Unit 14: Advanced Management Accounting Assignment Sample – BTEC-HND-LEVEL 4

This unit aims to develop a basic conception of management accounting. This management course focuses on comparing, analyzing different accounting techniques. It assesses organizational performance using management accounting principles. Learners explore how decisions taken by management accounting, impact the behavior of an organization.

On completing the assignment, students will be able to support businesses. They will be able to create value through effective decision-making management accounting. To control employees of a business organization. Besides, learners will gain skills and advance to a higher level of education.

Assignment solutions of Unit 14 Advanced Management Accounting

Performance measurement techniques may vary from one industry to the other. Performance measurement techniques incorporate both financial and non-financial measures. There are varieties of performance evaluation techniques. The main goal of measurement techniques is to identify the KPI indicator. PWC developed methods for evaluating KPI.

Performance evaluation measures are upgradable to meet the cost, services Quality, delivery. Management assigns a rating to the quality measurement technique such as rejection/acceptance of customer feedback.

It analyses components, percentage contribution in the negative, positive impact on cost variance. Management can test Performance measurement techniques with regards to the industry benchmark. It can measure negative or positive position following a mentioned benchmark, and client-retention.

LO1: Analyse the importance of presenting and developing financial information

The main aim of the financial statement is to provide information related to financial position, outcomes of different operations, cash inflow, and outflow of an inflow of an organization. It helps the managerial people to make important decisions related to the allocation of resources. at a refined level, their distinct purpose related to the financial statements. The income statement informs the management about the organization’s capacity to earn profits. It provides information related to the volume of sales, nature of the expenses. It provides information relying upon how payment-related information gets managed by the Finance department.

The income statement analyzes the trends associated with the business operations when reviewed over consecutive periods.

The purpose of the Balance sheet is to provide information About the current financial position of the organization. A balanced sheet lists the time, and date, and keeps track of the business operations. It offers information related to the equity, liquidity, debt position, and funding of a unit. It forms the basis for several Liquidity ratios.

Finally, the purpose of a cash flow statement is to Display the nature of cash reimbursements and receipts.

But, Cash flow statements have limited use as the cash flows mentioned in the sheet do not always match the actual expenses displayed in the income statement.

As a unit, financial statements help to make critical decisions and serve purposes as follows:

• Credit: Financial statements help lenders to determine whether they will extend the duration or limit of credit to a business or restrict the credit amount.
• Investments: Financial statements help investors to determine whether they will invest or increase the cost per share.
• Tax: Government may charge taxes depending on the number of assets, or liabilities. Financial statements help the government entities to make relevant decisions.
• Bargains: Financial statements help the union communities to make their bargaining decisions, relying on the payment capacity of the business organizations.

M1: How financial statement gets presented for effective planning and decision-making

A financial statement helps the business organization to keep a track of transactions. It helps the businesses to keep track of financial data that goes in and out of the Operation.

Financial statements let the management and external lenders, investors understand the financial condition of organizations. make thoughtful decisions.

There are accounting principles that the companies should adhere to Make decisions related to financial accounting. Incorporated organizations based in the United States follow the GAAP Standard that the Accountants follow as they collect accounting figures and produce financial statements.

Organizations outside the United States follow distinctive accounting standards and principles, International accounting standards vary from country to country. In general, there are three key areas in which financial statements influence management decisions.

• It helps creditors to Assess the capacity, liquidity, and solvency of an organization.
• Along with Management Accounting, it eases management decisions about the allocation of scarce resources.
• It provides investors with a basis for analyzing and comparing the financial health of an organization.

A financial statement helps the investors and lenders to make decisions about the Creditworthiness and capacity of an organization. It allows them to figure out the value of the share.

Without a financial statement, investors wouldn’t be able to know the past, current, and potential financial health of the organization.

How do effective management accounting techniques help to achieve organizational goals?

In Managerial accounting, management uses the accounting provisions to gain a complete insight that helps them to control organization functions. Managerial accounting is the part of accounting that helps managers to make important decisions by providing them with accounting information.

Managerial accounting is a modern and scientific Accounting approach to effective management.

Definition of Managerial accounting

Managerial accounting is the process of analyzing, interpreting, and preparing financial statements for use by managers within an organization. It provides information that is used internally by management to make decisions about how to grow and improve the business.

Managerial accounting is different from financial accounting in a few key ways. First, managerial accounting focuses on providing information to internal users, while financial accounting focuses on providing information to external users (such as shareholders and creditors). Second, managerial accounting reports can be customized to meet the specific needs of managers, while financial accounting reports must adhere to generally accepted accounting principles (GAAP). Finally, managerial accounting uses forward-looking tools and techniques, such as budgets and forecasting, while financial accounting looks primarily at historical data.

What are the important functions of managerial accounting?

There are four primary functions of managerial accounting: planning, decision making, performance management, and risk management.

• Planning involves setting goals and creating a roadmap for achieving them. This might include developing budgets, preparing financial projections, and creating marketing plans.
• Decision-making involves using the information to make informed choices about how to run the business. This might include choosing which products to sell, setting prices, and making investment decisions.
• Performance management involves tracking progress towards goals and taking corrective action if necessary. This might include creating financial reports, conducting audits, and analyzing data.
• Risk management involves identifying and mitigating risks that could potentially hurt the business. This might include insurance, hedging, and creating contingency plans.

