING..........................................................................4
MANAGEMENT ACCOUNTING :.........................................................................................................................................4
FINANACIAL ACCOUNTING :..............................................................................................................................................4
FOLLOWING ESSENTIALS OF MANAGEMENT ACCOUNTING SYSTEM................................................................................5
Types of Management Accounting Systems (MAS)...........................................................................................................5
COST- ACCOUNTING SYSTEM............................................................................................................................................5
JOB- COSTING SYSTEM......................................................................................................................................................5
INVENTORY MANAGEMENT SYSTEM....................................................................................................................................5
PRIZE- OPTIMIZING SYSTEM..............................................................................................................................................6
INTEGRATION OF MANAGEMNT ACCOUNTING WITHIN KHAADI AND ITS USEFLNESS FOR THE MANAGEMNET.............6
1. PLANNING..................................................................................................................................................................... 6
2. CONTROLLING...............................................................................................................................................................6
3. DECISION-MAKING........................................................................................................................................................6
4. GOAL SETTING...............................................................................................................................................................6
5. PROBLEM-SOLVING.......................................................................................................................................................6
DIFFERENT METHODS USED FOR MANAGEMENT ACCOUNTING REPORTING..................................................................6
LOII........................................................................................................................................................................................ 7
COST:..................................................................................................................................................................................... 7
FIXED COSTS:.........................................................................................................................................................................7
CVP:....................................................................................................................................................................................... 7
COST VARIANCE:...................................................................................................................................................................7
INVENTORY COSTS:...............................................................................................................................................................7
MARGINAL COSTING:............................................................................................................................................................7
ABSORPTION COSTING:.........................................................................................................................................................8
FIFO:...................................................................................................................................................................................... 9
LIFO:.................................................................................................................................................................................... 10
WEIGHTED AVERAGE COST (WAC) :....................................................................................................................................10
VARIANCE ANALYSIS :..........................................................................................................................................................10
SALES PRICE VARIANCE:......................................................................................................................................................10
DEFINITION:....................................................................................................................................................................... 4
PRINCIPLES OF MANAGEMENT ACCOUNTING..................................................................................................................4
1. DESIGNING AND COMPILING :...................................................................................................................................4
2. MANAGEMENT BY EXCEPTION :................................................................................................................................4
3. INTEGRETION :...........................................................................................................................................................4
4. USE OF RETURN ON INVESTMENT :...........................................................................................................................4
5. CONTROLLABLE AND UNCONTROLLABLE COSTS :.....................................................................................................4
DIFFERENCES BETWEEN FINANCIAL AND MANAGEMENT ACCOUNTING..........................................................................4
MANAGEMENT ACCOUNTING :.........................................................................................................................................4
FINANACIAL ACCOUNTING :..............................................................................................................................................4
FOLLOWING ESSENTIALS OF MANAGEMENT ACCOUNTING SYSTEM................................................................................5
Types of Management Accounting Systems (MAS)...........................................................................................................5
COST- ACCOUNTING SYSTEM............................................................................................................................................5
JOB- COSTING SYSTEM......................................................................................................................................................5
INVENTORY MANAGEMENT SYSTEM....................................................................................................................................5
PRIZE- OPTIMIZING SYSTEM..............................................................................................................................................6
INTEGRATION OF MANAGEMNT ACCOUNTING WITHIN KHAADI AND ITS USEFLNESS FOR THE MANAGEMNET.............6
1. PLANNING..................................................................................................................................................................... 6
2. CONTROLLING...............................................................................................................................................................6
3. DECISION-MAKING........................................................................................................................................................6
4. GOAL SETTING...............................................................................................................................................................6
5. PROBLEM-SOLVING.......................................................................................................................................................6
DIFFERENT METHODS USED FOR MANAGEMENT ACCOUNTING REPORTING..................................................................6
LOII........................................................................................................................................................................................ 7
COST:..................................................................................................................................................................................... 7
FIXED COSTS:.........................................................................................................................................................................7
CVP:....................................................................................................................................................................................... 7
COST VARIANCE:...................................................................................................................................................................7
INVENTORY COSTS:...............................................................................................................................................................7
MARGINAL COSTING:............................................................................................................................................................7
ABSORPTION COSTING:.........................................................................................................................................................8
FIFO:...................................................................................................................................................................................... 9
LIFO:.................................................................................................................................................................................... 10
WEIGHTED AVERAGE COST (WAC) :....................................................................................................................................10
VARIANCE ANALYSIS :..........................................................................................................................................................10
SALES PRICE VARIANCE:......................................................................................................................................................10
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SALES VOLUME VARIANCE:.................................................................................................................................................10
MATERIAL RATE VARIANCE:................................................................................................................................................11
MATERIAL QUANTITY VARIANCE:........................................................................................................................................11
LABOUR EFFICIENCY VARIANCE:..........................................................................................................................................11
LABOUR RATE VARIANCE:...................................................................................................................................................11
Direct Labor Rate Variance:.........................................................................................................................................12
VPOH RATE VARIANCE:.......................................................................................................................................................12
VPOH EFFICIENCY VARIANCE:..............................................................................................................................................12
FIXED P.O.H VARIANCE:.......................................................................................................................................................12
FORMULA:...................................................................................................................................................................... 12
BUDGET........................................................................................................................................................................... 15
COST REPORT..................................................................................................................................................................16
PERFORMANCE REPORT..................................................................................................................................................16
DISADVANTAGES AND ADVANTAGES OF DIFFERENT KINDS OF PLANNING TOOLS USED FOR BUDGETARY CONTROL...16
MERITS OF BUDGETARY CONTROL..................................................................................................................................16
DISADVANTAGES OF BUDGETARY CONTROL...................................................................................................................17
THE USE OF DIFFERENT PLANNING TOOLS AND THEIR APPLICATION FOR PREPARING AND FORECASTING BUDGETS...17
Use of Control and Planning Budget:..................................................................................................................................17
Pricing:................................................................................................................................................................................ 17
Costing System:...................................................................................................................................................................17
Strategic planning:..............................................................................................................................................................17
COMPARE HOW ORGANIZATIONS ARE ADAPTING MANAGERIAL ACCOUNTING SYSTEMS TO RESPONDING TO
FINANCIAL PROBLEMS.....................................................................................................................................................17
TOOLS AND TECHNIQUES OF MANAGEMENT ACCOUNTANT..........................................................................................17
FINANCIAL PLANNING :.......................................................................................................................................................17
FINANCIAL STATEMENT ANALYSIS:.....................................................................................................................................18
COST ACCOUNTING:............................................................................................................................................................18
CASH FLOW ANALYSIS:........................................................................................................................................................18
STANDARD COSTING:..........................................................................................................................................................18
MARGINAL COSTING:..........................................................................................................................................................18
BUDGETARY COSTING:........................................................................................................................................................18
AN ORGANIZATION CAN REACT TO FINANCIAL PROBLEMS USING THE FOLLOWING MANAGERIAL ACCOUNTING
METHODS........................................................................................................................................................................ 18
CAPITAL BUDGET:................................................................................................................................................................19
OPERATING BUDGET:..........................................................................................................................................................19
BEHAVIOURAL IMPLICATIONS OF BUDGETS:......................................................................................................................19
1
MATERIAL RATE VARIANCE:................................................................................................................................................11
MATERIAL QUANTITY VARIANCE:........................................................................................................................................11
LABOUR EFFICIENCY VARIANCE:..........................................................................................................................................11
LABOUR RATE VARIANCE:...................................................................................................................................................11
Direct Labor Rate Variance:.........................................................................................................................................12
VPOH RATE VARIANCE:.......................................................................................................................................................12
VPOH EFFICIENCY VARIANCE:..............................................................................................................................................12
FIXED P.O.H VARIANCE:.......................................................................................................................................................12
FORMULA:...................................................................................................................................................................... 12
BUDGET........................................................................................................................................................................... 15
COST REPORT..................................................................................................................................................................16
PERFORMANCE REPORT..................................................................................................................................................16
DISADVANTAGES AND ADVANTAGES OF DIFFERENT KINDS OF PLANNING TOOLS USED FOR BUDGETARY CONTROL...16
MERITS OF BUDGETARY CONTROL..................................................................................................................................16
DISADVANTAGES OF BUDGETARY CONTROL...................................................................................................................17
THE USE OF DIFFERENT PLANNING TOOLS AND THEIR APPLICATION FOR PREPARING AND FORECASTING BUDGETS...17
Use of Control and Planning Budget:..................................................................................................................................17
Pricing:................................................................................................................................................................................ 17
Costing System:...................................................................................................................................................................17
Strategic planning:..............................................................................................................................................................17
COMPARE HOW ORGANIZATIONS ARE ADAPTING MANAGERIAL ACCOUNTING SYSTEMS TO RESPONDING TO
FINANCIAL PROBLEMS.....................................................................................................................................................17
TOOLS AND TECHNIQUES OF MANAGEMENT ACCOUNTANT..........................................................................................17
FINANCIAL PLANNING :.......................................................................................................................................................17
FINANCIAL STATEMENT ANALYSIS:.....................................................................................................................................18
COST ACCOUNTING:............................................................................................................................................................18
CASH FLOW ANALYSIS:........................................................................................................................................................18
STANDARD COSTING:..........................................................................................................................................................18
MARGINAL COSTING:..........................................................................................................................................................18
BUDGETARY COSTING:........................................................................................................................................................18
AN ORGANIZATION CAN REACT TO FINANCIAL PROBLEMS USING THE FOLLOWING MANAGERIAL ACCOUNTING
METHODS........................................................................................................................................................................ 18
CAPITAL BUDGET:................................................................................................................................................................19
OPERATING BUDGET:..........................................................................................................................................................19
BEHAVIOURAL IMPLICATIONS OF BUDGETS:......................................................................................................................19
1

COMPARE HOW ORGANISATIONS ARE ADAPTING MANAGE MENT ACCOUNTING SYSTEMS TO RESPOND TO
FINANCIAL PROBLEMS?..................................................................................................................................................20
USING BENCHMARKS, FINANCIAL AND NON-FINANCIAL KEY PERFORMANCE INDICATORS, & BUDGETARY TARGETS
TO IDENTIFY FINANCIAL PROBLE MS AND FINANCIAL VARIANCES. EXPLAIN BY USING BENCH MARKS AND BUDGETING
TARGETS HELP IDENTIFY FINANCIAL PROBLEMS AND FINANCIAL VARIANCES:...................................................................20
ANALYSIS OF HOW MANAGEMENT ACCOUNTING CAN LEAD ORGANIZATION'S KHAADI OF SUSTAINABLE SUCCESS IN
RESPONDING TO FINANCIAL PROBLEMS.......................................................................................................................20
THROUGH DEVELOPING EFFECTIVE STRATEGIES AND PROCESSES WHICH INCLUDE ACCURATE AND PROMPT
DOCUMENTATION, WHICH ALSO INCLUDES DISCLOSURE OF ALL FINANCIAL SITUATIONS THAT ARE PROPERLY
GOVERNED AND HELD AMONG THOSE WHO OCCUPY THEM?.....................................................................................21
Strategic planning is concerned with the development of decision making on the kinds of markets and businesses in
which the Khaadi and Gul Ahmed operates and includes competitive decisions on market competition strategies.
