Name: Sara Al-Tayeb

Division:21
University ID:19011479
Teacher: Mais Disi
Task 1
:Lo1
Task 1 –( Learning outcome) (possible evidence is a written report)
Topic 1: The definition of Management Accounting and the difference between
:Management Accounting and Financial Accounting
Financial Accounting: It is systematic knowledge and the art of recording
business transaction in the books of business. It is a basic accounting which
helps the persons to know financial position of business concern
Management Accounting: It is the process of identifying, measuring
accumulating, analyzing, preparing, interpreting, and communicating
information that managers use to fulfill organizational objectives
between Financial Accounting and
:Managerial Accounting
Base Financial Accounting Managerial Accounting
Objective The main object of financial accounting is to The main objective of
.prepare periodical reports to outsider managerial Accounting is
to help internal
management in solving
various problems and
.decision making
Functions The functions of financial accounting are to Managerial Accounting
record and collect financial data it summarizes picks up significant data
.The data in the form of accounts out of collected data and
presents them for the
.use of management
Address Financial Accounting is generally addressed as Managerial Accounting is
Traditional Accounting or General Accounting generally called
Accounting for manager
Managerial Accounting
decision making
. accounting
Nature Financial Accounting is of historical Managerial Accounting
Nature it records only those transactions .stresses the future
which have taken place in the past

Topic 2: The importance of management accounting information as a decision

:making tool for different department managers within the company
Financial Planning: to plan the best scenario for the capital
 Analysis of financial statements: 3 main statements: Cash Flow, Balance Sheet &
Income
Statement
 Historical Cost: Original price to purchase a fixed asset
. Standard Costing: Standard is an estimated cost
. Marginal Cost. Is the cost to produce one extra unit
 Fund Flow Statement. Is Cash used verses cash collected
 Budgetary Control. Is the difference between Actual performance and actual
.performance
 Decision Making Accounting. Each alternative should be analyzed and feasible so
we
can choose among those alternatives
 Statistical Techniques. As we choose a certain sample and interpret its data

Topic 3: An explanation of the different types of Management Accounting Systems

and how it can be used by different departments within the company to improve
.their reports Your explanations should cover
:Cost accounting systems (Job costing systems and process costing
a) Cost accounting systems (Job costing systems and process costing:)
-is a framework used by firms to estimate the cost of their products for
profitability analysis, inventory valuation and cost control
costs are resources sacrificed to achieve and objective

:Manufacturing costs
Product costs: Are costs for the production process without which the product could
.not be made
DL-
DM-
OH-
:Non manufacturing Costs
Periodic cost: are not included in are not included in are expensed on the income
statement

Behavior of Cost (within the relevant range )

Cost In Total
Variable Total variable cost changes as activity level Variable cost per unit
.changes remains the same over
.wide ranges of activity
Fixed Total fixed cost remains the same even Total fixed cost remains
. when the activity level changes the same even when the
.activity level changes
Flow of costs
Direct materials Cardboard,picture
:puzzies in Producing
Direct labor Workers operating
Pressing machines
Manufacturing Maintenance and depreciation
overhead On pressing machines
 ↓Assembly process→Partially completed puzzies
Cutting process→completed puzzies

:b) Inventory management systems

?What is an Inventory Management System
, An inventory management system combines the use of desktop software
barcode scanners, barcode printers, and mobile devices to streamline the
management of inventory (e.g. goods, consumables, supplies, stoc

Inventory Management System

:Assumptions
.Economic Order Quantity: 1 Just in time: (JIT) Production.2
Demand is known with-1
mathematical tool for )EOQ( system which ascertains that
certainty &relatively constant
determining the order quantity raw materials and parts must
over time
that minimizes the costs of be purchased/ produced
No shortages are allowed-2
.ordering and holding inventory .just in time for its usage
Lead time for the receipt of-3
.and overhead cost It attempts to reduce
orders is constant .Lead time :the
Main questions should be inventory levels held in in
time between the initiation and
answered which it reduces Holding
completion of a production
How Much to order (Quantity))1 .process
2)When to order (Time Cycle) .Costs
The ordered quantity is-4
→→Assumptions CONTD Example :Dell
received all at once

contd
↓↓
 Inventory
Costs

Holding cost
include the cost
of financing the
inventory along
with the cost of
physically
maintaining the
inventory

Ordering cost
include the cost
associated with
actually placing the
order. These include
a labor cost as well
as a material and
.overhead cost

c) Price optimizing systems: Price optimizing systems can be used to tailor pricing for
customer segments by simulating how targeted customer will respond to price
changes with data-driven scenarios. Given the complexity of pricing thousands of
items in highly dynamic market conditions ,modeling results and insights helps to
forecast demand develop price and promotion strategies,control, inventory levels
and improve customer satisfaction

:Price Optimization Systems help businesses determine

Initial pricing.1
pricing, and Markdown (or discount)
:Companles use Price optimizing systems to
Price Optimization systems helps businesses determine initial pricing promotional
:pricing and markdown (or discount) pricing
Initial price optimization works well for companiens with a stable base of long life- -
cycle products_grocerystores, drug chains, office_supply stores and commodities
manufacturers
Promotional price optimization helps set temporary price to spur sales of items with -
long life _cycles-newly introduced products, products bundled together in special
promotions and loss leaders
Markdown to fashion trends and seasonality_airnes , hotels, specialty retailers and -
mass merchants

