Management Accounting Report: Budgeting, Pricing, and BSC Analysis

This report on management accounting explores various budgeting types (operational, cash flow, and master budgets), their advantages, and disadvantages. It details the budgeting process, including data gathering, coordination, communication, and analysis. Furthermore, it examines pricing strategies such as penetration, skimming, and competitive pricing. The report also delves into the balance scorecard (BSC) approach, explaining its implementation and use in identifying and responding to financial problems, as well as improving financial governance and developing effective strategies for Imda Tech. The analysis includes financial, customer, internal business processes, and learning and growth perspectives.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
TASK 3............................................................................................................................................3
a) Type of budgets and their advantages and disadvantages.......................................................3
b) The process of preparing budgets...........................................................................................3
c) Pricing strategies.....................................................................................................................3
TASK 4............................................................................................................................................4
a) Balance score care approach and describing the implementation of a balance score card.....4
I) Using Balance Score Card (BSC) to identify and respond financial problem........................4
ii) Use of Balance Score Card to improve the financial governance and development of
effective strategies.......................................................................................................................5
REFERENCES................................................................................................................................6

TASK 3
a) Type of budgets and their advantages and disadvantages
The budget is one of the most important methods which are used by the organisation for
making decisions regarding to investment. Budget can be defined as that process that helps the
company in estimating revenues, cost and resources that are used over some particular time
period. For this, Imda tech has considered various types of budgets that have some advantages
and disadvantages and are discussed as follows:-
Types of budgets
 Operational budget- It is used for preparing the routine business function. It is
categorised into two parts are revenue and cost for presents company profitability and
expenses that are incurred at a specific time period. The benefit from operational budget
is that it helps in keeping records of business transaction related to cost and revenue in a
well manner (Chenhall and Moers, 2015). Beside this, advantages of operational budget
are that it shows accurate information of the budget. For this, it facilitates the firm to
compare their performance with the previous year data.
 Cash flow budget- It is that type of budget that are summarised into cash inflow and
cash outflow of a company Imda tech prepares cash budget for predicting about their
capability and also monitors budget for identifying the short falls. Therefore, the main
benefit is that it suggests inventory levels and production cycles so that they get resources
for a company.
 Master budget- It is that type of budget which provides accurate information that helps
the company to determine its net profit in financial year effectively. The demerits of
master budget are that it is not reliable in terms of cash and sales.
Advantages and disadvantages of budgets
1. Operating budgets:
Advantages
 The main benefits of operating budgets are that it keeps record and track the entire
business.
 It helps the management of a company to tracking or experiencing issues arise within the
workplace.

 The benefits of operating budgets are that they keep track overall business and also
determines what changes are needed to be made to improve financial performance.
 It also managing the current expenses and determine projecting future expenses.
Disadvantage
 The budget is based upon the assumption if there is any change in business environment
than the actual results might be inaccurate.
 It becomes difficult to estimate expenses and revenue.
2. Master budget:
Advantages
 The master budget is used by top level management that present information in a capsule
form.
 It provides data for the purpose of forecasting company's balance sheet. It delivers an overview of organisation's budgets to understand that their financial
standing is positive or negative.
Disadvantages
 The disadvantage of master budget is that it is a lack of specificity.
 The demerit of master budget is that it is difficulty in updating information. The demerit
of master budget is that there is lacks of specificity as the number that are written on it
are collective sum.
3. Cash Flow budget:
Advantages
 It is used by company for the purpose of predicting income and spending.
 It also provides a valuable feedback. Company can able to make plan effectively for a optimum utilisation of cash.
Disadvantages
 It is prepared on the basis of next year for which there is no guarantee that revenue and
expenditure level remains the same.
 It may cause distortion as they do not equate to profit.

 It takes longer time to achieve and it is build up on the subjective estimation.
b) The process of preparing budgets
Budget is prepared by Imda tech by adopting budget process step by step. Therefore, in
preparing budget, the first step is to gather accurate data from each department of the firm. Thus,
it mainly includes sales, production and marketing to obtain the resource information to carry out
smooth functioning of a company. Further, in the second stage, required to coordinated with
them to estimation of funds needed by each department and aggregate demand. In the third stage
budget is commincated which is prepared in each department of the Imda tech company. In the
last stage, the firm analyzed the viewpoints of all incorporated firms and management which are
then turned into final budgets.
c) Pricing strategies
There are various types of pricing strategies that are adopted by Imda Tech Company
which are described as follows- Penetration pricing strategies- Lower price is quoted according to penetration pricing
strategy. This is adopted by those organization who is new in the market . Thereafter, the
company can increase the price by adding uniqueness in their service. Thus, it resultant
into that it will increasing sales of a company by attracts a larger number of customers. Skimming pricing strategies- It is that type of pricing strategy in which the company set
the prices higher at starting stage for its products or services (Burk, 2013). Thereafter, it
set prices low over a some time period that allow them to recovers sunk cost by lowering
market price. Competitive pricing strategies- It is used by most of the firm to beat the competition in
the marketplace. Therefore, it is adopted by the organisation to survive for a longer time
period in the competitive environment. It is useful for the firm is that they can able to
recover the cost of production regards to products or services. It is also adopted by the
company to attract large number of consumer at a smaller time period by offering goods
or services at the competitive pricing.

