Management Accounting Report: Financial Issues and Comparison Analysis

This report on management accounting delves into the core principles and practices essential for effective financial management within organizations. It begins by defining management accounting and its role in providing crucial information for decision-making, emphasizing the importance of cost analysis and budgetary control. The report then explores various planning tools, detailing the advantages and disadvantages of cash, capital, and operating budgets. A significant portion is dedicated to identifying common financial issues, such as inconsistencies in sales and higher expenses compared to profits, and proposes potential solutions. It also presents several methods for financial deduction, including ratio analysis, benchmarking, and financial governance. The report compares two companies, Fashion enter limited and Continental clothing limited, to highlight diverse financial challenges and corresponding strategies. The conclusion reinforces the significance of management accounting for informed decision-making and effective financial planning. References to academic sources support the analysis.

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Management Accounting

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 Management accounting is the process of creating firms
goals by measuring. Identifying, analysing, interpreting
and communication information to manager for
achievement of these goals. The main focus of
management accounting is to inform business about the
importance of business operation in working of business.
Thie information related to cost of products and services
will be identified in it. Budgets are used to qualify the
decision of business which are related to operational
planing
INTRODUCTION

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 A budgetary control is refers to the actions which is managed by
a company's through its financial execution that is planned and
carried out by several forms of budgets. In context to fashion
enter limited company, this is form of preparing their financial
performance which is used that is described as follows:
 Cash budget: It is defined to the form of budget that involves
the collection of information for anticipating cash revenue and
cost within a given period of time. Further, collection of
revenues and payments from loans which are involved in cash
inflow and cash outflow.
Advantages and disadvantages
of planning tools

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 Capital budget: It is refers to the budget which is
connected with assessment of long time investing funds of
a company. It involves buying of a property and a
building. Further, this budget gives a proper model of
buying and selling of large amount of liability. In fashion
enter limited the usage is done in long time funding
investments.
Advantages and disadvantages
of planning tools

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 Operating budget- It refers to a form of budget that
represents a company to anticipate revenue and
expenditure in a future given time. Every action is planned
for profit and estimated the cost. Fashion enter company
plans a budget to implement each and every actions.
 Advantages- It is good for impressive budget
for future and present expenditures.
 Disadvantages- Whether incorrect anticipation
is done for future and present expenditure
that creates vast loss for a company
Advantages and disadvantages
of planning tools

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 There is always a lack of financial resource in
firm which leads in arise of financial issues.
These are those financial problems which arise
because of low financial resources of firm. This
is firms liability to mange its resources of
finance in perfect manner where there is no
wastage of fund will happen and firm can
effectively utilize its scare financial resources
for achievement of smooth flow of fund in
organisation. Some of the common issues
related to finance are mention below
Comparison of organisations
to solve the financial issues

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 Inconsistency in sales: Because of low consumption rate
or decline in economy firm will face the issue of finance
because of decrease in its product sales. This issue will
also arise when there is large number of new entrants in
market, where sale of firm product decline for small
period of time because of business cycle. This factor must
be consider by firm seriously because it can become
reasons behind closure of operation of firm. Company can
pass this issue by using more innovation in there product
which attract customer in any condition. (Goh, 2016)
Comparison of organisations
to solve the financial issues

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 Higher expenses as compare to profits: Some time firm have
to buy assets which are necessary for survival and working.
These assets require hug capital investment and here the
finical problem arise as if firm invest then it have to face
liquidity problem and if it will not then working will be
impacted negatively.(West,2016) If company will not focus on
this than it will have to face serious issue like closure of its
operations because of finical unstable. There are some solution
which firm can adopt for solving this problem that it can take
lone from institution for financing its assets which have large
capital investment.
Comparison of organisations
to solve the financial issues

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 Ratio analysis: For anticipating actual finical
risk or issues the most common methodology
used is ratio analysis this is the method in
which various kinds of ratios are computed
and interpreted. Ratios like net profit and cash
reserve, Etc. will help firm in knowing its
financial position in market. The faction
entrant limited company can use there ratios
in firm context and can help in identifying
risks
Methods for deducting
financial

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 Benchmarking: Benchmarking is the technique
of comparison between firms performance and
pre determined standards . These standard
are set by top level management of firm .
There is critical evaluation of these standards
which have the main view of working smoothly
in organisation. This help firm in firm the
performance of company with standards and
evaluate the difference between that if it
exist. (Höglund,2016)
Methods for deducting
financial

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 Financial governance: Financial issues can be
solved with the help of financial governance in
organisation like Fashion enter limited.
This is the method which arrange the financial
transaction of firm by collecting them in
classified and well managed way. This play a
significant role in firms financial issued by
guiding them how to deal with it what kind of
support does organisation have by its whole
transaction. It also stated the actual finance
availability in firm
Methods for deducting
financial

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Basis Fashion enter limited company Continental clothing
limited company
Financial
issue
This company is facing the
financial issue which is
related to decrease in there
product sales . This
because of new entrant
and market situation. Firms
overall sales revenue is
also decreasing because of
this. And because of it
company efficiency to
retain in this competition
environment is decrease
continuously. (Jefrey,2018)
Company is facing the
issue which are related
with high expenses
and low revenue
generation so firm
have to do. This will
generate problem of
payment in firm
because it will unable
to make payments of
its creditors because
lack of liquidity. This is
generated because of
high production coat in
firm
Comparison of two
companies to solve the
financial issues