Management Accounting Report: Evaluating Financial Systems and Reports

This report provides a comprehensive overview of management accounting, focusing on its systems, techniques, and practical applications within the context of ABC Ltd, a medium-sized manufacturing company. It begins by defining management accounting and its role in financial decision-making, followed by an examination of various management accounting systems such as cost accounting, price optimization, job costing, and inventory management systems. The report then delves into the different methods used in management accounting reports, including budget reports, performance reports, inventory management reports, and accounts receivable reports. It also explores the benefits of these systems, evaluating the integration between accounting systems, reports, and organizational processes. Furthermore, the report analyzes cost analysis techniques, planning tools, and their application in forecasting budgets. Finally, it compares how organizations solve financial problems using accounting systems, emphasizing the role of management accounting in achieving sustainable success. The report concludes with a summary of the key findings and insights, supported by relevant references.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting and accounting systems.................................................................1
P2. Methods in management accounting reports.........................................................................3
M1. Benefits of management accounting systems......................................................................5
D1. Evaluating integration between accounting systems as well as reports with organisational
processes......................................................................................................................................6
TASK 2............................................................................................................................................6
P3. Calculation of costs by using cost analysis techniques.........................................................6
M2. Usage of appropriate techniques in order to produce financial reporting documents........10
D2. Financial reports to interpret business operational activities..............................................11
TASK 3..........................................................................................................................................11
P4. Distinct Kinds of planning tools..........................................................................................11
M3. Planning tools with application in order to prepare as well as forecasting budgets...........15
TASK 4..........................................................................................................................................16
P5. Comparison showing the ways organisations solve financial problems with the use of
accounting systems....................................................................................................................16
M4. Responding of management accounting towards financial problems for sustainable
success........................................................................................................................................18
D3. Planning tools usage to respond towards solving financial problems so to lead the
organisation towards sustainable success..................................................................................18
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
Management accounting helps accountants to emphasise towards numerous events that
occurs in financial year while performing business activities (Bennett and James, 2017). By
using management accounting, financial department presents accounting information to
managers so that policies can be framed to attain main goals. Management Accounting performs
a main role in organisations now a days and thus stakeholders in the organisation need to know
how to generate and use excellent accounting information systems. It is used for assisting daily
operations along with performing managerial functions. It describes accounting techniques,
methods together with systems with ability as well as specialised information to minimise losses
addition to maximising profits. In today's company setting, company intends to monitor market
data that extends further than the price-based data supplied by traditional financial accounting
data from historical general ledger systems like Cost volume profit, budgetary control, cash
budget, marginal costing and absorption costing to make applicable management accounting
reports for informed decision making. To develop understanding about management accounting,
selected organisation ABC limited which is a medium sized manufacturing company. To
promote their different departments require to understand of different business activities and
apply all the appropriate systems and reports. The present report involves information related
with management accounting together with its accounting systems, reports addition to
techniques. It further includes distinct planning tools and comparison between two organisations
in the manner accounting systems are adopted to respond towards financial problems.
TASK 1
P1. Management accounting and accounting systems.
Management accounting: The concept that comprises procedures to analyse costs as
well as activities in order to construct financial reports together with maintaining records that
aids in decision making to attain organisational goals is characterised to management accounting.
It is mainly used for keeping records, financial planning, analysing sales trends, performance
management, controlling expenses and to make decisions (Brewer, Garrison and Noreen, 2015).
In context to ABC Ltd Company, managers uses it for systematic management planning together
with formulating strategic decisions.
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Management accounting systems: These are described to the systems that helps
managers to measure price level, observing statistical information and evaluating business
operations so to make decisions. These are confidential as well as aids to provide guidelines so
that overall efficiency and productivity are improved for betterment of an organisation. In ABC
Ltd Company, following management accounting systems are used to record and maintain
information related to actual performance of company. Detailed description of the systems are as
follows:
Cost accounting system: It is defined as the framework that is applied by accountants to
approximate cost of distinct products for purpose of profitability analysis, controlling costs
addition to inventory valuation. It is a kind of accounting that helps production department of
ABC Ltd Company to analyse and identify cost that are associated with meal kit boxes so that
ices are set accordingly to attain profitability (Busco and Quattrone, 2015). The system is
essentially required at the company as to reduce costs, controlling materials, recording
production transactions as well as maintaining profitable status.