Topic 4: The benefits of management accounting systems and their application

within the context of the company. You should draw a conclusion in regard to the
:relevance and significance of each system for different departments
Benefits of management accounting systems:
-Provide the necessary information to assist managers in making decisions
and planning, for example the decision to open a production line New is
affected by estimates of the cost of constructing the line and the cost of
maintaining it during its operation, as well as estimates of costs and
associated revenues Operation, which helps in the budget preparation
process for this line
-Management accounting is concerned with measuring the performance of
individuals and sub-units of the facility, such as departments, production
lines, and geographical areas Measuring performance helps prepare
incentive systems where managers and employees should be motivated By
linking their reward to the profits made by the units they manage or work
with
-Assist managers in overseeing operational activities, and oversight is conducted through the
availability of comparative data between Actual and planned performance in the budget,
then identifying differences or deviations, analyzing their causes and taking corrective
actions, as they are done Benefit from this analysis when preparing new plans

Topic5: An explanation of different types of managerial accounting reports that

could be prepared by different operational department within the company with
:examples
Budgeting Reports: budget reports are used to provide incentives to .1
employees that motivate them to achieve desired objectives
reports helps the organization to integrate the efforts of various departments
.towards overall objective of the company
Interial reports used by management

:Accounts Receivable Aging Report .2

Job costs reports are concerned with identifying cost, expenses, and
profitability of each particular job. An evaluation can be made about the
earning aspect of the projects and so that the company can introduce its
efforts on those concerned while reducing their efforts on less profitable
business activities. These reports also evaluate the cost while the project is
in progress so that areas of waste can be taken care of and the project
.can be made profitable and workable
analysis can be made about the company’s credit policy and the need to tighten the
credit policy. This ensures reducing old bad debts and maintaining liquidity of the
.company
Used by sales departments by collection departments

Job Order Cost Report: An evaluation can be made about the.3

earning aspect of the projects and so that the company can introduce its
efforts on those concerned while reducing their efforts on less profitable
business activities
Used by Manufacturing cost
Inventory and Manufacturing Reports: Companies involved in manufacturing .4
processes prepare these types of reports so that their manufacturing and
inventory process can become more efficient. These reports contain labor cost, per unit
overhead cost and
wastages concerned with inventory which provides managers for the comparison between
different assembly
lines and to see the opportunities for improvement which can be exploited by various
departments and their
.employees
Use by Store/purchases departments

Performance Reports: The differences calculated on a comparison of actual .5

results with budgeted performances are analyzed and information regarding this are
presented in performance reports. These are generally prepared yearly
.however they can be prepared monthly or quarterly too
Use by HR
Order information Report: The order information report helps management to see .6
the trends in their
business efficiently and effectively. Various types of reports prepared in this
type of reporting help integrating management operations to achieve low
.cost on placing of orders and their management
Purchases department
A business situation or opportunity reports: The reports are prepared for .7
management so that they can be well aware of the occurrence of a particular event.
The preparation of well drafted situation or opportunity report helps the
management with taking important business decisions with regard to the events and
their understanding
Use by management

Topic 6: you need to critically evaluate how management accounting reporting is

integrated within the company processes. Your evaluation should include an
effective
:judgment supported with relevant factors
I think that
Accounting aims to provide financial information about establishments or projects in all its
forms (agricultural - industrial - commercial - service - financial), and all its types, whether
they are individual establishments, personal companies, or financial companies. And
financial information, which is provided by accounting, helps in taking various administrative
decisions within these establishments, that is, it helps in carrying out various administrative
functions, such as planning, organizing, monitoring and following up, and this is called
internal uses of financial information.
Financial information is also used by many external parties about the project, such as project
owners, creditors, potential investors in the project, financial analysts, the government, and
the public, who are interested in the project business, for one reason or another. Most of
these external parties are interested in obtaining information about the profits of the
projects and their financial position

https://www.sciencedirect.com/science/article/abs/pii/S036136829700024X
http://repository.sustech.edu/handle/123456789/8786

http://alsalam.edu.sd/journal/index.php/fafsj/article/view/96

https://books.google.jo/books?hl=ar&lr=&id=8eykDwAAQBAJ&oi=fnd&pg=PA5&dq=+
%D9%81%D9%88%D8%A7%D8%A6%D8%AF+%D9%86%D8%B8%D9%85+
%D8%A7%D9%84%D9%85%D8%AD%D8%A7%D8%B3%D8%A8%D8%A9+
%D8%A7%D9%84%D8%A5%D8%AF%D8%A7%D8%B1%D9%8A%D8%A9+%D9%88%D8%AA
%D8%B7%D8%A8%D9%8A%D9%82%D8%A7%D8%AA%D9%87%D8%A7+%D9%81%D9%8A+
%D8%B3%D9%8A%D8%A7%D9%82+
%D8%A7%D9%84%D8%B4%D8%B1%D9%83%D8%A9.&ots=qHd_GrkoLH&sig=uR_Kvktz6Wn
b0dm0DMuaGQ1bVaU&redir_esc=y#v=onepage&q&f=false

http://repository.aabu.edu.jo/jspui/handle/123456789/524
Lo3:
Task 3 - Learning outcome 3 (possible evidence is a written report)
Topic 1: the definition of budget and the different types of budgets that could be
used by
different departments within the company and their usefulness for different
departments:

Budget: A plan quantified in monetary terms prepared

and approved prior to a defined period of time
usually showing planned income to be generated
and/or expenditure to be incurred during that
period and the capital to be employed to attain a give objective

Types of budget:
1)Operating Budgets:

Sales
Budget

the budget for

income statement
Production
elements
Budget
such as revenues
and expenses.

