Analyzing the Purpose and Presentation of Financial Information with the Viewpoints of Different Stakeholders

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This report analyzes the purpose and presentation of financial information with the viewpoints of different stakeholders. It discusses the stakeholders of TESCO PLC, their information requirements, and the impact of globalization. It also evaluates the usage of various microeconomics techniques in application and support of organizational performance, and the external and internal factors that change the environment of business and have an impact on management accounting.

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Advance management
Accounting

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Table of Contents
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
P1 Analyzing the purpose and presentation of financial information with the viewpoints of
different stakeholders...................................................................................................................3
LO2..................................................................................................................................................6
P2 Evaluation of usage of various microeconomics techniques in application and support of
organizational performance.........................................................................................................6
LO4..................................................................................................................................................9
P5 Evaluation of external and internal factors which changes the environment of business and
have an impact on the management accounting..........................................................................9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14
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INTRODUCTION
Management accounting is also termed as managerial accounting where managers
undertake the provisions of the accounting information’s and statistical data in order to batter
inform themselves over a decision and make an informed business decision. The management
accounting assists the management of the company in decision making process as well in the
strategic planning of the organization so that it can perform effectively within controlled
functions. Under the management accounting falls different techniques, reporting and budgeting
and accounting techniques which help of which management of a company evaluate its
performance and analyses the business’s financial as well non-financial position. In the present
report a detailed discussion related with all the techniques and other factors of management
accounting are going to be discussed for the organization TESCO PLC. In this regard the
stakeholders of the organizations are identifies and the key information required to be presented
to them is analyses along with its use along with effects of globalization. Moreover, the different
accounting microeconomics techniques applying in TESCO PLC are evaluated such as marginal
and absorption costing along with their advantages and disadvantages and effects on the
organization. Furthermore, the internal and external factors which affect the performance of the
business are determined and how they have an impact on the business performance is evaluated.
LO1
P1 Analyzing the purpose and presentation of financial information with the viewpoints of
different stakeholders
Stakeholders and their relation to financial information:
Stakeholders:
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The stakeholders of a company can be defined as those people or organization who are
connected to the operations and functions of the business and have a direct impact on their
decision making by the performance of the company at global level. (Kaplan and Atkinson,
2015). These are the people who have a direct link with the organization and can affect and get
affected by the action of company. The stakeholders can be termed as any person, organization,
social group or society at large that has a stake in the business. They can be both internal and
external and have possess vital interest in the business activities as they have long term or short
term interest in the business which can be related to investments, returns, payrolls, interest and
other financial and non financial benefits.
Generally there are two types of stakeholder recognized for an organization and same are
for TESCO PLC, which includes internal and external stakeholders. The internal stakeholders of
TESCO PLC are the employees, board of directors and external stakeholders are the consumer
from around the world, creditors, banks and shareholders. All these stakeholder have a direct
interest in the financial and non financial information of the company as they make their decision
on the financial position and performance of the business regarding investing in the firm,
potential of the company to pay out its debts, legal compliances as per the accounting standers,
policy and taxation rule, the capability of company to pay out the salary and others.
Stakeholders and information requirement
Internal stakeholder:
Board of directors:
The board of directors are key personnel on TESCO PLC who are responsible to operate
the business and carry out the business activates of the company. The information they need is
all the financial statement such as P&L a/c, balance sheet, statement of shareholder equity,
statement of cash flow investments and others (Otley, 2016). With evaluating all these document
they can determine the performance of the company at global level and make decision
accordingly such as if cash and funds are surplus to invest in expansion and dividend
distribution. If the company is not performing well then to make plan how to raise funds and get
back to the better position.
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Employees:
The Employees also see the financial position of the business and potential of the
business to grow. A well performing company TESCO PLC ensures the salary and bonus to the
employee which is their key concern and future growth of company also endures the employee’s
growth as well both financial and professionally.
External stakeholders
Banks:
TESCO PLC takes loans and advances form the different bank to back up its funding for
the business operations. The banks are always concerned about the repayment of the principles
amount along with the interest. In this regard the financial statement of the company revels the
actual position of the business and can be referred as mirror of the business performance.
Globalization have a direct impact on business as this effect may factor of Tesco (Anessi-Pessina
and et.al., 2016). A business which is doing well shoes a potential of repayment of loan of lime
rather a business with decreeing profits and cannot be said to pay the debt on time. With this
banks can take measures on time to recovers it debt form the company.