Price optimisation system: With the use of mathematical analysis, price optimisation
system is used to determine perception of market towards prices of organisational products.
Under the system, administrators of ABC Ltd Company carefully understands customer
perceptions in order to set appropriate prices for distinct meal boxes that results in generating
more revenue. The essential requirement of the system is to determine prices that results in
maximising operating profits. This system mainly applied by the organisation to set effective
price structure in which price provide products to the customers. It helps to understand the
perception of customer regarding to different price of the products.
Job costing system: Another accounting system is job costing system in which
manufacturing costs are allocated to individual jobs or specific product. It encompasses
procedures to accumulate information on costs associated with specific service or job. By using
job order costing, production managers of ABC Ltd company calculates profits by collecting
costs as well as controls operational efficiencies. The system helps in providing accurate
valuation in context to work in progress. The system is essentially required at company as to
accumulate reliable estimates about direct information labour, overhead addition to direct
material.
2

Inventory management system: The system which is aggregation of barcode scanners,
technological devices, desktop software along with barcode printers in order to streamline
management of inventory at workplace. Using such system, the management of ABC Ltd
Company tracks inventory positions so to eliminate any overstock or under stock conditions. By
effectively tracking quantities across warehouses, managers are capable to make inventory
decisions in efficient manner. Such system is further classified into LIFO, FIFO together with
Weighted average methods. Essential requirements of the system at the company is to record,
manage and track inventory materials together with reducing shortages, improving timely
delivery as well as maintaining surplus stock (Charifzadeh and Taschner, 2017).
Thus, all the elaborated accounting systems are used by ABC Ltd Company managers as
to analyse performances and formulating strategies accordingly so to achieve higher profits.
P2. Methods in management accounting reports.
Management accounting reporting plays valuable function in protecting business and
analysing its performance. Such reports are prepared as per the requirements in the bookkeeping
period. These reports provides significant information about various transactions or activities
addition to making profits. It is crucial for management team to adopt appropriate methods for
preparation of distinct reports after analysing gains and expenditures made by company. In
context to ABC Ltd Company, distinct accounting reports are prepared by departmental heads
with the objective to track operational activities and recording them so to submit the same to top
managers. Certain methods that are adopted by departmental heads of selected company to
generate accounting reports are the following:
Budget reports: One of the fundamental report is budget report a it helps in
understanding as well as controlling costs so to measure business performances. Using budget
report, actual results are compared with pre established budget in order to determine the
expenses. Budgetary report is used by administrators to determine the use of monetary resources
in effective manner. The activities of ABC Ltd Company such as production, marketing and
sales are recorded in such report. By considering the budget reports, all the transactions are
performed within set budgetary amounts so that measuring performance becomes easy for
departmental heads and managers.
Performance reports: It is prepared with the aim to keep record of organisational
performances in distinct time frame. Using performance reports, managers of any entity provides
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bonus together with incentives to work force as per the efforts that are made by them towards
accomplishing business objectives (Cooper, 2017). It benefits administrators of Guosto Company
to analyse performances of employees and determine which individual is performing well
addition to which one not. High performers are awarded more where as under performers are
provided more training programs. Performance accounting reports provides in depth information
about business workings and its capacity.
Inventory management report: Organisations manufactures physical products and
inventory management reports plays important function in centralising data associated on
inventory costs or other overheads that are involved in providing raw material as well as
production processes. Such report is a customized report that involves information about
supplier, location and product. This report all over the information such as how much raw
material come in the firm and on which date and how much take for the manufacturing
procedure. So with the help of this report take detailed information about the raw material and
understand how to take help from this report. It provides detailed information how much material
remain in the warehouse and in which stage require more material for further procedure.
Account receivable report: The report that is used to record credit sales as well as
analysing due payments in the accounting period. It is generally opted by the entities that
performs operations in credit terms and record all credit transaction in systematic manner along
with date, creditors name and amount (Eterno and Silverman, 2017). Reason behind preparing
account receivable report at ABC Ltd company is to list out unused credit memos together with
unpaid customer invoices as to determine nature of invoices that are overdue for payments. It is
used by top management of the company to ascertain effectiveness of collection as well as credit
functions. Selected organisation uses accounting software system in order to reconfigure report
in context to distinct data ranges.
