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Management accounting is to be done for gathering information related to the accounting aspects. Most of the companies follow management accounting system for generating effective information. In the presented report Dell company has been taken which follows the management accounting system. The given report describes the meaning of management accounting, its types and methods. The benefits of applying management accounting has also presented. The absorption costing and marginal costing have also described. Different planning tools and its application for forecasting budget has been explained. The solutions to the financial problems of management accounting has been given in this report.
The bases of Management Accounting are financial accounting and cost accounting. It is the systematic process of analysing, measuring, interpreting and presenting the accounting information which has collected through financial accounting and cost accounting. This helps in taking decisions, policy creation and day to day or routine operations of an organisation by the management.(Kaplan and Atkinson, 2015) The information related to the cost of products or services purchased by the company that uses by the management accountant.
Types of Management Accounting System:
There are four types of Management accounting. These are as given below:
Tools and techniques which are used in management accounting are as follows:
Financial planning:Financial planning gives proper directions to the activities for well performing. The major objective of any organisation is to earn maximum profits. And this objective is fulfil by doing proper and sound financial planning.
Financial statement analysis:In this profit and loss account and balance sheet are to be prepared on the comparative basis for knowing the financial position of the company. This is to be done on yearly basis means after at end of every accounting period.
Cost accounting: Cost accounting is to be done for analysing the data related to cost. It shows the data of cost according to product, process, department, branch and the like (Gibassier and Schaltegger, 2015). The actual costs are to be compared with the standard ones. This comparison shows the deviation if any and helps to management for taking decisions for the differences.
Fund flow analysis: Fund flow analysis gives the over view of the transfer of funds from one period of time to another. In this funds from operations and working capital changes are to be calculated. It also provides information with comparison to previous year that whether the funds are properly used or not.
Cash flow analysis:This analysis gives the information related to the outflow and inflow of cash in the organization (Cooper, Ezzamel and Qu, 2016). It includes three activities: operating activities, investing activities and financing activities.
Ratio analysis: Ratio analysis shows the organisation's financial performance in several key areas which helps in comparative analysis with the previous year.
Advantages of Management accounting:
Uses of Management accounting:
Management of Dell is using various management accounting techniques for reporting. There are various techniques that can be used by the management of Dell for better planning and organising so that they can achieve their targets in available limited financial and non financial issues(Kaplan and Atkinson,2015). Other than this they also need to manage better organisational control so that various departments of Dell can coordinate with each other and they collectively achieve sustainable development.
As per the calculated data, if the company 'Dell' go with the absorption costing method then there will be loss of 660000, in which fixed cost of production included. Whereas if company go with the marginal costing then there will be situation of no profit and no loss. Marginal costing is also called as variable costing.
Budgetary control is a process in which different tools are used through whicfh an organisation can make plan and they can do forecasting for their proposed project(Renz, 2016). They can employ their available resources in a way so that they can get better return on available funds. There are numerous planning tools which can be used by Dell and its management in managing their funds. In preparation of budget Dell has certain objectives which are mentioned below :
There are certain advantages as well as there are certain disadvantages of planning tools which are used for the preparation budget(Tappura and et.al., 2015). These advantages and disadvantages are mentioned below :
There are different planning tools which can be used for the preparation of budget so that cited entity can do forecasting of their projects. As forecasting provide a prediction of future projects through which they can take better steps in achievement of various organisational goals and objectives. There are certain planning tools which can be used for making analysis about different factors and for making budget :
Various planning tools can be used for responding towards problems which are faced by management of Dell. As in the given case study management accounting expertise enhances service sales by 10%. sustainability in development is necessary and to achieve sustainable development management of Dell needs to identify various factors which can affect sustainable development. Budgeting and planning tools helps cited entity in estimation of various issues which are related with its future projects. Budgeting is process which needs to be done step by step so that proper and effective results can be derived out of budget(Ambe, 2016). Sustainable development is concerned with the creation of ideas and after such creation management needs to identity the best way to achieve that target. Budget allows them to make certain goals and it also providexs them the path to achieve those goals and objectives. Various planning tools like variance analysis helps in comparison of budgeted and actual output so that management can deal with the factors which are responsible for such variances. Some other planning tools which can assist Dell and its management in solving various problems and to achieve sustainable development are as follows :
There are certain issues which an organisation faces during the course of business. Budgeting and its techniques helps cited entity to respond towards various issues which arises during the course of business. Both the companies are facing issues like availability of inadequate finance for the proposed projects. Budgeting helps an entity to allocate its resources in a way so that they can get better returns on their funds hence they need to use planning tools for the better management of its funds(Otley, 2016). Comparison Lenovo and Dell of techniques through which they respond to financial problems is mentioned below :
· Management of dell is using ratio analysis for analysing their financial statements.
· Dell is using Variance analysis for getting information about the factors which creates gap between budgeted and actual output
· Management of Lenovo is using fund flow analysis and cash flow analysis for analysing their financial statements.
· Lenovo is not using such variances rather than this they are following traditional methods in comparison of outputs.
The financial problems are faces by every organisation in order to give to their best products to customers. Financial problem is that situation where the money causes a worries. To overcome with financial problem it is impossible for the company. The following are the some steps Dell company deal with the financial problems.
Review how the things are going – In last the manger have to take the review of their plans on monthly basis. It will help the company to deal with the financial problems and the results will get something different to get a different outcomes.
In this file it has been mentioned that how budgeting and its techniques can assist management of Dell to achieve their objectives. Further this report also contains advantages and disadvantages of various budgeting techniques are also mentioned in it. Readers can get knowledge through this file about the comparison of techniques which are used by Lenovo and Dell in responding to various financial problems.
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