Strategic planning also utilizes financial analysis information from different management systems such as pricing,
budgeting and quality measurement systems and also internally and externally organizational sources......................21
EVALUATE HOW ACCOUNTING PLANNING TOOLS ADDRESS FINANCIAL PROBLEMS APPROPRIATELY TO LEAD
ORGANISATIONS TO SUSTAINABLE SUCCESS:.................................................................................................................21
PLANNING AND CONTROLLING:..........................................................................................................................................21
IMPLEMENTING PLANS:......................................................................................................................................................21
COMPETITIVE EDGE:............................................................................................................................................................21
Bibliography........................................................................................................................................................................ 22
2
FINANCIAL PROBLEMS?..................................................................................................................................................20
USING BENCHMARKS, FINANCIAL AND NON-FINANCIAL KEY PERFORMANCE INDICATORS, & BUDGETARY TARGETS
TO IDENTIFY FINANCIAL PROBLE MS AND FINANCIAL VARIANCES. EXPLAIN BY USING BENCH MARKS AND BUDGETING
TARGETS HELP IDENTIFY FINANCIAL PROBLEMS AND FINANCIAL VARIANCES:...................................................................20
ANALYSIS OF HOW MANAGEMENT ACCOUNTING CAN LEAD ORGANIZATION'S KHAADI OF SUSTAINABLE SUCCESS IN
RESPONDING TO FINANCIAL PROBLEMS.......................................................................................................................20
THROUGH DEVELOPING EFFECTIVE STRATEGIES AND PROCESSES WHICH INCLUDE ACCURATE AND PROMPT
DOCUMENTATION, WHICH ALSO INCLUDES DISCLOSURE OF ALL FINANCIAL SITUATIONS THAT ARE PROPERLY
GOVERNED AND HELD AMONG THOSE WHO OCCUPY THEM?.....................................................................................21
Strategic planning is concerned with the development of decision making on the kinds of markets and businesses in
which the Khaadi and Gul Ahmed operates and includes competitive decisions on market competition strategies.
Strategic planning also utilizes financial analysis information from different management systems such as pricing,
budgeting and quality measurement systems and also internally and externally organizational sources......................21
EVALUATE HOW ACCOUNTING PLANNING TOOLS ADDRESS FINANCIAL PROBLEMS APPROPRIATELY TO LEAD
ORGANISATIONS TO SUSTAINABLE SUCCESS:.................................................................................................................21
PLANNING AND CONTROLLING:..........................................................................................................................................21
IMPLEMENTING PLANS:......................................................................................................................................................21
COMPETITIVE EDGE:............................................................................................................................................................21
Bibliography........................................................................................................................................................................ 22
2

DEFINITION:
The Institute of Cost and Management Accountants, London, has defined Management Accounting as: “The application
of professional knowledge and skill in the preparation of accounting information in such a way as to assist management
in the formulation of policies and in the planning and control of the operation of the undertakings”. (Tuovila, 2019)
PRINCIPLES OF MANAGEMENT ACCOUNTING
The following principles of management accounting are:
1. DESIGNING AND COMPILING :
In order to satisfy the requirements of the particular company and/or specific issue, accounting data, documents,
reports, statements and other proof of previous, current or future outcomes should be intended and compiled. It
implies that the accounting management system is intended to present the appropriate information in such a manner.
2. MANAGEMENT BY EXCEPTION :
When presenting data to management, the principle of exceptional leadership is followed. It implies that the
management accounting system follows the budgetary control system and regular costing methods. This compares the
real performance with the predefined performance to evaluate the variances.
3. INTEGRETION :
It indicates that all of the management's necessary information is built so they can be used successfully at the maximum,
while providing the accounting service at the minimum cost.
4. USE OF RETURN ON INVESTMENT :
Return on investment is otherwise called Capital Employed Return. The return rate demonstrates the company
concern's effectiveness. The capital used is calculated in terms of actual cash value for this purpose.
5. CONTROLLABLE AND UNCONTROLLABLE COSTS :
Costs are categorized into two kinds, i.e. controllable and uncontrollable, based on cost controllability. Taking measures
to control uncontrollable expenses is meaningless. Therefore, the accounting leadership scheme can provide
controllable cost control methods. (Dominic, 2019)
DIFFERENCES BETWEEN FINANCIAL AND MANAGEMENT ACCOUNTING
MANAGEMENT ACCOUNTING :
It is used internally. It is not governed by any law. Its consumers are an organization's management. It helps to make
internal decisions. It is not mandatory to prepare and present financial statements. It will not be audited. There is no
specified rate in which statements are prepared and presented. Monetary and non-monetary data includes
management reports.
FINANACIAL ACCOUNTING :
It is mainly used for external reporting, although it is also reviewed by management. It must be provided in accordance
with norms. Shareholders, investors and regulators are its consumers. It helps outsiders to make investment decisions
and regulators to monitor them. It is compulsory to prepare and present. It is necessary to audit financial statements.
Financial information for the financial year must be prepared and submitted. Financial accounts only include financial
data. (AccountingTools, 2018)
3
The Institute of Cost and Management Accountants, London, has defined Management Accounting as: “The application
of professional knowledge and skill in the preparation of accounting information in such a way as to assist management
in the formulation of policies and in the planning and control of the operation of the undertakings”. (Tuovila, 2019)
PRINCIPLES OF MANAGEMENT ACCOUNTING
The following principles of management accounting are:
1. DESIGNING AND COMPILING :
In order to satisfy the requirements of the particular company and/or specific issue, accounting data, documents,
reports, statements and other proof of previous, current or future outcomes should be intended and compiled. It
implies that the accounting management system is intended to present the appropriate information in such a manner.
2. MANAGEMENT BY EXCEPTION :
When presenting data to management, the principle of exceptional leadership is followed. It implies that the
management accounting system follows the budgetary control system and regular costing methods. This compares the
real performance with the predefined performance to evaluate the variances.
3. INTEGRETION :
It indicates that all of the management's necessary information is built so they can be used successfully at the maximum,
while providing the accounting service at the minimum cost.
4. USE OF RETURN ON INVESTMENT :
Return on investment is otherwise called Capital Employed Return. The return rate demonstrates the company
concern's effectiveness. The capital used is calculated in terms of actual cash value for this purpose.
5. CONTROLLABLE AND UNCONTROLLABLE COSTS :
Costs are categorized into two kinds, i.e. controllable and uncontrollable, based on cost controllability. Taking measures
to control uncontrollable expenses is meaningless. Therefore, the accounting leadership scheme can provide
controllable cost control methods. (Dominic, 2019)
DIFFERENCES BETWEEN FINANCIAL AND MANAGEMENT ACCOUNTING
MANAGEMENT ACCOUNTING :
It is used internally. It is not governed by any law. Its consumers are an organization's management. It helps to make
internal decisions. It is not mandatory to prepare and present financial statements. It will not be audited. There is no
specified rate in which statements are prepared and presented. Monetary and non-monetary data includes
management reports.
FINANACIAL ACCOUNTING :
It is mainly used for external reporting, although it is also reviewed by management. It must be provided in accordance
with norms. Shareholders, investors and regulators are its consumers. It helps outsiders to make investment decisions
and regulators to monitor them. It is compulsory to prepare and present. It is necessary to audit financial statements.
