Management Accounting: Principles and Planning Tools for Accounts

This report provides a detailed analysis of management accounting principles and effective planning tools used in managing accounts. The first part focuses on the principles of management accounting, including the role of managerial accounting and its systems, the utilization of methods and techniques such as variable costing and absorption costing for income statement preparation, the integration of management accounting within the business environment, and the importance of its functions to the organization. The second part differentiates between various managerial accounting instruments, discusses the application of managerial accounting for resolving financial errors, and provides recommendations for effective financial planning and analysis. The report emphasizes the importance of management accounting in decision-making, resource utilization, and overall organizational performance.

Management
accounting

Table of Contents
INTRODUCTION ..........................................................................................................................3
PART 1............................................................................................................................................3
Management Accounting Principles.......................................................................................3
1. Principles of management accounting................................................................................3
2. Role of managerial accounting and its accounting systems...............................................4
3. Utilisation of methods and techniques in managerial accounting through presenting
computations for income statement with the help of variable costing ..................................5
4. Management accounting integration within the business environment.............................7
5. The importance of functions to the organization................................................................8
6. Conclusions........................................................................................................................9
PART 2............................................................................................................................................9
Effective planning tools for managing accounts....................................................................9
1. differentiation between managerial accounting instrument...............................................9
2. Application of managerial accounting for resolving financial errors...............................12
3. Recommendations............................................................................................................13
CONCLUSION .............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Managerial accounting can be viewed as a managerial tool designed to address the
routine financial management issues faced by decision makers in the private and public
organisations (Alabdullah., 2022). In today's competitive era, managers from diverse
management backgrounds need to understand the tools of management accounting while making
financial decisions, and they have to be alert of the qualitative problem that impact those
decisions. This report is separated into two parts. The first is "Principles of Management
Accounting" and the second is "Effective Planning Tools for Managing Accounts". The first part
briefly explains the principles and functions of management accounting and its systems using
absorption and marginal costing. Also, conclude this section by describing its integration and
advantages in the business. In the second part, a variety of management tools and techniques are
used, and comparisons and contrasts between them are provided. In addition, there is an in-depth
discussion of the financial issues facing the organization
PART 1
Management Accounting Principles
Accounting consider the gathering of all data useful to the operation of an organization.
Such data may be financial or non-financial, real or approximated, based on past or early, data
related to volumes, trends, costs/income, profits/losses etc. Likewise, "management" may regard
an individual's activities in a field (Ambarriani and et.al., 2022). Number of positions, such as
senior administration, central and lower governance, enforcement managing director with
governance responsibilities. Management accounting is future oriented. It is primarily concerned
with providing managers with data to help them plan, measure and control actions. It contains
technologies and processes designed to provide people within an organization with financial and
non-financial data to make effective decisions, thereby enabling organizational control and
improving organizational efficiency.
1. Principles of management accounting
There are various generally accepted principles of managerial accounting are discussed below:
 Designing and assembling: Management accounting systems are designed in such a way
that they provide relevant data for solving specific problems. Financial and non financial

dare related to past present and future should be arranged to meet the need of the firm and
its problems, if any.
 Establishment of exception: Follow it when providing data to management. This means
that management accounting systems follow standard cost accounting techniques and
budget control systems. It is helpful in comparing the actual performance with the
predetermined performance and compute the deviation. Adverse deviations are accurately
notified to management.
 Control at source accounting: The principle says "costs are managed as they occur". Data
of material utilised and uses of services such as maintenance, machinery, repair and
power in the form of quantitative and qualitative data. In this way, control of materials,
employees and service delivery equipment can be achieved (Amoako and et.al., 2021).
 Absorption of overhead costs: Overhead is a aggregation of indirect materials, indirect
labour, and expenditures. They are reflect on any pre-planned basis. The absorption
method chosen should produce the desired results in the fairest way.
 Utilisation of resources: This point mainly focus on the effective use of resource. Proper
management and utilisation of resources result in reducing the wastage of important
resources. It is an important aspect for the business to ensure proper utilisation of
available resources.
2. Role of managerial accounting and its accounting systems
Management accounting and management accountants can have a important impact on an
organization's actions and strategies. This potential impact comes with the burden of ensuring
that management accounting data is produced and communicated in a responsible manner. The
role of the management accountant is a answerable one that can have a direct impact on people
inside and outside the firm. As the provider of performance monitoring data, management
accountants play an crucial and important link in the chain between administration and worker,
stockholder and management (Balashova and et.al., 2021).
Role of managerial accounting is discussed below:
 Establishment, coordinate and manage programs to assist forecasting of sales,
expenditure budgets and cost metrics for financing , capital budgeting and earnings
planning.

