Management Accounting Report: Dell's Financial Strategies and Analysis

This report delves into the realm of management accounting, exploring its core principles and practical applications, with a specific focus on the Dell company. The report begins by defining management accounting and differentiating it from other accounting types, highlighting its role in informed decision-making. It then examines various management accounting systems, including traditional, lean, throughput, and transfer pricing. The report details methods used in management accounting reports, such as financial planning, statement analysis, cost accounting, and ratio analysis, and elucidates the advantages and uses of these systems. A significant portion of the report, spanning multiple tasks, focuses on Dell as a case study. It evaluates how management accounting systems and reporting are integrated within Dell's organizational processes, interprets data from financial reports, and explores different planning tools for budgetary control. The report also analyzes the advantages and disadvantages of these tools, demonstrates their application in preparing and forecasting budgets for Dell, and assesses how these tools respond to problems, leading to sustainable business development. It concludes with a comparative analysis of Dell and Lenovo's responses to financial problems and examines how management accounting contributes to Dell's sustainable success. The report provides insights into key financial aspects and tools used by Dell.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Management Accounting and types of Management Accounting System...........................1
1.2 Methods for Management Accounting report.......................................................................2
1.3 Advantages and uses of Management Accounting System...................................................3
TASK 2............................................................................................................................................4
P3 & M2......................................................................................................................................4
D1 Evaluation of how management accounting systems and management accounting
reporting is integrated within organisational processes in the context of Dell...........................5
TASK 3............................................................................................................................................6
3.1 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control........................................................................................................................6
3.2 Use of different planning tools and their application for preparing and forecasting budgets
in the context of Dell...................................................................................................................7
3.3 Evaluation of how planning tools respond appropriately to solving problems in the context
of Dell , leading to sustainable business development ...............................................................8
TASK 4 ........................................................................................................................................9
4.1 Comparison between Dell and Lenovo that how they respond to financial problems .........9
4.2 Analyse how, in responding to financial problems, management accounting can lead an
organisation such as Dell to sustainable success.........................................................................9
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting is to be done for gathering information related to the accounting
aspects. Most of the companies follow management accounting system for generating effective
information. In the presented report Dell company has been taken which follows the
management accounting system. The given report describes the meaning of management
accounting, its types and methods. The benefits of applying management accounting has also
presented. The absorption costing and marginal costing have also described. Different planning
tools and its application for forecasting budget has been explained. The solutions to the financial
problems of management accounting has been given in this report.
TASK 1
1.1 Management Accounting and types of Management Accounting System
Management Accounting:
The bases of Management Accounting are financial accounting and cost accounting. It is
the systematic process of analysing, measuring, interpreting and presenting the accounting
information which has collected through financial accounting and cost accounting. This helps in
taking decisions, policy creation and day to day or routine operations of an organisation by the
management.(Kaplan and Atkinson, 2015) The information related to the cost of products or
services purchased by the company that uses by the management accountant.
Types of Management Accounting System:
There are four types of Management accounting. These are as given below:
 Traditional cost accounting
 Lean accounting
 Throughput accounting Transfer pricing
 Traditional cost accounting:- In the traditional cost accounting the calculation has done
which includes direct cost of raw material, labour and overhead. There is a cost driver
which causes the cost to occur, such as direct material hours, direct labours and machine
hours.(Simons, 2013)

 Lean accounting:- Lean accounting is the term which is generally used for changes made
in company's accounting, controlling, measurement and the management processes
(Fullerton, Kennedy and Widener, 2014). This supports to lean manufacturing and lean
thinking.
 Throughput accounting:- Throughput accounting is completely new in management
accounting. It is based on principle and approach of simplified management. It provides
support for decision making in context to the company's profitability improvement.
 Transfer pricing:- In simple sense, transfer pricing means the price which arises when
transfer of goods or services take place between holding to subsidiary company or from
subsidiary to holding company.
1.2 Methods for Management Accounting report
Tools and techniques which are used in management accounting are as follows:
1. Financial planning: Financial planning gives proper directions to the activities for well
performing. The major objective of any organisation is to earn maximum profits. And
this objective is fulfil by doing proper and sound financial planning.
2. Financial statement analysis: In this profit and loss account and balance sheet are to be
prepared on the comparative basis for knowing the financial position of the company.
This is to be done on yearly basis means after at end of every accounting period.
3. Cost accounting: Cost accounting is to be done for analysing the data related to cost. It
shows the data of cost according to product, process, department, branch and the like
(Gibassier and Schaltegger, 2015). The actual costs are to be compared with the standard
ones. This comparison shows the deviation if any and helps to management for taking
decisions for the differences.
