Unit 5: Planning Tools and Financial Problem Solving in Accounting

This presentation delves into various planning tools used in management accounting, comparing their effectiveness and providing practical examples of their application. It covers financial planning, financial statement analysis, historical cost accounting, budgetary control, standard costing, break-even analysis, variance analysis, marginal costing, decision accounting, and revaluation accounting. The presentation highlights tools like SCORO and PROPHIX for budget preparation and forecasting, and discusses the role of management accounting in achieving sustainable success through techniques such as break-even analysis and variance analysis. The presentation also explores how these tools can be used to address and prevent financial problems within organizations, supporting strategic planning, budgeting, and pricing decisions. The conclusion reiterates the importance of these diverse tools and techniques in effective management accounting practices.

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Management Accounting

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Slide 1: Introduction
This presentation is designed to depict comparison of different planning tools used in
management accounting. It will also provide judgement on effectiveness of each tool with
appropriate reasons. This presentation would also facilitate the ways and examples, in which
the management accounting is applied for dealing with financial problems in organizations
and also for preventing the financial problems in organizations.
Slide 2: Planning Tools Used in Management Accounting
Financial Planning
Financial Statement Analysis
Historical Cost Accounting
Budgetary Control
Standard Costing
Break Even Analysis
Variance Analysis
Marginal Costing
Decision Accounting
Revaluation Accounting
Slide 3: Continued…
Financial Planning:
Under financial planning, the short-term and long-term financial goals are designed for the
company. Capital structuring is also a major part of financial planning that is performed by
financial managers in companies. In this aspect, first of all the financial managers decides
total funding needs in business for company. Thereafter, he or she decides that what financial
source should be used for meeting the funding needs in business. Financial manager evaluates

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the cost and benefits that will be faced by company with debt and equity sources of funding.
After most suitable financial sources are selected, which will result in minimum financial cost
to the company. This will ultimately affect capital structure of the company, as the capital
structure of a company composed of debt and equity components.
Financial Statement Analysis:
There are four types of main financial statements of companies such as income statement,
balance sheet, cash flow statement and statement of change in equity. Analysis of these
statements is done for evaluating financial performance of company(Fridson and Alvarez,
2011). There are different techniques used for analysis of financial statements of the
companies such as ratio analysis, horizontal analysis and vertical analysis.
Slide 4: Continued…
Historical Cost Accounting:
Under historical costing technique, the actual costs in business are compared with the
historical costs in order to evaluate performance of company. It means the judgment about
current business performance of company is done on basis of historical business
performance(Greenberget al., 2013).
Budgetary Control:
Budgetary control is also an important tool that is used in management accounting for
evaluating the accounting performance of a company. Under this technique, the budgetary
targets are set for different departments of company. With the application of budgetary
control technique, actual performance of company is compared with the budgeted values in
terms of different types of expenditures and overheads.
Slide 5: Continued…
Marginal Costing Technique:

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Marginal costing technique is highly beneficial technique for the financial managers to
evaluate impact of marginal cost on profit of company with the change in output. Under this
technique, total business cost is divided into fixed cost and variable cost. Variable cost is
taken into account for taking different decisions for the company(Collis and Hussey, 2017).
Example of these decisions includes purchase or produce a particular component, sales mix,
profit planning and the pricing decision.
Decision Accounting:
Decision accounting is also a major tool that is used within the management accounting.
Under this technique different decisions are taken in organization like whether the should
make a product or buy it and capital expenditure decision. These all decisions are taken
through analysis of different factors such as profit, price and cost. In facts the non-financial
factors are also considered before finalizing any decision.
Slide 6: Continued…
Revaluation Accounting:
This is also an important tool or technique that is often used in management accounting.
Under this technique, effect of inflation is taken into account on overall accounting values for
better judgment about accounting performance of company. All the accounting values are
considered in current value of price.
Break Even Analysis:
This technique is also highly beneficial for management accountants in order to determine
minimum level of sales that will be required by organization for recovering total invested cost
of capital in business(Cafferky and Wentworth, 2014). After the break even point of sales, the
company will start profits.
Variance Analysis:

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This technique is also like budgetary control technique, in which the difference of budgeted/
standard costs is compared with actual costs in business. It is evaluated that whether different
variances are favourable or unfavourable. This technique is helpful to judge whether business
performance of company in terms of sales generation and incurred business expenses is good
or not. If the variances are unfavourable, new decisions are taken for business for improving
the performance.
Slide 7: Use of Planning Tools for Preparing and Forecasting Budget
SCORO and PROPHIX are the two major planning tools that are used for preparing and
forecasting budget. Detail of application of these planning tools is as below:
SCORO is a helpful tool to the companies, as it provides multiple budgets. In this context,
companies do not need to use multiple tools for financial planning and management
activities. SCORO facilitates single solution for different budget controls(Lymer and Lloyd,
2010). This tool also focuses on combining the CRM as well as online project with the
budgeting. So overall it can be said that SCORO provides entire financial database at single
place.
Similar to this, the PROPHIX is also an important tool for the companies. There is an
attribute of PROPHIX that it gets consistently scaled and upgraded in association with the
growth of organization. In this context, it becomes easier for management to do forecasting at
different times(Lymer and Lloyd, 2010). Apart from these, the PROPHIX tool is also helpful
in effective resource allocation and effective budget preparation.
Slide 8: Role of Management Accounting in Achieving Sustainable Success
There are different management accounting techniques that are helpful in achieving the
sustainable success in business. Example of these techniques includes break even analysis
technique, standard costing technique and the marginal costing. Production reports are also
produced with the help of management accounting that is composed of sustainability impacts.

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This ultimately helps in different decisions like strategic planning, budgeting decisions and
pricing decisions within the company. Under management accounting, there is duty of all
managers to support strategic and sustainable goals of the business. Variance analysis
technique is helpful to reviewing variance of organization and to take decisions for improving
unfavourable variances. This is also a very helpful technique in meeting goal of achieving
sustainable success in business.
Slide 9: Conclusion
On the basis of basis of this presentation, it can be concluded that there are different tools and
techniques used in management accounting. Example of these tools includesFinancial
Planning, Financial Statement Analysis, Historical Cost Accounting, variance analysis, BEP
analysis, Budgetary Control, Standard Costing, Marginal Costing, Decision Accounting and
Revaluation Accounting.
Slide 10: References
Cafferky, M.E. and Wentworth, J. (2014)Breakeven Analysis: The Definitive Guide to Cost-
Volume-Profit Analysis, Second Edition. USA: Business Expert Press.
Collis, J. and Hussey, R. (2017)Cost and Management Accounting. UK: Macmillan
International Higher Education.
Fridson, M.S. and Alvarez, F. (2011)Financial Statement Analysis: A Practitioner's Guide.
USA: John Wiley & Sons.
Greenberg, M.D.,Helland, E., Clancy, N. andDertouzos, J.N. (2013)Fair Value Accounting,
Historical Cost Accounting, and Systemic Risk: Policy Issues and Options for Strengthening
Valuation and Reducing Risk. USA: Rand Corporation.
Lymer, A. and Lloyd, D. (2010)Small Business Accounting. UK: Hodder & Stoughton.