P2: Financial management accounting techniques to achieve organizational goals

Financial management accounting techniques are the tools and methods used by financial managers to make decisions about how to allocate resources and manage finances within an organization. The goal of financial management accounting is to ensure that an organization’s financial resources are best used to achieve its strategic objectives.

There are a variety of financial management accounting techniques that can be used to make decisions about resource allocation and financial management. Some of the most common techniques include:

• Cost-benefit analysis: This technique is used to compare the expected costs and benefits of different courses of action in order to choose the option that is most likely to lead to the greatest overall benefit.
• Activity-based costing: This technique assigns costs to activities rather than products or services. This helps managers to better understand the cost of each activity and make decisions about where to allocate resources.
• Life-cycle costing: This technique takes into account all of the costs associated with a product or service over its entire life cycle, from development through to disposal. This information can be used to make decisions about which products or services are most cost-effective.
• Financial ratio analysis: This technique involves comparing different financial ratios in order to identify trends and relationships. This information can be used to make decisions about how to allocate resources and manage finances.

These are just a few of the many financial management accounting techniques that can be used to make decisions about resource allocation and financial management. By understanding the different techniques available, financial managers can choose the best approach for their particular organization and situation.

Accounting management tools

Tools used in present accounting management get classified as follows:

• Depending on the Financial accounting system
• Assessing Financial management through ratio analysis
• Financial management analysis through graphs Trends and Comparative statement
• cash flow and fund flow Analysis
• technics related to Return on capital

Based On cost accounting information

• Analysis of cost variance
• Differential costing and direct or incremental costing
• Standard costing
• Marginal costing (Analyses cost volume profit)

Based on Mathematical research

• Linear programming
• Operations research
• Games theory and queuing theory
• theory on simulation
• Network analysis

Based on predictable information

• Budget and budget planning
• Business forecasting
• project appraisal or evaluation
• Analyzing budget or Revenue variance

Miscellaneous tools or techniques

• Financial planning
• Revaluation accounting
• accounting decision making
• Integrated auditing
• MIS (aka management information system)

Role of management accountants, and accounting control systems

• Management Accountants work for private organizations, businesses, and government agencies.
• Management Accountants need to have an interest and aptitude for mathematics, Numbers, production processes, and Accounting. Likewise, Management Accountants know GAAP Accounting and leadership skills.
• Management Accountants help to manage and determine company Investments, strategizing, budgeting, studying, and risk management.

P3: Analyze how variance cost analysis helps to control the budget of an organization.

The majority of the organization focuses on meeting financial goals. Ultimately, all business proprietor emphasize growth, and accordingly, they analyze between

• Budget of the current year and Previous year’s actual result, which help them to plan budgets. Thus, it is a part of budgeting.
• To monitor the current year’s budget and actual expenses, which helps them meet the financial objectives. Activity gets repeated once every 4 to 6 months.
• It helps them to compare the actual expenses of the current financial year and the past year. It analyzes the economical growth of the firm. Management participates in this activity at the end of the year.

P4: Applications of Variance analysis are as follows:

• Comparing allocated budget with actual expenses

Variance analysis helps the management to control budgets by tracking the allocated budget and comparing it with the actual cost. For project or program-driven companies, an accountant analyses financial data at month-end or every alternate 4 months. The financial month-end report provides quantitative information related to inventory expenses and revenues.

• Identifies the relationship between two entities

Variance analysis helps deduction of relationships between two entities. Understanding the correlation between positive and negative elements is essential in planning. For instance, variance analysis can tell how the rise in the sale of the product can affect the productivity of an organization

An effective rise in sales of product B. Thus, it brings in a positive relationship between two or more products.

M3: Analyse the benefits and demerits of different types of variances

Variance refers to the difference between the expected use and actual use of an entity in an organization. The difference in revenue or operational expenses brings results invariance.

When the actual cost is higher than the estimated cost, such different results in a negative variance.

When the actual cost is lower than the estimated cost, such different results in a positive variance. Positive variance is termed as favorable variance, whereas negative variance is the unfavorable variance.

Effect of variance in the profitability of an organization

Negative or positive correlations of variance create an impact on planning. For instance, the positive variance of product A might lead to the negative variance of product B.

Benefits of variance analysis

• Variance analysis helps the management to assign responsibility to a particular department or organization. For example, the production manager is credible for product quality variance.
• Variance analysis acts as an effective accounting tool for budget control. By analyzing differences in particular variance, management looks for ways to minimize the variance.
• Variance analysis helps businesses to meet their objectives, and ensure effective utilization of resources. In this way, companies gain the trust of the shareholders.

Demerits of variance analysis

• Accountant executes variance analysis at the month-end. It is of no use when the authority needs feedback faster.
• Variance analysis is effective for large enterprises and proves to be expensive for small-scale businesses. Hence, a detailed analysis of the cost components does not make sense.
• Variance analysis relies on a preassumed standard. Standards restrict the operational efficiencies up to a limit.

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