Operating
Exp
Budget

2)Financial budget:
 Capital
Expenditure
s Budget

is the budget for

balance sheet
elements. In
other words, financial
Cash budget deals with the
Budget expected assets,
liabilities, and
’stockholders
.equity

Budgeted
Balance
Sheet

Operating Budgets:
Sales Budget: -The Sales Budget shows the expected sales in units of each product
and each product’s expected selling price

-The first Operating Budget to be prepared is always the Sales

Budget, because the Production Budget and all the other budgets for
the company are derived from the Sales Budget

-most difficult budget to produce because it relies entirely on

information and estimations that are outside of the direct control of
the company

If the sales budget is too optimistic If the budget is too low

production will be too high-
production will be too low-
inventory will be too high- Sales Budget inventory will be too low-
problems such as cash shortfall may result -
sales may be lost because of a lack of -
product to sell

We use these budget to determine

Collection of Account Recivable

:Production Budget
the Production Budget is developed so that it incorporates the company’s -
Sales Budget along with its capacity and inventory objectives. The
Production Budget incorporates the final determination of how many
units to produce during the period and when to produce the units

it developed so that it incorporates the company's sales budget alony with it's -
Capacity and inventory objectives

Production budget includes-

A: Direct Material (Dm)
to determine the quantity of each material to be purchased, and then the costs for
those quantities are determined, using the standard costs developed
:Example
To reduce on a chair you need one meter of wood and 1/2 meter of sponge and
1\2 meter of leatuer

meter of sponge is for (1) jd )1(

meter of leatuer is for (3) jd )1(

:B:Direct Labor Budget

It states the time allowed per unit of output and the standard cost allowed
per hour of direct labor time
Time needed to produce one unit*the wage per unit to be paid -
Example: you pay an hourly wage for labor = 5 and you need 2 hours to
produce on chair
Total production = 5*2= 10

:C: Overhead Budget

shows the expected cost of all production costs other than (Dm) and (DL)
Budgeted variable overhead costs are based on a budgeted
.variable overhead rate multiplied by budgeted activity
Example: glue = 2 jd
Budgeted fixed overhead costs remain unchanged as the activity level
changes
Example: factory rent = 500 jd
: D: Operating Exp Budget
Amounts for nonmanufacturing costs come from the various areas of the
:company that are not involved in production
-Research and Development (R&D) Budget
-Selling, Marketing and Distribution Budget including sales supervisory
salaries, sales commissions, selling expenses (such as travel and
entertainment)
advertising and promotion expenses, shipping-out expenses, telephone and
wireless
Administrative and General Expense Budget including salaries and wages -
for
management and support staff in administrative and staff departments (for
,example
accounting, legal, IT, and human resources), travel and entertainment,
insurance audit fees
Budgets for other expenses or sources of revenue such as interest income -
and interest expense

Financial Budgets
is the budget for balance sheet elements. In -
other words
financial budget deals with the expected assets, liabilities, and stockholders -
Equity
:A: Capital Expenditures Budget
-budget for long term capital expenditures such as property
plant, and equipment
Because capital expenditures are large and -
expensive, they require advance planning in
order to have the financing in place and the
necessary time to purchase or construct the
assets so they will be available when they are
needed
:B: Cash Budget
-The Cash Budget tracks the inflows and outflows of cash on a month-by
month (possibly even week-by-week or day-by-day) basis
The Cash Budget shows the planned sources and uses of cash for the budget -
period. The various budgets prepared up to this point provide the
information for the Cash Budget. For example, the Capital Expenditures
Budget provides information on planned equipment purchases. The Sales
Budget provides the information needed to determine budgeted collection
.of accounts receivable
One advantage of predicting cash shortfalls is that it will be easier (and less -
expensive) for the company to obtain a short-term loan if
management is aware of its need before the shortfall occurs and
if it is able to present cash inflow and outflow projections to the
bank to support its loan request and show the source of the
repayment of the loan
The company also would have more time to-
obtain permanent capital from equity sources by selling shares if
that is the best alternative
:C: Balance Sheet Budget
A budgeted balance sheet is a report that management uses to predict the levels of -
assets liabilities, and equity based on the budget for the current accounting period
the budgeted balance sheet shows where all of the accounts would be at the end of -
a period

*Use of budgets*
 Promote coordination and communication among organization .1
.units and activities
.Provide a framework for measuring performance .2
Provide motivation for managers and employees to achieve the .3
.company’s plans
Promote the efficient allocation of organizational resources .4
Provide a means for controlling operations .5
Provide a means to check on progress toward the organization’s goals .6

