Case Study Of Management Accounting On NISA

Added on -2020-02-05

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MANAGEMENT
ACCOUNTING
INTRODUCTION
In the accounting area, the process where company identify, measure, prepare, monitor,
diversify etc. to the different financial transactions and elements is known as management
accounting. Each and every business enterprise uses such kind of process which highly helpful to
manage financial resource and make the firm more financially sound. In the current case study of
management accounting, a retail store NISA, is selected which is a leading and a local retail store
which is only operating in UK. It is a small departmental store operating in UK only which sells
product and services in UK only. The present report shows various types of approaches of
management accounting along with their essential requirement in the business process. In
addition to this, it helps to assess different reports used to management accounting reporting and
determine performance of Nisa store in retail industry. Beside this, current study emphasises on
different methods of costing to derive net yield at the end fiscal year. At the last it describes
those planning tolls which helpful for Nisa store in budgetary control.
TASK 1
P1
Business Report
To,
General Manager,
Nisa Retail Store
Date: 4th October 2017.
Subject: Different systems of the management accounting
An aspect under which financial plan is framed, analysed, executed and monitored in the
workplace is considered as the management accounting. It helps to the Nisa retail store in order
to provide clear, accurate, proper, reliable and timely informations and data related to the
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account and finance. Further, when the managers have adequate and reliable financial data then
they are able to take effectual decisions whether these are for short term or long term (Lukka,
2014). Further, the company is able to make day to day decisions, weekly, monthly or yearly in
appropriate and profitable way. When the Nisa retail store uses management accounting process
at the workplace then it can make effective business decisions as well as analyse regarding what
has to buy and make in the manufacturing process. It can be said that higher the uses of
management accounting aspect at the workplace lead to manage various financial resource in
effectual manner. Further, Nisa retail store is easily become more strong in the retail industry in
terms of financial health. Various kinds of systems and approaches by which Nisa retail store
can manage the firm. So, essential requirement and necessity of the such systems for Nisa store
are explained as below:
Inventory accounting: The method or system where inventory or stock of the firm is to
be managed and utilized to generate sales is known as inventory or stock accounting.
With the help of such kind of approach the Nisa retail store is highly able to use or
utilize those items which are in stock to produce products and services. Higher the level
of stock remains at the workplace is not better and profitable for an entity (Rossi, 2014).
It is very compulsory for Nisa retail store to manage the stock and reduce it in the
business which is done by using accounting process. Hence, it can be said that stock
accounting is essentially required for managing and effectively utilizing stock or
inventory.
ABC costing: The method of costing where the management of Nisa retail store
determine cost and expenses of each and every stage or activity of particular process is
known as ABC costing (Kotas, 2014). Requirement of the method is to assess that which
activity incurs how many expenses and these are proper and utilized or not.
Accounting for lean: The approach of accounting in which unused and miscellaneous
expenses are eliminated and increase quality of services and products of Nisa retail store
is identified as lean accounting system. When the management uses such system then it
able to reduce the costs which are unproductive and not giving any kind of return
(Schaltegger, Gibassier and Zvezdov, 2013). Along with quality of retail products will
be increase up to better level by which more number of customers want to purchase
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goods from Nisa retail store.
LIFO: The respective system or approach is related with the stock valuation in which
the company is able to sell its stock and manage the business process effectively. LIFO
stands for last in first out where the Nisa retail store sell those inventory at the initial
which are comes at the last time rather than using new level of stock. It is very less used
by the firms due to not efficient, productive and helpful for generate more profit.
FIFO: Another method of stock valuation is FIFO which stands for the first in first out
and due to this it is the most usable approach for the company. According to this, stock
and inventory sold at the first time which comes and occurs first time in the business
process. The current method of valuing the level of inventory is used by most of the
companies. In the reality when comparing with the LIFO than first in first out method is
the better and shows value of the overall stock in appropriate and actual way.
Weighted average: According to the weighted average stock valuation method it helps
to know about the average value of LIFO as well as FIFO. Moreover, with the help of
respective approach of stock valuation Nisa retail store able to determine that average
value of its overall stock is how much.
Price optimisation system: It is a mathematical system adopted by the Nisa retail store
in order to assess that at which pricing strategy and level majority of the consumers
purchasing goods and services. If a company needs to maximise its operating profits
what all best opportunities should it consider for maximising it. Price optimisation
system have been implemented in industries like casinos, hotels, car rental, airlines,
banking and insurance company, cruise lines and retail sector.
Cost accounting system: Under this approach, costs and expenses which incurred in the
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workplace are analysed and decisions for deriving selling prices are taken. The main aim
of the system is to advice the management on the best alternative opportunities based on
cost efficiency and capability. Cost accounting is mainly used in the financial
accounting but the basic function is for the management to facilitate decision making.
Job costing system: The Nisa retail firm producing different range of products where to
assess cost of each job goods the mentioned system is considered in the workplace.
Further, it is an effective approach which provides information to the managers about
the expenses incurred for producing products of every job cost.
P2
For the business it is very important to prepare number of financial statements which
include P&L, cash flow account, B/S etc. For such statements the relevant data are derived from
different small level reports. In those reports financial transactions for specific activity, process
or department are to be recoded and by summing and analysing such data management of Nisa
retail store is highly able to know position of its in terms of finance. Different small kinds of
reports which are used by Nisa retail store in order to assess financial performance are analysed
as below:
Budget report: The report which shows various kinds of financial data and information
for further fiscal year is to be identified as a budget report. With the help of budget report
the Nisa retail store can know that how much sum of money is to be required in next year
to produce products and services. By this it able to determine that amount of total
expenses along with incomes will be how much (Five management report types, 2016).
Hence, it helps to assess future performance of the company in the retail store of UK. On
the basis of this, Nisa retail store can easily formulate business strategies in the firm.
Payroll report: Other report which is used to make financial statements is payroll report
which is related to the employees or workers which are working in the Nisa retail store.
In this, expenditures which are highly related to the employees are to be recorded and
after making total of all expenses treated in the income statement. Various number of
expenses relating employees recorded which are such as wages, labour, salary,
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