Thus, the above stated management accounting reports are used by administrators of
ABC Ltd Company in order to manage inventory, knowing performances, working within set
budget as well as recording details of unpaid customers. All these reports helps in maintaining
efficiency together with formulating appropriate decisions so to grab opportunities.
M1. Benefits of management accounting systems
Management accounting with benefits: There are defined the different benefits of the
particular system that help to conduct the business activities smoothly and easily take decision
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regarding to business. For this purpose require to understand the benefits of the system that
discussed below:
Systems Benefits
Job costing system  The system benefits the organisation to ascertain costs
associated with particular job or finished product. It
also helps in controlling costs through implementing
suitable steps.
 Job costing system provides advantages to ABC Ltd
Company managers by computing revenues that are
earned from specialised jobs through tracking
performances through controlling costs and to improve
profitability.
Cost accounting system  The system helps in measuring as well as improving
business efficiency, fixing prices, providing guidelines
to reduce costs, proper planning and expanding
production activities of the business (Farrell and
Gallagher, 2015).
 Using such system, administrators of ABC Ltd
Company reduces irrelevant costs as well as control on
expenditures in order to set appropriate prices for meal
boxes.
Inventory management system  Inventory management system minimises costs,
increasing information transparency, improves
delivery performances and improves business
negotiations.
 The system benefits management team of ABC Ltd
Company to maintain required stock levels and
recording detailed information about inventory usage
so that further purchase decisions are make before the
requirements of inventory.
5

Price optimising system  Such system helps organisations to focus on sales,
managing elements along with customer perceptions.
It helps businessmen to find sweet pricing spot so that
they can maximise prices and motivates customers to
pay for the products (Fleischman and Parker, 2017).
 It benefits ABC Ltd Company to understand customer
perceptions addition to reactions of customers towards
set prices and accordingly framing future strategies.
D1. Evaluating integration between accounting systems as well as reports with organisational
processes.
Management accounting systems addition to reports are important for organisational
processes as they acts as guidances to work in effective manner so to attain objectives as per the
set criteria. Accounting system that are used by ABC Ltd Company encompasses inventory
management, job costing, cost accounting addition to price optimising system that benefits uin
numerous ways. In contrary, accounting reports delivers essential informations to carry forward
certain operations towards the path of attaining business targets and to frame decisions that
facilitates organisational procedures to achieve goals (Hoque, 2018). Using reports like
performance, account receivable, inventory management and budget, important aspects of the
company are analysed so to execute operations in smooth manner that benefits in achieving
organisational goals. Thus, accounting systems addition to reports are directly integrated with
procedures of ABC Ltd Company.
TASK 2
P3. Calculation of costs by using cost analysis techniques.
Cost refers to monetary valuation of materials, time, utilities, efforts and resources in
order to manufacture addition to delivering products. All the expenses incurred by company are
costs and is further classified as direct cost, variable costs and many more. In context to Galway
Plc, huge costs are spent by production team on acquiring raw materials, services, products as
well as equipments.
6

Marginal costing: It is a technique in which additional costs are associated in producing
additional product component. The costing technique is adopted by managers of ABC Ltd to
analyse situations where break even point is equivalent to fixed costs. Its nature id dependent on
costs behaviours which vary with output volumes.
Absorption costing: Another technique to value inventory is absorption costing which
provides comprehensive addition to accurate view points related to actual costs associated with
producing final products (Ji, 2017). It is considered as conventional method to ascertain costs as
it involves variable together with fixed costs in processes, operations as well as products.
Absorption costing helps management team of ABC Ltd with mechanisms such as external
financial addition to income tax reporting.