Topic2: the definition of budgetary control and the advantages and

disadvantages of different types of planning tools that the company could use
.for budgetary control you need to mention at least two tools

Budgetary Control: is the process by which budgets are prepared for the
future period and are compared with the actual performance for finding out
variances, if any. The comparison of budgeted figures with actual figures
will help the management to find out variances and take corrective actions
.without any delay

Budgetary control planning

Fixed Static Master
tools
Budget Budget

Flexed
Budget Flexible
Master budget: (the comprehensive budget) .1
-.The master budget is the culmination and the goal of the budgeting process
-.Is a full set of budgeted financial statements for the budget year
-The master budgeted include the budgeted balance sheet, budgeted
.income statement, and budgeted statement of cash flows
- The budgeted financial statements are prepared by
.responsibility center
-A master budget serves as planning and control tool to
the management since they can plan the business activities during the period
.on the basis of master budget

*At the end of each period, actual results can be

compared with the master budget and necessary control actions can
.be taken
Fixed Budget: is one that is drafted on the basis of specific criteria without .2
any provision for any changes at any point during the period of time
.covered by the budget
The budget lets those involved know how much they
have to spend during a given time frame, regardless of any eventualities
.such as a slump in sales or increased profit

:Advantages
prioritize by forcing yourself to remain .1
.consistent
-ensures that your bills will be paid on
.time
Static budgeting can also be .2
beneficial if you regularly spend more
than you bring in. It essentially allows
,you to start living within your means
.meaning you spend less than you earn
:Disadvantages
unpredictable events variable .1
expenses are
unpredictable. As a result, exceeding
.your budget will cause stress
Static budgets .2
also are not an accurate way to track
.expenses

:Flexed Budget .3
A flexible budget is a budget that adjusts or flexes for changes in the volume
of activity. The flexible budget is more sophisticated and useful than a static
.budget, which remains at one amount regardless of the volume of activity
:Advantages
Flexible budgets let you tie.1
spending to sales, allowing you to
increase spending to take
advantage of opportunities presented by
.better-than expected revenues
Flexible budgeting enable.2
management to focus its attention
on variances caused by factors
other than differences between
.actual and budgeted volumes
:Disadvantage
To prepare a flexible budget, the .1
business owner or manager must clearly
categorize expenses into fixed, variable
.and semi-variable expenses
Business owners and their staff must .2
have the expertise and knowledge to
.prepare a flexible budget accurately

Topic 3: based on the given production budget by the company, analyze the use of
different planning tools and their application for preparing and forecasting such
.budget for next month

:May’s budget
For next month the expected units to be produced
based on the fixed budget analysis that results 900
.in 100 units adverse variance
Selling price = sales revenue/unites 100000/1000 = 100 jd/u
R.M = costs of Rm/number of unites 40000/1000 = 40 jd/u
Labor =costs of labor/unites 20000/1000 = 20 jd/u
Fixed costs = fixed costs/unites 20000/1000 = 20 jd/u

:Flexed budget
Flexed budget Actual figures Variances
30/4
Output Units 1000 900 )adverse )100

Sales 100,1000 92,000 adverse 8000

revenue
Raw 40,000 36,900 favourable 3100
material
Labor 20,000 20,700 adverse +700
Fixed 20,000 20,700 adverse 700
overhead
Operating 20000 16,900 adverse 3100
profit

https://corporatefinanceinstitute.com/resources/templates/excel-modeling/operating-
/budget

https://www.thebalancesmb.com/financial-budget-small-business-393574

https://www.accountingtools.com/articles/2017/5/15/production-budget

https://www.accountingtools.com/articles/2017/5/14/master-budget

http://www.yourarticlelibrary.com/cost-accounting/budgetary-control-cost-
accounting/fixed-and-flexible-budget-meaning-difference-and-utility/73918

Lo4
Task 4
:Topic 1
the available tools that can be used to identify financial problem and
measure the organization performance, with examples. And compare how the
company can use different management accounting systems and techniques to
:respond to different financial problems

:Gross Profit Margin.1

Your gross profit margin tells you whether you are pricing your goods or services
appropriately. Here is the equation to calculate this
Gross profit margin = (revenue – cost of goods sold)/revenue
Your gross profit margin should be large enough to cover your fixed (operating) expenses
.and leave you with a profit at the end of the day
THE HIGHER THE BETTER
:Example
gross profit margin = (revenue-cost)/ Revenue
Sales revenue =1000,000-75000/1000,000=25000/100000=25%
The higher the better *

:Net Profit Margin .2

Net profit margin tells you what percentage of your revenue was profit. The
:equation is simple
Net profit margin = net profit/total revenue
THE HIGHER THE BETTER
 Example: net profit margin = net profit/total revenue
Net profit = 10,000/ 100,000=10%
Total revenue= 100,000

The higher the better *

Aging AR .3

accounts receivable aging is a report that lists unpaid customer invoices and unused
credit memos by date ranges. The aging report is the primary tool used by
collections personnel to determine which invoices are overdue for payment. Given
its use as a collection tool, the report may be configured to also contain contact
information for each customer
 The report is also used by management, to determine the effectiveness of the credit
and collection functions. A typical aging report lists invoices in 30-day "buckets,"
where the columns contain the following information:
* The left-most column contains all invoices that are 30 days old or less
* The next column contains invoices that are 31-60 days old
* The next column contains invoices that are 61-90 days old
* The final column contains all older invoices

