Management Accounting Report: Budgetary Control and Planning Tools

This report delves into the realm of management accounting, emphasizing its significance in analyzing, measuring, and controlling business activities for organizational success. It explores the application of various accounting systems like cost accounting and inventory management within companies such as Unilever. The report examines techniques and methods, including cost management reports, performance reports, and accounts receivable reports, and how these are integrated to maintain profitability. Furthermore, it discusses the merits and demerits of planning tools used in budgetary control, such as contingency tools, forecasting tools, and flexible budgets, highlighting their role in financial planning and problem-solving. The report compares how Unilever and Tesco utilize management accounting to address financial challenges, and concludes with the importance of management accounting for sustainable business success.

Management
accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
1. Management accounting, benefits and its requirement .........................................................3
2. Techniques and methods used for management accounting and integration...........................4
LO3 ................................................................................................................................................5
1. Merits and demerits of planning tools that is used in budgetary control and their application
......................................................................................................................................................5
2. Planning tools helps to solve financial problems ....................................................................7
LO4..................................................................................................................................................8
1. Comparison between Unilever and Tesco that used management system to solve problems. 8
2. Management accounting help to lead the enterprise sustainable success ..............................9
CONCLUSION................................................................................................................................9
REFERENCE.................................................................................................................................11

INTRODUCTION
Accounting is the ballpark of every organisation that give a idea of running a business
controlling its activities and maintain profits of an enterprise. Management accounting is the
combination of management and accounting. Management refers planning, organising, directing
and controlling the business activities and accounting refers to keep proper records of accounting
transaction (Ali and Zhang, 2015). The main purpose of this report is to understand the
importance of management accounting in any industry and what planning tools helps to control
the budget. To understand importance of management accounting Unilever has been taken that is
UK based manufacturing company that manufacture different of consumer products such as
beauty care, beverages, cleaning agents and various food items. Moreover, this report will
covered accounting techniques and methods that will help to integrate within organisation and
planning tools helps to solve financial problems in order to maintain profitability.
LO1
1. Management accounting, benefits and its requirement
Management accounting is very essential in any industry that is used to analyse, measure,
report, monitor and controlling the business activities for maintain the performance of any
organisation. Manager of Unilever analyse the performance and take corrective action in order to
get improvement in presentation. It makes planning every year and set budgets by evaluating
performance of organisation as well as business actions. It follow different types of accounting
system that has benefits also such as-
Cost accounting system: This is used to analyse the manufacturing cost of products and
services and measure the profit margin by controlling the costs. Moreover, this system is mostly
used in each and every industry that gives cost idea and maintain profits. Manager of Unilever
keep records of all incurred cost by using this system that helps to maintain profits and
accountable for all cost (Ashraf and Uddin, 2015).
Benefits:
 This system identify all incurred cost in a organisation and helps to correct
decision to reduce the cost.
 It gives an estimation of products and services to Unilever who earns profits at
less cost.

Inventory management system: It is used to keep proper and exact records of goods and
services in each company and maintain stock that should be order. Manager of Unilever give
order of raw material after analysing inventory system that helps to maintain stock and give idea
of further order.
Benefits:
 This is useful in Unilever and each industry to arrange systematically stock's
information at one place.
 It also helps to save time and money by arranging records of slow moving
products in any industry.
Job costing system: This is a process of assigning the cost in to specific job that incurred
in any organisation. This system is mostly used in construction business that divide the cost
according to project. Manager of Unilever also used this system to distribute the cost in different
department such as marketing, finance, advertising, and human resource department that helps to
control cost of corporation.
Benefits:
 This system is able to keep track records of individual's and team's performance
that helps Unilever to control the cost,efficiency and productivity.
 It also helps to maintain the cost of every department and arrange reduce the extra
cost.
2. Techniques and methods used for management accounting and integration
Management accounting plays an important role to run a business effectively that helps to
control the cost by analysing the performance. Any industry used techniques and method in
management accounting that helps to take better decision in order to make profitable corporation
(Hirsch, Nitzl and Schauß, 2015). Manager of Unilever follows techniques and methods that
helps to managing accounts such as-
Cost managerial reports: This report is used to control the cost in each enterprise by
using this technique. It gives an estimation of cost that occurred in a company after calculating
all expenses in corporation. Manager of Unilever prepares cost management reports with the
helps to past report that give a idea how much need to invest in particular sector.

