Management Accounting Report: Toshiba's Planning and Analysis

This report delves into the realm of management accounting, focusing on its application within Toshiba. It explores various planning tools, including cash flow, capital, zero-based, rolling, and operational budgets, outlining their advantages and disadvantages. The report examines how management accountants utilize these tools, such as cost accounting, budgetary control, pricing strategies, and financial statement analysis, to predict costs, revenues, and make informed decisions. It also analyzes the use of Key Performance Indicators (KPIs) in internal processes, highlighting their role in measuring performance. Furthermore, the report concludes with an analysis of the role of management accounting in the Patisserie Valerie scandal, providing a comprehensive understanding of the subject matter.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
ASSESSMENT TWO......................................................................................................................3
Planning tools used in management accounting..........................................................................3
Using different planning tools.....................................................................................................6
Use of Key Performance indicator in internal process................................................................7
Patisserie Valerie scandal............................................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION
Management accounting is the internal accounting tool which provides manager with the
different information about the position of the company in the market. Manager used to take this
accounting as the basic to take decision in the organization (Quattrone, 2016). Toshiba is the
Japanese multination company headquartered in Tokyo, Japan. Toshiba was founded in the year
1939 by the founder Tokyo Shibaura Denki K.K. through the merger of Shibaura Seisaku-sho
and Tokyo Denki. This report highlights the purpose of budgetary control and different form of
budgetary control which include advantage and disadvantage of different budgetary control tool
in the organization. After that the report highlights ways in which management accountants use
different planning tools and then the report goes on to explain the way management accountant
used to keep the KPI in company internal process with the help of different advantage and
disadvantage of KPI system. In the end the report highlights analyses role of management
accounting profession with reference to Patisserie Valerie scandal.
MAIN BODY
ASSESSMENT TWO
Planning tools used in management accounting
There are a variety of planning tools that can be used by the managers of the company in
order to ensure that the business i.e. the entire organization runs smoothly and is able to allocate
funds in an appropriate manner. One such planning tool is budget. Budgetary Control can be
defined as the formulation of a financial statement where the managers of the company identify
the sources of fund and its allocation to different expenditures of the company where the exact
amount is specified (Yermack, 2017). Further, tools like budget also helps in regularly evaluating
the financial performance of the company and therefore, it gets easier for managerial accountants
to track the performance of the organization and compare it with their past performance or the
competitor’s performance. At Toshiba, some major types of budgets that assist in financial
planning of an organization are:
Cash Flow Budget: Cash Flow Budget can be defined as that budget that is used to prepare to
ascertain all those sources through which there is inflow of cash and determine the expenditure
modes i.e. the venue at which there is expenditure of funds in the form of cash. They identify all
those sources and then allocate and estimate the funds which can be generated and the probable
amount of expenditure that can be incurred. There are various advantages as well as

disadvantages of the preparation of cash budget and therefore the mangers should take this into
account before implementing it (Zietlow and et.al., 2018).
Advantages Disadvantages
When the funds are allocated in an
appropriate manner, it gets easier to ascertain
the financial position and therefore control
any unnecessary expenditure that might be
incurred otherwise. It also helps in
determining the liquidity of the company and
therefore ascertains the financial position of
the company easily ensuring that company
does not go into debts.
However the disadvantages of the preparation
of cash budgets can be categorized that
preparation of these such budgets is an
extremely lengthy and complicated process
and therefore, it might get difficult for the
managers to identify every single source and
then included in the preparation of budget is
an extremely tedious process.
Capital Budget: Capital Budget is another type of budget categorised as the one which accounts
for these assets that are usually long term in nature and cannot be reversed. It needs to be taken
for long term and therefore, the managers of the company need to formulate this type of budget
extremely carefully because it is not easy to incorporate changes in the budget if necessary,
easily (Kaplan and Atkinson, 2015). Although, it is of extreme assistance to the managers
intending to implement a long term project, yet there are various disadvantages as well
associated to it.
Advantages Disadvantages
Capital budget involves selection of the
various avenues through which funds can be
raised and therefore it helps in correct
estimation of the cost required an arranging
funds accordingly so that costs can be
predetermined and therefore it gets easier to
arrange funds beforehand so that
underutilisation or overutilization can be
avoided and the entire project can be
completed on time.
Once this budget has be formulated, it is not
easy to deviate from this budget and therefore,
the entire process needs to be repeated which
is an extremely tedious task. In order to
complete this process of budget formulation,
an extensive study needs to be taken and
therefore, this is an extremely time consuming
process.

