Analysis of Financial Problems in Unicorn Grocery

The assignment report delves into the importance of accounting management for businesses, specifically focusing on Unicorn Grocery. It discusses different costing methods, such as KPIs and variance analysis, and introduces planning tools like budgetary control management. A comparison with Sollatek is also presented to highlight effective strategies for overcoming financial issues and ensuring a sustainable future.

Management
Accounting

Table of Contents
FROM: MANAGEMENT ACCOUNTING OFFICER..................................................................1
TO,...................................................................................................................................................1
GENERAL MANAGER..................................................................................................................1
UNICORN GROCERY...................................................................................................................1
SUB: MANAGEMENT ACCOUNTING SYSTEM .....................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting and essential requirements of its different types..........................1
P2. Methods of various management accounting reporting........................................................4
M1: Advantages of management accounting .............................................................................5
D1: Critical evaluate management reporting system..................................................................6
TASK 2............................................................................................................................................6
P3: Calculations of net profits by using methods of costing methods........................................6
M2: Methods of accounting........................................................................................................8
D2: Analysis of income statements.............................................................................................8
TASK 3............................................................................................................................................8
P4: Merit and demerits of using planning tools..........................................................................8
M3: Analysis of planning tools.................................................................................................10
D3: Tools used to overcome financial issues............................................................................11
TASK 4..........................................................................................................................................11
P5: Comparison with other company's in order to solve financial issues.................................11
M4: Analysis of financial problems..........................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
UNICORN GROCERY
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
A field of accounting that provides financial and non-financial information for managers
and other users, who are playing important role in internal development of an organisation.
Information regarding financial transaction is very useful for the future planning. It assists the
management in development of various policies and use of techniques in its daily business
operations (Ahmad and Kamilah, 2013). Accounting information is considered as the prime
objective for management that will be useful for making future decisions in order to attain long
term objectives. The managers of an organisation used to record various transactions which are
collected from respective sources.
The purpose of accounting data is to increase efficiency and profitability of company.
The present report consists of various tasks that provide necessary information about different
accounting systems and their essential requirements in an organisation. Various costing methods
are also highlighted here to determine the profitability of company. Different planning tools in
budgetary control process are discussed in this report as well. The manner in which various
issues are resolved by carrying out comparison among two companies will also be discussed in
below presented report.
TASK 1
P1. Management accounting and essential requirements of its different types
Accounting is collecting, summarising, recording and analysing various financial data in
order to get positive results in the future. While management of accounting is the planning,
organising and providing right directions to attain short and long term objectives. It provides
systematic guidelines to managers to implement accurate techniques and system so that better
results can be attained in the future. It is also useful for the preparation of report variance
1

analysis by the ways to compare differences in between actual performance and standard. It is
related with primary part of accounting system that helps them to make effective decision so that
profitability can be higher (Becker and et. al, 2011). This project report consists of various
accounting techniques that are related with effective planning, organising and controlling of
financial transactions. It is considered as one of the important tools that is projected to solve day
to day problems in an organisation. These are the issues faced by top management while making
effective decision in terms of making maximum profit for company.
In the current scenario, accounting is an effective source of utilising resources so that
profitability can be enhanced. It can be affected by various factors such as internal and external
factors. Basically, it is related with financial data that is used by the managers during planning
and managing various activities used during the year. Unicorn Grocery requires essential
accounting services that can help them to make their business more effective. The target of
managers of Unicorn Grocery is to modify the future performance of organisation. A manager
would need to collect necessary information about the sales trends, inventory position and
evaluation of salesperson (Management Accounting, 2016). All these are managed by using
perfect accounting systems. Management accounting is associated with implementing accounting
data for the purpose of taking crucial decisions regarding development of an organisation. It will
be helpful in attaining individual as well as organisational goals and objectives. The significance
of using management accounting is stated as follows:
 It is responsible for providing accounting information by which top management can take
critical decision in the favour of company.
 Another analysis is related with cause and effect analysis that is used to determine the
loss occurred in organisation. In case of profit, all the related factors such as expenditure,
current assets and share capital are determined.
 Use to taking valuable decision regarding performance of Unicorn grocery during past
and current year time.
There are various accounting systems which are needed to be followed by the managers
in formulation of plan and strategies (Bodie, 2013). Some of them are:
Cost accounting system: It is considered as an effective design used by company in
order to identify the total costs incurred over production of products and services. These are done
with respect to profit analysis, cost control and inventory management. In relation to attain
2