 Develop accounting policies and procedures. differentiation between real and awaited
activities should assist management properly identify responsibilities and also helps to
measure various functional and department heads.
 Responsibility to protect corporate assets to the greatest extent possible through external
controls, internal audit and insurance.
 Responsible for tax policies and procedures, overseeing and coordinating reporting
required by various departments.
 Continuously understand the impact of economic and social forces and government
policies and actions on business activities.
An effective management accounting system touches all parts of a business such as finance,
human resources, marketing, operations and sales. To render critical data for operational
business decisions, an internal management accounting system is used (Căpușneanu and et.al.,
2021). Manufacturing companies can use these systems to calculate costs and manage their
processes. Hospitals can use these systems to help them with insurance billing and other internal
requirements. These systems vary within the industry they are used in and allow for functionality
and reporting specific to that industry.
3. Utilisation of methods and techniques in managerial accounting through presenting
computations for income statement with the help of variable costing
The expenditures required to produce and sell products and services or acquire assets are
called costs. For analysis purposes, costs can be specified as variable costs that vary with activity
levels. Conversely, costs can be said to be fixed costs that do not vary with changes in activity
levels.
Managerial Costing: It refers to determining marginal cost by distinguishing between fixed and
variable costs and the effect on net income of changes in the quantity or type of output. In this
case, only variable costs are modify to the product or actions, while fixed costs are charged to the
income statement for the period of time in which they are incurred (Cardinaels and et.al., 2022).

Absorption Costing: The procedure of including all variable and fixed costs in an operation,
process or product is called absorption costing (Centorrino Naciti and Rupo., 2022). Accenture's
income statement using the absorption costing method is as follows:

To the best of management's knowledge, the above reports are legitimate and true as
various organizational decisions may be relied upon. The above data contained in the report was
reviewed by Accenture authorized personnel. The concept of variable cost focuses on excluding
fixed overhead to calculate the profit earned. Fixed costs are usually included in production costs
and used in absorption costing, where fixed overheads are allocated to products (Dapueto and
et.al., 2022). While variable costing can provide relevant information, it cannot be used for
financial reporting under accounting frameworks such as IFRS or GAAP. Here are the
advantages of variable costing and how it can help accounting management:
 Designing and controlling: A variable cost income statement is more suitable for internal
use for short-term preparation and control work. To perform these functions, managers
must understand and predict how various costs of different natures will vary with activity
levels.
 Goods pricing decisions: When variable costs indicate exceptions and contingent
conditions, management processes orders related to products or services. Variable costing
defines the minimum selling price under the above conditions and provides essential data
about the contribution margin and the most profitable pricing policy.
 No impact of inventory alteration: In variable costing, profit is only characterized as a
function of sales, so it is not affected by changes in inventory, either at the end of the
period or at the beginning of the period.
 Segmental reporting: A segmented report that is drafted based on variable costs is
preferable as it provides an accurate analysis of profitability in relation to plants,
products, activities, regions and other sectors. It mainly focuses on the contribution of
various departments in the business process (De Nichilo, 2021).
4. Management accounting integration within the business environment
Today's managers cannot dismiss the role of the management accountant, as competition
progressively drives demand for quality products and services. According to one study, for all
commercial enterprise, managers prioritize the several factors: "customer satisfaction, product or
service quality, the running and control of management operations, and company profitability".
To achieve these goals, managers believe that they need a strong management system, and
management accounting is seen as the main tool to guide them to achieve the set goals.
Numerous studies have shown that managerial accounting is more valuable and relevant to

