Question

Question One Distinguish between traditional management accounting and strategic management (20 marks) What do we mean by the term "cost" as regards to management accounting? (5 marks) (Total : 25 marks) a) accounting. b) Question Two (10 marks) Discuss the signi ficance of budgeting in any business organization. a) Distinguish between a functional organization structure and a divisionalized b) (15 marks) (Total : 25 marks) organizational structure. Question Three (13 marks) Discuss the FOUR major perspectives of the balanced scorecard as a strategic (12 marks) (Total : 25 marks) What are the major objectives of transfer pricing? a) management tool.

Answer 1

Solution. 1.a)Traditional management accounting, as the name suggests, originally focuses on calculation of organization's profit. Whereas, strategic management accounting, focuses on keeping track of organization's objectives alignment with profit generating activities. Traditional management accounting encompasses organization's planning process, budget preparation, internal control and position. Whereas, strategic management accounting encompasses advanced form of internal management along with organization's sustainability processes in competitive economic market.

b)Under management accounting, keeping records and budgeting of costs refer to the process of determining and estimating cost incurring processes in different operating activities in process of production of goods/services, to facilitate in decision making activities. It forms an important part of management accounting, projected costs in financial statements, help determine management profit in allocating monetary value(cost) on different activities, and setting price and volume analysis, to meet determined profit margin of an organization, in order to ignore loss in future and sustain in market.

2.a)When an organization decides to enter in competitive economic business market, it sets a general objective of achieving profit, based on which, it prepares,reports and analyzes budget, which provide with financial activities transactions and minimizes cost overrun and allocation of available capital effectively and maximizing revenue generating capacity of an organization.

b)Functional organization structure encompasses employees of an organization based on their work. Whereas, divisionalized organization structure groups employees on basis of demographics, product line, etcetera. Functional organization structure focuses on grouping of employees of similar specialization and work independently in achieving organization's goals. Whereas, divisionalized organization structure encompasses work of employee's activities in achieving one full division of organization's objectives as one. Functional organization is adopted by small organization's whereas, divisionalized organisation structure is employed working on larger scale having different market divisions, product divisions, etcetera.

3.a)Firstly, transfer pricing refers to pricing process when subsidiary company sells its goods to parent company, which gets regulated internally to minimize costs. Objectives of transfer pricing are to reduce company's cost by inter transfer of goods thereby, minimizing tax liabilities, through employing arm's length price. It provides basis for determining market pricing process and facilitating in increasing organization profit making as whole. It aligns subsidiaries performance with parent company. It reduces tax liability by shifting profit artificially inter departmentally. It helps achieving advantage over foreign exchange.

b) Balanced Scorecard provides feedback to management of an organization which again facilitates in measuring internal business functions and their benefits respectively to an organization.

A.An individual responsibly has recorded and regulated organization's financial transactions.

B.Identification and development of strategy to build better relationships internally and externally.

C.Betterment and achieving efficiency of human resource in workplace to meet goals and targets smoothly to sustain in dynamic economic market.

D.Developing ways to improve and balance individual's goal and performance with organizational goals and objectives.