Creditors:
The creditors are the one who lends money to the company TESCO PLC on certain
terms and company is required to repay them. This can incudes the suppliers who send the
material and equipment on credit to the organization for getting a payment at a letter date. The
financial information of the business for years, if seen in a row significantly shows the direction
of the business operation and tis potential in payment to creditors, if the credit rating of company
is goods creditors and suppliers will automatically give credit to the TESCO PLC. but if the
credits rating of company is not good no one tends to extent credits as company can default in
repayment of the credit amount.
Customers:
The customers are other stakeholder who has keen interest in the financial information of
the company. They have an interest as by looking into the financial position of the business that
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can make diction to invest in the company and become shareholders of TESCO PLC . Also, a
good performing business makes stronger connection with the customers and they tend to
becomes loyal consumers of the company.
Shareholders:
Shareholders are the most important stakeholder of TESCO PLC as they are the owners
of the company and have a right to inspect the financial information of the company. They get
affected by the information and participate in certain specific decision making of the company
such as mergers, takeovers, expansion and others (Bui and De Villiers, 2017). The financial
information is reveled through the financial statement of the company which clearly shows that
performance and position of the company in monetary terms. The shareholders invite in the
company and for a good performing and rewarding firm they want to stay long. But a company
who is not in a good position and a loss with not paying dividend cannot ensure that its
shareholders will stay with it for long. This way the shareholders make their decision to stay,
leave or to father purchase shares of the coming on the basis of tis financial performance which
can be seen through its financial statements, key performance indicators, ratios and others.
With this it can be stated that both internal and external stakeholders have a direct interest
in the financial information of the business where they how TESCO PLC is performing and
how well it can meet is financial duties. All the stakeholders have interest in specific area of
financial information such a shareholder want to know the position and performance of
company as to dividend payment and the valuation of their shares. While the board of directors
have a direct interest in overall performance so that they can make decision according to make
the financial position of the business effective.
LO2
P2 Evaluation of usage of various microeconomics techniques in application and support of
organizational performance
Management accounting techniques:
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The management accounting techniques are the one which analyses and evaluate the
financial and cost accounting information of TESCO PLC. Tools and techniques used under
management accounting are the financial planning, analysis of financial statement and cost
accounting.
Cost accounting and its purpose:
The cost accounting is that branch of accounting which is used as techniques having a
goal to provide advice to the management on how to optimize the practices of business processes
based on the cost efficiency and capabilities of TESCO PLC (Chenhall and Moers, 2015) . The
purpose served by cost accounting is that it issue information to the management for various
purpose which includes tuning of the operations for generation of higher profits, to take decision
over cost cutting and to match the actual cost with budgeted cost and spending to meet level
controlling. Three of the main purpose severed by cost accounting are:
Cost control: means to put a control on the cost of production by evaluating the expenses
incurred and then to rule out those which are not required and to lessen the cost in terms
of different elements of cost such material, labour and overheads.
Cost computation: means to determine actual coat of production incurred on a
manufacturing each unit of good. The cost accounting system assists in determining each
element and the expenses there to as well.
Cost reduction: the cost accounting system determined each cost element so it is easy to
identify that where the expenses are incurred and how cost can be reduces through
elimination of unnecessary cost and by cutting cost.
Cost volume Profit analysis:
The cost volume analysis is the method of the cost accounting that looks at the impact
which different level of cost and volume have on the operating profits of Tesco. In this several
assumptions are made on sale price, fixed cost, variable cost per unit. All of them are considered
constant when determining the impact of change in cost at different level of production.
Marginal and absorption costing
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Marginal costing:
Under the marginal costing techniques the Tesco the fixed are treated as period cost. In
this the organization treats all the variable cost as the part of contribution and the fixed cost are
charged from the period cost. No fixed costs are charged to cost of the product.
Absorption costing
Under the marginal costing method the manufacturing fixed overhead are charged to the cost of
product by Tesco. This means that the variable cost and production overhead are part of
contribution and after that other fixed costs are deducted to reach the profits of the company.
Standard costing
The standard costing for Tesco can be defined as the estimated or the predetermined cost
for performing an operation or for production of a unit of goods or commodity or servings a
provision of service under the target cost by comparing the target cost with the actual cost.
Advantages:
The advantages of this costing method can be outlined as it can be used for product
costing for cost control (Shields,2015). This assist in the decision making process of Tesco
where the if variance is high production must be diverted.
Disadvantages:
Disadvantage of this method if costing can be stated as it is time consuming, labor
intensive and expensive methods. As to compare the actual and budgeted performance require
comparison on regale time intervals which takes too much resources and time of Tesco.