The report is sorted by customer name, with all invoices for each customer itemized
directly below the customer name, usually sorted by either invoice number or
invoice date

4. A/R turnover kpI:

The Accounts Receivable Turnover KPI measures the rate at which you collect on
outstanding accounts. The problem in maintaining a large bill for a customer is that you are
essentially offering them an interest-free loan. Monitoring this metric is essential to ensure
that accounts receivable is collecting on bills in a timely manner. This KPI is an essential piece
of understanding your organization's cash flow process.
The formula = net credit sales/ average accounting recivable

Accounts receivable turnover example

Corporation A has a beginning accounts receivable of $125,000 and an ending accounts
receivable of $235,000 and a net credit sales of $2.8 million, the formula would look like this:
* Step 1: $125,000 + $235,000 = $360,000 / 2 = $180,000
* Step 2: $2,800,000 / $180,000 = 15.55
Corporation A has an accounts receivable turnover of 15.55.
#Higher better

5. A/P turnover kpi:

The Accounts Payable Turnover KPI measures the rate at which your company pays off
suppliers and other expenses. This ratio is important for understanding the amount of cash
that your business spends on suppliers during any given period. It shows how many times
over the course of the year your business is able to pay off its accounts payable. Used in
conjunction with Current Ratio or Quick Ratio, this financial metric shows your ability to
meet your financial obligations.
Accounts Payable Turnover Ratio Example
Let’s clarify the accounts payable turnover ratio with an example.
Let’s say you made the following purchases over the course of the past year:
* Inventory on credit with your vendors: $135,000
* Inventory paid for with a check at the time of purchase: $25,000
* Office supplies on credit with the supplier: $12,000
* Meals on the company credit card: $600
* Window cleaning paid with cash: $120
Your accounts payable balance at the beginning of the year was $127,000, and at the end of
the year, it was $74,000.
Let’s take your accounts payable turnover ratio calculation step by step:
Total Purchases
For the purposes of the accounts payable turnover ratio calculation, your Total Purchases for
the year were:
* Inventory: $135,000
* Office Supplies: $12,000
Meals and window cleaning were not credit purchases posted to accounts payable, and so
they are excluded from the Total Purchases calculation. The inventory paid for at the time of
purchase is also excluded, because it was never booked to accounts payable.
Your Total Purchases, then, were $147,000.
Beginning and Ending Accounts Payable
The accounts payable total on your balance sheet as of January 1 of the past year was
$127,000. On the balance sheet dated December 31, it was $74,000. We calculate the
denominator for the accounts payable turnover ratio as follows:
($127,000 + $74,000) / 2
$201,000 / 2
$100,500

6.Inventory turnover:

Inventory turnover is a ratio showing how many times a company has sold and
replaced inventory during a given period. A company can then divide the days in the
period by the inventory turnover formula to calculate the days it takes to sell the
inventory on hand. Calculating inventory turnover can help businesses make better
decisions on pricing, manufacturing, marketing and purchasing new inventory.
Formula:
1-Average Inventory = (Beginning Inventory + Ending Inventory) / 2

2-Inventory Turnover = Sales / Average Inventory

Example of Calculating Inventory Turnover

For the fiscal year 2019, Wal-Mart Stores (WMT) reported annual sales of $514.4
billion, year-end inventory of $44.3 billion, and an annual cost of goods sold (or cost
of sales) of $385.3 billion.

Walmart's inventory turnover for the year equals:

$385.3 billion ÷ $44.3 billion = 8.7

Its days inventory equal:

(1 ÷ 8.7) x 365 = 42 days

7.Budget variance kpi:

A key performance indicator, or KPI, for budgeting can be an effective tool to keep track of a
company’s financial health. KPIs are measures by which a company can monitor its progress
throughout a specified period of time. By closely managing budgets to achieve a KPI target, a
company can reduce unnecessary spending and improve its bottom line. KPIs also help a
company plan future spending.

Static budget variances are the differences between what a company or individual thought it
would spend in its budget versus what it actually did. In a static budget, a company or
individual creates the budget for the entire period -- a year, a quarter, or any other amount
of time -- and doesn't change the budget as time moves forward.

To calculate a static budget variance, simply subtract the actual spend from the planned
budget for each line item over the given time period. Divide by the original budget to
calculate the percentage variance.

An exampleIf a company sets its budget for the year based on revenue of $1 million, but
actual revenue comes in at just $500,000, then that company's budget can't simply stay
static. It most likely doesn't have the finances to spend the same at $1 million in revenue as
it does at $500,000.
8. Budget Creation Cycle Time KPI:

While taking time to plan your annual budget is important, it is also important to
remember that time spent on budget creation is also money spent on budget
creation. The Budget Creating Cycle Time KPI includes the number of days needed to
research, produce and publish the firm’s budget. It provides an important
benchmark for year-to-year improvement. Of all the KPIs for finance directors, this
one may be one of the hardest to calculate, but it’s value is without question.