operational profit, proper evaluation of costs can be determined clearly. During production of
products, managers are using some other costs such as normal, standard and actual.
Inventory management system: It is considered as one of the crucial aspects of an
organisation which is needed to be primary concern for managers. It is used to determine the
stock level, order summary and sales delivery along with other details related with management
of stock. It is totally related with the production units in which huge amount of orders are
produced and delivered in a day (Burritt, Schaltegger and Zvezdov, 2011). This system helps
them to control and record each entry of stock produced by company.
Price optimisation: It is known as a crucial technique used in numerical planning that
provides information about prices which vary at different levels of production. The term
optimization is mostly associated with pricing which describe tools that set prices for a product.
It will help to identify best possible price, estimate the profit results and to determine maximum
business objectives. It is numerical calculation that is used to analyse how customers will react to
various prices for its goods and services.
Job costing system: It is that accounting system used by managers of Unicorn Grocery
to determine the product’s lot size and cost of labour required to produce that particular lot. It
consists of overhead costs from the pool of various costs incurred with the production of each job
orders. It is used at that point where products produced by companies are entirely different from
each other.
3

P2. Methods of various management accounting reporting
In most of organisations such as Unicorn Grocery which is using accounting reporting as
an important tool to manage their financial record and statements. It will be an essential aspect
for the utilisation of company resources in order to attain growth and efficiency. It will help
managers of Unicorn Grocery to make informal decision which is vital for the management of
business operations (Caglio and Ditillo, 2012). These reports are rendering essential information
to the managers of different departments and guide them to take valuable decision. It will be
helpful for the management to determine performance by using accurate report that is based on
financial position of company. Information which is collected for the preparation of reporting is
taken from financial as well as non-financial sources. Information collected from various sources
are firstly analysed and recorded before transferring it into financial books of accounts.
It is necessary to do so as most of the decisions are based on all those journal entries
made by accounts managers. It is responsible to have complete information of various
departments which are working with the common objectives. They are associated with those
factors which are affecting productivity of the department which consists of internal as well as
external factors (Callahan, Stetz and Brooks, 2011). Before making any reports, the social and
cultural aspects of every employee and department are needed to be considered at prime factors.
Data related with Unicorn Grocery are recorded by using effective accounting system so that less
chances of mistakes can be occurred.
Report is a statement of financial data prepared by collecting various information about
company's investments, its profits and losses as well as costs which are incurred during the year.
It is considered as crucial documents that are submitted to the top management to take crucial
decision regarding future investments. A reporting statements is known as detailed information
of company's one year performance which are done with the motive to earn maximum profit. It is
prepared by collecting various information from different sources. It is related with company's
performance, growth aspects and total investment.
In order to present a valuable results manager need to prepare various financial reports
such as income statements and balance sheet. By using information from these statements
company can make necessary investment plan for further decision making. The overall
performance and stability is determine according to these statements. It consists of various
information like total cost incur by company over production of products and services. There are
4

various reporting system that can be useful for the company to identify financial position of
Unicorn grocery (DRURY, 2013). In management of there business operation some reporting
system are:
Operational budget report: It is known as internal report which is used by managers to
determine estimation, forecasted projection within actual performances generate during the year.
It consists of various information related with production process which included detail of cost
and expenses that are incur by company. The actual cost can be identified by using this particular
report. It include information regarding sales budgets, variable budgets and other budget use in
operation.
Job cost reporting: It consists of accumulation of the costs such as material, labour and
other overhead for a particular job. It is known as perfect tool for tracking actual costs to an
individual jobs and evaluate them to check if the costs can be minimise in later jobs. It also
present information of each job activities to analyse timing and costs.
Inventory management report: The oversight of non – capitalised product and stock
items. It is key element of supply chain management that flow of products from manufacturer to
warehouses and then to point of sale (Gates and et. al, 2012). It is used to track information about
inventories order, delivering and billing of opening and closing stocks. It also covers wide areas
of information related with collecting necessary information about how stocks can be
maintained. Their are various tools such as EOQ and ABC costing which can provided accurate
information of inventory.
Performance report: Under this report, performance related aspects are covered. It
consists of various information related with past and present year data. It is used to determine
and compare financial performance of company. Information related with financial aspects,
goodwill and cost incur by company during the year are recorded in it.
M1: Advantages of management accounting
For perfect outcome, unicorn grocery is using various accounting system in their business
premises. It will help them to manage and control their extra costs and expenses which are used
in production process. Management accounting is applicable for both medium, small or large
organisation. They use it to increase profitability of their business. The biggest advantages of
using MA is related with decision which are taken for the long term basis. It will also help to
5