4. Fund flow analysis: Fund flow analysis gives the over view of the transfer of funds from
one period of time to another. In this funds from operations and working capital changes
are to be calculated. It also provides information with comparison to previous year that
whether the funds are properly used or not.
5. Cash flow analysis: This analysis gives the information related to the outflow and inflow
of cash in the organization (Cooper, Ezzamel and Qu, 2016). It includes three activities:
operating activities, investing activities and financing activities.
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Job costing: This is related with the recording all expenditure in the production or
manufacturing process. It plays a vital role in order to make a product in a cost effective manner
and also evaluating records which helps use in the future course of action.
Batch costing: It is similar to the job costing and related to the items manufacturing for a stock
items. There are various products which required to assembling in a way so that they can make
minimise the operational cost of a product.
Contract costing: This type of costing basically belong to the civil and construction industry. In
such type of approach a company required record all spending for each contract so that they can
review these calculation in the near future.
6. Ratio analysis: Ratio analysis shows the organisation's financial performance in several
key areas which helps in comparative analysis with the previous year.
1.3 Advantages and uses of Management Accounting System
Advantages of Management accounting: Increase efficiency- Management accounting increases the efficiency of operations. For
evaluation and comparison of performance is accurate because everything is done with
scientific system. Profit maximization- By using budgetary control and capital budgeting tools of
management accounting organisation can easily reduce its operating cost and capital
expenditures. And by this company can earn super profits. Simplify the financial statements- With the help of various managerial decisions the
management accountant can generate technical reports in a simple and easily
understandable way. Control on cash flow- One of the advantage of this is that it makes control over cash
flows of the company (Fullerton, Kennedy and Widener, 2013). The accountant can
undergo with the incoming and outgoing of money and also can control over if there is
any misuse of money. Critical decisions of business- Management accounting is more power in taking critical
business decision-making. This can be done at global level.
Uses of Management accounting:
1. Record keeping-
 Business transactions are to be recorded
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 Result of financial changes is to be measured
 Financial effects of future transactions are to be projected Internal report is to be prepared in user friendly format
2. Planning and controlled-
 Cash collecting
 Stocks can be controlled
 Expenses are to be controlled
 Performance is to be monitored and coordinated Gross margins has to be monitored
3. Decision making-
 For pricing, capital investment and marketing information of cost is to be used
 Market and product profitability can be evaluated
 Financial effects of strategies and plans are to be evaluated
TASK 2
P3 & M2
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D1 Evaluation of how management accounting systems and management accounting reporting
is integrated within organisational processes in the context of Dell
Management of Dell is using various management accounting techniques for reporting.
There are various techniques that can be used by the management of Dell for better planning and
organising so that they can achieve their targets in available limited financial and non financial
issues(Kaplan and Atkinson,2015). Other than this they also need to manage better
organisational control so that various departments of Dell can coordinate with each other and
they collectively achieve sustainable development.
D2 Interpretation of data from Financial reports
As per the calculated data, if the company 'Dell' go with the absorption costing method
then there will be loss of 660000, in which fixed cost of production included. Whereas if
company go with the marginal costing then there will be situation of no profit and no loss.
Marginal costing is also called as variable costing.
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TASK 3
3.1 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control
Budgetary control is a process in which different tools are used through whicfh an
organisation can make plan and they can do forecasting for their proposed project(Renz, 2016).
They can employ their available resources in a way so that they can get better return on available
funds. There are numerous planning tools which can be used by Dell and its management in
managing their funds. In preparation of budget Dell has certain objectives which are mentioned
below :
 It defines the ultimate objective of Dell.
 Through budgets management of cited entity can provide the plans to achieve desired
objectives of it.
 Through budget they can generate coordination between various departments of Dell
There are certain advantages as well as there are certain disadvantages of planning tools
which are used for the preparation budget(Tappura and et.al., 2015). These advantages and
disadvantages are mentioned below :
Advantages
 Goals and objectives of cited entity can be defined easily. Because they need to make
efforts in accordance with the target.
 Through it cited entity can easily fix their targets for a certain period. They can form
short term as well as long term targets through preparation of budgets.
 It can help management of Dell to cut down the cost of production.
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Disadvantages Budget preparation includes research and analysis which clearly means there is
involvement of cost in the preparation of budget(Sulaiman,Ramli and Mitchell,2016).
Hence it becomes tough for small business enterprise to prepare budget. Budgeting and its planning tools makes organisational system more rigid and less flexible
hence employees who are working in cited entity may feel more stressed.