Zero Based Budget: This kind of budget can be defined as short term budget which is prepared
after keeping the base as zero between regular intervals (Maas, Schaltegger and Crutzen, 2016).
This was done in order to stop the traditional practice of building a new budget on the basis of an
older one which was always more than the previous one due to incremental amount. However,
there are a number of disadvantages as well associated with the zero budget formulation.
Advantages Disadvantages
Zero based budget helps the managers in
ensuring that whatever amount is being spent
is spent wisely and therefore, all the expenses
which are of operating nature are done in a
controlled and justified manner, i.e. the
expenses made by the company are in check
and no unnecessary expenditure is incurred.
However, the major drawback in this type of
budget is that it is for short term only i.e. it
can be prepared for short term only since it
lacks the necessary insight required for
preparation in a budget for longer time period.
Further, this type of budget can be prepared
by financial experts or those managers who
have complete knowledge about their
business.
Rolling Budget: This type of budget which is also known as continuous budget i.e. the while
preparing the new budget, the older budget is modified or extended after the period of older
budget gets completed. There is always an increment i.e. addition in the older budget and
therefore, this budget is a never ending one i.e. it keeps on adding further. As in other types of
budget, there are various advantages as well as disadvantages in this type of budget as well
(Mills, 2018).
Advantages Disadvantages
The major advantage of preparing a rolling
budget is that it helps in incorporating the
unexpected changes and respond to them
accordingly. Further, it also helps in analysing
the trends of the budget and involves all of
these in the current budget so that the
company can deal with critical situations at all
The major disadvantage of a rolling budget is
that it involves too much time on preparation
of forecasting reports i.e. it involves regular
collection and analysis of the data that is
being collected and therefore, this reduces the
time to be spent by mangers on tasks that
require much more attention and therefore,

times. this budget is resented by managers.
Operational Budget: Operational budget can be defined as the one in which all the probable
operational expenditure that might be incurred are included and these are then compared with the
total sources of income (Bennett and James, 2017). The operating income as well as the sales
income in incorporated in the income section of this budget and operating expenditures are
treated as expenditures. The various advantages and disadvantages associated with the fund can
be categorized in following manner:
Advantages Disadvantages
Preparation of operational budget helps in
proper allocation of funds for various quarters
i.e. it can be made for multiple years as well.
Further, it is also a flexible budget and
therefore, the changes in the budget can be
incorporated accordingly.
The major disadvantage of creating an
operational budget involve the negative
impact on taxes and it is extremely necessary
to incorporate correct information in the
budget each time and most importantly,
correct information should be incorporated
and this is often a drawback since companies
fail to make correct projections.
Using different planning tools
Planning Tools assist in predicting the future costs and revenue sources that can be
generated in the company and making provisions for the company in future accordingly. These
tools are used for a variety of purpose the major management being determination of future costs
etc. There are various tools that can be used in different method. At Toshiba, these are used in
following manner:
Cost Accounting: Cost accounting is normally used to ascertain the average cost that might be
incurred i.e. it is a set of financial statements that are used to incorporate the cost of
manufacturing goods and services in the preparation of the budgets (Mack and Goretzki, 2017).
These help in determining various costs that are associated and categorises fixed and variable
costs related to the product so that operational budget, cash budget etc. can be prepared by
determination of the amount associated with the product. This will help in achieving competitive
advantage by determining of the correct levels of cost in the future and making provisions
accordingly so that unnecessarily liquid that has been blocked can be freed up.

Budgetary Control: Budgetary control helps in determining and comparing the actual results
from the budgeted ones and therefore, the standards are used for determining the variance in the
budget if any so that performance can be improved. These variances help in determining those
areas due to which deviation is occurring and therefore, the performance of the overall
organization gets improved ultimately (Khan and Jain, 2018). This will help in ensuring that
budgets are formulated in a correct and accurate i.e. precise manner with any faults and hence the
efficiency if the organisation will increase thus simplifying the entire process and helping he
mangers’ in utilising their attention on other core activities of the firm.
Pricing Strategies: Pricing strategies involve determination of the methods through which
pricing is done i.e. there are four separate categories which are competitive pricing, value-based
pricing, skimming and penetration pricing (Agrawal and Cooper, 2017). These help in
determining how a product should be placed in the new market and therefore helps in launching
of the product accordingly, the major assistance in budgetary control is of preparation of budget
so that appropriate marketing plan can be formulated. These help in adequately pricing hte
product in the market an hence target a larger market segment than the competitor in an effective
manner.
Financial Statement Analysis: The analysis of financial statement involves analysing of the
figures that have been depicted in the statements and this assists in decision making process.
Further, there is another major assistance in preparation of budgets since these financial
statement provide an insight into the current or future performance and this is then analysed and
incorporated while preparing the budget of the company (Ax and Greve, 2017). Analysis of
financial statements help in using accurate figures while preparing budgets and therefore, the
investors that might invest in the business get improved and even shareholders of the company
are satisfied thus increasing the overall brand value of the company as compared to its
competitor.
Use of Key Performance indicator in internal process
There are a variety of ways in which the management of the company can monitor their
performance and evaluate whether it is moving in positive or negative direction. One such tool is
Key Performance Indicator. Key performance indicator helps in determination of one such
indicator or one issue which is used to indicate the key performance of the company. It helps in
the measurement of the performance of the company and these can be both qualitative as well as