a) Production cost per unit
Absorption Costing: £40 unit ( 10+20+5+100000/20000 = 40)
Direct material 10
Direct Labour 20
Variable overhead 5
Total fixed production
overhead cost
£100000
Use standard volume of 20000 units to absorb the fixed production overhead cost
Selling price = £50
Absorption cost = £40
Total production cost
Budget: Absorption costing technique
Production
cost Per Unit Total
£ £
Direct
Material 10 18000x10 180000
Direct 20 18000x20 360000
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Labour
Variable
Overhead 5 18000x5 90000
Fixed
Overhead 5 90000
40 18000x40 720000
BUDGETED COST OF
SALES
£
Cost of production 720000
Opening Inventory 0
Closing inventory -80000
COST OF SALES 640000
2. Apply appropriate techniques
Absorption costing: Actual profit or loss statement January 2019
PER UNIT TOTAL
£ £ £ £
SALES 50 800000
COST OF PRODUCTION
DM 10 180000
DL 20 360000
VOH 5 90000
FOH 5 90000
40 720000
8

OPENING INVENTORY 0
CLOSING INVENTORY -80000
COST OF SALES -640000
STANDARD PROFIT 160000
ADJ. FOR UNDERABSORPTION -10000
BUDGETED PROFIT 150000
Absorption costing: Budgeted profit or loss statement January 2019
PER UNIT TOTAL
£ £ £ £
SALES 50 800000
COST OF PRODUCTION
DM 10 190000
DL 20 380000
VOH 5 95000
FOH 5 95000
40 760000
OPENING INVENTORY 0
CLOSING INVENTORY -120000
COST OF SALES 40 -640000
STANDARD PROFIT 10 160000
ADJ. FOR UNDERABSORPTION -5000
BUDGETED PROFIT 155000
9

Marginal Costing: Actual Profit or Loss statement January 2019
PER UNIT TOTAL
£ £ £ £
SALES 50 800000
COST OF PRODUCTION
DM 10 190000
DL 20 380000
VOH 5 95000
FOH 35 665000
OPENING INVENTORY 0
CLOSING INVENTORY -105000
COST OF SALES 35 560000
CONTRIBUTION 15 240000
FOH PRODUCTION -100000
BUDGETED PROFIT 140000
Marginal Costing: Budgeted Profit or Loss statement January 2019
PER UNIT TOTAL
£ £ £ £
SALES 50 800000
COST OF PRODUCTION
DM 10 180000
DL 20 360000
VOH 5 90000
FOH 35 630000
10

OPENING INVENTORY 0
CLOSING INVENTORY -70000
COST OF SALES 35 560000
CONTRIBUTION 15 240000
FOH PRODUCTION -100000
BUDGETED PROFIT 140000
BUDGET ACTUAL
£ £
FOH CHARGED TO PRODUCTION COST 90000 95000
under FOH charged to Profit or Loss account 10000 5000
FOH CHARGED IN THE MONTH 100000 100000
FOH TRANSFERRED THROUGH CLOSING
INVENTORY TO NEXT MONTH OCT 2018 10000 15000
FOH CHARGED 90000 85000
There is analysing the cost of production in budgeted and actual way and get the amount
of net profit with the help of both costing method. On the basis of these results company take
decision easily regarding to costing method.
M2. Usage of appropriate techniques in order to produce financial reporting documents.
In an organisation, several accounting techniques are adopted by financial managers in
order to calculate business profitability. By using such techniques, managers analyses, classify,
record as well as control transactions (Kaplan and Atkinson, 2015). For instance, managers of
ABC Ltd uses absorption along with marginal technique to produce financial statements which
further helps in making critical decisions for betterment of working. Financial reports interprets
financial position along with provides suggestions related with strengthen positions and
accomplishing objectives.
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 Standard Costing – This method defined that to conduct different types of sales such as
actual and budgeted sales conduct this costing. In the company it could uses by the
manager to determine the reason that are outcomes in difference among the current and
standard costs.
 Historical costing – The particular technique defined that all assets and liabilities are
recorded in the accounting books. The organisation should be recorded as nominal value.
The manager of the company utilised of this type of costing to record all the elements.
D2. Financial reports to interpret business operational activities.
Financial reports helps in providing information related to operations, cash flows together
with status of an organisation. Such reports are generally used by stakeholders to make
performance analyses so to frame future investment decisions in advance. According to
mentioned financial statements, it can be interpreted that during January 2019, ABC Ltd has
earned huge revenues. In context to absorption costing technique, earned net profits in as well as
e. All the income statements were prepared by using costing techniques such as marginal and
absorption addition to this interpretation is done on the basis of such statements (Labro, 2015).
TASK 3
P4. Distinct Kinds of planning tools.
Budget: Quantified financial plan which is prepared for forthcoming period is said to
budget. It is generally defined in monetary terms in order to provide forecasting of expenditures
together with incomes. It is compiled annually but is used to short term planning so to list out
expected revenues or losses in final budget. Short term budget covers one year time span where
estimations are done in beginning of accounting period where as actual transactions are
evaluated at the end so to meet the budget estimates. There are pre planned by financial
department by communication with production team in order to describe a structure to reach the
final platform. Administrators of ABC Ltd company carefully examine current performance and
sets budgets for future time period. They prepares budgets with the helps of distinct spreadsheets
so that errors are found together with taking remedial actions.
