MANAGEMENT ACCOUNTING TABLE OF CONTENTS

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Systems of management accounting and their evaluation..........................................................1
Management accounting reports and its uses..............................................................................4
TASK 2............................................................................................................................................5
P3. Calculation of absorption and marginal costing...................................................................5
Marginal costing and absorption costing....................................................................................5
TASK 3............................................................................................................................................6
P4 Advantages and disadvantages of tools used in budgetary control........................................6
TASK 4..........................................................................................................................................10
P5. Comparing how organisation are adopting management accounting systems to respond to
...................................................................................................................................................10
Financial problems....................................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
APPENDIX....................................................................................................................................15
Income statement using marginal and absorption costing........................................................15

INTRODUCTION
Management accounting is the area of accounts that help in analysing and implementing
financial reports in the regular course of business. It helps in managing accounting information
of everyday activities and enable the company to take its accounting decisions carefully. To have
the better understanding of the topic, the report is based on UK based retailer store, Nisa deals in
food and drinks and is a retail chain of super market. . Further the report lays emphasis on
meaning of management accounting, methods of management accounting in context to the
company and their evaluation. After evaluating pros and cons of methods it describes various
management accounting reports used in company and later depicts the use of these reports and
further includes use of different planning tools in addition to effective solutions that management
accounting provides for financial problem of the company which leads to efficiency of work in
the company.
TASK 1
Systems of management accounting and their evaluation
Management accounting is the process of presenting information whether financial or non
financial to the mangers to plan and formulate policies that helps in decision making of
formulating budgets and forecasting future trends. It identifies problems and acts as atool to
solve them for efficient operations of business.
To record daily operations and activities including cash inflow and outflow, formulation
of new policies, budget planning of the company, managing inventory etc. the need of
management accounting arises as it helps the company by applying techniques which can help
management to take all this relevant decisions in order to maximise the profit and sales of the
company and minimises the losses of the company (Malina, 2018). The UK based food retailer
company Nisa with more than 3500 stores has an effective management accounting which
increases the turnover of the company and enhances the expansion of the company. The systems
of management accounting used in companies are -
Cost accounting – It focuses on reducing project cost, decreasing process cost
effectively to gain economies of scale and to reduce cost of production. It is concerned with
internal cost expenses of the company. The internal cost factors of any company can be its labour
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or employees, the material is manufactures and at last other expenses which can be direct or
indirect like salary paid to employees or transportation cost etc. In Nisa cost accounting is
required to manage relevant information on its employees and their compensation. Nisa supplies
its food items to supermarkets and to manage the transportation cost along with production and
process cost accounting system is needed in the company.
Advantage Disadvantage
It finds out the loss in the company and the
reason behind the losses incurring in the
business.
It requires extra employees and amount of
money for maintenance and installation of the
cost accounting system.
Job costing – It refers to a system where individual unit of output are assigned with cost
of manufacturing that unit. It is mostly used when items that are produced are different from
each other and the company wants to know the cost of manufacturing each product. It help
managers to record expenses and to keep their track. (Maas, 2016).
Advantage Disadvantage
It allows the company to know accurate cost
expenses on different jobs which helps the
company to compare the cost of various jobs.
It relies on estimated data not accurate data.
The overhead costs are relied on expert's
knowledge and non accurate data.
Inventory management- It is the most important aspect of any business which deals
with managing inventory of the firm. It includes goods, parts, raw materials etc. of the company
which need to be sorted, arranged and maintained whether are final products or are in progress
(Chenhall, 2015). Inventory management is efficient when inventory is available at low costs.
There most used inventory system are LIFO and FIFO in which LIFO stands for last in first out
where the inventory which is receive in last will be used first whereas FIFO stands for first in
first out which means the materials that come in first will be used or sold at first. In Nisa, for
improving and managing their inventory they have introduced a new solution called Ensono
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