Budgeting and budgetary control
The budging is a technique where various budgets for each activity carried out in Tesco
are made. These budgets forecast the budget expenses which each activity must incur while
carrying out its specified quantum of work. Some of the budgets prepared by Tesco are sales,
inventory purchase, account receivables, cost, revenue budgets etc (Lopez-Valeiras, Gomez-
Conde and Naranjo-Gil, 2015). on the other hand the budgetary control is a measure which is
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undertaken by Tesco to measure the performance on the basis of budgets and than to take
controlling measures to reach the pre determined outcomes in the set funds. The budgetary
control is done through planning tools which includes KPI, balance score cars, ratio analysis etc.
Advantages:
The main benefit of this techniques is that it set the goals for management and various
department of Tesco to achieve a certain outcome in given specific budgets which makes the
working more efficient and effective. This controls the cost of the organization as well.
Disadvantages:
The major drawback of this method is that the budgets are prepared on assumptions
which cannot lead to a term and clear picture of the present situation and environmental
condition affecting the operations of Tesco. This is also time consuming, cumbersome and
expensive.
Capital budgeting and its importance
Capital budgeting is that techniques of management accounting which is used by the
Tesco evaluate the profitability and feasibility of different projects. These projects are related to
buying new machinery, replacing an old plant or any other investment where two or more
options are available to the business (Bennett and James, 2017). In this situation capital
budgeting works as live saver where it evaluate the projects and available options through
different methods such pay back period, average rate or retune and net present value. This helps
the Tesco to select the best option with highest a timely profitability.
LO4
P5 Evaluation of external and internal factors which changes the environment of business and
have an impact on the management accounting
The business TESCO PLC operates in a dynamic global environment where things do
not remain constant for long. The factors which affect the business operations are every changing
in nature. These factors prevail both within and outside the organization. they are generally
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termed as internal and external factors that affects the business organization and have significant
impact on the business operations as well as on the decision making process of the business.
Some of the key internal and external factors which affects the activities and functioning of
TESCO PLC are defined underneath:
External factors impacting business environment on management accounting:
The External factors of the business environment having impact on the management
accounting system of TESCO PLC are the factors which exist outside the organization nad at
global level and affect the economy as well as other organization within same industry. These
factor and conditions and certain factors which are present outside the organization can also have
direct and indirect effect on the businesses these includes:
Economic factor:
Economy is one of the most determining factors to the success of the company even
though it is an external element (Pavlatos and Kostakis, 2015). Within the national and
international economy, some contributing factors such as the fluctuation of interest rate,
economic crisis, and so on directly and strongly affects the consumption of buyers, and
consequently, the profits of businesses. Its impact on the management accounting of TESCO
PLC can be explained as with change economy profits gets effected either adversely or
positively with rise in the prices of the raw material as well as the labour cost.
Legal factor:
The rules and regulations from local government play an integral role in the development
of the company. There are some countries which their laws prevents the development of some
certain industries. That can be a threat to the company. On the other hand, some industries
receive positive and continuous support from local government via their rules and regulations.
The impact of can be defined on TESCO PLC as it organization outside from the countries allow
them to invest in local industries, they will indirectly create an enormous source of financial
support for local business.
Political factor:
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Lack of political stability in a country effects business operations. This is especially true
for the companies which operate internationally. Such as the current situation of Brexit could
overthrow UK government (Miller, 2018). This could lead to riots, looting and general disorder
in the environment. These disrupt business operations and Companies such as Tesco that have
international operations use political risk insurance to reduce their risk exposure. This can affect
the management accounting of TESCO PLC as the political changes trigger changes in the
overall strategies of the company and the decision making process is required to made with
considering the changes in policies and rules.
Social factor:
The social aspect focuses on the forces within the society. Family, friends, colleagues,
neighbors and the media are social factors. These factors can affect our attitudes, opinions and
interests. So, it can impact sales of product and revenues earned. The social factors which impact
customer’s needs are lifestyles, buying habits, education level, emphasis on safety, religion and
beliefs, health consciousness through globalization as well. This can affect the management
accounting of the TESCO PLC as the prices are to be decide as per the trends and preference of
consumer as for high demanded product higher profit margin can be set and for lower
demanded goods prices must be kept low.
Consumer demand:
For TESCO PLC it is necessary to identify what people want, what people need, and
what they demand are usually different from each other (van Helden and Uddin, 2016).
Customers need something to communicate with their family member outside their countries,
they want to a smartphone which can perform multi-function; however, they cannot afford that
smartphone with a limited budget. Therefore, their demand is just a typical phone which can
perform basic functions. If TESCO PLC is not able to figure out what are your customer
demands, organization can face difficulty in how to make the products consumed by customers.