manufacturing because they must constantly monitor production costs, manage pricing, budget
capital for current maximization and future sustainability, and effective decision-making.
Because organizations can vary according to their operations and activities, management
accountants should be involved through a structured approach that identifies key operational
aspects of each unit or division. There are many management accounting processes such as
Activity Based Costing (ABC), Grenz-plan-kosterechnung (GPK), Lean Accounting, Resource
Consumption Accounting (RCA) etc. ABC, GPK, and RCA are the most popular because they
work for so many organizations. One of the most assured ways to ensure cost accounting
management accounting information is efficient is to incorporate different management
accounting methods in process analysis and instructional data development. In this regard, the
possibility of integrating all these processes must be continuously exploited to ensure that the
management accounting culture is also accurate and detailed (Djumanova and Bobomurodov.,
2021). In the long run, the organization's performance improves, leading to a competitive
advantage, and management has a support system that can effectively meet its needs. One of the
strongest techniques to apply when looking to create a culture in an organization is reward
culture. This leads to continued or even further improvement in the habit or performance. The
successful application of management accounting can be illustrated in a number of ways,
including: maximization of organizational resources, continued cost control as the organization's
profits continue to grow, and better employee and customer satisfaction.
5. The importance of functions to the organization
 Inventory Management System – Applying a system that handles inventory and its
movement will help Accenture deal with issues such as stock shortages or increased
waste. Before applying any inventory management system, companies must strictly check
the reports related to inventory and another similar details.
 Cost Bookkeeping System - This benefits Accenture's accounting and finance
departments by measuring variable and fixed expenses incurred during the business
cycle. It is often used to track costs, calculate burrs and variances in project value with
appropriate tools and techniques (Grasso, and Tyson., 2021).
6. Conclusions
It is a decision-making method used to add value to an organization by allowing its
decision makers to make decisions based on the assessment of costs and other performance

issues. It is monolithic in nature and is mainly intended for internal use. The impact of
management accounting makes it a key tool for an organization's short- and long-term survival,
therefore, this report supports its application in an organization. These impacts include the ability
to guide decision-making through the information provided, the ability to ensure maximum
utilization of human and physical organizational resources, the ability to ensure robust
organizational operations through the use of technology, and the ability to provide services
through products and institutions. These benefits can be summed up as better income, higher
satisfaction, and higher organizational performance.
PART 2
Effective planning tools for managing accounts
1. differentiation between managerial accounting instrument
Financial Preparation and Analysis: The health or position of an organization is assessed
by four activities: planning, budgeting, performance reporting, and management (Gunarathne
and et.al., 2021). Together, these activities define the process of financial analysis, leading to the
effective application of financial resources and linking corporate strategy to the organization's
vision and mission.
Advantages Disadvantages
Real-time analysis of historical and current
expenses to help generate forecasts and reports,
and capture opportunities for growth and
investment.
Skilled analysts are able to successfully
conduct financial analysis more than others.
Appointing such a person or a team will
require significant investment.
Better management of debt is also a key
advantage of financial statement analysis, and
debt management will be improved by
accurately analysing ratios related to assets and
liabilities.
Only one organization's monetary data was
included in the financial analysis, and all non-
monetary transactions were ignored. This can
lead to unnecessary losses or outflow of
profits.
Through the use of financial statements,
through effectively managed transactions, if
the relationship between the entity and the
Financial statements are always based on
accounting principles and concepts. For
example, raw material inventory can be priced