Financial information for the financial year must be prepared and submitted. Financial accounts only include financial
data. (AccountingTools, 2018)
3
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FOLLOWING ESSENTIALS OF MANAGEMENT ACCOUNTING SYSTEM
Types of Management Accounting Systems (MAS)
1. Cost-accounting systems
2. Job-costing system
3. Inventory management systems
4. Price-optimizing systems
COST- ACCOUNTING SYSTEM
Corporations like Khaadi apply the framework of costing system for approximate cost determination of its products in
order to carry out inventory valuation, analysis of profitability, and control costs. The costs are allocated in cost
accounting system on the basis of either costs incurred due to activity or traditional costing system. It is essential to
estimate the costs of products for effective functioning of Khaadi’s business. This system aims at determining the costs
of productions through calculating the direct and variable costs incurred at every production step and also the fixed
costs like equipment depreciation. Costing process can calculate and report expenses separately and then correlate
input figures to actual results or revenue to aid the company's management in assessing financial performance. Business
managers depend on general and cost-specific accounting information as any of the company's activities can be clarified
through its value. Cost accounting is known to be the key concept of management accounting as it incorporates the
analytical tools such as budgetary control marginal costing, absorption costing, and inventory control that are used
by management to effectively discharge their reproducibility. (XPLAIND, 2019)
JOB- COSTING SYSTEM
Job costing refers to the system of allocating production costs to the product's individual items or batches. It is applied if
the manufactured products differ from each other. It involves collecting data on the costs of a single company or
production work. You may need the details to submit price data under the agreement to a customer in which expenses
are refunded. Therefore, the information is useful to assess the reliability of the Khaadi’s valuation process, which must
be capable of quoting rates which require reasonable income. In addition, the information may be used to assign
inventory costs to processed products. The job costing system needs three types of direct information workers, direct
materials, and overhead to be accumulated. (AccountingTools, 2018)
INVENTORY MANAGEMENT SYSTEM
Inventory management relates to the technique used by the company to control and supervise the ordering use and
storage of elements used in the manufacturing of the products it sells. Inventory management system mixes the use of
barcode scanners, desktop software, mobile phones and barcode printers to simplify inventory management such as
consumer goods, stocks and supplies. It is also the practice of monitoring and supervising the quantities for sale of the
manufactured goods. The goal of inventory management is to understand the current inventory levels accurately and to
minimize over blocking and understanding situations. Managers should have insight to be willing to make appropriate
inventory decisions by an accurate tracking of quantities around the stocking location. A Khaadi's stock is one of the
main resources and savings funds which are related to selling products. Inventory management system functions are the
following: generating purchase orders, acquiring, relocating, changing and disposing of stock. It also makes marketing
orders, pick-ups, packing and consumer delivery. This executes process checks and records, produces, handles, plans,
and exchanges actual stock statements and barcode labels for printing. The advantages of an Khaadi's inventory
management program include increasing the Khaadi's bottom line, enhancing the quality of the inventory, and
improving the company's workflow. (Pontius, 2019)
PRIZE- OPTIMIZING SYSTEM
Price management relates to applying mathematical analysis to the Khaadi to decide how customers can respond across
different channels to different prices of their goods and services. It is also used to evaluate the costs that a Khaadi
4
Types of Management Accounting Systems (MAS)
1. Cost-accounting systems
2. Job-costing system
3. Inventory management systems
4. Price-optimizing systems
COST- ACCOUNTING SYSTEM
Corporations like Khaadi apply the framework of costing system for approximate cost determination of its products in
order to carry out inventory valuation, analysis of profitability, and control costs. The costs are allocated in cost
accounting system on the basis of either costs incurred due to activity or traditional costing system. It is essential to
estimate the costs of products for effective functioning of Khaadi’s business. This system aims at determining the costs
of productions through calculating the direct and variable costs incurred at every production step and also the fixed
costs like equipment depreciation. Costing process can calculate and report expenses separately and then correlate
input figures to actual results or revenue to aid the company's management in assessing financial performance. Business
managers depend on general and cost-specific accounting information as any of the company's activities can be clarified
through its value. Cost accounting is known to be the key concept of management accounting as it incorporates the
analytical tools such as budgetary control marginal costing, absorption costing, and inventory control that are used
by management to effectively discharge their reproducibility. (XPLAIND, 2019)
JOB- COSTING SYSTEM
Job costing refers to the system of allocating production costs to the product's individual items or batches. It is applied if
the manufactured products differ from each other. It involves collecting data on the costs of a single company or
production work. You may need the details to submit price data under the agreement to a customer in which expenses
are refunded. Therefore, the information is useful to assess the reliability of the Khaadi’s valuation process, which must
be capable of quoting rates which require reasonable income. In addition, the information may be used to assign
inventory costs to processed products. The job costing system needs three types of direct information workers, direct
materials, and overhead to be accumulated. (AccountingTools, 2018)
INVENTORY MANAGEMENT SYSTEM
Inventory management relates to the technique used by the company to control and supervise the ordering use and
storage of elements used in the manufacturing of the products it sells. Inventory management system mixes the use of
barcode scanners, desktop software, mobile phones and barcode printers to simplify inventory management such as
consumer goods, stocks and supplies. It is also the practice of monitoring and supervising the quantities for sale of the
manufactured goods. The goal of inventory management is to understand the current inventory levels accurately and to
minimize over blocking and understanding situations. Managers should have insight to be willing to make appropriate
inventory decisions by an accurate tracking of quantities around the stocking location. A Khaadi's stock is one of the
main resources and savings funds which are related to selling products. Inventory management system functions are the
following: generating purchase orders, acquiring, relocating, changing and disposing of stock. It also makes marketing
orders, pick-ups, packing and consumer delivery. This executes process checks and records, produces, handles, plans,
and exchanges actual stock statements and barcode labels for printing. The advantages of an Khaadi's inventory
management program include increasing the Khaadi's bottom line, enhancing the quality of the inventory, and
improving the company's workflow. (Pontius, 2019)
PRIZE- OPTIMIZING SYSTEM
Price management relates to applying mathematical analysis to the Khaadi to decide how customers can respond across
different channels to different prices of their goods and services. It is also used to evaluate the costs that a Khaadi
4

decides will best meet its goals, such as optimizing operating profit. Exploring an alternative through the highest
achievable or cost-effective performance under the constraints provided by increasing desired aspects and reducing
unwanted aspects.
INTEGRATION OF MANAGEMNT ACCOUNTING WITHIN KHAADI AND ITS USEFLNESS FOR THE MANAGEMNET
THE BENEFITS OF MANAGEMENT ACCOUNTING SYSTEMS AND THEIR APPLICATIONS
Management accounting is primarily used to generate data within an organization for executives. While financial
accounting is of greatest benefit to stakeholders, financial accounting enables to achieve inner organizational goals.
1. Planning
2. Controlling
3. Decision-Making
4. Problem-Solving
5. Goal setting
1. PLANNING
Future planning is a main focus of financial accounting. Management auditors create more comprehensive reports than
economic accountants. They can include particular product data, market reach and regional data
2. CONTROLLING
The managerial accounting data provides managers a higher feeling of control over the achievement of an organization.
During the control stage, executives examine managerial accounting quantitative and qualitative reviews and make
further choices.
3. DECISION-MAKING
Accounting management also perceives how certain choices can influence the conduct of a manager. A manager makes
long-term choices with a permanent effect, thus using financial accounting to create plans and communicate data with
the objective of enhancing management choices.
4. GOAL SETTING
Accounting management also perceives how certain choices can influence the conduct of a manager. A manager makes
lengthy-term choices that have a permanent effect, thus using financial accounting to create proposals and
communicate data with the aim of enhancing management choices
5. PROBLEM-SOLVING
Unlike financial accounting, which concentrates on historical data, management accounting perceives real performance
and relates it to objectives and outlooks for the future. This data is used to define problems that may emerge from
expenditures or changes in manufacturing and to create options (toppr, 2019)
DIFFERENT METHODS USED FOR MANAGEMENT ACCOUNTING REPORTING
Managerial accounting relies on internal financial reporting data received. Controlling, planning and decision-making are
applied for management accounting. Management accountants are based on the balance sheet, report of profit and
analysis of cash flow. However, in evaluating corporate information, they also apply other forms of accounting reports.
Which can involve monitoring of the budgets, material and quality.
1. Cost Report
2. Performance Report
5
achievable or cost-effective performance under the constraints provided by increasing desired aspects and reducing
unwanted aspects.
INTEGRATION OF MANAGEMNT ACCOUNTING WITHIN KHAADI AND ITS USEFLNESS FOR THE MANAGEMNET
THE BENEFITS OF MANAGEMENT ACCOUNTING SYSTEMS AND THEIR APPLICATIONS
Management accounting is primarily used to generate data within an organization for executives. While financial
accounting is of greatest benefit to stakeholders, financial accounting enables to achieve inner organizational goals.
1. Planning
2. Controlling
3. Decision-Making
4. Problem-Solving
5. Goal setting
1. PLANNING
Future planning is a main focus of financial accounting. Management auditors create more comprehensive reports than
economic accountants. They can include particular product data, market reach and regional data
2. CONTROLLING
The managerial accounting data provides managers a higher feeling of control over the achievement of an organization.
During the control stage, executives examine managerial accounting quantitative and qualitative reviews and make
further choices.
3. DECISION-MAKING
Accounting management also perceives how certain choices can influence the conduct of a manager. A manager makes
long-term choices with a permanent effect, thus using financial accounting to create plans and communicate data with
the objective of enhancing management choices.
4. GOAL SETTING
Accounting management also perceives how certain choices can influence the conduct of a manager. A manager makes
lengthy-term choices that have a permanent effect, thus using financial accounting to create proposals and
communicate data with the aim of enhancing management choices
5. PROBLEM-SOLVING
Unlike financial accounting, which concentrates on historical data, management accounting perceives real performance
and relates it to objectives and outlooks for the future. This data is used to define problems that may emerge from
expenditures or changes in manufacturing and to create options (toppr, 2019)
DIFFERENT METHODS USED FOR MANAGEMENT ACCOUNTING REPORTING
Managerial accounting relies on internal financial reporting data received. Controlling, planning and decision-making are
applied for management accounting. Management accountants are based on the balance sheet, report of profit and
analysis of cash flow. However, in evaluating corporate information, they also apply other forms of accounting reports.
Which can involve monitoring of the budgets, material and quality.
1. Cost Report
2. Performance Report
5

3. Budget
LOII
COST:
Cost is specified in accounting as the amount of cash (or the equivalent of cash) given up for an item. Cost includes all
the cost of getting an item in operation or ready for use. The price of an object in the inventory for instance, also
involves the freight-in cost of the item. Land cost covers all the costs of getting the property ready for use.
(AccountingCoach, LLC, n.d.)
FIXED COSTS:
A fixed cost is a cost which does not alter as the quantity of goods or services generated or consumed increases or
decreases. Fixed costs are bills that a company pays, regardless of any particular business operation. Companies may
typically have two kinds of costs, fixed costs or variable costs, culminating in their total costs combined.
CVP:
Analysis of cost-volume-profit (CVP) is a cost accounting approach which explores the effect on operating profit of
different levels of volume and costs. The cost model, more commonly known as break-even analysis, attempts to
determine the break-even point of different pricing levels and expense systems, that can be helpful for managers
making quick-term economic decisions.
COST VARIANCE:
The disparity between the actual expenses reported and the regular costs calculated at the start of a period is a cost
variation. These variances are used by management to analyze and monitor the progress of production processes,
budgets, and other operations.
INVENTORY COSTS:
The cost of inventory is the cost of procurement, storage and inventory management. It involves costs such as the cost
of ordering, the cost of carrying and the cost of shortage / storage. Cost of inventory can be divided into three bullet
points.
Ordering Cost
Carrying Cost
Shortage or Stock out
MARGINAL COSTING:
The marginal cost of production in economics is the change in total cost of production resulting from the creation or
production of one additional unit. (BusinessJargons, n.d.)
Marginal costing
Alpha Beta Total
Sales 207000 120000 327000
Less: Cost of sales
Opening stock 0 0
Direct material 37500 21000 58500
Direct labor 45000 21000 66000
6
LOII
COST:
Cost is specified in accounting as the amount of cash (or the equivalent of cash) given up for an item. Cost includes all
the cost of getting an item in operation or ready for use. The price of an object in the inventory for instance, also
involves the freight-in cost of the item. Land cost covers all the costs of getting the property ready for use.
(AccountingCoach, LLC, n.d.)
FIXED COSTS:
A fixed cost is a cost which does not alter as the quantity of goods or services generated or consumed increases or
decreases. Fixed costs are bills that a company pays, regardless of any particular business operation. Companies may
typically have two kinds of costs, fixed costs or variable costs, culminating in their total costs combined.