:Non-FINANCIAL KPIs
:Management of Human Resources -1
Staff is a major asset to the company and an important factor so succeed
For example we use the A-employee turnover KPI : The number of employees who leave an :
organization and they are replaced with new ones
The less the better
And B-competence survey: Identify the problems related to the employees performance and
correct it
Product and service quality : If there is a quality issue-2
Long term sustainability will be affected & dissatisfied customers in which loss of sales .Thus
the products quality should be compared to competitor’s product quality and the customer’s
satisfaction and it has to be combined for us to have a full image
Brand Awareness & Company’s Profile: The Measurement of brand and company’s -3
profile can reflect its growth and development this should include
: Multiple dimensions like
A-High loyalty (By customer’s): special offers & high value
B-name awareness: Customer's recognition to a company by its name
C-perceived Quality: (Tangible Quality)
Hence: Company profile =(mission, vision, history..)
Brand Awareness: Customer’s recognition to a
company by its name

Topic 2: Analyze how, in responding to financial problems, management accounting

can the company to sustainable success. And evaluate how planning tools will be
.affected by different responses to company to sustainable success

:Management accounting drives companies to sustainable success

Identify the social and environmental trends which will impact on the -1
.organization’s capability to build value over the time
By forecasting . For example: when you are providing vegan cheese in different
markets using production processes and technology that are not harmful to
.environment
.In which you build your company value in such segments

Continued
Describe the impact of the sustainability issues in strong business terms .2
.comprising of how and when they would affect the company
When sustainability is an objective it must be declared with our terms so we must
:describe when and how its issues will affect the company for example
as our previous examples we should only use unhazardous production method and
.transparency should be a key issue

.Establish KPIs which support sustainable and strategic goals .3

For example :Profit Margin. Budget creation cycle time, and all non financial KPIs
.would serve
Apply tools and techniques of management accounting to assist incorporate .4
.sustainability issues into the process of decision-making
:For example
.Statistical Techniques. As we choose a certain sample and interpret its data
Decision Making as we choose among the alternatives
)for example to direct our products to segments to to certain countries (
Use the three MA Systems
We can use benchmarks here that are related to our competitors
Generate reports which include information on sustainability effects to inform .5
.pricing and budgeting decisions, strategic planning and investment appraisals
:Example to reports that could be used
Order info report , budgets for sure , opportunity / situation reports ,Inventory and
manufacturing reports. Flexible budget
Establish the reporting strategy which incorporates sustainability matters to .6
.ensuring that relevant non-financial and financial information is revealed
We should consider Quality to sales
Transparency to sales & costs
Efficiency to costs
Employee motivation to profits

How to solve KPI Problem

Use Inventory Low Inventory Turnover Overstock
Management System
Use the Accounts Rcceivable Low Accounts AR Turnover High Outstanding AR
Reports
To improve the collection
process
We Can Use the price
optimization system in order
To select the right prices for
customers

Cost accounting system Net Profit Margin Low profitability

_Price optimization
system _Inventory
&Manufacturing Report

Benchmarking,Use budget Employees Turnover High Employees

to motivate employees Rcsignations
Benchmarking ,USE cost Product and service Low Quality
Accounting System quality
&Inventory Management
system

TOPIC 10
))talk about KPI financial, non-financial
  
-Definition KPI
- Define financial KPI : 4- TYPES + examples
- Define non- financial KPI : 3 -TYPES + examples

-Definition KPI:
Key Performance Indicator is a measurable value that demonstrates how effectively
a company is achieving key business objectives. Organizations use KPIs at multiple
levels to evaluate their success at reaching targets. High-level KPIs may focus on the
overall performance of the business, while low-level KPIs may focus on processes in
departments such as sales, marketing, HR, support and others.
1-financial kpi

a measurable value that indicates how well a company is doing regarding generating
revenue and profits. Monitoring KPIs shows whether a business is achieving its long-
term goals.
 A.Net Profit Margin
This metric shows how efficient is a company at generating profit compared to its
revenue. Frequently calculated as a percentage, this KPI indicates how much of each
dollar earned by the company translates into profits.
The Net Profit Margin reflects on the profitability of a business and shows how fast
the company can grow in the long-term prospect.
Net margin = net profit / revenue
Example:

Let’s say your business makes $12,000 in sales, it cost you $8,000 to make your
products, and you spent another $2,000 on operating costs (such as overhead and
taxes).
Total sales - (cost of goods sold + operating costs) = net income
$12,000 - ($8,000 + $2,000) = $2,000
Net income ÷ sales = net profit margin
$2,000 ÷ $12,000 = 0.1667
0.1667 × 100 = 16.67%

 B.Working Capital
The Working Capital KPI measures an organisation’s currently available assets to
meet short-term financial obligations. Working Capital includes assets such as
available cash, short-term investments, and accounts receivable, demonstrating the
liquidity of the business (the ability to generate cash quickly).
Immediately available cash is known as Working Capital. Analyse financial health by
reading available assets that meet short-term financial liabilities. Working capital,
calculated by subtracting current liabilities from current assets, includes assets such
as on-hand cash, short-term investments, and accounts receivable.
Working Capital is calculated by subtracting current liabilities (financial obligations)
from current assets (resources with cash value).
<img class="original" title="Financial KPIs" src="https://www.scoro.com/wp-
content/uploads/2016/03/Working-Capital-financial-metric.png" alt="working
capital financial KPI" />

