Management Accounting and Business Success

This assignment delves into the crucial role of management accounting in ensuring organizational success. It examines concepts like financial governance, benchmarking, and key performance indicators (KPIs) to demonstrate how businesses utilize these tools for effective performance measurement, risk mitigation, and competitive advantage.

Management Accounting

Table of Contents

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
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ZYLLA COMPANY
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management accounting is identify as an effective process of identification,
accumulation, measurement, preparation, analysis, communication and interpretation of
information that supports managers in particular decision making within the framework of
completing the organisational goals and objectives. It is also define as a process of preparing
management accounts and reports that render proper and timely statistical and financial data
which is require by administrators in order to make short as well as day-to-day decisions in
accurate manner (Baldvinsdottir, Mitchell and Nørreklit, 2010). Management accounting is more
essential and important for the company in different terms like; determine of aim, better service
to audience, assist in the plan preparation, measurement of performance, large number of profits
can be obtained, security and safety from trade cycle etc. In present assignment, chosen
organisation is Unicorn Grocery which is a retail business that deals in dried, processed and fresh
drink and food. They also renders, body care, household and grocery products to the customers.
Annual turnover of the organisation is less than £500,000 and workers are employing approx 50.
This report based in different tasks which cover various points like, importance of management
accounting, range of management accounting tools and many other. Use of planning tools and
techniques which is also determined in this project. There are different ways in which an
enterprise apply management accounting in order to solve financial problems in an effective and
efficient manner.
TASK 1
P1. Management accounting and essential requirements of management accounting systems
Management accounting: It is the provision of non-financial and financial decision-
making data or information to managers (Bodie, 2013). Management accounting is also identify
as the cost and managerial accounting, it the process and activity of evaluating business
operations and costs in order to prepare internal financial account, report and records to assist
administrators' decision making process in accomplishing long term goals of business. In simple
word, it is an effective act of making sense of costing and financial information and translating
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that content into valuable data for officer and management within an enterprise. All these in
formations are assist the administrator of Unicorn Grocery to recognise their market position and
design such plan of action which support in effectively preparation of their activities and
functions (Cinquini and Tenucci, 2010). Management accounting report give different
information and data about sales revenue, cash, outstanding debts, variance analysis, raw
material and so on. These type of data assist in allocation of optimum and various resources to
organisational departments.
Management accounting system: There are different systems of management accounting which
is used by the Unicorn Grocery with motive to maintain their financial as well as non-financial
record, report and account information (What are the Different Types of Management Accounting
Systems? 2017). Certain management accounting systems are determine as below:
Managerial accounting: It is the main type of management accounting which is identify
as a process. It is essential and important for the manager of Unicorn Grocery in order to make
an effective decision about achievement of long term growth and success. This type of system
renders a chance to administrator in order to plan, manage and control business functions and
take an effective judgement which assist to enhance their performance and profitability.
Inventory accounting: It is another beneficial part of the management accounting system
which is prepare by each and every organisation with motive to track the inventory level in
enterprise. This assist in finding that how much inventory is needed to yield their goods
effectively (DRURY, 2013). It also help the business manager to satisfy basic needs and
demands of the customers by providing quality and healthy products to them at reasonable price.
This also support in ordering fresh stock and assign to the department of production in a proper
manner.
Job costing: It is another approach that assist in determination of product cost which is
obtain by an enterprise in case of revenue and job generated. For this motive, there is the
requirement to allot jobs to various items of revenues as well as expenses also.
Cost accounting system: It is another important system of management accounting which
help Unicorn Grocery in monitoring cost which are get on the effectiveness of various functions
of enterprise. This approach includes cost determination process with purpose of improving
profitability and analysing inventory valuation.
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Requirements and Importance of management accounting systems: Above discussed all
management accounting systems are needed by the Unicorn Grocery in different terms which are
shown as below:
Determine of Aim: System of management accounting is highly needed by the
organisation because with the help of financial and non-financial information, Unicorn Grocery
easily determine their long term goals and objectives in allotted time period (Garrison and et. al.,
2010).
