Management Accounting: Techniques, Budgeting, and Financial Responses

This report provides a comprehensive overview of management accounting, highlighting its principles, techniques, and the importance of budgeting. It discusses various methods used in management accounting reporting, including margin analysis, budgeting, historical cost analysis, inventory valuation, and constraint analysis. The report also examines the advantages and disadvantages of budgeting as a management tool, focusing on aspects like planning, decision-making, motivation, and potential dysfunctions. Furthermore, it compares how two organizations, Eastern Engineering Co. Ltd and Unilever, adapt their management systems to respond to financial problems, emphasizing the importance of financial governance and managerial accounting skills. The study concludes that effective accounting practices are crucial for maintaining financial stability and fostering business growth in a competitive market.

Management Accounting

Table of Contents
Management Accounting.................................................................................................................1
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Principles of management accounting and its importance along with examples........................3
The different techniques and methods used for management accounting reporting...................4
The advantages and disadvantages of budgeting tool..................................................................5
Comparison of organizations which are adapting management system to respond to financial
problems......................................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................1

INTRODUCTION
Accounting is the process of keeping the track of financial records in a business. It
includes summarizing, analysing and reporting all the transactions and tax collection reports.
This will maintain the finance records of an organization and will know about the company's
position(Akimova, and et.al, 2018). The report will illustrate the concept of management accounting,
its importance, different techniques and methods, their advantages and disadvantages and
economic issues which an organization have to confront. In this article, Eastern Engineering
Co. Ltd which is medium size enterprise in manufacturing sector which has recruited graduate
trainees. Here, preparing a study note for them on the role and function of the management
accounts department and its systems which generates in an organization.
MAIN BODY
Principles of management accounting and its importance along with examples.
The developed needs of internal management to improve the process, decision-making,
resources, customer value and capital utilization to achieve a goal. In general, there are five
principles to manage the accounting of an organization.
Designing and compiling : Creating and designing any records, reports, data, statements, past
present or future evidences which needs to be compiled together for any specific business
obstacles. The accurate formation of these relevant data can resolve the issues and more
information can get by modifying the statements.
Management by exception : This principle refers to information of management which actually
means the control over budget system and costing technique or methods to follow the accountant
management.
Control at source : The utilization of individual employee, material issues, services such as
machine, repairs, power and maintenance and vehicles which are prepared to form a sufficient
information.
Management accounting is important to develop a new business strategy by maintaining
the financial reports which can give an accurate information of the tax revenue, share values and
all cost of in and out expenditures(Rizza, and Ruggeri, 2018). It is the crucial tool for driving any
department business. Here, performing the importance of the accounting with the help of
examples.

Reviewing products : Keeping the records of previous products to get information about the
financial utilization and what amount of the economy can use for providing a better products and
services. It well helps to decide the stable and profitable product selection for a company. For
example : The company named Eastern engineering Co. Ltd always review their selection of the
products and it will help them to understand the faults and new ideas accordingly.
Launching new products : Requirement of accounting in producing a new product is more
important. From initial to end it will help an organization in creative planning and detailed
analyses of market capabilities. Eastern Engineering company has launched a new product by
proper identification and well picture of the market to make excellent decision.
Staffing : Staffing is the other method to make a balance in finance accounting of the
management. Eastern company has number of employee working there(DO, et.al, 2020). By
keeping the records of economic accounting they can know how much they can spend on the
wages of the staffing and what number of people they can hire. Making the perfect accounts of
finance will able to get clear structure. This will help to make a decision what amount a company
can afford in staffing and how much they can expect from them as results.
The different techniques and methods used for management accounting reporting.
Margin analysis : The process of identification of the production through economic scale which
help an organization to optimize their balance. Eastern engineering company uses this technique
to get the information about their margins which they are getting from selling the goods and
services. This analysis help above mentioned organization to identify the costing, direct control
and decision-making for profit maximization. If this method wasn't use then they will not able to
know their financial stages.
Budgeting : Budgeting means outflows and inflows of an economy to evaluate the expected
return at a boundary. Costing is mainly utilized when a company is launching or making an
investment in any project. This calculates the enclosure like NPV which is net present value and
IRR which is internal rate of return which helps management to make decision on the
investments and how maximum benefit they can get. This method is followed by a company
named Eastern engineering from this technique they are able to utilize this accounting.
Historical Cost : The cost is determined as the past data which will help a company to compare
the present and past revenue and economic values. For example : In 2017, above mentioned
company has a 20% effect in productivity as financial year while in 2019, a company has gain