3.2 Use of different planning tools and their application for preparing and forecasting budgets in
the context of Dell
There are different planning tools which can be used for the preparation of budget so that
cited entity can do forecasting of their projects. As forecasting provide a prediction of future
projects through which they can take better steps in achievement of various organisational goals
and objectives. There are certain planning tools which can be used for making analysis about
different factors and for making budget :
 Variance Analysis : it is an quantitative investigation of the difference between actual
results and budgeted output. Through it the organisations can investigate that which
factors are responsible for variances(EBRAHIMI and MOGHADASPOUR,2015). When
management of Dell prepares their budget they estimate the output of that budget as per
certain estimations which are needed to be estimated on some scientifically approved
basis so that they can be reliable.
 Ratio Analysis : Ratio analysis is made through analysing the financial statements of
cited entity on the basis of certain scientiok fically approved ratios so that stakeholders of
Dell can get better information of it. Through such ratio which are scientifically approved
stakeholder like employees, suppliers, shareholders, customers and local government etc.
can take better decisions regarding Dell.
 Financial Analysis : Financial statements and its analysis can be helpful for management
of cited entity in forecasting as after assessing the data of previous year they can make a
target to expand organisational growth.
 Zero Base Budgeting : It is method of budgeting which be used by management of Dell
for forecasting. Zero base budgeting is a budget in which all expenses are justified for
each new period. As the name describe itself, it starts from a zero base. Management of
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Dell can analyse every function which occurs in an organisation after that they can assess
the needs and cost involved in it.
3.3 Evaluation of how planning tools respond appropriately to solving problems in the context of
Dell , leading to sustainable business development
Various planning tools can be used for responding towards problems which are faced by
management of Dell. As in the given case study management accounting expertise enhances
service sales by 10%. sustainability in development is necessary and to achieve sustainable
development management of Dell needs to identify various factors which can affect sustainable
development. Budgeting and planning tools helps cited entity in estimation of various issues
which are related with its future projects. Budgeting is process which needs to be done step by
step so that proper and effective results can be derived out of budget(Ambe, 2016). Sustainable
development is concerned with the creation of ideas and after such creation management needs
to identity the best way to achieve that target. Budget allows them to make certain goals and it
also providexs them the path to achieve those goals and objectives. Various planning tools like
variance analysis helps in comparison of budgeted and actual output so that management can
deal with the factors which are responsible for such variances. Some other planning tools which
can assist Dell and its management in solving various problems and to achieve sustainable
development are as follows : Activity Based Budgeting : it can be defined as a method of budgeting which is actually
designed so that entity which is using this planning tool can bring transparency in its
operation(Noordin,2016). It is a method in which revenues generated through some
research activities done by Dell can be allotted to that unit of business which is
responsible for generating such revenue. Target Costing Management : It can be defined as an approach through which
management of Dell can identify cost of product life cycle. Through which management
can grew functionality and quality as well as they can earn their expected profit. Through
which sustainability in development can be made. Balanced Score Card : It can be defined as strategy performance tool through which cited
entity can manage its performance. Through it management can efficiently respond
towards its problems and they can achieve their target of sustainable development.
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TASK 4
4.1 Comparison between Dell and Lenovo that how they respond to financial problems
There are certain issues which an organisation faces during the course of business.
Budgeting and its techniques helps cited entity to respond towards various issues which arises
during the course of business. Both the companies are facing issues like availability of
inadequate finance for the proposed projects. Budgeting helps an entity to allocate its resources
in a way so that they can get better returns on their funds hence they need to use planning tools
for the better management of its funds(Otley, 2016). Comparison Lenovo and Dell of techniques
through which they respond to financial problems is mentioned below :
Dell Lenovo
 Management of dell is using ratio
analysis for analysing their financial
statements.
 Dell is using Variance analysis for
getting information about the factors
which creates gap between budgeted
and actual output
 Management of Lenovo is using fund
flow analysis and cash flow analysis for
analysing their financial statements.
 Lenovo is not using such variances
rather than this they are following
traditional methods in comparison of
outputs.
4.2 Analyse how, in responding to financial problems, management accounting can lead an
organisation such as Dell to sustainable success
The financial problems are faces by every organisation in order to give to their best
products to customers. Financial problem is that situation where the money causes a worries. To
overcome with financial problem it is impossible for the company. The following are the some
steps Dell company deal with the financial problems.
 To identify the underlying problem that causing difficulties – The first step is to
overcome with financial problems which are causing the difficulties for Dell to raise
funds from different sources(Shields, 2015 ). To cope up with these problems the manger
have to identify the real sources of financial troubles.
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