Better services to customers: In this cost accounting system is highly support the
business manager to reduce their product price. Thus, it can result is large number of the
customers are attracted towards grocery products. Entire workforce in the organisation are
assemble cost conious effectively. In this product quality is become better because standards of
quality are predetermined.
Provide effective management control: Above all systems of management accounting
help the business manager in order to control all process and activities of the business
organisation (Giovannoni, Maraghini and Riccaboni, 2011). It also support to the administration
in planning of coordinating and monitoring activities of company.
M1:Benefits of management accounting systems
Management accounting system is one of the best approach which is used by the each
and every organisation in order to accomplish their predetermined objectives and goals. There
are different benefits of management accounting system in Unicorn grocery which are identify as
below:
 Identifying the Aim
 Assist in the preparation of better plan.
 Better Services to Customers
 Measurements of performance
 Easy to take judgement:
 Its Increase Efficiency of the business
All these provides are highly support the organisation to achieve long term success and
development. With the help of these they can easily measure employees performance in an
effective and efficient manner (Herzig and et. al., 2012). It assist the manager is to take an
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effective decision about attracting large number of clients towards business products and
services.
D1 Process of the management accounting systems
Management accounting system process assist the business organisation in order to
maintain their financial record in an effective and efficient manner. Further, it help organisation
to accomplish long term objectives and targets in limited time duration. With the help of this
process, Unicorn grocery can easily deal with customers and gain competitive advantages in easy
manner.
P2. Different methods of management accounting reporting
There are different approach of management accounting reporting which assist the
business manager in order manage the financial records. This approaches is apply by the
accounting manager of the Unicorn Grocery with motive to prepare management report in an
accurate manner. This reporting includes job cost report, budget reports, accounts receivable
report, inventory and manufacturing reports. All these are highly beneficial for the retail sector to
accomplish their predetermined objectives and targets. In this manager play vital and essential
role in making an effective decision about increasing performance and profitability of company
in given time duration (Li and et. al., 2012). These type of report mainly prepared weekly,
quarterly, monthly and yearly basis. Some management accounting reports are defined as below:
Budget reports: This type of report is highly required by the each and every organisation
to prepare budgets of organisation as per its expenditure which are obtain in previous years. It
support the management level of the enterprise in order to analysis business and different
department of the organisation performance. These kind of report works as monitoring device
which support in handling the risks as well as render solutions about various problems.
Account receivable report: It is another part of the management accounting report which
is prepared by the accountant for the motive of handling their debtors easily. It is an effective
method which is applied by business with purpose to manage cash flows and take an accurate
decisions about increase the credit period time in which cash payment is cured from business
debtors. This method also support the company to identify problems related in collection
process. This render chance about plan of better strategies and resolve from such issue. This will
also support in enhancing entire system in an effective manner.
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Job cost report: It is another part of the management accounting report which is prepared
by the cost manager of the Unicorn Grocery in order to determine revenue which are get on
formulation of particular project. This will also support in linking the outgoing with the
anticipated revenue. It also render chance about evaluation of profitability and effectiveness of
the project or plan which is started by organisation for achievement of their long term targets and
objectives (Luft and Shields, 2010). Job cost report is also support in generating maximum
number of profit and advantages in a proper manner. This also involves on saving the cost and
time of the organisation to decrease their business operations and functions on such ground
which is not better for them.
Manufacturing and Inventory report: It is the role and responsibility of manager is to
prepare a report regarding manufacturing and inventory goods of Unicorn Grocery. Such kind of
report support the administration of the finished products and raw materiel in a proper manner.
This methods involves in preparation and designing of the grocery products as per the market
demands as well as allocation of optimum resources. These type of report consider regarding
overhead cost, labour cost and wastage of stock.