Budgetary control: It defines the ways in which managers uses budgets in order to
monitor together with controlling distinct operations or costs in defined accounting period. It
involves ongoing procedures that facilitates planning, coordination along with measures to
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control costs (McWatters and Zimmerman, 2015). At ABC Ltd Company, managers uses it for
planning as well as formulating policies. Effective budgetary control helps in reduction of costs,
ascertaining deviations and increasing profitability. Managers of the company uses following
planning tools that facilitates budgetary control as as elaborated:
Capital Budget – This budget is important for all organization as it is used to maintain
the long term assets for the purpose of getting long term profit. This is the process of defining the
viability to long term investment on purchase of plant and equipment, property and new long
term assets that helps to make higher profits. To manufacture new product require to capital for
the different activities that related to new product. That time apply this budget effectively. In this
budget includes capital receipts and payments. Such as ABC Ltd manager prepare capital budget
for the purpose of maintaining long term profits. It is helpful for managers to know long term
investment as well as productivity.
Advantages – There are defined the different benefits of this budget when company apply such
as:
 It helps managers of ABC Ltd to understand risk and its effects as it invest on long tern
investment. Manager can make decision in investment opportunities and it also increases
shareholders wealth.
 Through this budget understand the several problems that related with the investment
opportunity and predict how to risk influence on the performance of the organisation.
 This budget helpful to analysis several methods from different techniques to predict the
financial advantages regarding to project or not.
Disadvantages – There are discussed different limitations of the budget underneath:
 Decision are long term in capital budget that take much time. ABC Ltd is known as meal
kit retailers where skilled workers are required which is difficult for organization to hire
skilled and experienced person.
 Due to wrong predication in this budget impact on the decision making as the long term
durability of the business thus there is required to complete the budget by the experts in
well manner.
 Most of the techniques mainly based on the predication and postulate as per the potential
activity that would always stay same in the uncertain situation.
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Sales budget: It provide estimations of quantities of goods that a business plans to sell in
future duration. Budgeting is essential for any organisation because with any sales budget a
company can not track the process and can not improve the performance. It involves monthly or
quarterly estimates in currency and units. Operational team of ABC Ltd carefully analyses sales
trend, seasonal fluctuations, technological development, production capacity and price
fluctuations while preparing sales budget. These elements are playing essential role by the
business to analysing the actual performance. It also helps in building core strategies,
determining overhead expenses and improving cash management. The main purpose to prepare
of this budget to analysis the different departments by the management. A manager know how
much amount require to spend in other departments and how many staff members cam pay for
material & labour to meet with the organisational goals and objectives.
Advantages: Sales budget have some advantages in the context of the ABC Ltd:
 Such budget benefits ABC Ltd in budgeting, planning, strengthening flow, examining
actions performed by sales team and maximising sales performances in order to expand
business through attaining sales goals.
 Weak areas: It is beneficial to develop sales budget in the organisation because this
budget help to identify those areas which weak and deterrent to accomplishing the sales
budget. For this company take all the appropriate action that can be taken to right those
weak strengthen and link the front line.
 This budget guide to manager that how to allocate different resources into different
departments and constant reminder with the help of the year in the business in respect to
agreed budget and supports every one to be on track.
Disadvantages: There are defined the different demerits of the particular budget regarding
to ABC Ltd such as:
 The budget adds additional costs for ABC Ltd as to manage it in appropriate manner,
professional experts are hired who charges huge fees (Nwogugu, 2015).
 Decision regarding to sales budget has been taken by the authority and top directors that
may not go well due to different causes. The unrealistic sales budget is a common
complaint by the front line executives.
 In this budget does not included unforeseen expenditure that may raise due to calamity or
un-forecasted market situations.
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 This budget take more time because for this require to follow the systematic procedure
such as preparing, editing, modifying, re-working ad getting the approval from the top
authority.