supplier is well established, the organization
can maintain liquidity and even ask for
deferred payments.
at cost, while finished goods inventory can be
priced at the lower of cost or market price.
This results in mismatched or misleading
information.
By analyzing financial statements and other
necessary documents, organizations can easily
reduce the risks associated with different types
of activities. It also helps correct delays,
inefficiencies and iterative improvements will
improve business processes (Mahmoudian and
et.al., 2021).
All documents used in the financial analysis
process are based on past data and therefore
cannot provide absolute assurance as to the
fairness of the statements, nor can they provide
a basis for forecasting or estimating future
values.
For example, Accenture applies multiple ratios
and trend analysis to efficiently manage its
business without wasting resources while
maintaining productivity.
Financial analysis for a large company like
Accenture requires a highly qualified team and
up-to-date software, which is costly in most
cases.
Cost Accounting: Cost accounting is defined as the process of reporting and analysing the
structures implemented in an organization (Oyewo and et.al., 2021). Through this process, costs
are allocated to cost objects, which typically include a company's products, services, etc.
Advantages Disadvantages
Cost accounting assists management by
helping them understand the cost patterns that
occur in the business and how to successfully
control them to reduce costs.
Almost every year, the cost of an item keeps
changing based on the surrounding market
conditions. Therefore, no absolute guarantee of
company costs can be given.
Accounting specialists apply and create certain
accounts to get through a comparable situation
and can provide cost estimates for forecasting
and management.
In order to calculate the company's costs,
proper books should be kept. Without books,
such as sales books, purchase books, or
journals, analysts cannot estimate actual costs
incurred.

It also helps the government obtain relevant
information to assess the tax impact and tax the
company based on the profits earned as all
costs associated with the business item are
identified (Ping., 2021).
Cost accounting is a complex and somewhat
rigid process. Relevant skills, training and
experience are required to thoroughly
understand the process and provide a fair
estimate.
For unions, they can use cost accounting-based
statements to efficiently calculate bonuses and
determine compensation reasonably.
Cost accounting systems require management
to absorb costs at predetermined rates, which
often results in over- or under-administrative
expenses, whether fixed or variable
(Richardson., 2022).
The most important issue with using cost
accounting in an organization like Accenture is
setting up costs and comparing them to a
standard set.
Cost accounting is a process that uses past
data, Accenture's management cannot use it to
estimate the price of an asset's present value.
Budgetary Control: It is defined as a control system used to compare actual outcome with
estimated outcome. Used to initiate action to bridge the gap or reduce bias. It includes the
preparation of budgets, such as fixed, flexible, cash or procurement budgets.
Advantages Disadvantages
The preparation of a budget means that the
organization must follow a clear plan to align
with the prepared budget, or the company will
experience a job mismatch.
Since budgets are prepared for the future, they
depend on stable conditions in the market.
However, it is clear that the future is always
uncertain and unexpected situations can arise,
so the budget fails in this case.
When developing a budget, keep in mind the
prospect of communication between
employees. Every department has to prepare a
budget after consulting department staff and
other levels (Terdpaopong, Visedsun and
Goals are often given to everyone in an
organization, indirectly limiting high-
performing employees to achieve goals and
exceed and perform better.

Nitirojntanad, 2021).
The budget is said to make the management
process possible. The comparison between the
actual budget and the current budget shows the
weaknesses of the entity.
Due to rigidity and individual budgets,
unnecessary conflicts can arise between
multiple departments, leading to low
productivity and errors.
It indirectly promotes decentralization or
delegation of authority by assuming separate
budgets for different departments.
Subordinates and executives can exercise
initiative within a certain range.
The budget is prepared with the assumption
that top management or those responsible for
governance are enthusiastic about the success
of the proposed budget. However, without
management support, the system could
collapse.
Accenture, for example, is a consulting firm
that uses a zero-based budgeting approach,
which involves creating a budget from scratch
or creating an entirely new budget.
A large company like Accenture will have
multiple consumer satisfaction departments,
and preparing separate budgets for all of them
requires a lot of time and investment.
2. Application of managerial accounting for resolving financial errors
Financial issues will always exist in any company, regardless of its size, profit orientation
and infrastructure. To reduce the likelihood of significant damage to an organization, many types
of financial planning and analysis techniques are used, some of which are discussed above. The
most common problems organizations face are inefficient money management or resource
utilization, which require financial analysis and management (Wang., 2021). To better
understand the situation, its impact, and solutions, firm evaluated the following case studies:
 Accenture's focus on work-from-home policies during COVID-19 has certainly limited
its high-touch consulting model, directly forcing it to offer consulting-focused sales.
However, by choosing the right management accounting technology, it supports clients
who have not yet opted for work-from-home services and integration of digital workplace
solutions through technology platforms.
 Professional services firm Deloitte suffered a cyber attack in 2017, and hackers also
gained access to vital information about its clients and employees. Management