TASK 2
P3 Calculation of cost by using marginal costing and absorption costing
Unicorn Grocery is a retail organisation and has less employees and turnover. In order to
increase their sales and maintain employees performance, company use two types of costing
approach which support business to prepare their income statement and calculate cost (Lukka
and Modell,2010). Absorption and marginal both are essential and useful approach which is used
by the organisation. These are identified as below:
Marginal costing: This type of approach support in finding of opportunity cost obtained
by business on the manufacture of one and more unit of grocery items. It is also define as,
variation in the total manufacture due to maximise and minimise of single unit. With the use of
this methods, business can get only break even point. It means variable cost is accounted and
fixed cost is engrossed. This approach is also essential in allocation of resources because it
support in accomplishment of optimum outputs. It is also important for the organisation to
maintain their performance and profitability in an effective and proper manner.
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Absorption costing: It is depict as an essential and foremost approach of costing which is
applied by the administration of Unicorn grocery company. This tool assist the business
organisation in measurement of cost which is obtained on the process of product production
considering indirect and direct expanses (Macintosh and Quattrone, 2010). In case of direct cost
which is directly linked to the product production like, labour cost, raw material and son on. In
case of indirect coast that cover different expanses which are find supportively and indirectly on
the measurement of products such as factory rend and many other.
Difference between Absorption and marginal costing: There are some points which are
easily identify differences in between both costing. These are determine as below:
Basis for comparison Marginal costing Absorption Costing
Meaning and definition It is a decision making concept
for finding the entire cost of
production is called marginal
costing (Otley and Emmanuel,
2013).
Apportionment of entire values
to the cost center with aim to
identifying total production
cost is called absorption
costing.
Classification of Overheads Variable and fixed Administration, production,
selling and distribution.
Profitability Profit is calculated with the
help of profit volume ratio.
Due to fixed cost inclusion is
highly affected on business
profitability.
Highlights This type of cost is highlight
on contribution per unit.
This kind of cost is highlight
on net profit per unit.
Cost recognition In this variable cost includes as
per the product cost and fixed
cost calculated as per the
period cost.
In this both variable and fixed
cost are included as per the
product cost.
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M2 Techniques and reconcile the profit
Above disused both technique's such as absorption and marginal costing help the
organisation to identify their net profit and sales. This tools are highly support retail organisation
to keep employees performance easily. In this profit and information are accurately proper
which support to maximise their profitability and productivity ratio in given time duration
(Scapens and Bromwich, 2010). All these technique's give accurate information to the company
so that they are capable to accomplish their long term and pre-determine objectives in given time
duration.
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D2 Data of the business activities.
Balance sheet, income statement and cash flow are important tool for the each and every
organisation. All these are known as a financial report of the company which turn to get accurate
data regarding business performance and profitability. These technique's are provide accurate
and proper information to the organisation. With the help of these they are capable to do their all
activities and functions in proper manner. These support to increase their reputation and goodwill
in marketplace.
TASK 3
P4. Benefits and limitation of using planning tools
Budget is an effective technique which is prepared by the accounting manager on the
basis of figuring expenses and cost which will obtained in future. It is assemble with the aim of
ignoring the situation of lack of fund by which entire employees of the enterprise perform better
with motive to accomplish long term goals and objectives of the company. Accurate budget also
support them to maximise customers and employees base in the organisation. Thus, budget is
necessary for the each and every company to maintain their regular basis transaction easily.
Mainly it is prepared for 5 years for handling future operations and activities of Unicorn grocery.
Budgetary control: It is a role and duty of manager is to apply different tools and techniques for
control process of budget in an effective and efficient manner (Simons, 2013). This tool guide
and direct the workforce to utilise optimum resources in proper manner. It support an enterprise
in order to perform business operations and functions without facing any issue related to lack of
fund.
Process of budgetary control: It is another important and beneficial for the each and
every organisation to control all activities and functions of the company easily. With the help of
this process Unicorn grocery can easily identify needs and wants of the customers as well as
employees towards business products, services and process. This process includes different steps
which are determined as below:
Discuss with administrator to make an effective strategy: It is a fist step which is
essential for the company to maximise their sales and revenues. In order to make an effective
budget process, manager is responsible to make better decision which assist to accomplish long
term objectives and targets easily (Soin and Collier, 2013).
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Record the real performance: It is also essential process which is follow by the Unicorn
grocery in order to maintain entire record and information related to employee performance. It
assist the enterprise to retail entire activities and functions of the organisation in limited time
period.