CVP:
Analysis of cost-volume-profit (CVP) is a cost accounting approach which explores the effect on operating profit of
different levels of volume and costs. The cost model, more commonly known as break-even analysis, attempts to
determine the break-even point of different pricing levels and expense systems, that can be helpful for managers
making quick-term economic decisions.
COST VARIANCE:
The disparity between the actual expenses reported and the regular costs calculated at the start of a period is a cost
variation. These variances are used by management to analyze and monitor the progress of production processes,
budgets, and other operations.
INVENTORY COSTS:
The cost of inventory is the cost of procurement, storage and inventory management. It involves costs such as the cost
of ordering, the cost of carrying and the cost of shortage / storage. Cost of inventory can be divided into three bullet
points.
Ordering Cost
Carrying Cost
Shortage or Stock out
MARGINAL COSTING:
The marginal cost of production in economics is the change in total cost of production resulting from the creation or
production of one additional unit. (BusinessJargons, n.d.)
Marginal costing
Alpha Beta Total
Sales 207000 120000 327000
Less: Cost of sales
Opening stock 0 0
Direct material 37500 21000 58500
Direct labor 45000 21000 66000
6
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Variable Production
overheads
30000 14000 44000
Closing Stock 9000 4800 13800
Variable selling
overhead
2300 1600 3900
Contribution Margin 101200 67200 168400
Less: Fixed costs
Fixed admin overhead 27000
Fixed production
overheads
105000
Net Income 36400
ABSORPTION COSTING:
Absorption costing, also referred to as total absorption costing, is a managerial accounting technique to collect all costs
associated with producing a specific product. Direct and indirect expenses are compensated to use this system, like
specific materials direct labour, rent and insurance.
Absorption
Alpha Beta Total
Sales 207000 120000 327000
Less: Cost of
Sales
0
Opening stock 0 0 0
Direct
material
37500 21000 58500
Direct labor 45000 21000 66000
Variable
production
overheads
30000 14000 44000
Fixed
production
overheads
75000 35000 110000
Closing Stock 15000 7800 22800
7
overheads
30000 14000 44000
Closing Stock 9000 4800 13800
Variable selling
overhead
2300 1600 3900
Contribution Margin 101200 67200 168400
Less: Fixed costs
Fixed admin overhead 27000
Fixed production
overheads
105000
Net Income 36400
ABSORPTION COSTING:
Absorption costing, also referred to as total absorption costing, is a managerial accounting technique to collect all costs
associated with producing a specific product. Direct and indirect expenses are compensated to use this system, like
specific materials direct labour, rent and insurance.
Absorption
Alpha Beta Total
Sales 207000 120000 327000
Less: Cost of
Sales
0
Opening stock 0 0 0
Direct
material
37500 21000 58500
Direct labor 45000 21000 66000
Variable
production
overheads
30000 14000 44000
Fixed
production
overheads
75000 35000 110000
Closing Stock 15000 7800 22800
7

(Under)/Over
Absorbed
Overhead
5000
Gross Margin 34500 36800 76300
Less: Non-Production Overhead
Variable
selling
overhead
2300 1600 3900
Admin
overhead
27000
Net Income 45400
FIFO:
First In, First Out, widely known as FIFO, is a method of resource management and distribution that the first sells,
utilizes, or disposes of property created or acquired. FIFO states the properties with the oldest values are included in the
cost of goods sold (COGS) of the income statement for tax purposes.
FIFO
Date details Units
Cost of
unit £ Amount
Closing balance in
units
1-Jan
Opening
inventory 700 10 7000 700
3-Jan Purchases 100 12 1200 800
8-Jan Sold -500 (W1)10 5000 300
15-Jan Purchases 600 14 8400 900
19-Jan Purchases 200 15 3000 1100
25-Jan Sold -400 (W2)12 4800 700
27-Jan Sold -100 (W3)14 1400
31-Jan Closing inventory 600 (W4)15 9000 600
LIFO:
Last in, first out (LIFO) is an inventory valuation method based on the principal that the last (newest) asset acquired will
be the first asset sold.
LIFO
Date Details Units Cost of Amount Closing balance in
8
Absorbed
Overhead
5000
Gross Margin 34500 36800 76300
Less: Non-Production Overhead
Variable
selling
overhead
2300 1600 3900
Admin
overhead
27000
Net Income 45400
FIFO:
First In, First Out, widely known as FIFO, is a method of resource management and distribution that the first sells,
utilizes, or disposes of property created or acquired. FIFO states the properties with the oldest values are included in the
cost of goods sold (COGS) of the income statement for tax purposes.
FIFO
Date details Units
Cost of
unit £ Amount
Closing balance in
units
1-Jan
Opening
inventory 700 10 7000 700
3-Jan Purchases 100 12 1200 800
8-Jan Sold -500 (W1)10 5000 300
15-Jan Purchases 600 14 8400 900
19-Jan Purchases 200 15 3000 1100
25-Jan Sold -400 (W2)12 4800 700
27-Jan Sold -100 (W3)14 1400
31-Jan Closing inventory 600 (W4)15 9000 600
LIFO:
Last in, first out (LIFO) is an inventory valuation method based on the principal that the last (newest) asset acquired will
be the first asset sold.
LIFO
Date Details Units Cost of Amount Closing balance in
8

unit £ units
1-Jan Opening inventory 700 10 7000 700
3-Jan Purchases 100 12 1200 800
8-Jan Sold -500 (W1)10 5000 300
15-Jan Purchases 600 14 8400 900
19-Jan Purchases 200 15 3000 1100
25-Jan Sold -400 (W2)15 6000 700
27-Jan Sold -100 (W3)14 1400 600
31-Jan Closing inventory 600 (W4)12 7200
WEIGHTED AVERAGE COST (WAC) :
The inventory valuation system of Weighted Average Cost (WAC) utilizes a weighted average in accounting to calculate
the amount going into COGS and stocks. The weighted average cost technique divides the expense of available products
for sale by the amount of available units for sale. Under both GAAP and IFRS accounting, the WAC approach is
permitted. (CFI Education Inc, 2019)
VARIANCE ANALYSIS :
Analysis of variance seems to be an analytical tool that can be used by managers to equate actual activities to budget
estimates. In other terms, managers look at the actual expense and revenue statistics after a period is over and equate
them with what has been budgeted. Some budgets have been met and some are not continuing to be.
SALES PRICE VARIANCE:
Sales price variation is the difference between the amount, amount of money for which a business plans to market its
goods or services and the amount of revenue for which it actually sells them. Variances in sales prices is said to be either
"favorable," when sold at a price higher than expected, or "unfavorable" when selling for less than the intended or
normal price.
SALES VOLUME VARIANCE:
Sales Volume Variance is the calculation of benefit or expense change as a result of the difference between real and
budgeted volumes of sales.
FORMULA:
Sales Volume Variance (where absorption costing is used):
=(Actual Unit Sold - Budgeted Unit
Sales) x Standard Profit Per Unit
Sales Volume Variance (where marginal costing is used):
=(Actual Unit Sold - Budgeted Unit Sales)x Standard Contribution Per Unit
9
1-Jan Opening inventory 700 10 7000 700
3-Jan Purchases 100 12 1200 800
8-Jan Sold -500 (W1)10 5000 300
15-Jan Purchases 600 14 8400 900
19-Jan Purchases 200 15 3000 1100
25-Jan Sold -400 (W2)15 6000 700
27-Jan Sold -100 (W3)14 1400 600
31-Jan Closing inventory 600 (W4)12 7200
WEIGHTED AVERAGE COST (WAC) :
The inventory valuation system of Weighted Average Cost (WAC) utilizes a weighted average in accounting to calculate
the amount going into COGS and stocks. The weighted average cost technique divides the expense of available products
for sale by the amount of available units for sale. Under both GAAP and IFRS accounting, the WAC approach is
permitted. (CFI Education Inc, 2019)
VARIANCE ANALYSIS :
Analysis of variance seems to be an analytical tool that can be used by managers to equate actual activities to budget
estimates. In other terms, managers look at the actual expense and revenue statistics after a period is over and equate
them with what has been budgeted. Some budgets have been met and some are not continuing to be.
SALES PRICE VARIANCE:
Sales price variation is the difference between the amount, amount of money for which a business plans to market its
goods or services and the amount of revenue for which it actually sells them. Variances in sales prices is said to be either
"favorable," when sold at a price higher than expected, or "unfavorable" when selling for less than the intended or
normal price.
SALES VOLUME VARIANCE:
Sales Volume Variance is the calculation of benefit or expense change as a result of the difference between real and
budgeted volumes of sales.
FORMULA:
Sales Volume Variance (where absorption costing is used):
=(Actual Unit Sold - Budgeted Unit
Sales) x Standard Profit Per Unit
Sales Volume Variance (where marginal costing is used):
=(Actual Unit Sold - Budgeted Unit Sales)x Standard Contribution Per Unit
9
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MATERIAL RATE VARIANCE:
Direct Material Cost Variance is the disparity between the actual direct material cost and the standard purchased or
used quantity value
FORMULA:
=Actual Quantity x Actual Price-Actual Quantity x Standard Price
= Actual cost - Standard Cost
Where:
Actual quantity is the amount purchased over a period when the variance is measured at the time of purchase of
the material.
Actual quantity is the amount consumed throughout a period when the variance is measured at the time of the
consumption of the material
MATERIAL QUANTITY VARIANCE:
In the analysis of variation, the variance in direct materials can be divided into two: price variability and variation of
quantities The variability in the quantity of direct materials applies to the variance arising from the discrepancy in the
estimated and real amount of materials used in manufacturing.
LABOUR EFFICIENCY VARIANCE:
Direct Labor Efficiency Variance is the measure of the distinction between the standard price of the actual number of
direct working hours used over a period and the standard direct labor hours for the output level achieved.
FORMULA:
= Actual Hours x Standard Rate -Standard Hours x Standard Rate
=Standard Cost of Actual Hours- Standard Cost
Note: Since the consequence of the differential between the standard rate and the actual rate of direct labor is taken
into account separately in the variation of the direct labor rate, the gap in productivity is measured using the standard
rate.
LABOUR RATE VARIANCE:
Direct labor rate variance is the measure of the discrepancy between the actual direct labor costs and the standard
direct labor costs used over a period of time.
FORMULA:
Direct Labor Rate Variance:
=Actual Hours x Actual Rate- Actual Hours x Standard Rate
10
Direct Material Cost Variance is the disparity between the actual direct material cost and the standard purchased or
used quantity value
FORMULA:
=Actual Quantity x Actual Price-Actual Quantity x Standard Price
= Actual cost - Standard Cost
Where:
Actual quantity is the amount purchased over a period when the variance is measured at the time of purchase of
the material.
