Management Accounting

This article discusses the accounting policies used by JB Hi-Fi Company, depreciation methods, useful life of assets, minimum average annual net cash flow, payback period, accounting rate of return, supply chain management consultant, and critical examination of the costing model.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Depreciation Methods............................................................................................................2
Useful life of the Assets.........................................................................................................2
Minimum Average Annual Net Cash Flow...........................................................................3
Payback Period.......................................................................................................................4
Accounting Rate of Return.....................................................................................................5
Comparison of Average Payback Period...............................................................................5
Supply Chain Management Consultant..................................................................................6
Evaluating the Return on Investment (ROI) methodology and the influence of the same....6
Objective of the Study............................................................................................................6
Critical Examination of the Costing Model...........................................................................8
Methodology and Structure of the Annual Budgeting Process..............................................8
Conclusion..................................................................................................................................9
Reference..................................................................................................................................10

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Introduction
Accounting Policies used by the JB HI-Fi Company is in accordance with the
Australian Accounting Standards and the principles and guidelines laid down by the same
were taken into view and account. The interpretation for the accounting policies were used in
accordance with the Corporations Act 2001. The financial report for the company was
prepared in accordance to the IFRS and the compliance with the same was taken into account.
Discussion
Depreciation Methods
The depreciation methods taken into account for the JB HI-Fi Company’s Plant and
Machinery was for the year 2016. The Depreciation provided on the plant and equipment and
the leasehold improvements were noted I the financial statements of the company at the
historical cost less any accumulated. The depreciation on all the non-current assets of the
company was provided. The method for depreciation is provided on a straight line basis
where the cost of each assets or the value of the assets is distributed among the useful life of
the asset and the following depreciation per year was calculated by the company. The
company reviews and overviews the different factors of the assets such as the useful or total
life of the asset or the market value and the suitable depreciation method. If the management
of the company felt regarding changes that needs to be done on the factors than the changes
are made. The oversight and annual review of the non-current assets of the company once
annually which will help a company helps them in better forecasting and maintaining better
operational efficiency in the business (Qian et al. 2016).
Useful life of the Assets.
The useful life of the assets was one in order to review and study the assets of the company in
brief. The estimated life selected and evaluated for the non-current assets of the company

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were defining two key assets of the company (Kawasmi, Brown & Shell, 2018). The
leasehold improvements of the company was taken ad the useful life of the asset was
considered to be around 1-15 years of total time frame. The plant and equipment on the other
hand useful life for the asset was considered to be around 1.5years of time frame to 15 years
of time frame. The intangible assets of the company comprises the intangible assets like the
goodwill. The intangible assets of the company that have an indefinite useful life is are
carried and reported down at cost of acquisition less if any accumulated impairment charges
arising from the same. The viability of non-current assets of the company is generated with
the help of annual testing of impairment of assets for the company. The plant and equipment
of the company is charged with the impairment charges if the company observes that the
book value or the carrying value of the assets is greater than the fair market value of the
assets and the same assets amount is not expected to be recoverable then the company
charges the impairment charges on the following is charged to shows the economic viability
of the assets.
Payment Spend/incurred on Purchase of Plant and Machinery Evaluation and the r
Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Cash Flows 52343
19404.7085
2
19404.70
9
19404.7085
2
19404.70
9
19404.7
1 19404.
Return on
Investment
14.00
%
Asset Useful
Life 10 Years
Maturity Amount of
Amount. Invested
194047.
1
{Equals:
52343*(1.14)^1
}
Minimum Average Annual Net Cash Flow

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Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
0
10000
20000
30000
40000
50000
60000
Cash Flows
The average net annual cash flow is calculated with the help of the amount invested in the
assets of the company multiplied by the required rate of return for the company. The required
amount of investment was derived by the company in the form of the assets invested and the
return required in the due course of the time. The approximate cash flows was then estimated
using the maturity amount divided by the useful life of the assets.
Payback Period
The payback period was calculated as the recovery of the initial amount invested into the
assets and the time in which the amount was invested. The key factor to notice in this cases is
that the payback period ignores the time value of money (Lin, Chang & Chung, 2015).
Payback Period Calculations
Particulars
Year
0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Yea
Cash Flows 52343 19404.70852 19404.709 19404.70852
19404.70
9 19404.71 19404.71 1940
Recoverable Amt.
-
52343 1904.7085 21309.417 40714.12555
60118.83
4 79523.54 98928.25 118
Payback Year 0 1 1 1 1.87 1 1
Payback Period 0 1 2 3 4.87

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1 2 3 4 5
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Payback Year
Accounting Rate of Return
Accounting Rate of Return (Average Annual Profit/ Average Investments)
Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Cash Flows 52343 19404.70852 19404.709 19404.70852 19404.709 19404.71 19404.71 19404.71
Depreciation 10 yrs 5234.3 5234.3 5234.3 5234.3 5234.3 5234.3 5234.3
Average Annual Profit 14170.40852 14170.409 14170.40852 14170.409 14170.41 14170.41 14170.41
Accounting Rate of Return 27.07% (14170/52343)
Comparison of Average Payback Period
The average payback period calculated for the company was around 4.87 years the payback
period of 4.87 years shows the initial amount recovery of the total investment done by the
company in the acquisition of the assets. The payback period is a useful method of
calculating and devaluating the recovery of the non-current assets of the firm over the useful
life of the assets (Christodoulou, Clubb & Mcleay, 2016). The useful life of the non-current
assets of the firms was calculate as the average useful life of the non-current assets of the
firms which comprises of the lease hold improvements and plant and equipment’s is as
follows the useful life of the leasehold improvements is around 1-15 years. The Plant and
Equipment which is a major component of the non-current assets of the firms which is having