Example:

C-OCF shows the total amount of money 

generated by a company’s daily business operations. The financial metric hints
whether a company can maintain a positive cash flow needed for growth or requires
external financing to cope with all the expenses
D- Quick Ratio / Acid Test
The acid-test ratio indicates whether a business has sufficient short-term assets to
cover its near-future liabilities. The Quick Ratio gives a more accurate overview of a
company’s financial health than the Current Ratio as it ignores liquid assets such as
inventories.
<img class="original" title="Financial KPIs" src="https://www.scoro.com/wp-
content/uploads/2016/03/Quick-ratio-financial-kpi.png" alt="quick ratio financial
KPI" />

Example 
Following is an extract from balance sheet of Apple for the latest period:
$ '000,000
Cash and cash equivalents 21,120
Short-term investments 20,481
Receivables 16,849
Inventories 2,349
Deferred income taxes 5,546
Other current assets 23,033
Total current assets 89,378
Total current liabilities 80,610
Following information is available regarding Kiwi for the latest complete financial
year:
$ '000,000
Total current assets 51,787
Deferred income taxes 1,242
Inventories 3,485
Prepaid expenses 1,116
Other current assets 4,148
Total current liabilities 42,191
Solution
Amounts other than ratios are in million

Working Capital=
Current Assets – Current Liabilities

Define non- financial KPI : 3 -TYPES + examples:

Non financial Kpi 

In today’s knowledge economy, company value is no longer driven primarily by

physical assets, but is increasingly attributable to non-financial business drivers — the
intangible assets of an enterprise.
Success and future value creation depend on the effective measurement and
management of these critical non-financial or intangible resources that comprise the
intellectual capital of the business.
Non-financial KPIs, also referred to as the intellectual capital of an organisation,
include the knowledge, skills, brands, corporate reputation, relationships, information
and data, as well as patents, processes, trust or an innovative organisational culture.
The Intellectual Capital Performance Indicator Design Model that provides the basis
for this tool guides the user through the process of:
* determining which value drivers to measure
* formulating key performance questions (KPQs) to ensure KPIs are useful and
meaningful to the organisation
* selecting the right measurement instrument
Specific guidance and examples are provided for:
* measuring human capital
* measuring customer experience
* creating KPI indices
* avoiding dysfunctional behaviours
Example:
1- Conversion Rate: The percentage of interactions that result in a sale. Formula:
(Interactions with Completed Transactions) / (Total Sales Interactions) = (Conversion
Rate
2-Retention Rate: The portion of consumers who remain customers for an entire
reporting period. Formula: (Customers Lost in a Given Period) / (Number of
Customers at the Start of a Period) = (Customer Retention Rate)
3-On-Time Rate: The percentage of time products were delivered promptly as
scheduled. Formula: (Number of On-Time Units in a Given Period) / (Total Number
of Units Shipped in a Given Period) = (On-Time Rate)
2.talk about BENCHMARKING: definition, example:
Benchmarking Definition

Benchmarking is the practice of comparing business processes and performance

metrics to industry bests and best practices from other companies. Dimensions
typically measured are quality, time and cost.

Benchmarking is used to measure performance using a specific indicator (cost per

unit of measure, productivity per unit of measure)

Benchmarking Examples
1- Process Benchmarking: This type of benchmarking helps you to better understand
how your processes compare to others in your industry. By looking at other
companies in the industry you can improve your processes to make them more
efficient and cost-effective.
2- Strategic Benchmarking: Strategic benchmarking, similar to process
benchmarking, is all about improving parts of your company through looking at
others in the industry. Strategic benchmarking relates to strategy and how to create
a strategy that will allow you to be more competitive in your area.
3- Performance Benchmarking:  Performance benchmarking is the hardest process to
improve as it involves learning about competitor performance metrics and
procedures, and also making changes to processes within your business on the lower
levels. Introducing new processes is a challenging action in any business as it
requires buy-in from many different levels in the company. Performance
benchmarking can uncover findings that might not be possible to implement in the
business without creating a long-term change plan. These can be also the most
effective and successful changes for a company.

3. Mention 4 Problems that you may face and which KPI Will use it and
how to solve it:
Problem 1: KPIs aren’t specific to your business
The first mistake relates to how businesses identify the KPIs that they intend to use.
Often this is done by compiling a list in a haphazard manner, through brainstorming
sessions, searching the net or by adopting ‘off the shelf’ KPIs that other organisations
use.
The problem is that these KPIs are generic and not specific to their business and their
individual objectives. It does not allow the business to focus on what matters to
them, and they are certainly not aligned to their strategy.
Solution:
You can use your data dashboard to find the KPIs that matter most to your business.
You’ll see tangible, measurable business metrics—like your daily, weekly and
monthly sales, gross profit and staff performance—that let you be more specific with
your KPI setting and tracking.