increase efficiency and profitability of the company. Some of the other aspects are associated
with the growth aspects that make the company to plan their future.
D1: Critical evaluate management reporting system
In a business organisation, recording of financial transaction by using appropriate system
is done so that corrective actions can be taken. The major decision related with financial position
are taken on that basis. The report are prepared by using various information collected from
different department. It consists of profit and loss detail and balance sheet information. The
investors of the company overlook all these report before making any investment decision. Some
reporting systems are job cost report that is use to determine which activities are taking
maximum cost during the time. Performance report is another important system which is used to
measure the actual and past performance of an organisation.
TASK 2
P3: Calculations of net profits by using methods of costing methods
Costing: In manufacturing, retail and accounting, a cost is the amount of money that has
been used up to develop something or rendering a service. It is normally considered as monetary
value which consists of efforts, material and resources or delivery of a product and service to
respective customers. Costing is known as system for allocating costs to a components of a
specific business (Herzig and et. al., 2012). It consists of variable costs that are varies with the
changes in activities. Such type of costing is considered as direct costing. Like, cost of material
use in production process. In accounting system various costing method are used for the purpose
of generating maximum profit and increase future sustainability. Some of them are:
Absorption costing: These are those cost which a company incur during manufacturing of a
specific product for the purpose external reporting. Some of direct costs related with production
of a good consists of wages for workers, raw material used during that time and other overhead
costs. It does not considers fixed costs which represent various condition in which all the stock
are not sold.
Marginal costing: It is the amount paid by company for the purpose of producing additional
units. It is related with increase or decrease in the amount of production costs if results are
increase with the extra units of production. For the decision-making this costing is more effective
6

tool used by company. It present contribution per unit which is the primary base for the
company.
Comparison among both costing methods
Absorption costing Marginal costing
The computation of results are done by using
both fixed and variable costs.
Only variable costs are considered during
production while, fixed cost are termed as
period costs.
The results are determine by using total Net
profit incur by the company during the year.
On the basis of contribution, necessary analysis
is done.
For the purpose of decision-making, it is not
considered as that much effective.
In relation to future profitability, decision are
depend totally on this basis.
In this costing overhead costs are concluded
during calculation.
Production related expenditure such as selling
and distribution are taken as important aspect.
Under this costing, it affect cost of production
because of difference in closing and opening
inventories (Hopwood and et. al.,2010).
The impact of difference in opening and
closing stock cannot affect the cost of
production.
Income statements through Absorption costing
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
Less:
Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
Calculation by using marginal costing
7

Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2 - 7800
Closing stock: 100*13 - 1300 -6500
Contribution 11000
Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
Total Profit / Loss 7500
According to the above information, Unicorn grocery is having two of the best option
such as marginal costing and absorption costing. It can help them to present a valid solution that
from which of these costing methods they are getting maximum profit. With the use of first
methods, they incur a profit of 7800 and by the second one they are getting 7500. The minimum
costs and expenses used with marginal costing so it will be more effective for them.
M2: Methods of accounting
In most of the organisation, several accounting system can be used in order to gain
maximum profit and to provided interest to its shareholder. The Unicorn grocery is mostly
depend on company performance that are identify by using correct accounting system. For the
future forecasting of company sales and performance they required as well organise platform
which can help them to plan their activities. The best part of using accounting methods is to
make comparison among actual and standard cost incur by company to balance their operations.
It will help them to control wastage and extra costs.
D2: Analysis of income statements
According to the information, net profit for the company is computed by using both
absorption and marginal costing. It is the most effective ways to determine actual gain incur by
company. For this, actual sales are provided with 500units. If absorption costing is used, they are
getting profit of 7800. while, using marginal costing they are receiving profit of 7500. The
difference of 300 is shown which is arises because of allocation of fixed overheads.
8

TASK 3
P4: Merit and demerits of using planning tools
Budget are known as estimation of cost and expenses which are incur by company during
the year with its limited resources (Kotas, 2014). The main objective of preparing budgets is to
determine the actual costs incur by company.
Budgetary control: It implies reporting, evaluating and measuring important
recommendation on the basis of past budgets. Controlling of costs and other expenses will help
them to stop wastage of resources that are done by company during production process. In order
to achieve future aims and objectives managers need to plan their budgets in more effective
manner. The primary target of managers is to maintain perfect balance among various
department by using corrective techniques.
Budgetary control process:
Requirement of budget: The ideas starts from evaluating various needs of controlling
costs and expenses for the company (Kotas, 2014). It can only be fulfil through using an
effective budget in order to manage their business operations.
Consideration of Actual costs: Crucial decision are taken on the basis of information
collected from various sources. It is related with actual costs incur during that phase of
production. It is associated with current year performance which is analyse by managers through
a providing suggestion of favourable and unfavourable for the company.
Analysis between actual and standard cost: In this stages, manager used to compare
results of two year performance of Unicorn grocery which is associated with actual and standard
cost. This will provide an effective ideas about perfect decision-making.
Review stage: Overall, project is analyse by using necessary techniques so that future
chance of mistakes can be overcome (Richard, 2014). After clearness of every aspects
management approve this budget.
There are various budget prepared by managers to control and manage its resources.
Some of them are:
Operating budget: It is a combination of various expenses, predicted future cost and
forecasted profit over the period of time. It is prepared in advance of financial period, that's why
they need estimated information about expenses and profits.
Advantages:
9