Actual quantity is the amount consumed throughout a period when the variance is measured at the time of the
consumption of the material
MATERIAL QUANTITY VARIANCE:
In the analysis of variation, the variance in direct materials can be divided into two: price variability and variation of
quantities The variability in the quantity of direct materials applies to the variance arising from the discrepancy in the
estimated and real amount of materials used in manufacturing.
LABOUR EFFICIENCY VARIANCE:
Direct Labor Efficiency Variance is the measure of the distinction between the standard price of the actual number of
direct working hours used over a period and the standard direct labor hours for the output level achieved.
FORMULA:
= Actual Hours x Standard Rate -Standard Hours x Standard Rate
=Standard Cost of Actual Hours- Standard Cost
Note: Since the consequence of the differential between the standard rate and the actual rate of direct labor is taken
into account separately in the variation of the direct labor rate, the gap in productivity is measured using the standard
rate.
LABOUR RATE VARIANCE:
Direct labor rate variance is the measure of the discrepancy between the actual direct labor costs and the standard
direct labor costs used over a period of time.
FORMULA:
Direct Labor Rate Variance:
=Actual Hours x Actual Rate- Actual Hours x Standard Rate
10

= Actual Cost -Standard Cost of Actual Hours
VPOH RATE VARIANCE:
Variable overhead efficiency variability applies to the disparity between the actual time required to produce a product
and the time duration budgeted for it, and also the effects of that discrepancy. It results from variation in efficient
performance.
VPOH EFFICIENCY VARIANCE:
The variable overhead performance variability is the discrepancy between the actual working hours and the budgeted
working hours, that are then adjusted to the standard overhead rate per hour. The formula is:
Standard overhead rate x (Actual hours - Standard hours)
= Variable overhead efficiency variance
FIXED P.O.H VARIANCE:
Fixed overhead production volume Variance, quantifies the disparity between overheads for variable production
budgeted and consumed
FORMULA:
Fixed Overhead Volume Variance:
=Absorbed Fixed overheads-Budgeted Fixed overheads
= Actual Output x FOAR* -Budgeted Output x FOAR*
* Fixed Overhead Absorption Rate per unit of output
Variance Amount
Adverse/
Favourable
Sales price variance (Actual Price – Standard Price) × Actual Units Sold
(306-300)*1200= 6*1200
7200 F
11
VPOH RATE VARIANCE:
Variable overhead efficiency variability applies to the disparity between the actual time required to produce a product
and the time duration budgeted for it, and also the effects of that discrepancy. It results from variation in efficient
performance.
VPOH EFFICIENCY VARIANCE:
The variable overhead performance variability is the discrepancy between the actual working hours and the budgeted
working hours, that are then adjusted to the standard overhead rate per hour. The formula is:
Standard overhead rate x (Actual hours - Standard hours)
= Variable overhead efficiency variance
FIXED P.O.H VARIANCE:
Fixed overhead production volume Variance, quantifies the disparity between overheads for variable production
budgeted and consumed
FORMULA:
Fixed Overhead Volume Variance:
=Absorbed Fixed overheads-Budgeted Fixed overheads
= Actual Output x FOAR* -Budgeted Output x FOAR*
* Fixed Overhead Absorption Rate per unit of output
Variance Amount
Adverse/
Favourable
Sales price variance (Actual Price – Standard Price) × Actual Units Sold
(306-300)*1200= 6*1200
7200 F
11

Sales Volume variance (Actual units sold - Budgeted units sold) x Budgeted profit
[(1200-1000) *60]
12,000 F
Material rate variance (Actual price - Standard price) x Actual quantity
(12 – 9) x 22,000
66,000 A
Material quantity
variance (Actual quantity - Standard quantity) x Standard price
(22000 - 21000) x 9
9000 A
Labour efficiency
variance (Actual hours - Standard hours) x Standard rate
(6800-7000) x 12
-2400 F
Labour rate variance (Actual rate - Standard rate) x Actual hours worked
(15-12) x 6800
20400 A
VPOH rate variance
Actual hours worked x (Actual overhead rate - standard overhead
rate)
6800 x (4.85 – 6)
-7820 F
12
[(1200-1000) *60]
12,000 F
Material rate variance (Actual price - Standard price) x Actual quantity
(12 – 9) x 22,000
66,000 A
Material quantity
variance (Actual quantity - Standard quantity) x Standard price
(22000 - 21000) x 9
9000 A
Labour efficiency
variance (Actual hours - Standard hours) x Standard rate
(6800-7000) x 12
-2400 F
Labour rate variance (Actual rate - Standard rate) x Actual hours worked
(15-12) x 6800
20400 A
VPOH rate variance
Actual hours worked x (Actual overhead rate - standard overhead
rate)
6800 x (4.85 – 6)
-7820 F
12
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VPOH efficiency variance Standard overhead rate x (Actual hours - Standard hours)
6 x (6800 - 7000)
-1200 F
Fixed P.O.H variance Actual fixed overhead - Budgeted fixed overhead
18000-15000
3000 A
Actual Gross Profit for the Period
Sales (1200*306) 367200
Less: Cost of sales
Direct material (22000*12) 264000
Direct labour (6800*15) 102000
Variable p.o.h 33000
Fixed p.o.h 18000
Less: Closing stock 48000
Actual gross profit/(loss) (1800)
Reconciliation Statement
Budgeted profit 60000
Sales volume variance 12000 F
sales price variance 7200 F
material rate variance 66000 A
material quantity variance 9000 A
labour rate variance 20400 A
Labour efficiency variance 2400 F
V.P.O.H rate variance 7800 F
V.P O.H efficiency variance 1200 F
13
6 x (6800 - 7000)
-1200 F
Fixed P.O.H variance Actual fixed overhead - Budgeted fixed overhead
18000-15000
3000 A
Actual Gross Profit for the Period
Sales (1200*306) 367200
Less: Cost of sales
Direct material (22000*12) 264000
Direct labour (6800*15) 102000
Variable p.o.h 33000
Fixed p.o.h 18000
Less: Closing stock 48000
Actual gross profit/(loss) (1800)
Reconciliation Statement
Budgeted profit 60000
Sales volume variance 12000 F
sales price variance 7200 F
material rate variance 66000 A
material quantity variance 9000 A
labour rate variance 20400 A
Labour efficiency variance 2400 F
V.P.O.H rate variance 7800 F
V.P O.H efficiency variance 1200 F
13

Fixed O.H variance 3000 F
Actual profit/(Loss) (1800)
BUDGET
A budget is a financial report used to plan future income and expenses. This may well include goods anticipated to be
sold and manufactured and resources (materials, labor and overheads) bought and consumed in a manufacturing
context. Budget scheduling is one of the main aspects of administration accounting. Estimates were made up by
applying prior-year estimates and modifying them for expected forecasts. A Khaadi's budgets mention both sources of
costs and profits. Managers make the use of new vendors to save costs as sources of raw materials. The Khaadi also
trying to achieve their goals and objectives while remaining within the amounts budgeted. (Ganti, 2019)
WHAT IS BUDGETARY CONTROL?
BUDGET PLANNING.
DIFFERENT PLANNING TOOLS.
FORCASTING (PREDICTION OF THE FUTURE)
CONTIGENCY PLANNING.
BENCHMARKING
Scenario 5
Production budget A1 A2
Units Units
Budgeted Sales 32000 56000
Add: Increase in finished goods inventory 1000 0
Less: Decrease in finished goods inventory 0 -2000
Quarter Production budget 33000 54000
Material Usage Budget B3(kg) B4(kg)
Product A1 264000 132000
Product A2 216000 162000
Total raw material usage 480000 294000
Material Purchase budget B3(kg) B4(kg) Total (£)
Total Material Usage 480000 294000 1129200
Less: Raw material opening inventory -30000 -20000 -73500
14
Actual profit/(Loss) (1800)
BUDGET
A budget is a financial report used to plan future income and expenses. This may well include goods anticipated to be
sold and manufactured and resources (materials, labor and overheads) bought and consumed in a manufacturing
context. Budget scheduling is one of the main aspects of administration accounting. Estimates were made up by
applying prior-year estimates and modifying them for expected forecasts. A Khaadi's budgets mention both sources of
costs and profits. Managers make the use of new vendors to save costs as sources of raw materials. The Khaadi also
trying to achieve their goals and objectives while remaining within the amounts budgeted. (Ganti, 2019)
WHAT IS BUDGETARY CONTROL?
BUDGET PLANNING.
DIFFERENT PLANNING TOOLS.
FORCASTING (PREDICTION OF THE FUTURE)
CONTIGENCY PLANNING.
BENCHMARKING
Scenario 5
Production budget A1 A2
Units Units
Budgeted Sales 32000 56000
Add: Increase in finished goods inventory 1000 0
Less: Decrease in finished goods inventory 0 -2000
Quarter Production budget 33000 54000
Material Usage Budget B3(kg) B4(kg)
Product A1 264000 132000
Product A2 216000 162000
Total raw material usage 480000 294000
Material Purchase budget B3(kg) B4(kg) Total (£)
Total Material Usage 480000 294000 1129200
Less: Raw material opening inventory -30000 -20000 -73500
14

Add: Raw material closing inventory 24000 14700 56460
Material purchase 474000 288700 1112160
COST REPORT
Budgets will generally be focused on regular bills (e.g. approximate costs per unit per kg, hours per unit and use per unit
of manufacturing depending on previous real accounting data plus inflation, for instance). Accounting management
measures the value of manufactured goods. It is done by taking into consideration all the overheads of the raw product,
expenses, labour and some extra costs. The numbers are then split into output quantities of products. The cost report
summarizes all the data. The report allows managers to view the product's cost value versus the selling price. It supports
the control of managers and plans profit margins (Designing Buildings Ltd, 2019)
PERFORMANCE REPORT
Management accountants use forecasts to equate actual income and expenses with the sums budgeted. Determined
disparities were measured when forming future plans and all sums data is included in the performance report. Such
statements are measured yearly, but they are formed by some companies on a quarterly or monthly basis. The reports
help managers to plan future production demands and cost increases.