Flexible budget: It is a budget which is adjusted according to the changes in activities
addition to quantities. It estimates losses and gains as per actual outputs in current period. It
caters logical comparison of actual costs with budgeted allowances. It helps managers of ABC
Ltd Company in price fixations, expenditure controlling addition to sending quotations. It is
defined as the financial plan where predict the income and expenditure on the basis of present
activities. If any variable can change in future so according to that add those expenses and
income to predict accurately. Most of the companies use this budget for estimate the revenues of
both a best case and worse scenario for potential period of time. This budget offered the look at
the future of the company's financial performance.
Advantages: There is defined the benefits of the flexible budget that apply by the ABC
Ltd in efficient way:
 Flexible budget benefits financial department of ABC Ltd Company to easy compare
standard outputs or costs with actual ones. It further helps in measuring operational
addition to managerial performances.
 Updated with the current data: Revenues and expenses can be settled in the flexible
budget due to analysis position of company for current operating condition. Due to
applying new environmental regulations cost of production based on the purchase of
machine due to changes act. In the flexible budget a manager constantly change the price
of material and other things
 Better cost control: The management follow the budget to control cost due to respond
more quickly to adverse situations. The company follow all the procedure according to
budget of any areas spend money more than to budget so immediately take action in
order to apply cost control. Such as expected sales 20000 and material cost budgeted
about 5000 as per 20% of sales. If sales declined so it will impact on the performance and
material cost.
Disadvantages: Every budget have right as well as wrong phase so many time company
face negative side. So there is discussed about the limitations of flexible budget in detailed
manner such as:
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 Flexible budget is more confusing and complicates things as it includes several
regulations that are easily changed by accountants which created more cheating during its
preparations.
 Time consuming – It is a time consuming budget where take more time to figure out the
how variant those variable cost might be. There is required to management follow the
particular procedure effectively so it will take more time and face many hazards in the
organisation.
 It is difficult to predict the cost and revenues for the organisation due to flexible expenses
change conditions anything. So many people take advantages and increase chances of the
fraud activities. They are changing amount any time and recover amount by the company
for the personal things.
M3. Planning tools with application in order to prepare as well as forecasting budgets.
Planning tools helps in converting targets into achievements. Such tools works with
effective logics while understanding present circumstances in order to predict forthcoming
situations in advance. The tools that are used by ABC Ltd Company administration team for
forecasting purposes includes capital, sales and flexible budget. These are effectively opted to
forecast activities so to prepare policies so that issues are cleared and targets are achieved in
effective manner (Schaltegger and Burritt, 2017). For example, sales budget is used to identify
the areas where improvements are required as well as to determine increases in prices while
forecasting sales. On other hand, flexible budget helps in anticipating doubtful activities which
are concerned with future operations.
TASK 4
P5. Comparison showing the ways organisations solve financial problems with the use of
accounting systems.
The troubles related with monetary resources are financial problems. All businesses
whether public or private, small, medium or large faces financial issues while operating
activities. It arises when the managers of the company fails to afford basic necessities as well as
makes payments on time. Some financial issues are also faced by ABC Ltd Company which as
the followings:
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Inappropriate credit policy: The management has framed certain credit policies to
market certain products. Managers of ABC Ltd company became liberal on customers whose
creditworthiness was doubtful that results in increase in sales but on credit terms that increased
bad debts that resulted in liquidity problem.
Cash flow management: it is not possible to emphasis on each activities during
accounting period which later becomes reason of poor management of cash flows. Accountants
of ABC Ltd Company at various time period failed in tracking spot trends as well as making
future preparations in order to tackle problems which has now become problem of cash flow
management (Sundin and Brown, 2017).
In order to overcome from the above stated financial problems, following systems are
applied by ABC Ltd company administrators:
Price optimising system: Using such system, managers of the entity can understood
perceptions of customers together with their creditworthiness and set prices as well as policies
accordingly. Implementing the policies in effective manner will help in forcing customers to
make payments which will increase business profitability (Weygandt, Kimmel and Kieso, 2015).
Cost accounting systems: Application of such system will help in creating projections of
cash flows, regularly checking transactions, automating tasks that will result in managing all
activities through spreadsheets. It will help the company managers in tracking spot trends and
preparing others to tackle future problems along with managing cash flows.
Management accounting approaches: These are inter related with accounting
techniques as to resolve problems that are concerned with funds. Some of the approaches
followed by Guosto Company are as defined:
Benchmarking approach: It is another tool to identify the financial problem that arise in
the company due to financial activity. The main purpose of this method to get minimum
expected result from the organisation. Every business set a particular benchmark that achieve in
certain period of time. Finance department of ABC Ltd makes comparative analysis with other
companies in similar field on the basis of structures, products addition to procedures. It helps in
lowering labour costs, improving performances in various departments as well as emulating best
practices.