Problem 2: You focus on activities not results

Another critical mistake is to use KPIs that focus on business activities. For example,
‘number of customer interactions’, ‘number of items produced’ or ‘hours worked’
are all activity-based measures.
Why is this a mistake? Because it focusses on tasks rather than results. For KPIs to be
truly effective, they must focus on the desired results. This includes short-term
objectives as well as long-term strategic goals.
Some examples of results a business may want to monitor include ‘customers value
our products and services’, ‘our people are engaged’, and ‘our customers have great
experiences with us’. See how these are focussed on the desired result rather than
on activities?
When we look to develop measures around the results we wish to achieve, it forces
us to seriously consider the end-state that we want to reach. This, in turn, makes it
easier to determine meaningful measures for those results. Using the above
examples, to get the result of:
* "customers value our products and services:" we may consider measuring Net
Promoter Score or an organisational reputation measure
* "our people are engaged:" we might consider measuring staff satisfaction, or
employee turnover rates
* "our customers have great experiences with us:" we could measure customer
effort or customer journey cycle time.
The measures are focussed on the results that we want to achieve. Of course, we can
then set specific targets for each of these measures.
Solution:
Spokes top tip: To make sure you’re focussing on the right improvement areas,
consider using the 80/20 rule for setting KPIs. A simple analysis can show you if your
most time-consuming activities are aligned with your most important results.
 + picture 
 Problem 3: There’s no buy-in and ownership of KPIs
Staff and stakeholder buy-ins are fundamental; without them, these people will not
use the KPIs to help guide their business decisions, and ultimately won’t be active in
helping your business meet its objectives.
We’ve found the most successful approach is to get keep staff involved in
determining not just the measures but also the desired results of the organisation—
at all levels. Ultimately this should paint a picture of the organisational day-to-day
and strategic objectives throughout the business, and allow everyone to see
alignment from their day-to-day activities through to the organisation’s high-level
strategic purpose.
Our experience shows that by getting stakeholders to identify and agree on the
desired results, they will accept the KPIs that are identified to measure these same
result areas. This is additionally true when staff and management appreciate that the
KPIs will not be used as a tool to ‘punish’ them.
Another solution:
Buy-in isn’t a one-way street. To improve engagement of your KPIs, make sure you’re
listening to those you want buy-in from, address their concerns and be prepared to
change your KPIs if staff or management make valid points. Stakeholders are more
likely to ‘own’ KPIs if they feel they’ve played some part in their creation.

 Problem 4: You’re searching for the ‘perfect measure’

When identifying measures of your key results, the single most important thing to
consider is not whether a measure is the ‘perfect measure’ or whether a measure
has ‘perfect integrity’. What’s important is whether the measure has enough
accuracy and reliability to be trusted as a source of information that will lead to
making better decisions. There is simply no such thing as the ‘perfect measure’.
As we mentioned earlier, performance measuring is about continuous improvement
and focussing on the things that matter. When that becomes embedded in the
organisation, it becomes an organisation with a high-performance culture that
achieves its goals and objective.
Solution:
Each member of your team can set up their own data dashboard and track the KPIs
that matter most to them. Embed a goal-orientated culture by letting people see the
progress they’re making, in a visual way, whenever they want.

80%OF 20%OF
TIME RESULTS
EXPENDED

80%OF
RESULTS

OF 20%
TOPIC 11
2.how Management accounting may guide companies towards
the sustainable success of the business ( the final 6 points )

Organisations today face the question of how to adapt their strategies, business
models, and practices to respond to social and environmental challenges while
creating financial success and value for their shareholders.

Yet, just 13% of companies are confident they have the necessary skills to meet
these challenges and compete in a sustainable economy, according to data from the
Institute of Environmental Management and Assessment.

argues that many companies are missing out on valuable insight and analysis by
failing to take advantage of the management accounting skillset. This includes
making the business case for sustainability and analysing and reporting on the
impact of environmental and social factors on business performance.

The report suggests a number of ways management accountants can guide their
organisations towards sustainable business success:
* Identify the environmental and social trends that will impact on the company’s
ability to create value over time.
* Link sustainable business challenges to the company’s strategy, business model,
performance outlook, and licence to operate.
* Explain the impact of these sustainability issues in robust business terms, including
how and when they could affect the business.
* Develop KPIs that support strategic and sustainable goals.
* Apply management accounting tools and techniques, such as scenario planning of
natural resource availability, lifecycle costing, and carbon foot-printing, to help
integrate sustainability matters into the decision-making process.
* Produce reports that include data on sustainability impacts in order to inform
budgeting and pricing decisions, investment appraisals, and strategic planning.
* Develop a reporting strategy that integrates sustainability issues to ensure that
relevant financial and non-financial information is disclosed. The International
Integrated Reporting Framework created by the International Integrated Reporting
Council is one example.
https://www.fm-magazine.com/news/2015/jan/201511533.html

https://www.9spokes.com/blog/four-kpi-mistakes-and-how-to-avoid-them/

https://www.google.com/amp/s/www.oberlo.com/ecommerce-
wiki/benchmarking/amp

https://www.google.com/amp/s/www.clearpointstrategy.com/nonfinancial-
performance-measures/amp/

https://www.scoro.com/blog/financial-kpis-for-financial-kpi-dashboard/

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https://www.klipfolio.com/resources/articles/what-is-a-key-performance-
indicator