DISADVANTAGES AND ADVANTAGES OF DIFFERENT KINDS OF PLANNING TOOLS USED FOR BUDGETARY CONTROL
Budgetary control refers to a method whereby budgets are organized for the future date and are contrasted with the
real results when determining the variances. Comparing budgeted amounts with exact amounts will help management
in identifying variances and immediately taking corrective action. The following are main budgetary management
objectives:
1. Defining the objectives of Khaadi.
2. Offering plans to achieve the specified objectives.
3. Coordination of the activities of various departments.
4. Efficiently and efficiently run different cost centers and divisions.
5. Improve profitability by eliminating waste.
6. Centralizing the process of management.
7. Correcting the differences between the standards set.
8. Fixing the roles of the various people in the Khaadi. (The Peak Performance Center, 2019)
MERITS OF BUDGETARY CONTROL
Budgetary management must be an important tool for controlling expenses and maximizing profits within the Khaadi.
Some of the budgetary management benefits include: this determines the company's goals, priorities, and policies. If
there are no clear objectives, the determinations of meeting any other targets shall be lost. This fixes goals as well. Every
department needs to work successfully to achieve its goal. This is also an efficient method for coordinating the
operations of the Khaadi’s different departments. It also guarantees strong cooperation between different departments.
In a case where output is under plan, budgetary management helps managers to figure out the obligation. This helps to
reduce the cost of production by reducing wasteful spending. Budgetary management contributes to the economy and
productivity by facilitating cost understanding among the employees. Budgetary control through the decentralized task
promotes centralized control. Budgetary management helps the Khaadi to run smoothly, as everything is given and
planned in advance. Budgetary management informs managers where they need the trick to solve problems without
delay.
DISADVANTAGES OF BUDGETARY CONTROL
The following are budgetary control limitations:
15
Material purchase 474000 288700 1112160
COST REPORT
Budgets will generally be focused on regular bills (e.g. approximate costs per unit per kg, hours per unit and use per unit
of manufacturing depending on previous real accounting data plus inflation, for instance). Accounting management
measures the value of manufactured goods. It is done by taking into consideration all the overheads of the raw product,
expenses, labour and some extra costs. The numbers are then split into output quantities of products. The cost report
summarizes all the data. The report allows managers to view the product's cost value versus the selling price. It supports
the control of managers and plans profit margins (Designing Buildings Ltd, 2019)
PERFORMANCE REPORT
Management accountants use forecasts to equate actual income and expenses with the sums budgeted. Determined
disparities were measured when forming future plans and all sums data is included in the performance report. Such
statements are measured yearly, but they are formed by some companies on a quarterly or monthly basis. The reports
help managers to plan future production demands and cost increases.
DISADVANTAGES AND ADVANTAGES OF DIFFERENT KINDS OF PLANNING TOOLS USED FOR BUDGETARY CONTROL
Budgetary control refers to a method whereby budgets are organized for the future date and are contrasted with the
real results when determining the variances. Comparing budgeted amounts with exact amounts will help management
in identifying variances and immediately taking corrective action. The following are main budgetary management
objectives:
1. Defining the objectives of Khaadi.
2. Offering plans to achieve the specified objectives.
3. Coordination of the activities of various departments.
4. Efficiently and efficiently run different cost centers and divisions.
5. Improve profitability by eliminating waste.
6. Centralizing the process of management.
7. Correcting the differences between the standards set.
8. Fixing the roles of the various people in the Khaadi. (The Peak Performance Center, 2019)
MERITS OF BUDGETARY CONTROL
Budgetary management must be an important tool for controlling expenses and maximizing profits within the Khaadi.
Some of the budgetary management benefits include: this determines the company's goals, priorities, and policies. If
there are no clear objectives, the determinations of meeting any other targets shall be lost. This fixes goals as well. Every
department needs to work successfully to achieve its goal. This is also an efficient method for coordinating the
operations of the Khaadi’s different departments. It also guarantees strong cooperation between different departments.
In a case where output is under plan, budgetary management helps managers to figure out the obligation. This helps to
reduce the cost of production by reducing wasteful spending. Budgetary management contributes to the economy and
productivity by facilitating cost understanding among the employees. Budgetary control through the decentralized task
promotes centralized control. Budgetary management helps the Khaadi to run smoothly, as everything is given and
planned in advance. Budgetary management informs managers where they need the trick to solve problems without
delay.
DISADVANTAGES OF BUDGETARY CONTROL
The following are budgetary control limitations:
15
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It is difficult in inflationary situations to prepare accurate budgets. Budgets include a huge expenditure that may not
afford to small businesses. Budgets will be planned for the next cycle, which will always be unknown. Circumstances that
will impact expenditures will change in the future. Future uncertainties thus reduce the use of the budget control
system. Budget planning is a management tool. It can not therefore replace management in decision-making, since it is
not a substitute for management. Quality in budgetary command depends on top management assistance. If there is a
lack of top management support, it will fail. (AccountingTools, 2018)
THE USE OF DIFFERENT PLANNING TOOLS AND THEIR APPLICATION FOR PREPARING AND FORECASTING BUDGETS
Use of Control and Planning Budget:
Preparing different types from budgets, like operating and capital expenditures. Alternate financial methods and
behavioral inferences of management budgets enable us to make considerable and timely decisions.
Pricing:
The pricing strategy can be accomplished by recognizing that rivals assess their goods or service costs and demand and
supply conditions.
Costing System:
Ordinary costing, real costing, and standard costing allow the Khaadi to reach the best costing system to maximize its
profits. Depending on the costing activity such as job costing, sample costing, process costing and cost contracting, the
costing systems vary.
Strategic planning:
Implementing SWOT, PEST, Porter's Five Forces balance score card research to the financial position of the Khaadi that
allows the management to recognize the criteria needed to grow the enterprise Khaadi.
COMPARE HOW ORGANIZATIONS ARE ADAPTING MANAGERIAL ACCOUNTING SYSTEMS TO RESPONDING TO
FINANCIAL PROBLEMS.
Today, Khaadi is faced with the question of how to adjust their business models, policies and processes to address
environmental and social problems while at the same time assessing the interest of their investors and financial
success. Khaadi believe that they have the skills they need to tackle the challenges and start competing in the stable
economy. It is argued that the valuable analysis and insight is missing from certain corporations by failing to take benefit
of the management accounting skill set. It includes making the business hypothetical situations for analysis and
sustainable development and reporting on the impact on Khaadi's performance of social and environmental aspects.
(ResearchProspect, n.d.)
TOOLS AND TECHNIQUES OF MANAGEMENT ACCOUNTANT
Management accounting offers management accounting services via its different functions, using a range of tools,
methods and techniques. No one meets all the needs of the managers. A lot of new tools and techniques have been
established with the gradual development of this subject, either placing the old ones or as additional ones.
FINANCIAL PLANNING :
Any business as Khaadi’s main goal is to maximize profits. This goal is accomplished through proper or solid financial
planning. As a result, financial planning is seen as the strongest tool to achieve business goals.
FINANCIAL STATEMENT ANALYSIS:
Profit and loss account and income statement are key accounts. For different periods, such statements are analyzed.
This sort of analysis allows management to recognize the company Khaadi's concern rate of growth. Such analysis was
carried out by way of descriptive financial statements, declaration of specific scale and review of ratios.
16
afford to small businesses. Budgets will be planned for the next cycle, which will always be unknown. Circumstances that
will impact expenditures will change in the future. Future uncertainties thus reduce the use of the budget control
system. Budget planning is a management tool. It can not therefore replace management in decision-making, since it is
not a substitute for management. Quality in budgetary command depends on top management assistance. If there is a
lack of top management support, it will fail. (AccountingTools, 2018)
THE USE OF DIFFERENT PLANNING TOOLS AND THEIR APPLICATION FOR PREPARING AND FORECASTING BUDGETS
Use of Control and Planning Budget:
Preparing different types from budgets, like operating and capital expenditures. Alternate financial methods and
behavioral inferences of management budgets enable us to make considerable and timely decisions.
Pricing:
The pricing strategy can be accomplished by recognizing that rivals assess their goods or service costs and demand and
supply conditions.
Costing System:
Ordinary costing, real costing, and standard costing allow the Khaadi to reach the best costing system to maximize its
profits. Depending on the costing activity such as job costing, sample costing, process costing and cost contracting, the
costing systems vary.
Strategic planning:
Implementing SWOT, PEST, Porter's Five Forces balance score card research to the financial position of the Khaadi that
allows the management to recognize the criteria needed to grow the enterprise Khaadi.
COMPARE HOW ORGANIZATIONS ARE ADAPTING MANAGERIAL ACCOUNTING SYSTEMS TO RESPONDING TO
FINANCIAL PROBLEMS.
Today, Khaadi is faced with the question of how to adjust their business models, policies and processes to address
environmental and social problems while at the same time assessing the interest of their investors and financial
success. Khaadi believe that they have the skills they need to tackle the challenges and start competing in the stable
economy. It is argued that the valuable analysis and insight is missing from certain corporations by failing to take benefit
of the management accounting skill set. It includes making the business hypothetical situations for analysis and
sustainable development and reporting on the impact on Khaadi's performance of social and environmental aspects.
(ResearchProspect, n.d.)
TOOLS AND TECHNIQUES OF MANAGEMENT ACCOUNTANT
Management accounting offers management accounting services via its different functions, using a range of tools,
methods and techniques. No one meets all the needs of the managers. A lot of new tools and techniques have been
established with the gradual development of this subject, either placing the old ones or as additional ones.
FINANCIAL PLANNING :
Any business as Khaadi’s main goal is to maximize profits. This goal is accomplished through proper or solid financial
planning. As a result, financial planning is seen as the strongest tool to achieve business goals.
FINANCIAL STATEMENT ANALYSIS:
Profit and loss account and income statement are key accounts. For different periods, such statements are analyzed.
This sort of analysis allows management to recognize the company Khaadi's concern rate of growth. Such analysis was
carried out by way of descriptive financial statements, declaration of specific scale and review of ratios.
16

COST ACCOUNTING:
Cost accounting presents product-wise cost data, process-wise, dept-wise, branch-wise, and the like. Compared to the
predetermined cost data. A two-cost comparison helps managers to evaluate the explanations for the discrepancy
between these costs.
CASH FLOW ANALYSIS:
This analysis can determine the movement of cash from one period to another. In addition, the reasons for cash
equilibrium and changes between two periods are also found. It surveys the operating cash and cash movement in a
period.
STANDARD COSTING:
Normal costing is the price of predetermining. It includes a yard stick for actual performance assessment. If any, it will be
used to find the reasons for the anomalies.
MARGINAL COSTING:
The marginal costing technique is used to set the sales price, select the best selling mix, make best use of scarce raw
materials and resources, make or purchase decisions, accept or reject large orders and foreign orders etc. It is based on
fixed costs, variable costs and contribution.