Comparison of existent with the planned: At this level, budgetary-control activity
support the manager in order to compare actual performance with desired effectiveness which
assist in measuring budgeted and variable cost of sales effectively.
Determine different or other variance: This stage mainly connected with reviewing
differences in between desired and real performance of company. For this administrator of the
Unicorn grocery require to recruit a best people who is liable to analysis the intellect of variation
and taking effective actions with motive to accomplish predetermined goals and objectives
effectively.
Respond immediately: It is a last phase which is needed by the manager in order to
analysis business performance according to the necessary data and information which is
collected by the manager of the Unicorn grocery (Van der Steen, 2011).
Planing tool: It is one of the best and essential tool which is used by the each and every
organisation to prepare an effective budget. This tool includes different budget which is
determine as below:
Forecasting Tools: It is essential techniques which is applied by the administrator in forecasting
the happenings and trends of the company that happen in the competitive marketplace like
labour, prices, demands and many other. For this the administrator has to conduct an
investigation programme where they analysis chances of possibility which support them in
accomplishing predetermined objectives and targets. There are different advantages and
disadvantages of the forecasting tool which are determined as below:
Advantages Disadvantage
It support administrator is to prepare and
design for future situation via implementing
and formulating effective strategies to
organisation.
Information and data regarding this tool is not
appropriate which can cause as a losses in the
company.
Scenario Analysis techniques: It is another technique which support Unicorn grocery
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and its manager in order to identify risk and uncertainties that will highly impacts on the business
development and growth (Ward, 2012). There are some advantages and weakness of this
methods which are identify as below:
Advantages Disadvantage
This tool support in handling risk and
uncertainty via implementing proper
contingency strategies and plan to accomplish
desired objectives and targets.
The quality data and information which is
highly impacts the dependability of model. In
this quality is very poor which can case as
negative outcomes.
Contingency planning tool: It is another essential and beneficial techniques which is apply by
Unicorn grocery. Today's business environment is more complex or analysable, it is required by
the organisation in order to control business activities via formulating contingency plan
(Zimmerman and Yahya-Zadeh, 2011). Some disadvantage and advantages of Contingency
planning tool are determine as below:
Advantages Disadvantage
This tool assist in managing and handling
excessive burden and load though decreasing
cost.
In nature, business environment is dynamic or
complex by which administrator analysis
difficulties and issues to forecast.
Types of budget: There are different kind of budget which are follow by the Unicorn grocery.
These are determined as below:
Master Budget: It is an aggregate of an organisation's individual budgets planned to
show a complete image of its financial health and activity. It is combination of operating
expense, sales, income streams, assets to allow business in order to establish long term goals and
analysis their entire performance.
Advantages Disadvantage
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 Master budget show the entire earning
and spending of the organisation
 This budget yield the summary of the
organization budget to the business
manager and company executives.
 The main disadvantage of master
budget is difficult to inform the detail.
 In this budget various categories are
enclosed that is why it is hard to
perform.
Operating budget: With the help of this budget business entity analysis and forecast their
projected expanses and income over the study of a particular time period. This type of budget
includes production, labour cost, sales, overhead, material cost, administrative expenses,
manufacturing cost and many other.
Advantages Disadvantage
 This type of budget render the
elaborated investigation of future and
actual planned expense pattern control.
 It change unnecessary costs and
concentration on worth adding
activities.
 This type of budget is time consuming
due to different transactions.
 In nature operating budget is
inaccurate.
Financial budget: This kind of budget shows business strategy for handling its income,
cash flow, expenses and assets. It is used by the Unicorn grocery to determine their financial
budget value in the part of a public stock offering.
Advantages Disadvantage
 This budget show the financial position
and situation of the company at market
place.
 With the use of this budget an
enterprise easily analysis their
performance.
 This budget is more costly and time
consuming for the small and medium
organisation.
 This type of budget is only used in
order to record financial information.
