Management Accounting Report: Budgeting, Planning, and KPIs

This report on management accounting provides an overview of key concepts and tools used in financial management. It begins with an introduction to management accounting and its purpose, followed by a detailed discussion of various budgeting methods, including cash flow, capital, zero-based, rolling, and operational budgets. The report then explores planning tools like cost accounting, budget control, pricing strategies, and financial statement analysis. It delves into the significance of Key Performance Indicators (KPIs), explaining their role in internal processes and outlining their advantages and disadvantages. Finally, the report addresses the role of management accounting in identifying and preventing financial irregularities, drawing on real-world examples. The conclusion summarizes the importance of management accounting in informed decision-making and maintaining financial stability within an organization.

MANAGEMENT
ACCOUNTING

Table of Contents
1.0 Introduction................................................................................................................................4
2.0 Purpose of budgets ....................................................................................................................4
2.1 Cash Flow budgeting.............................................................................................................4
2.2 Capital budgeting..................................................................................................................4
2.3 Zero based budgeting:...........................................................................................................4
2.4 Rolling Budgets.....................................................................................................................5
2.5 Operational budgets:.............................................................................................................5
3.0 Planning tools used in Management Accounting.......................................................................5
3.1 Cost Accounting....................................................................................................................5
3.2 Budget Control......................................................................................................................6
3.3 Pricing Strategies..................................................................................................................6
3.4 Financial statement Analysis.................................................................................................6
4.0 (Question 3) Explaining the term KPI's.....................................................................................6
4.1 Company manage accounts in context of KPI's internal process. ........................................6
4.2 Advantages and disadvantage of KPI's.................................................................................7
4.0 (Question 4) Role of management accounting profession in identifying and preventing the
financial irregularities......................................................................................................................7
5.0 Conclusion.................................................................................................................................7
6.0 REFERENCES..........................................................................................................................9

1.0 Introduction
Management accounting refer to the managing the financial and non financial activities
of the company which helps them to take effective decision and also expand their business to
gain more profits (Management Accounting – Meaning, Advantages and Limitation, 2019). Thus,
to mange the accounts various plans and procedure are to be implemented to take appropriate
decision. In this report it includes the planning tools which is used inn management accounting.
It also includes the appropriate ways which is used by the organization to take effective decision
to respond to financial problems.
2.0 Purpose of budgets
Budgets are mainly prepared by company to analyse the income and expenditure which is
incurred in the internal working of the company. With the preparation of authentic budgets it
helps to analyse the financial stability of the company (Bromwich and Scapens, 2016). The main
purpose to budgetary control system is that it helps the company to expand their business and
also raise funds through presenting their stability and performance to achieve goal and target
within the stipulated time.
2.1 Cash Flow budgeting
This budget is mainly prepared by company to analyse the cash inflow and outflow from
such transaction. The advantages of cash budgets reflect the sustainability of the company by
managing there cash and can also borrow the funds for investors and banks. The major
disadvantage of cash flow budgeting reflects the fraud and distortion of cash from the company
and also demotivate the interests of employees by viewing more cash in the company.
2.2 Capital budgeting
This is considered to be the important budget which is prepared by every organization or
the investment for longer time period. With this budgeting it enhances the values of the firm and
also it examined the strong reputation in the market (Carlsson-Wall, Kraus and Lind, 2015). The
advantage of capital budgeting is that once the investment is made in capital it results in
increasing the profits of the company. The disadvantages which is to examined that there are
more chances of risk arise and also the equipment required lot of maintenance amount.

2.3 Zero based budgeting:
This budget is usually prepared by company to start from the base and examine the
various factors which is to be needed to make the budgets. The main advantages of the budget is
that it enhance the communication level of the company personally gathering information
regarding any changes which they needed at their work places. There are more chances to get the
accurate results by implementing this budgets but the major disadvantage is that it is the time-
consuming method and also it results in carrying the fraud transaction at the time of preparing
such budgets.
2.4 Rolling Budgets
This budgets are mainly prepared to extend or roll the existing budgets and examines the
incremental budget period in the upcoming year. The advantages of the rolling budgets helps
comp y to take effective decision-making, as they can review the budgets in the mid of the year
and can reviewed their expense and the income through such activity (Boučková, 2015). The
disadvantage of the rolling budgets includes that the budgets are to be prepared again and again
thus it results in more consuming method.
2.5 Operational budgets:
It is mainly prepared to carry the overall activity of the company including the sales and
production and also the product which is to be carried to the warehouses for further selling of
such products and services. Thus, proper budgets are to be estimated to prepare the operational
budgets. The advantages of using this budgets includes the managers of the company to keep a
day to day inspection on the working of the employees and the targets which they are achieving
through such strategies (Hald and Thrane, 2016). The major disadvantage of preparing the
operational budgets are in respect of competing the time-consuming method and includes lot of
expenses which result in wastage of product at the time of production.
3.0 Planning tools used in Management Accounting
There are various ways in which the management accountants uses various planning tool
to carry the management accounting activity such as
3.1 Cost Accounting
This planning tool is mainly used by company to manage their coat transaction in better
perspective which helps company to take effective decision-making. In such case they planned
the cash transaction accurately to expand the business activities for long term growth. Thus cost