KPI Approach: The approach is used at Company so to evaluate success to reach
extraordinary heights. The particular approach mainly applied by the organisation to analysis the
17

financial problem that arise in the firm any time and show impact on the organisation
performance. These are categorised into two parts such as financial and non financial factors. In
the financial factors consist of those activities that create problem regarding to financial
activities. It helps in identification of deviation gaps together with their root causes. It is
basically used to track non financial addition to financial performances so to take corrective
decisions for resolving financial issues.
Financial governance: It is a essential method that impact on the collection,
management and control of the financial information. Through this method company sort the
problem that identify through other management tool. It provides all appropriate alternatives as
per the situation company select best option and apply on the financial problem of the company.
It is used by ABC Ltd Company to smoothly running operations without any obstacles. In
involves regulations or legislations imposed by government and are mandatory to be followed by
all entities.
Comparison among ABC Ltd Company and Galway Plc
Basis ABC Ltd Galway Plc
Problem The company is facing problem in
managing cash flows in which
emphasizing all activities or cash
transactions becomes impossible.
Galway plc is facing financial
problem of inappropriate credit
policies.
System Described financial problem can be
resolved through applying cost
accounting system which will result
in projecting cash flows as well as
focusing on all transactions through
spreadsheets (Zheng and Alver,
2015).
By following price optimisation
system, managers of the entity
can understand creditworthiness
of customers and can set
strategies to recover payments
from doubtful customers.
Approach Marketing department should
implement KPI approach in order to
analyse creditworthiness of
customers addition to measuring
The marketing team of such
business can apply approach of
benchmarking through which
reports are prepared through
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their performances in competitive
market.
comparative analysis with other
best industry in context to
structures or followed strategies
that will result in resolving such
problem.
M4. Responding of management accounting towards financial problems for sustainable success.
Management accounting helps in gathering, monitoring as well as controlling financial
issues that are faced by businesses. It involves techniques or approaches such as KPI and
benchmarking that deals with hurdles (Busco and Quattrone, 2015). ABC Ltd Company uses
KPI approach in order to measure performances and implements programs so that financial
problems are resolved and can lead the business towards sustainable success through effectively
managing accounts as well as making decisions. To sort out the problem of financial aspects
related to apply all the appropriate systems of management accounting to sort out the problem
effectively. It is applied by every type of organisation rather than small, medium and large. It is
defining as continue procedure of analysing, interpretation and presentation of financial
information after gather of financial information.
D3. Planning tools usage to respond towards solving financial problems so to lead the
organisation towards sustainable success.
Planning tools are applied for preparing decisions and budgetary estimates. Such tools
provides accurate and true representation of transactions so that organisations responds towards
financial problems (Eterno and Silverman, 2017). Using planning tools, ABC Ltd Company
monitors situations through flexible, capital and sales budget so to distinguish actual results with
standards budgetary targets which will provide profitability in order to solve problems and lead
the entity to sustainable success. Through flexible budget a company easily analysis the situation
in changing atmosphere and adding all the important component that add in the budget so it is
helpful to analysis the actual situation and apply changes with updated data. Sales budget
provide all the predication of volume units and outputs regarding to particular period of time. For
this require to follow the procedure and take permission from the top authority. The capital
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budget prepare by the company to know the investment amount regarding to any machine and
investment amount in any activities.
CONCLUSION
From the presented report, it has been concluded that management accounting is essential
for all entities as it encompasses systems and reports that strengthens procedures to run
operations. Management accounting systems includes job costing, price optimisation, cost
accounting and inventory management. Some reports prepared by departmental heads are
performance, budget, account receivables and inventory management reports. Costing techniques
includes absorption and marginal that are used for preparing financial accounts. On the basis of
these techniques get different result in actual and budget manner. After the analysis company
select appropriate method that suit according to structure and calculate the net profit. Planning
tools such as flexible, sales addition to capital budgets helps in solving financial issues as well as
provides path to attain sustainable success. Every organisation face different financial problem
for this apply different management tool such as key performance indicator, benchmarking and
financial governance. After that compare with other organisation problem according to that apply
all the modification in suitably way.
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