Internal factors impacting business environment on management accounting
Business structure:
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A significant and suitable organizational structure required the management of the
company to have full consideration and careful set up of the system of work organization and
smooth distribution within the company (Messner, 2016). The organization can have centralized
and decentralized system and its efficiency can be established on the application by the
company. Its effect on the TESCO PLC can be defined as the head of department needs to
make sure that the information flow is widely conveyed to all customers in all the countries of its
operation. Its organization’s management accounting system can be stated as setting rules and
regulations to ensure the employee benefits and of the company as well.
Operational efficiency:
The way an organization operates directly affects their success in the marketplace at
domestic as well as international level (Nitzl, 2016)The operations undertaken by the company
includes the employees, products and customers of the business. This have an impact on
TESCO PLC as the owners of the business need to fully understand how their product are
manufactures and how the consumption is taking place and how much they are favorable to the
consumer and how the organization handle the current problems being operating at global market
place.
Capital resources:
Money is a vital part for any organization to perform its plan and achieve its objective.
No company can survive without having capital resource which requires the company to have
enough budgets. Its impact on the management accounting can be defined on TESCO PLC is
that its mangers can prepare several budgets to maintain stability in the organization and by
some resources such an investment opportunities, funding and annual income.
From above evaluation it is clear that for the business TESCO PLC the both internal and
external factor have a potential impact on the business as it have global operations. The political,
legal factors have affect the decision making in context of legal compliance while the consumer
demands and social effect the management accounting system of price optimization and
management techniques (Maskell, Baggaley and Grasso, 2016) . The internal factors affect the
business as well such as the organizational structure and the resource availability ensures the
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efficiency in operations of the business thus assist in the decision making process for the future
development.
CONCLUSION
From the above report it can be concluded that management accounting plays a vital role
in the performance evaluation of the business organization and its effectively assist the
management of TESCO PLC in its decision making process also being operating at global level.
The key stakeholders of the organization have been identified as the employees, managers,
suppliers, shareholders, creditors and government. They all are essential for the business and
each of them have a different need and requirement form the financial information of the
company. The microeconomics techniques have been determined as marginal and absorption
costing along with cost value analyses, cost profits volumes and others. For some of these
techniques there benefits and drawbacks have also been presented so that TESCO PLC can make
an informed decision over application of these techniques in its practice. Furthermore it has been
articulated that the internal factors affecting the business are the structure, operational
sufficiency, capital resources. The External factors have identifies as the economic, political,
legal, social and consumer demand that have a direct impact on the business environment and
on the management accounting of TESCO PLC. The potential effect of these factors on the
business has been evaluated in context of delivering information to its stakeholders.
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REFERENCES
Books and journals
Kaplan, R. S. and Atkinson, A. A., 2015. Advanced management accounting. PHI Learning.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research. 31. pp.45-62.
Anessi-Pessina, E and et.al., 2016. Public sector budgeting: a European review of accounting and
public management journals. Accounting, Auditing & Accountability Journal. 29(3). pp.491-519.
Chenhall, R. H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, organizations and
society. 47. pp.1-13.
Shields, M. D., 2015. Established management accounting knowledge. Journal of Management
Accounting Research. 27(1). pp.123-132.
Lopez-Valeiras, E., Gomez-Conde, J. and Naranjo-Gil, D., 2015. Sustainable innovation,
management accounting and control systems, and international performance. Sustainability.7(3).
pp.3479-3492.
Bennett, M. and James, P., 2017. The Green bottom line: environmental accounting for
management: current practice and future trends. Routledge.
Pavlatos, O. and Kostakis, H., 2015. Management accounting practices before and during
economic crisis: Evidence from Greece. Advances in accounting. 31(1). pp.150-164.
Miller, G., 2018. Performance based budgeting. Routledge.
van Helden, J. and Uddin, S., 2016. Public sector management accounting in emerging
economies: A literature review. Critical Perspectives on Accounting. 41. pp.34-62.
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Nitzl, C., 2016. The use of partial least squares structural equation modelling (PLS-SEM) in
management accounting research: Directions for future theory development. Journal of
Accounting Literature. 37. pp.19-35.
Maskell, B. H., Baggaley, B. and Grasso, L., 2016. Practical lean accounting: a proven system
for measuring and managing the lean enterprise. Productivity Press.
Messner, M., 2016. Does industry matter? How industry context shapes management accounting
practice. Management Accounting Research. 31. pp.103-111.
Bui, B. and De Villiers, C., 2017. Business strategies and management accounting in response to
climate change risk exposure and regulatory uncertainty. The British Accounting Review. 49(1).
pp.4-24.
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