quantitative (Jansen, 2018). At Toshiba as well, the use of key performance indicator is well
integrated with the use of key performance indicators in their company. Performance helps in
measuring various aspects of performance such as input and output and the activity, mechanism
as well as control regarding various instruments of performance and these are sued to indicate
various performance levels.
The manner in which Toshiba uses KPI in their operations is different in different departments:
In Accounts Department the various KPI used by them are percentage of invoices, percentage of
the orders for purchase, error rate for finance report, duplicate payments made etc. (Chenhall and
Moers, 2015). Similarly, in marketing or sales department of the company, there are different
KPIs used by the company i.e. customer acquisition, consumer attrition, collection of bad debts,
customer loyalty, profitability as per demographic characteristics etc. KPI used as a financial
tool as well as non financial one. The financial KPI involves using Standard Costing etc.
methods do analyse deviations in a quantifiable manner. Non Financial techniques involve using
benchmarks etc. techniques that assist in taking appropriate decisions. There are various
advantages as well as disadvantages while using KPI in Toshiba and these can be categorised in
following manner:
Advantages Disadvantages
Implementing KPI in the work culture helps in
identification of those important and vital parts
in the success of the company and therefore set
those performance targets that will assist in
decision making. KPI helps the organization in
measuring the result in the organization as it
helps the organization in displaying accurate
result in numeric and statistics way. Employee,
team and organization can easily measure the
result. It also helps the organization in staying
allgned toward the goal as it make result more
accessible (Honggowati and et.al., 2017). The
biggest advantage which is brought by the KPI
is that it helps the organization in building the
KPI involves formulation of targets for the
company and therefore this can be a
demotivating or stressful process for the
employees since it is usually perceived in a
negative manner As KPI used to more focused
on the short term goal of the business there is a
big chances that the organization looses the
focus on the quality of work done toward the
long term goal of the business (Chenhall and
Moers, 2015). Another disadvantage which is
brought by the KPI is that the creativity level
of the employee in the organization used to
decrease as they become more aligned toward
the result and traditional work rather than the

future strategy as organization used to make
the different policy and rules in the
organization on the basis of result measure by
KPI.
process of doing it. Also sometime it get
difficult for the company to track quality of
work as KPI just shows the progress level of
organization.
Patisserie Valerie scandal
Patisserie Valerie which was a company operating in UK is a chain of cafes and in the
year 2018 it was found that the company had committed major frauds by making numerous false
entries which the company has made in previous years thus depicting false profits and position of
the company. The financial auditor of the company was to be blamed for the fraudulent entries.
The management accountant or the internal auditor of the company could have pointed out the
fraudulent activities that were going on to the owner or the top management (Bui and De
Villiers, 2017). Even if they had not taken any decision, they could have gone further and
complained to regulatory or legal bodies stating that the practices carried out at the company are
fraudulent. If they had taken an active role in avoiding frauds within the company it could have
been avoided ultimately. The management of the company can adopt a zero tolerance approach
for fraud management and for this purpose, the management accounting can assist in formulation
of proper budgets, cost sheets etc. that ascertain the exact amount that might be incurred and the
comparison between actual and budgeted expenses is done minutely so that the fake transactions
that were depicted in the books could be removed immediately. Further, the management
accountant should have immediately reported the incidents of fake transactions taking place in
the company to higher authorities (Patisserie Valerie: It’s Not The Accountants Responsibility To
Spot Fraud, 2017). This might had prevented the wide scale failure that the company is now
experiencing.
CONCLUSION
After going through the above report it has been summarized that budgetary control used
to play a very crucial in the organization to help them in getting the success. After that the report
summarized that there are many benefits and dis benefits of budgetary tool which are used by the
accountant. Most commonly used budgetary tools are Cash flow budgeting, Capital budgeting,
Zero Based Budget, Rolling Budget, Operational Budge. After that the report summarized the
way in which management accounting is used by the management accountant. After that the

report summarized that KPI used to help the company in looking at the performance of the
company on the regular basis that’s the reason accountant used to keep KPI in an internal
process. In the end the report summarized that the management accounting profession has played
a crucial role in identifying and preventing the financial irregularities that were seen.

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