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Name: Muhammad Ibrahim

1. Financial and Management Accounting Differences (LO 2.1, 3.1, 4.1)

Existing between them are their uniquely different roles in organisation reporting, financial and
management accounting.
Financial accounting centres around production of financial statements i.e. income statements,
balance sheet, and cash flow statement to external interest groups including investors, regulatory
agencies, taxation authority, and creditors. Such reports are provided according to the set
standards, like IFRS or GAAP, and show the financial state and performance of the organisation
during a specified period. They are of historical nature, compliance, auditing and shareholder
reporting.
On the contrary, management accounting is inward looking and prospective. It assists in the
internal decision-making by offering specific financial and operation data in the form of cost
analysis, budget prediction, and break-even analysis. Management accounting is not under
standard patterns and can be adjusted to the requirements of different departments and decision-
makers.
Financial reports in my organisation are used to monitor the financial health and enforcement of
tax and statutory compliance. In the meantime, strategic choices including pricing models,
resource allocations, and departmental budgets are directed through the management accounting.
The analysis of financial statements especially the ratio analysis allows the various stakeholders
to carry out an evaluation of the liquidity, the profitability, the solvency and the operational
efficiency. An example is that the current ratio indicates how the organisation is doing in terms
of short-term obligations, whereas the net profit margin enables us to check on the profitability
which is measured in the long run.
2. The Budgetary Control and utilization of financial statements (LO 2.2, 3.2,
4.2)
Budgetary control is the financial planning process which includes development of budgets,
variance analogy, and the initiations of corrective measures of deviations. This is important in
ensuring financial discipline and ensuring that expenditures are pegged on organisational goals.
Various stages of budgetary control process take place in our organisation:
Planning: The cost estimates are prepared on the departmental basis based on history and
priorities.
Approval: Proposed budgets are reviewed and approved by the senior management.
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Monitoring: This is done by recording a monthly actual performance using two statements,
namely the income statement and the cash flow statement as principal tools of budget
monitoring.
Variance Analysis: This is where the finance department measures result with budget figures to
detect favorable or unfavorable variances.
Action: The managers must explain substantive differences and take cost control measures
where needed.
Income statement (or profit and loss statement) allows tracking income and outgoings, and cash
flows statement allows monitoring the real ins and outs of cash, to make sure the liquidity is
sustained. The required periodic consultation of the balance sheet is also done to observe assets,
liability, and equity.
The control of budget guarantees the optimal allocation of financial resources and gives timely
warning messages to cover weak areas, avoid over expenditures, and endorse development
projects.
3. Numerical value of the information delivered by statements and ratio
analyses (LO 3.3, 4.2)

The usefulness of financial statements is that they give an appropriate picture of the financial
position of the organisation. both forms of statements mete out their own insights:
Income Statement: This indicates profitability and makes the stakeholder know income against
expenses during a period.
Balance Sheet: It is a picture of financial stand at a specific date showing assets as well as
liabilities of the business.
Cash Flow Statement: Discloses the ability of the organisation to manage cash, in which
operation, investing, and financing cash flow are revealed.
These statements become very informative when they are combined with ratio analysis. The
ratios which are commonly applied in my organisation include the following:
Liquidity Ratios (example current ratio, quick ratio): These show the capability to cover
short-term obligations. As illustration, current ratio of 1.8 implies the existence of 1.8 times as
many current assets as liabilities in the business, indicating high liquidity.
Profitability Ratios (examples gross profit margin, net profit margin): These determine the
effectiveness with which the organisation uses sales to generate profit. Good control over direct
expenses may be represented by gross profit margin of 40 percent.
Efficiency Ratios (Puttur for example inventory turnover, accounts receivable turnover,
battery turnover etc ): Those measures of how efficiently the organization makes use of its
assets.
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Solvency Ratios (e.g., debt-to-equity ratio): they assist in determining the risk potential and the
fiscal fitness in the long-term.
It is the actual value when these metrics are being followed over the years and against the
industry standards. As an example, the industry averages of assets and revenue indicate that they
are not as useful as in another industry, and the show that the return on value of assets (ROA) is
lower than the industry average; there may be an inefficiency struggle or underutilisation of
assets.
Besides, ratio analysis aids in strategic planning in that it indicates areas that need enhancement.
It also fortifies interaction with stockholders and creditors because of its ability to show
quantitative performance metrics and risk measures.
Conclusion
Financial reporting in an organisation plays a very important role in giving transparency,
compliance and making sound decisions. This difference, between financial and management
accounting, makes the organisation serve the external and internal stakeholders well.
Management of the process of budgetary control with the assistance of a range of financial
statements can assist in maintaining the organisational activities in line with the planned goals.
Lastly, ratio analysis in financial values provides a coat of deeper representation to such reports,
which enables managers to come up with informed and strategic decision making. Financial
reporting in this manner is the vital component of the operational management and long-term
organisation planning.
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Reference List

 Atrill, P. and McLaney, E., 2020. Accounting and Finance for Non-Specialists. 11th ed.
Harlow: Pearson Education.
 Drury, C., 2018. Management and Cost Accounting. 10th ed. Andover: Cengage
Learning.
 Horngren, C.T., Sundem, G.L., Elliott, J.A. and Philbrick, D., 2016. Introduction to
Financial Accounting. 11th ed. Pearson Education.
 Chartered Institute of Management Accountants (CIMA), 2021. Management
Accounting: Official Terminology. [online] CIMA Global. Available at:
[Link] [Accessed 22 Jul. 2025].
 International Accounting Standards Board (IASB), 2023. International Financial
Reporting Standards (IFRS). [online] Available at: [Link] [Accessed 22 Jul.
2025].
 ACCA (Association of Chartered Certified Accountants), 2021. Understanding Financial
Statements. [online] ACCA Global. Available at: [Link] [Accessed
22 Jul. 2025].
 Wood, F. and Sangster, A., 2018. Business Accounting 1. 13th ed. Harlow: Pearson
Education.