BUDGETARY COSTING:
Future financial demands are measured and organized on a structured basis under budgetary control techniques. It is
used to control the company Khaadi's financial performance. In a desired direction, business operations are directed.
AN ORGANIZATION CAN REACT TO FINANCIAL PROBLEMS USING THE FOLLOWING MANAGERIAL ACCOUNTING
METHODS
Identification of financial issues: use of budgetary goals, key performance measures (non-financial, financial and
measurements to identify problems and variances and fix them without delay. Financial governance: the Khaadi and Gul
Ahmed can identify financial governance and consider how it can be used to prevent or predict financial problems. The
Khaadi can use financial governance to monitor the plan. Sets of managerial accounting expertise: Khaadi and Gul
Ahmed will learn the characteristics of a managerial accountant that is efficient and effective. They also recognize how
the abilities can be used to address problems such as misappropriation of resources required to grow the Khaadi.
Effective strategies and processes: the development of programs and policies that include timely and good accounting,
the full filing of financial statements, and that the Khaadi is responsible for and owned.
THE REPORT SUGGESTS A NUMBER OF WAYS IN WHICH MANAGEMENT ACCOUNTANTS SHOULD DIRECT THEIR
COMPANY TOWARDS SUSTAINABLE BUSINESS RESULTS.
Identify the environmental and social trends that will affect the ability of the organizations Khaadi and Gul
Ahmed to generate value over time. Keeping the company's approach, success forecast, business model and licensing sustainable business’s Khaadi
issues work. Describe in strong business terms, the impact of sustainability issues, including when and how they will affect
the company’s Khaadi. Develop KPIs that support strategic and sustainable objectives. Use management accounting tools and techniques such as natural resource availability scenario scheduling,
carbon footprinting and lifecycle costing to help integrate environmental problems into the decision-making
process. Generate reports that may include sustainability impact information to notify pricing and budgeting
judgements, coordination and investment evaluations.
17
Cost accounting presents product-wise cost data, process-wise, dept-wise, branch-wise, and the like. Compared to the
predetermined cost data. A two-cost comparison helps managers to evaluate the explanations for the discrepancy
between these costs.
CASH FLOW ANALYSIS:
This analysis can determine the movement of cash from one period to another. In addition, the reasons for cash
equilibrium and changes between two periods are also found. It surveys the operating cash and cash movement in a
period.
STANDARD COSTING:
Normal costing is the price of predetermining. It includes a yard stick for actual performance assessment. If any, it will be
used to find the reasons for the anomalies.
MARGINAL COSTING:
The marginal costing technique is used to set the sales price, select the best selling mix, make best use of scarce raw
materials and resources, make or purchase decisions, accept or reject large orders and foreign orders etc. It is based on
fixed costs, variable costs and contribution.
BUDGETARY COSTING:
Future financial demands are measured and organized on a structured basis under budgetary control techniques. It is
used to control the company Khaadi's financial performance. In a desired direction, business operations are directed.
AN ORGANIZATION CAN REACT TO FINANCIAL PROBLEMS USING THE FOLLOWING MANAGERIAL ACCOUNTING
METHODS
Identification of financial issues: use of budgetary goals, key performance measures (non-financial, financial and
measurements to identify problems and variances and fix them without delay. Financial governance: the Khaadi and Gul
Ahmed can identify financial governance and consider how it can be used to prevent or predict financial problems. The
Khaadi can use financial governance to monitor the plan. Sets of managerial accounting expertise: Khaadi and Gul
Ahmed will learn the characteristics of a managerial accountant that is efficient and effective. They also recognize how
the abilities can be used to address problems such as misappropriation of resources required to grow the Khaadi.
Effective strategies and processes: the development of programs and policies that include timely and good accounting,
the full filing of financial statements, and that the Khaadi is responsible for and owned.
THE REPORT SUGGESTS A NUMBER OF WAYS IN WHICH MANAGEMENT ACCOUNTANTS SHOULD DIRECT THEIR
COMPANY TOWARDS SUSTAINABLE BUSINESS RESULTS.
Identify the environmental and social trends that will affect the ability of the organizations Khaadi and Gul
Ahmed to generate value over time. Keeping the company's approach, success forecast, business model and licensing sustainable business’s Khaadi
issues work. Describe in strong business terms, the impact of sustainability issues, including when and how they will affect
the company’s Khaadi. Develop KPIs that support strategic and sustainable objectives. Use management accounting tools and techniques such as natural resource availability scenario scheduling,
carbon footprinting and lifecycle costing to help integrate environmental problems into the decision-making
process. Generate reports that may include sustainability impact information to notify pricing and budgeting
judgements, coordination and investment evaluations.
17

Develop a reporting technique that integrates sustainable development issues to ensure the disclosure of
relevant non-financial and financial information. An example is the IIRC (International Integrated Reporting
Council) developed International Incorporated Reporting Framework. (Shanker, n.d.)
HOW BUDGETS CAN BE USED FOR PLANNING AND CONTROL FROM PREPARING A BUDGET TO DIFFERENT
TYPES OF BUDGETS AND EXPLAIN BEHAVIOURAL IMPLICATIONS OF BUDGETS FOR BUDGETARY CONTROL.
Budgets as a planning source help the organization Khaadi develop a financial plan that includes presenting how the
Khaadi will gain the necessary resources and use them over the specified period of time in different operations. Those
reflect the sums predicted as opposed to the performance's past financial data. Budgets also generate a controlled
environment within the firm Khaadi because they have an efficient and effective set of internal controls to ensure
compliance with management policies and procedures aimed at achieving goals. Budget variances are collected from the
performance reports which are then quickly identified and the administrators are informed of the important issues
linked to the causes for the output anomalies. (Accounting For Management, n.d.) The various types of budgeting
include:
!
CAPITAL BUDGET:
Capital budget requires receipts from capital and payments This applies to the plan allocating money for reviewing and
retaining long-term or fixed assets such as property, building, equipment, etc. It lets Khaadi and Gul Ahmed control the
investment that can affect the company Khaadi's long-term plans and to provide the firm with strategic direction.
Capital budget preparation includes such steps :
Preparation for Khaadi's priorities report.
Cash flow analysis to determine costs and revenue.
Estimation of the projected expenditure costs and assessment of the funds needed for the financing.
Create a spreadsheet based on the information gathered and make decisions on behalf of the information.
OPERATING BUDGET:
–The planning of the operating budget is concerned with the representation of the costs of the Khaadi, the expected
costs and the expected income for a certain period of time. In the event that Khaadi and Gul Ahmed takes into account
the company's operating operations, ensuring that the proper system is adopted by the Khaadi's day-to-day practices
and no anomalies were noted. The expense falling within the operating budget includes the wages of the employee.
Costs related to business activity, depreciation, advertising, and cost of sales. Preparing a realistic operating budget
would involve learning from past historical experience and taking into account additional costs and industry factors.
BEHAVIOURAL IMPLICATIONS OF BUDGETS:
Interdepartmental conflict – Sometimes the budgeting process becomes an informal negotiation process for an
organization’s Khaadi where managers from various departments keep pace for organizational resources. This
leads to dilution of objectives and managers are trying to gain further power and recognition by trying to blame
one another for failing to achieve the goals they require.
Budgetary slack–Budgetary slack happens when the disparity is noticed in the expected revenue or costs and the
realistic estimate of the same. It occurs when the managers intentionally overestimate or neglect the expenses
and try to obtain additional funds to support the activity level budgeted.
The excessive pressure that Budgets – Budgets generate should not impose excessive pressure or tension on the
organization's Khaadi senior executives, bosses and other employees. Budget expectations should be specific and
functional and must not be too high or too low.
Participatory budgeting–The participatory approach to the budgeting process includes the involvement of line
managers and lower-level staff in the preparing of the budget so that people affected by the budget could
participate in setting a standard for themselves. It gives them the feeling that it is our budget and gives them
some sort of responsibility.
Dysfunctional behavior–Due to unreasonable expectations and inadequate budget application, circumstances
arise in which subordinate managers have a 31 damaging budget outlook, which in turn affects the achievement
18
relevant non-financial and financial information. An example is the IIRC (International Integrated Reporting
Council) developed International Incorporated Reporting Framework. (Shanker, n.d.)
HOW BUDGETS CAN BE USED FOR PLANNING AND CONTROL FROM PREPARING A BUDGET TO DIFFERENT
TYPES OF BUDGETS AND EXPLAIN BEHAVIOURAL IMPLICATIONS OF BUDGETS FOR BUDGETARY CONTROL.
Budgets as a planning source help the organization Khaadi develop a financial plan that includes presenting how the
Khaadi will gain the necessary resources and use them over the specified period of time in different operations. Those
reflect the sums predicted as opposed to the performance's past financial data. Budgets also generate a controlled
environment within the firm Khaadi because they have an efficient and effective set of internal controls to ensure
compliance with management policies and procedures aimed at achieving goals. Budget variances are collected from the
performance reports which are then quickly identified and the administrators are informed of the important issues
linked to the causes for the output anomalies. (Accounting For Management, n.d.) The various types of budgeting
include:
!
CAPITAL BUDGET:
Capital budget requires receipts from capital and payments This applies to the plan allocating money for reviewing and
retaining long-term or fixed assets such as property, building, equipment, etc. It lets Khaadi and Gul Ahmed control the
investment that can affect the company Khaadi's long-term plans and to provide the firm with strategic direction.
Capital budget preparation includes such steps :
Preparation for Khaadi's priorities report.
Cash flow analysis to determine costs and revenue.
Estimation of the projected expenditure costs and assessment of the funds needed for the financing.
Create a spreadsheet based on the information gathered and make decisions on behalf of the information.
OPERATING BUDGET:
–The planning of the operating budget is concerned with the representation of the costs of the Khaadi, the expected
costs and the expected income for a certain period of time. In the event that Khaadi and Gul Ahmed takes into account
the company's operating operations, ensuring that the proper system is adopted by the Khaadi's day-to-day practices
and no anomalies were noted. The expense falling within the operating budget includes the wages of the employee.
Costs related to business activity, depreciation, advertising, and cost of sales. Preparing a realistic operating budget
would involve learning from past historical experience and taking into account additional costs and industry factors.
BEHAVIOURAL IMPLICATIONS OF BUDGETS:
Interdepartmental conflict – Sometimes the budgeting process becomes an informal negotiation process for an
organization’s Khaadi where managers from various departments keep pace for organizational resources. This
leads to dilution of objectives and managers are trying to gain further power and recognition by trying to blame
one another for failing to achieve the goals they require.