accounting involves recording the process, analysing the activity which is to be incurred and the
allocating the actual cost which is to be incurred in such process.
3.2 Budget Control
This is such panning tool which is used by company to secure their resources and other
activity to save for future use (Honggowati and et.al., 2017). Management plans the budget by
keeping in mind various factors which they examined minutely, verify the risk which is to be
incurred in future and also direct such process to get the accurate results.
3.3 Pricing Strategies
This is such planning tool which is used by the company to set the accurate prices on the
products which determine to maximize profits to the company. With this planning tool they can
set some norms which examined the complete structure of the company and there retention in the
business for longer term. Management plans the prices of the product by keeping in mind the
strategies to achieve goal and then take action to beat competitors through there pricing
strategies.
3.4 Financial statement Analysis
With analysing the financial statement it helps company to take effective decision and
also planned their activity more effectively. With this planning tool they can financially support
the company by reflecting the complete structure and also they can attract the external
stakeholder towards their company through their planning strategies. This helps company to
reflect their overall working of the organization by taking certain corrective action by initiating
various plan and procedure to achieve goal in better way.
4.0 (Question 3) Explaining the term KPI's
Key performances Indicator is usually implemented by company to increase their growth
and sustainability for longer term (Kaplan and Atkinson, 2015). In such cases the performance of
the employees and the company are minutely examined to achieve targets within the set time and
standards. It also results in identifying the factors which results in lacking the person to achieve
goals.
4.1 Company manage accounts in context of KPI's internal process.
Company manage their internal working by keeping in mind the factors related to KPI's
as it results in setting the targets to the employees which they had to achieve within the stipulated
time and efforts. The employees are to be examined minutely regarding their strategies which

they initiated to complete such work in better way. With the KPI's it resultant in more quality
work to be provided by their employees which enhances the stability of the company for longer
term.
4.2 Advantages and disadvantage of KPI's
The main advantages of KPI's are related to getting the accurate results which are to be
planned by the management team of the company and the company are more sort regarding the
strategies and techniques which is to be implemented at the time of occurring risk (Maas,
Schaltegger and Crutzen, 2016). The disadvantage which is to be occurred ta the time of
providing the work is that if the employee's no reached to the target, they provide such work
which is of waste and not of quality work. It also reflects the loyalty of employees for retaining
in longer time period by implementing strict norms regarding KPI's.
4.0 (Question 4) Role of management accounting profession in identifying and
preventing the financial irregularities
In respect of scandal arises in TESCO scandal the matter are related to financial
governance which is neglected by the TESCO company which results in financial irregularities.
Company had to manage their accounts in respective of planning the targets, making plans to
initiate that budgets and also examine various outcome which is to be raised in the company
regarding the objectives to get more accurate results (Messner, 2016). In such cases management
accounting profession planned various activities in facing the financial irregularities by setting
the accurate benchmarking regarding the plans and polices which the company and employees
are to be followed to achieve their targets within the time allotted.
The factors which is to be identified at the time of financial irregularities are wasting the
resources and not using the appropriate techniques which are guided by senior manger to their
employees thus it results in affecting the financial stability of the company (Bromwich and
Scapens, 2016). To prevent such factors day to day conversation is to be conducted regarding
their technique which they used to provide quality work during there working hours.
5.0 Conclusion
From the above study it is to be concluded that management accounting provide
information to the company to take decision while keeping the various aspects in mind. Thus, it
results in managing the internal activities of the company and also control their function by
imposing certain restriction to work in set norms and standards. In this report, various factors are

to be concluded in respect of budget which helps in determining the effective planning tools and
to set certain standard to examine the performance of the company to achieve objective.

6.0 REFERENCES
Books and journals
Boučková, M., 2015. Management accounting and agency theory. Procedia Economics and
Finance. 25. pp.5-13.
Bromwich, M. and Scapens, R. W., 2016. Management accounting research: 25 years
on. Management Accounting Research. 31. pp.1-9.
Carlsson-Wall, M., Kraus, K. and Lind, J., 2015. Strategic management accounting in close
inter-organisational relationships. Accounting and Business Research. 45(1). pp.27-54.
Hald, K. S. and Thrane, S., 2016. Management Accounting and Supply Chain Strategy. In 1st
InternationalCompetitiveness Management Conference.
Honggowati, S. and et.al., 2017. Corporate governance and strategic management accounting
disclosure. Indonesian Journal of Sustainability Accounting and Management. 1(1). pp.23-
30.
Kaplan, R. S. and Atkinson, A. A., 2015. Advanced management accounting. PHI Learning.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment,
management accounting, control, and reporting. Journal of Cleaner Production. 136.
pp.237-248.
Messner, M., 2016. Does industry matter? How industry context shapes management accounting
practice. Management Accounting Research. 31. pp.103-111.
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Management Accounting – Meaning, Advantages and Limitation. 2019. [Online]. Available
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