6MANAGEMENT ACCOUNTING
a useful life of 1-15 years. The different useful life of the assets of the company and the
payback period will actually help the company in investing decisions and let them know the
recoverable amount in the asset when compared to the useful life of the assets. The
depreciation of the non-current asset of the firms were calculated down on a straight line
basis of depreciation for assessing the actual value of the assets (Richard, 2014).
Supply Chain Management Consultant
Evaluating the Return on Investment (ROI) methodology and the influence of the
same
Return on Investment = (Net Profit/Total Investments): The return on investment is a
financial ratio that evaluates the profitability of the company in terms of the profit the
company generates on the total assets or investment of the company (Dekker, 2016). The
company should use the return on investment as a important ratio to assess the financial
performance of the company. The return on investment will help assess the financial position
of the company whether the company is able to generate and utilize the assets and the
investments of the company (Formentini & Taticchi 2016). The stakeholders of the company
asses this financial ratio as an important ratio for assessing the financial wealth creation done
by the company in the due course of the time. The return on investment for the JB Hi-Fi
Company was calculated taking into view of the financial report for the year 2016. The
company’s return on investment for the year 2015 was around 15.25% while the same ratio
for the year 2016 was around 15.33% which shows the growing return on investment for the
stakeholders of the company (Mylan et al. 2015).
Return on Investment
Particulars 2016 2015
Net Profit 152181 136511
Total Assets 992381 895013
Return on Investment 15.33% 15.25%

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Objective of the Study
There are several places where company can influence the financials improvement of
the JB Hi-Fi Company through improvement in the working capital and cash flow of the
company. The company should view logistics supply management as a process and a cycle
which influences the basic operations of the company. The calculation of requirement of the
working capital of the company significantly depends on the logistics process of the
company. The most important portion and a significant portion of the working capital of the
JB Hi-Fi Company is the Inventory of the company (Kozlenkova et al. 2015). The amount of
days it takes to clear the inventory which is present in the warehouses of the company the
greater the amount of expenses a company may have to bear in terms of logistic handling
charges. This in fact turns out to be a greater problem for the JB Hi-Fi Company which gives
rise to the operational expense of the company in the form of rising working capital and
rising cash outflow of the company. Thus there are different reasons why the company needs
to account for improvement in the logistics cycle and managing the supply chain for the
company. The management of the supply chain can be done by properly and carefully
evaluating the amount of goods it should produce and analyse the average inventory turnover
ratio for the company which will suggest the company with the times the company takes in
actually clearing the stocks or the inventory of the company. The working capital shows the
amount available for the company in meeting the daily expenses of the company and the
same should be carefully analysed by the company in order to maintain the operational
efficiency of the company. The important factor which can be implemented by the company
for improvement in these filed are:
 Evaluating the Warehouse Capacity and location
 Does the company pay late fine on delivery
 The collection cycle and the payment cycle of transactions for the company

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 The velocity of the inventory
 Treatment of stagnant inventory ad taking action on the same.
These are the key steps for the JB Hi-Fi Company to evaluate and the steps which could
provide an improvement in the financials of the company.
Critical Examination of the Costing Model
The designing of an optimal and an efficient supply chain by utilizing or
implementing the supply chain costing model could be useful for the company. The
utilization and implementation of the model could improve supply chains and logistics
management at JB Hi-Fi Company. The key features and the challenge of such an model
would be that the model ability and the utilization should be such that is able to adapt and
capture the movement of the supply chain and the network or the process which supports it
and the infrastructure, changing customers and other developments in the field of economic
and technological field. The supply chain model developed could help the management of the
company in implementation of important managerial decisions via executing or deploying a
communication model which would bring out financially efficiency in the optimization of the
company’s services and products and the supply chain of the company. Whereas it is crucial
to note that the traditional costing model does not incorporate the several factors which are
included in the modern supply chain costing model. The traditional models just used to treat
costs under variable and fixed heads and the recommendations and the distributions and the
ways for reducing the fixed and variable expenses of the company were stated that gave a
minimum exposure in proving and interacting with the business environment for the
company. The benefits of using and implementation of the supply chain costing model
would be that it would depict a clear and a much transparent costing structure of the company
and the sensitivities of the different components involved in the same. Maximizing of the net

9MANAGEMENT ACCOUNTING
profits for the company by reducing the operational expenses of the company are some of the
key factors and benefits of the supply chain costing model.
Methodology and Structure of the Annual Budgeting Process
The JB Hi-Fi Company needs to use an annual budgeting process the annual budget
for the company will help the company determine and evaluate the financial goals of the
company relating to operating and investing activities of the company. In creation of values
or value creation for both the suppliers and the customers of the company it will be the role of
logistics and the management of the same. Time and place will be expressed as the functions
and key factors of the budgeting (Grossi, Reichard & Ruggiero, 2016).
The annual budgeting process or the continuous budgeting process will help the JB
Hi-Fi Company evaluate the costing nature of the company. The use of continuous budgeting
will help the company in easy forecasting of sales, financial and operational expenses
quarterly or month instead of the annual process. The key benefits for the company in the
implementation of the same will be the proper financial planning and evaluation of the
company’s operational and financial goals of the company.
Conclusion
A high quality budgeting system would provide a direction to the company for meeting the
operational work of the company. The short term forecasts and targets could be easily and
planned with the help of the continuous budgeting for the products and services given by he
JB Hi- Fi Company. The key pitfalls for implementation of such a model will be the excess
time and resources spent in the planning and implementation of the same.

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