Budgetary slack–Budgetary slack happens when the disparity is noticed in the expected revenue or costs and the
realistic estimate of the same. It occurs when the managers intentionally overestimate or neglect the expenses
and try to obtain additional funds to support the activity level budgeted.
The excessive pressure that Budgets – Budgets generate should not impose excessive pressure or tension on the
organization's Khaadi senior executives, bosses and other employees. Budget expectations should be specific and
functional and must not be too high or too low.
Participatory budgeting–The participatory approach to the budgeting process includes the involvement of line
managers and lower-level staff in the preparing of the budget so that people affected by the budget could
participate in setting a standard for themselves. It gives them the feeling that it is our budget and gives them
some sort of responsibility.
Dysfunctional behavior–Due to unreasonable expectations and inadequate budget application, circumstances
arise in which subordinate managers have a 31 damaging budget outlook, which in turn affects the achievement
18
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of organizational objectives. This is usually due to the confrontation between individual behavior and
organizational goals.
COMPARE HOW ORGANISATIONS ARE ADAPTING MANAGE MENT ACCOUNTING SYSTEMS TO RESPOND TO
FINANCIAL PROBLEMS?
USING BENCHMARKS, FINANCIAL AND NON-FINANCIAL KEY PERFORMANCE INDICATORS, & BUDGETARY
TARGETS TO IDENTIFY FINANCIAL PROBLE MS AND FINANCIAL VARIANCES. EXPLAIN BY USING BENCH MARKS
AND BUDGETING TARGETS HELP IDENTIFY FINANCIAL PROBLEMS AND FINANCIAL VARIANCES:
Over the past few years, new business trends have emerged where data has been seen as the most vital resource for
assessing the Khaadi and Gul Ahmed’s performances, recognizing the financial problems correlated with the variances
contained in the standard array of performance indicators. This has resulted in the use of different management
accounting methods which set the benchmarks using financial and non-financial primary performance indicators that
measure the company Khaadi's performance which represents how it tends to focus on the long-term sustainable
aspect. The use of budgetary management in the planning and execution of multiple business activities of Khaadi and
Gul Ahmed would enable the corporation focus on achieving the standards set for the expected performance to achieve
the company Khaadi's desired goals
ANALYSIS OF HOW MANAGEMENT ACCOUNTING CAN LEAD ORGANIZATION'S KHAADI OF SUSTAINABLE SUCCESS IN
RESPONDING TO FINANCIAL PROBLEMS
The role of management accounting in Khaadi and Gul Ahmed’s sustainable success can be outlined in the following
points:
Managers will be required with the plans and policies to be implemented to achieve the strategies and
sustainability goals.
The management of accounting tools and techniques such as marginal costing, standard costing, fall-up of
analysis, etc. will assist to integrate sustainable issues into the different decision-making procedures
Management accounting helps to produce reports that include sustainability impact information that will help
to understand pricing, budgeting and strategic planning decisions.
Helps to develop a reporting strategy that integrates sustainable problems and, in turn, enables financial and
non-financial information to be reported..
THROUGH DEVELOPING EFFECTIVE STRATEGIES AND PROCESSES WHICH INCLUDE ACCURATE AND PROMPT
DOCUMENTATION, WHICH ALSO INCLUDES DISCLOSURE OF ALL FINANCIAL SITUATIONS THAT ARE PROPERLY
GOVERNED AND HELD AMONG THOSE WHO OCCUPY THEM?
Strategic planning is concerned with the development of decision making on the kinds of markets and
businesses in which the Khaadi and Gul Ahmed operates and includes competitive decisions on market
competition strategies. Strategic planning also utilizes financial analysis information from different
management systems such as pricing, budgeting and quality measurement systems and also internally and
externally organizational sources.
Sewport Ltd.’s management accountants will help implement these techniques using the scheduling and control systems
as listed below:
Budgeting systems – These systems must be linked to long-term plans in order to generate annual budgets that
can defend organization Khaadi's strategies.
Performance measurement systems – These can be used for comparison of actual outcomes to that of
related budgets and various other targets that focus on organizational strategies.
19
organizational goals.
COMPARE HOW ORGANISATIONS ARE ADAPTING MANAGE MENT ACCOUNTING SYSTEMS TO RESPOND TO
FINANCIAL PROBLEMS?
USING BENCHMARKS, FINANCIAL AND NON-FINANCIAL KEY PERFORMANCE INDICATORS, & BUDGETARY
TARGETS TO IDENTIFY FINANCIAL PROBLE MS AND FINANCIAL VARIANCES. EXPLAIN BY USING BENCH MARKS
AND BUDGETING TARGETS HELP IDENTIFY FINANCIAL PROBLEMS AND FINANCIAL VARIANCES:
Over the past few years, new business trends have emerged where data has been seen as the most vital resource for
assessing the Khaadi and Gul Ahmed’s performances, recognizing the financial problems correlated with the variances
contained in the standard array of performance indicators. This has resulted in the use of different management
accounting methods which set the benchmarks using financial and non-financial primary performance indicators that
measure the company Khaadi's performance which represents how it tends to focus on the long-term sustainable
aspect. The use of budgetary management in the planning and execution of multiple business activities of Khaadi and
Gul Ahmed would enable the corporation focus on achieving the standards set for the expected performance to achieve
the company Khaadi's desired goals
ANALYSIS OF HOW MANAGEMENT ACCOUNTING CAN LEAD ORGANIZATION'S KHAADI OF SUSTAINABLE SUCCESS IN
RESPONDING TO FINANCIAL PROBLEMS
The role of management accounting in Khaadi and Gul Ahmed’s sustainable success can be outlined in the following
points:
Managers will be required with the plans and policies to be implemented to achieve the strategies and
sustainability goals.
The management of accounting tools and techniques such as marginal costing, standard costing, fall-up of
analysis, etc. will assist to integrate sustainable issues into the different decision-making procedures
Management accounting helps to produce reports that include sustainability impact information that will help
to understand pricing, budgeting and strategic planning decisions.
Helps to develop a reporting strategy that integrates sustainable problems and, in turn, enables financial and
non-financial information to be reported..
THROUGH DEVELOPING EFFECTIVE STRATEGIES AND PROCESSES WHICH INCLUDE ACCURATE AND PROMPT
DOCUMENTATION, WHICH ALSO INCLUDES DISCLOSURE OF ALL FINANCIAL SITUATIONS THAT ARE PROPERLY
GOVERNED AND HELD AMONG THOSE WHO OCCUPY THEM?
Strategic planning is concerned with the development of decision making on the kinds of markets and
businesses in which the Khaadi and Gul Ahmed operates and includes competitive decisions on market
competition strategies. Strategic planning also utilizes financial analysis information from different
management systems such as pricing, budgeting and quality measurement systems and also internally and
externally organizational sources.
Sewport Ltd.’s management accountants will help implement these techniques using the scheduling and control systems
as listed below:
Budgeting systems – These systems must be linked to long-term plans in order to generate annual budgets that
can defend organization Khaadi's strategies.
Performance measurement systems – These can be used for comparison of actual outcomes to that of
related budgets and various other targets that focus on organizational strategies.
19

EVALUATE HOW ACCOUNTING PLANNING TOOLS ADDRESS FINANCIAL PROBLEMS APPROPRIATELY TO LEAD
ORGANISATIONS TO SUSTAINABLE SUCCESS:
With the help of management accounting techniques and tools, the multiple planning tools help management to identify
financial difficulties. The information obtained from these planning tools helps to take tactical directions and financial
decisions which can make a contribution to the financial success of Khaadi and Gul Ahmed. The tools can
help, implement, monitoring and financial decisions can be made appropriately. Financial data processing and
assessment will assist in external disclosure, which will in effect ensure the company Khaadi's sustainable growth. With
the implementation of planning resources, the organization Khaadi's will have a significant impact on its sustainability
issues. (Dietrich, 2019)
In the way explained below, management accounting relates to different levels of planning and strategic decisions.
PLANNING AND CONTROLLING:
This is the key element in management accounting of Khaadi and Gul Ahmed. will put into place a plans and establish a
direction for the company Khaadi and monitoring system to ensure that all activities are carried out in accordance with
the plans.
IMPLEMENTING PLANS:
Implementing strategies – Managers utilize management accounting methods to gather information on a regular basis,
including forecasts, progress reports and product costs, and execute the strategies planned during the budgeting
process. This helps Gul Ahmed management to allocate funds according to the needs of different departments and
divisions, including each process.
COMPETITIVE EDGE:
It can be said that well-managed organizations are focusing their strategies and goals on creating an enterprise
Khaadi's competitive advantage. Consequently, organizational strategies using management accounting techniques are
very well focused on gaining a competitive advantage in the market while focusing on minimal cost and brand
recognition.
20
ORGANISATIONS TO SUSTAINABLE SUCCESS:
With the help of management accounting techniques and tools, the multiple planning tools help management to identify
financial difficulties. The information obtained from these planning tools helps to take tactical directions and financial
decisions which can make a contribution to the financial success of Khaadi and Gul Ahmed. The tools can
help, implement, monitoring and financial decisions can be made appropriately. Financial data processing and
assessment will assist in external disclosure, which will in effect ensure the company Khaadi's sustainable growth. With
the implementation of planning resources, the organization Khaadi's will have a significant impact on its sustainability
issues. (Dietrich, 2019)
In the way explained below, management accounting relates to different levels of planning and strategic decisions.
PLANNING AND CONTROLLING:
This is the key element in management accounting of Khaadi and Gul Ahmed. will put into place a plans and establish a
direction for the company Khaadi and monitoring system to ensure that all activities are carried out in accordance with
the plans.
IMPLEMENTING PLANS:
Implementing strategies – Managers utilize management accounting methods to gather information on a regular basis,
including forecasts, progress reports and product costs, and execute the strategies planned during the budgeting
process. This helps Gul Ahmed management to allocate funds according to the needs of different departments and
divisions, including each process.
COMPETITIVE EDGE:
It can be said that well-managed organizations are focusing their strategies and goals on creating an enterprise
Khaadi's competitive advantage. Consequently, organizational strategies using management accounting techniques are
very well focused on gaining a competitive advantage in the market while focusing on minimal cost and brand
recognition.
20

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21
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Available at: https://www.accountingformanagement.org/problems/
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Available at: https://www.accountingcoach.com/terms/C/cost
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