Account receivable report: This report is used and prepared by every business concern
that gives information of creditors of business. Such as Unilever indulging to dealing with many
credit transaction then it need to prepare this report that will helps to give information creditors
and received payment through this report. It also helps to keep track of receivables and
unexpected loss.
Performance report: This is a most useful method and technique that helps to analyse
the performance of company and employees. Manager of Unilever prepare this report every
month and quarterly basis to provide rewards, incentives, bonus and motivation which is based
on individual and team performance.
From above mentioned method such as cost report, performance and account receivable
are integrate with each other that helps to give proper information of cost management and
maintain profits. In the absence of these reports any organisation will not be success to get
proper coordination and maximum profits because of mismanagement. Such as in Unilever
manager prepares cost reports that gives proper record of incurred cost, performance report that
provide information about employees performance and also prepares account receivable report
that provide information about creditors. Hence, it is integrate with each other that helps to
maintain profits by controlling cost (Ji, 2017).
LO3
1. Merits and demerits of planning tools that is used in budgetary control and their application
Budgetary control is a most important technique to control the budget in any industry and
formulate financial budget annually basis. Moreover, it helps to formulate future financial plans
and set goals in any corporation that by evaluating budgets. Such as manager of Unilever
prepares financial budget every year that helps to give idea how much investment is require to
gain profits and how unwanted cost can be eliminate. Planning tools are the equipment in a
company that gives ideas how and when planning should be implemented in order to make
profits by controlling budgets. Following benefits and barriers of planning tools are discussed as
below that help Alpha finance to control the budget (Modell, 2015).
Contingency tool: This tools is used to manage risk and unexpected losses that may be
occur suddenly in business firm. This tools associated with unexpected risk that has chances to
be occur in future while performing business activities (Ward and Calabrese, 2018).Manager of

Unilever used this tool and make contingency provision to face this loss situation such as bad
debt, unpaid customer, loss by fire and theft etc.
Advantages:
 This tools helps to overcome the situation and run business continuously of
Unilever if any contingency arises.
 Unilever address unexpected losses and take corrective actions in order to
minimize risk.
 This provision also helps to establish back up plan to after recovering the losses.
Disadvantages:
 It may create misunderstanding between different managers who prepares
contingency provision and expected budgets.
 This is not easy to prepare contingency planning because it required more fund to
make provision.
Forecasting tools: This tools is used in budgetary control that provides an estimation of
forecasting budget and future expectation. It is prepare with the helps of past information and
budgets that gives estimation for current year cost and budgets. Manager of Unilever used this
tools to prepare future budgets and maintain profits (Vasarhelyi, Kogan and Tuttle, 2015). This
budgets can provides information about invest and cost that need to be spent at specific
department.
Advantages:
 It gives benefits to Unilever's manager to predict budget and started to manage the
cost according to prepared budget.
 By using forecasting tools any organisation can forward excess income towards
extra expenses that may be arises in a company.
Disadvantages:
 This is difficult to predict future planning because it depends on previous
financial information.
 This tools may be difficult to take better decision for welfare of organisation.
Flexible budget: This tools is used to make fluctuate budgets that helps to make changes
in budgets. Moreover, it is used to bringing changes in budgets if expenses are more than

