Report on Management Accounting: Planning Tools and Monetary Issues

This report delves into the realm of management accounting, focusing on the significance of planning tools in business operations. It explores various budgetary control methods, including cash, capital, flexible, and fixed budgets, highlighting their advantages and disadvantages. The report als...Read More

MANAGEMENT
ACCOUNTING

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 3............................................................................................................................................3
P4. Advantages and disadvantages of various kind of planning tools of budgetary control.......3
P5. Comparison of ways by which business entities are overcoming from their monetary
issues. ..........................................................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

EXECUTIVE SUMMARY
The project report summarise about role of planning tools in order to manage different
kind of aspects of business. In addition, the further part of report abstracts about monetary issues
and possible alternatives for overcoming in less time period.
INTRODUCTION
The Ma is an accounting mechanism connected to a structured method of evaluation and
compilation of financial and anti-monetary data in order to produce internal reports
(Yigitbasioglu, 2017). This accounting's main purpose is to generate internal documents using
the data collected. The main objective of this project report is to provide detailed information
regards to planning tools of budgetary control. As well as about role of management accounting
systems in the context of overcoming monetary issues in an effective manner.
MAIN BODY
TASK 3
P4. Advantages and disadvantages of various kind of planning tools of budgetary control.
Budgetary control - This is linked to monitoring the financial output of organizations
through the use of multiple budgets. The key purpose of using this method is to focus on
companies financial performance. Companies use vital range of budgets in order to manage the
performance and some of them are mentioned below :
Cash budget - This is a form of estimation that contains information on the input and
output of cash over a given period of time. Through this plan, business entities forecast future
cash needs for different activities (Cazier and Wilson, 2015). It is very beneficial for companies
in order to make effective control over available cash. It has some benefits and drawback that are
as followings such as :
Benefits – One of the benefit of this budget that it is very suitable for those companies that deals
in vital range of cash regarding activities. By help of this budget they become able to know about
how much amount of cash will be needed to complete the operations and activities.

Disadvantage - This budget's biggest disadvantage is that it prohibits businesses from spending
money even in advantageous opportunities.
Capital budget - This can be described as a budget that is linked to the process of
evaluating the long-term investments of companies (Sulong and Norhayati, 2015). Using this
plan, companies are taking appropriate decisions on ambitious projects. In recent time period, the
role of this budget is increasing significantly. This is so because by help of this budget,
companies can take suitable decisions whether they should make investment or not. It comprises
below mentioned advantages and limitations that are as followings :
Advantage- One of the key benefit of this budget that it is beneficial for companies in order to
focus on long term investments in an effective manner.
Disadvantage – Same as the above budget, this budget has some drawback too that are higher
time consumption and cost consuming. As well as this budget is not suitable for small business
entities because they can not afford cost of preparing this budget.
Flexible budget - A flexible budget is a budget that, with volume or event adjustments,
shifts or flexes. This budget is more easier and efficient is the dynamic budget than a fixed
budget. This is so because under it companies make adjustment as accordance of own suitability.
Same as the above mentioned budgets, it has some benefits and drawbacks that are demonstrated
below such as :
Advantage – This budget is beneficial for companies in order to focus on those activities that can
be change in futuristic time period. In addition, these budgets are beneficial, but they may also
become coercive if a person can not regularly stay inside the boundaries or move on chances to
save funds.
Disadvantage - Budgets are easy as they provide a estimate that one has to live inside but some
cases these budgets become cause of fraud inside the company. It is so because under this budget
any one can make changes as accordance of own suitability. In some cases, employees make
changes in order to hide own deficiencies.
Fixed budget – It can be defined as a kind of financial plan in which rises and quantity
declines does not adjust or move. In other words, this budget can not be changed by companies

as accordance of own willing. Basically, this type of budget is being prepared for long time
period usually for more then one year (Vesty and Oliver, 2015). As well as companies in which
most of the activities remain same then this budget is preferred by them effectively. This budget
has vital range of advantages and disadvantages that are mentioned below in such manner :
Advantage - A main advantage of the fixed budget is that it is easy to apply and track, because
static budgets do not have to be regularly revised across the accounting cycles that they are
designed to cover. Due to this benefit of budget, companies can easily manage their overall
performance. It is so because they can easily track out the variation in financial outcomes during
a particular time period.
Disadvantage - The static budget's biggest disadvantage is its lack of mobility. If an organization
sets a plan based on a amount of sales volume and that pressure increases, extra resources can
not be allocated to stay current.
So these are the key planning tools of budgetary control and each of them has own role in
context of business entities (Vann, 2016). As time passing the role of budgets are increasing
because by use of budgets, companies can easily allocate and manage their monetary outcomes.
Herein, it is important to know that which type of budget can be suitable for companies. In recent
time period, the budget which is mostly used by companies is cash budget. This is so because it
helps to companies in order to control activities regards to cash.
P5. Comparison of ways by which business entities are overcoming from their monetary issues.
Financial issues - The financial problems are those which emerge in businesses caused by
lack of funds. Due to these issues, companies get unable to sustain in competitive environment
because they do not have enough amount of monetary resources in order to complete their
operations and tasks. There are different kind of monetary issues and some of them are
demonstrated below that are as followings :
Lower sales - This can be described as a kind of cash flow problem in businesses which occur
over the period due to inconsistencies in sales. Because of such a financial problem, corporate
entities do not gain further revenues (Arunruangsirilert and Chonglerttham, 2017). Along with
due to this financial issue, companies can not stand to beat their competitors in an effective
manner because their sales revenues decrease continuously. For example the Tesco company is
facing this monetary problem since many time period that is effecting their profits.