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M3 Preparing and forecasting budgets
Above disused all tools are highly essential and beneficial for the organisation to
maintain their performance. Name of this tools are forecasting, Contingency planning and
Scenario Analysis technique's. All these are highly support to maximise sales and revenues of the
organisation. These technique's also support to analysis risk and uncertainties, it is the role of
manager is to use different effective concepts which support to overcome this in an appropriate
manner.
D3 Planning tools of the accounting in financial problem
Planning tool also support the business organisation in order to overcome all issues and
problems in the organisation. Contingency planning, Scenario Analysis and forecasting tool
support the business enterprise to reduce manage employees performance and improve
effectiveness and profitability of the organisation (Zimmerman and Yahya-Zadeh, 2011). It is
also beneficial for the Unicorn grocery to easily record important and financial information. This
information and data assist to accomplish long term objectives and targets in given time duration.
TASK 4
P5. Various measures to resolve financial problems
In Unicorn grocery, there are different issues which are face by the company and its
employees. These are highly effects on the business performance and profitability. Some issues
which is observe by the managers are determine as below:
Profitability: It is a main issue which is face by the organisation due to lack of fund and
misunderstanding which is rises among the workforce (Cinquini and Tenucci, 2010). This issues
mainly effects on the company and its productivity ratio which can cause in negative outputs.
Cost effectiveness: It is another main issue which is face by the Unicorn grocery. This
problem mainly related with the production process of organisation. So it is a main problem in
the enterprise which effects on its performance and effectiveness.
In order to over come above both type of issues company use different tools and technique's
which are determined as below:
Key performance indicators: It is used by the each and every enterprise with a objective
of analysing employees performance. Thus, it is the role and duty of administrators to fix desired
performance and effectiveness which help to reduce employees turnover in an effective and
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efficient manner. This tool also assist in enhancing entire performance of workers, thus Unicorn
grocery easily achieve long term objectives and targets.
Financial governance: It is another important technique which is mainly related with the
standards and guidelines which is made by the legal authority in order to ensure success and
development of company. Sometime business entity found few issues in complying with laws
and rules of the government in order to attain targets.
Benchmarking: Large number of the competition in marketplace would which impact
the stability and effectiveness of organisation thus it is needed for administrator to emphasis on
challengers strategy and policy (Bodie, 2013). Such type of strategy support the company in
order to compete their challengers efficiently.
Difference between Unicorn Grocery and Imda Tec
Unicorn Grocery Imda Tec
Unicorn grocery is a small organisation that
deals in different products, so in this they
required to apply financial governance tool
which help to easily measure business
performance.
As the business run at small level due to which
business administrator necessity to measure
and control issues or problems in appropriate
manner. In this they use Key performance
indicators.
They also apply KPI which help to easily
measure employees performance in an
effective and efficient manner.
In this they use benchmarking with aim to set
their effective position in marketplace by
providing quality and healthy products or
services to the customers.
M4 Financial problems, management accounting
In the organisation, there are large number of the issues which are face by the company
while producing products and services to the customers (Baldvinsdottir, Mitchell and Nørreklit,
2010). In this they face profitability and productivity problem which can hinder on company
performance and effectiveness. In order to overcome such kind of issues business entity apply
different tools and technique's such as Key performance indicator, benchmarking and financial
governance. All these are highly support organisation to retain employees and business
performance in an easy and effective manner.
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CONCLUSION
From the above mentioned report, it can be concluded that management accounting is
foremost and beneficial part of the each and every organisation. It is prepared by the each and
every organisation with motive to achieve competitive benefits and advantages in given time
period. There are different systems and reporting of management accounting that support to
retain their financial as well as non-financial record, report and account. Thus, with the assist of
this information, an enterprise easily do their all activities and survive in marketplace without
any difficulties and issues. There are mainly two types of costing such as absorption and
marginal which assist the company to calculate net profit. Planning tool is also beneficial for the
organisation to identify future risk and uncertainty which support to survive in marketplace in an
easy manner. In the organisation different issues are faced by the business managers, so in order
to overcome this, company apply different tools such as Key performance indicators,
benchmarking and financial governance, all these are highly essential and useful for them.
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