incomes. Such as Unilever set flexible budget with the help of manager and can fluctuate it if
expenses are excess than revenues (Osadchy and Akhmetshin, 2015).
Advantages:
 This budgets helps to get changes and brings effective communication between
employees and organisation.
 It also helps Unilever to get accurate results after making changes if is required
for setting budget.
Disadvantages:
 It may be difficult for Unilever or other organisation to understand this because
does not remain fix and constant.
Application of planning tool in forecasting budget
It has been recommended that application of planning tools in any organisation is a
fruitful option because it helps to set budget for future planning that give further information in
order to make profits. Forecasting tools help to make future plans and budget for controlling
cost, flexible budget helps to get changes if is require and maintain cost and contingency tool
helps to make contingency provision that help to face unexpected loss situation in any
corporation. Hence, manager of Unilever apply this tools in their organisation that helps to
prepare and forecasting budgets.
2. Planning tools helps to solve financial problems
Planning tools are the technique of management accounting that helps to take better
decision by solving financial problems such as cash flow, risk management, money
measurement, spending more than income etc. Manager of Unilever solve financial problem by
adopting planning tools such as:-
Cash flow problem: This means when an organisation does not have enough fund to
respond liabilities then cash flow problem arises. The main reason is firms have high spending
and low incomes. Manager of Unilever are facing this problem because its outflows are more
than inflows as result less profit margin situation (Schaltegger, Etxeberria and Ortas, 2017).
Risk management: This is a ordinary factor that can be arises at any time in any industry
. This main reason of this problem is to ignore the short and not proper records of transaction. To
eliminating this risk manager of Unilever need to make strategy and keep records of transaction

that helps to give information about further risk that can be manageable by adopting planning
tools.
Money measurement: This is a financial problem that has chances to arise in any
business industry. This means every business concern should involve monetary transaction that
relates to business activities and helps to maintain profits. Such as manager of Unilever face and
address money measurement financial problem by maintaining records of transaction and
control financial information (Sohn, 2016).
Financial governance: This is a method which is adopted by a company to collect, manage,
records, monitors and control the financial information. Moreover, it contains how a business
industry track financial data, manage performance and control data, operations and disclose
important information. Manager of Unilever focus on financial governance that is a core of rules
and regulation in order to solve financial problems. Manager establish establish formal structure
and practices that helps to solve financial problems.
Management accounting approach: This approach helps an organisation to solve the financial
problems by using management approach. Manager of Unilever follows different types of
management approach that helps to solve financial problem such as:-
KPI: Key performance indicator is a tools to evaluate the performance of employees and
industry by comparison to other organisation. Manager of Unilever make evaluate the
performance of staff and business activities and get improvement by solving financial problems
(Theriou, 2015).
Benchmarking: This process helps to identify best practices in order to product and
services are delivered. Its main purpose is to understand and evaluate the present situation of
business industry. Manager of Unilever are using this technique to get best result and good
performance by solving financial problems (Trucco, 2015).
LO4
1. Comparison between Unilever and Tesco that used management system to solve problems
Basis Unilever Tesco
Problem Unilever is facing risk management
problem because of not proper records
of monetary transaction.
Tesco is facing cash flow problems
because outflow is more than inflow
.

System/
Approach
To solve risk management problem
Unilever should adopt key performance
approach that helps to measure the
performance and get changes if is
required to solve the financial problems.
To reduce cash flow problems
Tesco need to adopt benchmarking
approach that will help to give best
practices and procedure to increase
the inflow and decrease the outflow.
2. Management accounting help to lead the enterprise sustainable success
Difference between management and financial accounting
Management accounting Financial accounting
This prepares reports overall performance such
as planning, organising, directing and
controlling the products and services.
It prepares reports on the result of a running
business. It includes monetary transaction.
It focuses on problems that arises in enterprise
and make planning to solve problems.
Financial accounting focuses on profitability or
efficiency of a business.
It does not follow any standard at the time of
preparing management reports.
It need to follow accounting standard at the
time of preparing financial reports.
It has been recommended that management accounting are trustable information that
helps to guide crucial business decision and sustain strong business enterprise by solving
financial problems. Every organisation combines management and accounting to achieve
sustainable business success. Manager of Unilever helps to sustain successful business by
identify financial problems and use key performance management system to solve this problem
that helps to support strategic and sustainable objectives. It also helps to make effective decision
in order to solve financial problems keeping proper records of accounts.
CONCLUSION
From above mentioned report it has been concluded that managerial accounting is
essential in any enterprise that helps to manage accounts and provide good financial results. This
report covered management accounting system and planning tools such as contingency, flexible,

forecasting tools that helps to control excess budget ans maintain profitability situation. In
additional, it covered management approach such as KPI and bench marking that helps to
address or solve financial problems in order to maintain profit margin.

REFERENCE
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