TASK 4
a) Balance score care approach and describing the implementation of a balance score card
Balance score card approach is one of the most useful aspects for understanding the
firm’s performance. It showed company’s efforts within the organisation and maintained firm
performance so, they integrate all the activities of business for generate the valid results.
I) Using Balance Score Card (BSC) to identify and respond financial problem
The balance score card used by the Imda tech company for analyzing the standard
performance of a businesses and it is also used for comparing actual sales with expected sales. It
covers various elements that are relating to the firm’s performance that are human resources,
financial, internal business process and customer perspective. Apart from this, it covers all
innovative aspects in the balance score card (Armstrong, 2015). It shows the real performance of
a firm and also facilitates valid results in most desired manner.
In Context to Imada tech case, they are now suffering from loss of 1.5 million GBP.
Therefore, there is a need of balance score card to be applied within the organisation for
assessing the internal performance of a firm. Therefore, they are required to prepare a SMART
objective for the Imda tech company that are as described as follow-
 To improve sales by 25% in the accounting year 2017.
 To reduce customer retention by 20% in the end of accounting year 2017
 To increase profitability of a firm by 30% in the financial year 2017
ii) Use of Balance Score Card to improve the financial governance and development of effective
strategies
The balance score card is adopted by the Imda tech company in which several issues are
addressed which are now faced by the finance department. Therefore, it is required to highlight
each balance score card perspective. They primary focused on customer perspective that are to
understand the customer requirement and provided the services accordingly (Ali, 2015). For
instance, the Imda tech marketing manager will prepare budget by offering discounts to its
customers and promoting products by adopting various communication modes. Therefore, the is
internal business perspective which is covered through balance score card approach by set up
standard for their staff members. The performance of a company is analysed with the help of
balance score card that gives actual and expected results of the organisation of each department.
Thus, learning program is also introduced for increasing company’s productivity and it also

facilitates proper controlling of the firm which helps in attaining the firm’s objectives in the most
desired manner.
Balance score card approach is used for the purpose improve the Imda tech performance through
the four perspective that interrelated with each other. These are discussed as follows:-
 Financial perspective: It is mainly emphasising on cost and shows the value to
stakeholders and customers. In regard to this, they can able to minimize the cost and also
formulate financial policy of a company in most desired manner. For example, Imda tech
company analyse their financial performance through their ROI, cash flow statement and
financial results on quarterly or yearly basis. For this, they develop effective strategies
through financial perspective such as manage working capital, budget plan and key
funding source etc.
 Customer perspective: It is mainly focused on the needs of customers in most effective
and efficient manners. It also understands who are their stakeholders and customers as
well as also identification of needs so; can able to meet them in effective way. For
example, to satisfy the needs of customer Imda tech adopts new channels of distribution
and individual relationships. It will effectively deliver products or services to its clients in
target market at right time and able to enhance customer loyalty.
 Internal business processes: It is mainly focused on the business performance
expectation and make sure that there is a proper used of resource within the firm that
maximizing their performance. For instance, the effective strategies can be developed in
internal business process is an electronic channels of distribution and customer
relationships management.
 Learning and growth: It is mainly emphasising on the ability of employee and also
restructure of an organisational structure so, they can attain their objectives in most
effective manner. It is that type of perspective that focus on people that worked within the
organisation. It can be understand by employee turnover and level of job satisfaction so,
they can be to develop effective strategies such as training session and development
programs etc. for instance, development of effective strategies in the learning and growth
perspective of balance score card though provides learning to employees to adopt new
approaches

REFERENCES
Journals and books
Ali, M.S. and et. al., 2015. Reporting of covariate selection and balance assessment in
propensity score analysis is suboptimal: a systematic review. Journal of clinical
epidemiology. 68(2). pp.122-131.
Armstrong, V.S., 2015. Using real option analysis to improve capital budgeting decisions when
project cash flows are subject to capacity constraints. Academy of Accounting and
Financial Studies Journal. 19(2). p.19.
Burk, J.M. and et. al., 2013. Balance error scoring system performance changes after a
competitive athletic season. Clinical Journal of Sport Medicine. 23(4). pp.312-317.
Chenhall, R.H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, Organizations and
Society. 47. pp.1-13.
Coad, A., Jack, L. and Kholeif, A.O.R., 2015. Structuration theory: reflections on its further
potential for management accounting research. Qualitative Research in Accounting &
Management. 12(2). pp.153-171.
Cornell, B., 2014. Capital Budgeting: A'General Equilibrium'Analysis. Browser Download This
Paper.