Higher expenses- It's another cost issue that most corporate entities are facing due to inefficient
distribution of funds to different activities. This is one of the most common issue that is faced by
vital range of business entities. It depends on business entities that how they are managing their
overall expenditures in order to sort out the problem. For example in the competitive company
of Tesco that is ASDA is also facing this monetary issue. This issue is resulting decreased
amount of revenues in order to complete different kind of activities.
Methods to identify financial problems :
 Ratio analysis – It can be described as a way for companies to identify financial problems
by measuring different types of ratios (Elmassri, Harris and Carter, 2016). Various types
of financial ratios are measured in most business entities to measure the financial
strengths and weaknesses. For example in the aspect of Tesco company, they are
calculating sales turn over ratio in order to focus on their monetary issue of lower sales.
 Key performance indicator- It is a form of technique whereby financial problems are
defined by categorizing activities according to their rate of expenditure, allowing
businesses to recognize that practices have become the source of higher spending. Such
as the ASDA company is focusing on those activities that are resulting as higher cost.
Financial governance - This is a kind of way to manage a firm's activity over a specific period of
time (Barnard and Mostert, 2015). It effectively serves as a tracking tool when it comes to
solving financial problems because it tracks company monetary transactions in depth. It therefore
helps in predicting corporate monetary problems as it has detailed financial information from
past years. For example both of the companies, including Tesco and ASDA plc both are using
this framework in order to keep an effective control over their monetary problems.
Comparison :
Basis TESCO plc ASDA
Types of
monetary issue
The financial problem of this
business has been reduced earnings in
the current period of time. The
problem of lower sales leads to a lack
of income and resources to recover
The financial issue of above company is
the higher costs of different business
activities. This financial concern is
caused by a lack of regulation over
operations that generate greater costs.

the cost of investment. As a result, a productivity is falling
sharply.
Method They use the method of "ratio
analysis" to identify the exact
financial issue. Like comparing past
years' profitability ratio such as gross
profit margin with GP ratio of current
year to find real revenue discrepancy.
The financial issue is eliminated using
the methodology of "KPI." They
concentrate on those things which are
becoming the source of increased
expense by using this tool. Therefore, a
legal problem is defined.
Management
accounting
system
The company is using price
optimisation system in order to sort
out the financial issue (Kumarasiri,
2017). It is helping them in
overcoming from monetary issue
because under this accounting system
prices of products are changed and
revised as accordance of customers.
The above company is changing their
price of products that is helping them
in increasing sales and their revenues
are increasing.
This business entity is using cost
accounting system in order to manage
their overall expenses and controlling
total cost. As a result they are able to
focus on those aspects that are causing
as higher cost. Thus, by help of this
accounting they are sorting financial
issues in an effective manner. Except
from this accounting system there is no
any specific system to resolve monetary
issue of higher expenses.
CONCLUSION
On the basis of above project report it has been articulated that MA has a crucial role in
the aspect of different kind of companies. Under the planning tools of budgetary control, there
are a vital range of budgets are included and each of them has own importance in order to
prepare and forecast the financial outcomes. In the further part of project report role of
management accounting systems in order to overcoming the monetary issues is concluded. This
concept is explained by help of taking example of two companies that are Tesco and ASDA

which are sorting their financial issues by help of cost accounting technique and price
optimisation method.

REFERENCES
Books and journals:
Yigitbasioglu, O. M., 2017. Drivers of management accounting adaptability: the agility
lens. Journal of Accounting & Organizational Change. 13(2). pp.262-281.
Cazier, R., Rego, S., Tian, X. and Wilson, R., 2015. The impact of increased disclosure
requirements and the standardization of accounting practices on earnings management
through the reserve for income taxes. Review of Accounting Studies. 20(1). pp.436-469.
Sulong, F., Sulaiman, M. and Norhayati, M .A., 2015. Material Flow Cost Accounting (MFCA)
enablers and barriers: the case of a Malaysian small and medium-sized enterprise
(SME). Journal of Cleaner Production. 108. pp.1365-1374.
Vesty, G., Brooks, A. and Oliver, J., 2015. Contemporary capital investment appraisal from a
management accounting and integrated thinking perspective: case study evidence.
Vann, C. E., 2016. Strategic benefits of integrating the managerial accounting function with
supply chain management. Journal of Corporate Accounting & Finance. 27(3). pp.21-
30.
Arunruangsirilert, T. and Chonglerttham, S., 2017. Effect of corporate governance characteristics
on strategic management accounting in Thailand. Asian Review of Accounting. 25(1).
pp.85-105.
Elmassri, M. M., Harris, E .P. and Carter, D. B., 2016. Accounting for strategic investment
decision-making under extreme uncertainty. The British Accounting Review. 48(2).
pp.151-168.
Barnard, K. J. and Mostert, M., 2015. Exploring student perceptions and experiences of ICT-
enhanced formative assessment in an undergraduate management accounting
course. South African Journal of Accounting Research. 29(2). pp.132-150.
Kumarasiri, J., 2017. Stakeholder pressure on carbon emissions: strategies and the use of
management accounting. Australasian Journal of Environmental Management. 24(4).
pp.339-354.