Draft Project Proposal - Management Accounting and Finance Concepts

Solution Preview

Hello!

Please find guidelines and ideas for writing about Management Accounting & Financial Practices in the attached file.

Running Head: TOYOTA MOTORS

Management Accounting & Financial Practices

Table of Contents
Company Description 3
Description of Budgeting Process 3
Management Accounting Information System 5
Costing Process 7
Capital Decisions 9
Capital Acquisition & Structure 11
Conclusion 12
Information Source & Methodology 13
References 14

Company Description
For the project related to the management accounting and financial information, the largest Carmaker of the World, Toyota Motors is chosen. It is a multinational corporation that is headquartered in Japan. Toyota Motors uses the diversified business scenarios as it also provides financial services to its customers through the Toyota Financial Service Division. Financially the company is quite strong due to managerial effectiveness in using the past financial data and other aspects in an appropriate manner (Toyota Motor Sales, 2010). The management accounting process of Toyota is quite effective that causes an increase in its financial position as well as market base.
The management accounting system in the company is quite supportive to the managerial decision that also ensures the optimal utilization of resources and reduces overall cost of the business. Management accounting information is used differently as per the change in the situations in the organization. The success of the company is completely based on its cost effective production process. It is also causing a continuous increase in its revenue and profitability position (Toyota Motor Corporation, 2010).
Description of Budgeting Process
In the Toyota Motors budget process starts with the development of a plan with assumptions and ends with the load of financial information in the organizational system as the industry standards and business requirements (Kemp & Dunbar, 2003). The budgeting process of Toyota has many revisions as it prepares the budget by using top-down approach of budgeting. The budgeting process of Toyota clearly communicates and supports to the top management that causes an increase in its effectiveness. The management emphasizes on the long term objectives in its budgeting process that are obtained through the managerial experience and assumptions about the future market and economic environment and its impact on the business operation and revenues generation ability of Toyota (Young, 2004).
The budgeting system of Toyota is quite different from its financial accounting system and at the same time it is also very different from other most budgeting systems that are used by other organizations. The budgeting system of Toyota mainly focuses on variable costs. The goals related to the variable costs are reduced through the continuous improvement and at the same time indirect cost is not allocated to the products. The upper management determines the short term and long term target profits in advance by using predetermined formula (Morgan & Liker, 2006). After it, the budget is segregated into the variable and fixed cost budgets that were previously based on the profit target and volume of production.
Further the fixed budget is segregated on the basis of functions namely uncontrollable and controllable. The variable cost budget is also divided accordingly. After it, the target profit and estimated profit is calculated and the difference between both is termed as the kaizen value. The remaining variable costs are controlled by the kaizen budget (Mansour, 2002). In the last step of budgeting process, the actual and budgeted figures are compared and appropriate controlling actions are taken to correct them. The following chart shows the budgeting process of Toyota -

(Source: Mansour, 2002)
The budgeting system of Toyota includes kaizen, target costing and cost control instead of using only target costing. This methodology of the budgeting process in Toyota is unique as it includes the ultimate responsibility of senior management to administrate the budget and to make the profits for the firm. It doesn't include the profit centers that reduce the need for transfer pricing for other business units and divisions. At the same time, lack of transfer pricing also eliminates the biased performance evaluation. The goals in the budget for the employees are set in terms of kaizen that is quite significant to motivate the employees as it is relatively simple and understandable (Huntzinger, 2007). These characteristics of the budgeting process and procedure of Toyota support clarity to the vision of organization and to plan for the future in an effective manner. It also provides an effective tool to motivate the employees and to attain a uniform quality throughout the organization.
The budgeting process in the Japanese culture is quite similar to the budgeting process in Toyota. Most of the manufacturing companies in prepare the budgets for sales and marketing department with a consistent hierarchical management style. The same procedure is followed by the management of Toyota by motivating the employees and providing them achievable goals and objectives. It is used to avoid high uncertainty in the business environment (Yee, Otsuka, James & Leung, 2008).
Management Accounting Information System
The management accounting system in Toyota plays an important role to enhance the effectiveness of its business activities by using the accounting information collected by ...