25% profit(Erokhin, and et.al, 2019). According to the past detail information of accounts it can be
compare are get knowledge how much amount the company increases and what percentages they
grow from past years.
Inventory valuation : Inventory valuation is the amount of production of goods. In other terms,
Eastern engineering company has finding the value of unsold stock at the time when they ate
preparing their financial statements.
Constraint analysis : This analysis refers to bottleneck of an organization. In this the
management only view the methods to increase the level of bottleneck till they return the
profitable business. They put a benchmark from which they have to improve and achieve their
performance at high level.
The advantages and disadvantages of budgeting tool.
Advantages
The budget planning : A procedure of creating a well designed budget that takes a management
in short-term or day to day business and drive it to build a long-term business association( Faccia,
and et.al, 2019). Accurate planning is the main point of budgeting, even when company cannot able
to decide and manage the budget system instead of that they can give focus on financial position
and how it can be improve.
Decision making : This process of decision making will help an organization to focus on the
matters and statements of budget not even only company’s share value, along with that the
manipulating of products and goods can be determined.
Monitoring and controlling : The most important benefit of budgeting is it can help a
management to monitor the entire operational system and control them over a accurate and
perfect timing.
Motivation : The motivation and energy can be improved by budgeting system. Providing the
best budgets to employee and staffs they will put a great efforts to increase the business as well
fulfil the requirements and needs of an individual employee. Keeping the targets and offering
them a increment and incentives will motivate them to work hard which increases the
productivity of a company.
Focus on goal : In the field of managing the accounts it is must to concentrate on the targets and
goals. When a company creates a accurate targets through their analysis and statements which
helps them to make a budget(Yu and et.al, 2018). Planning and evaluation is the basic part of this

function as well and effective planning will cause to understand the budget system, their
expenses and incomes through the entire process. Keeping the concentration on the goals will
lead an organization to prepare a well designed finance and a excellent outcome.
Disadvantages
Dysfunction management : Cracking the targets and still not getting a best offerings and budget
incentive to make them feel motivated and confident will decrease the hope and strength to
work(Nanyun, and et.al, 2021). For example: an organization is providing the increment of 20% for
cracking the targets and on other hand, the another company has not fixed the budget system
which will create an issue in productivity.
Demotivation : Employees are not satisfied with the budgets still putting the efforts but still they
did not get any increase in amount and always disagree their needs will demotivate the staff.
Strategy rigidity : In this process, when a organization plans a annual budget and keep the outline
targets which have to perform accordingly. This can create a problem as sometimes the market
changes its direction according to its financial year budgeting. In this, a company should follows
the route of market analysis report.
Gaming the system : An experience manager can attempt a threat or false activity by making the
expenditure costs at high at revenue results at low prices and manager can get a favourable
valued budget. This can be the most serious problem and requires a accurate solution for this
action.
Comparison of organizations which are adapting management system to respond to financial
problems.
The process of creating an statement for the better understanding of the budget is accounting.
Here, performing a report to illustrate the management adaptation to respond to financial issues
in a organization. For this understanding choosing two companies to compare them from each
other. Firstly selecting the company whose name is Eastern Engineering private limited and
second is Unilever manufacturing company.
In every department it is important to take care of the economy and budgeting
system. For making the balance companies are performing to utilize some management system to
gain the beneficial results in a firm. Eastern company practicing mainly two adaptations to
decrease their financial problems. Firstly, they concentrate on identifying the economic issues.
When a company will know the obstacles then only they can make a decision to resolve it.

The company mainly focuses in analysing the issue from different methods like using budget
targets, KPI which is key performance indicator, economic and non-economic benchmarks to
research them without getting any delay. After this identification, they follows the finance
governance factor(Liu, Xing, et.al, 2017). Finance governance field collects, manages, monitor and
control the financial information. They provide the perfect reading and capturing the data
information and companies performance through their experience and some unique methods.
These two systems help the Eastern company to improve and resolve their finance issues.
On the other hand, Unilever company which is also a manufacturing follows two
major steps to resolve their economic problems. The company should knows the managerial
accounting skill to increase the growth. It simply means, the company hire the employees who
has expert in mathematics and computer skills which helps them to make a accurate reports and
statements of their expenses and incomes. In addition, Unilever also utilizes the effective
strategies and system to solve their obstacles(Keith, et.al, 2017). In the accounting management
there are various kinds of strategies and methods which can make the procedure in a simplest
from. It includes budgeting, benchmarking, costing, monitoring and profit analysis.
These different methods help a company to improve their accounts and
economic management at a successful and fine position. Here, both the companies utilizes the
different elements and techniques to protect their financial growth and make a balanced
informational sheet for better understanding. Each organization has its choice of equipment to
utilize in their work process. This concept will create a better understanding regarding the
adaptations process of management in any department and in a marketing society. It ensures that
generating this example by comparing the two manufacturing companies results in excellent
performance.
CONCLUSION
In this report, it has been concluded the meaning of accounting. An accounting is a process of
maintaining the records of the in and out expenditures. It has been clear that when a organization
uses the different techniques and methods to manage their finance at stable position requires to
perform a accounting which enhance the development and growth of a business association in a
market surrounding(Van Helden, 2019). The report has also concluded the advantages and
disadvantages of budgeting and how it can is important factor to operate in a company for the

better arrival outcomes. This study has been provided an ideology to generate the functions of
making a appropriate decision and analysis for the effectiveness and productivity of an
organization. According to this article, it ensures the chief principle of the management,
accounting and budgeting in a cooperative environment.

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Keith, et.al, 2017. Ecosystem accounts define explicit and spatial trade-offs for managing natural
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