 It identify the future expected costs which a company is going to invest over the
production of products and services.
 It can be prepared at regular basis such as weakly, monthly, quarterly and annual basis.
Disadvantage:
 If the company is having very minimal information it is difficult to analyse performances.
 It is too costly method because they are prepared on constant basis.
Cash budgets: It is related with all those costs which a company incur from various
activities such as operating, investing and financing. It is used to determine total cost investment
by company and how much they are getting as outflows.
Advantages:
 A detail information about total cash invested by company over the production of a
product.
 Estimation of cash inflows and outflows are analysed easily.
Disadvantage:
 It does not considered for profit measurement.
 If the recovery period is completed the cash-flows are ignored at that point of time.
Static budget: It is an estimated data which is used at each level of activities produce
( Merchant and Kenneth A, 2012). This project report is prepared at the beginning of the
accounting session and continue for only for planned level of activities. It is basically used
during planning process (What Are the Advantages and Disadvantages of Using a Static Budget,
2017).
Advantages:
In this budget all the information are based on assumption basis that cannot be modified
or changes.
Disadvantage:
It has very limited sources of application and is not effective techniques for controlling
costs.
M3: Analysis of planning tools
In accordance to get more accurate results company can use various planning tools. The
objective of implementing these tools is for the purpose of increasing productive and profitability
of the company. The long term debts can only be cover by using these tools that help them to
10

attain future goals and objectives. Some of the important tool is operating budgets because it
provided an estimation of total costs and expenses a company is going to invest over the
production of goods. Likewise, cash budgets can also be an effective option to decide total cash
collected by company from their investment in various activities.
D3: Tools used to overcome financial issues
According to the analysis, it has been found that many of the organisation is having
problem related with finance in managing their daily business operations. It can be of two types
of financial and non-financial. Company's has the option to use balance scorecard system to
overcome those issues. Recording of transaction is not done because of outdated technology and
other inventory systems which are not providing perfect results to the managers. Problems
related with the lack of cash-flows or the company has taken excess of debt. All these issues can
be solved through corrective and reliable tools which will help them to attain future objectives.
TASK 4
P5: Comparison with other company's in order to solve financial issues
It is the biggest concern in current time, that financial problems are making huge impact
on the business operations of an organisation ( Elsevier, 2015). As a general manager of a
company, it is the responsibility to determine financial problems so that company could attain its
profitability. The financial problems can be resolve in initial stage of planning so that it does not
affect any other aspects of company. In some situation, problems can be arises because of
misconducts of cash and under-utilization of resources. It will directly impact the earnings and
goodwill of Unicorn grocery. In order to attain positive results in coming future they need to
overcome these problems by using right tools and techniques (Nixon and Burns, 2012). They
have the option of using balance scorecard so that to reduce fraud and cash deficiencies in short
or long term basis. There are various stakeholder who used to analyse present year performance
of the company to invest their funds in relation to gain future interest and gains. Some of the
important techniques are:
KPI: Key performance indicators is one of the crucial techniques used for the purpose of
analysing current and past year performances of an organisation. For this, actual cost and
standard are compared.
11

Benchmarking: Under this, an average of performance is collected from various company
by setting perfect standard.
Financial governance: It is totally based on government regulation which is already been
set for these company. They have to follow in well manner so that misconducts chances can be
reduce.
Comparison among Unicorn grocery and Sollatek
Sollatek Unicorn Grocery
The company used to control and monitor their
daily operation so that their profitability can be
increased (Ward, 2012).
The managers used to analyse actual year
performances by using variance information.
Because the business of this company is very
limited so that decision are taken to increase
efficiency in short time.
They are using historical data to take decision
for further expansion of there units.
They are using KPI for the purpose of solving
financial issues.
Benchmarking is an effective option for the
company.
M4: Analysis of financial problems
For a project, there is always a risk of getting good or bad results. Because of risk
projects cannot be completed in well organise manner. It is consists of financial, legal and
environmental risk. It the responsibility of top management to use corrective action to overcome
these risks. The role of government regarding increasing profitability of the company can be
implemented in well planned manner. It will affect company's growth and stability if they are not
used in positive term.
CONCLUSION
From the above project report, it has been found that management of accounts is crucial
part of any business. It will help them to plan their operations in order to attain its long term
objectives. This project report summarise with various information about accounting system and
reporting in context to Unicorn Grocery. Various costing methods used in relation to determine
profit for the company. Use of planning tool in budgetary control management. At last,
12

comparison with other company is done to known that how financial issues can be overcome by
them to make sustainable future for an organisation.
13

REFERENCES
Books and journals:
Online
What Are the Advantages and Disadvantages of Using a Static Budget. 2017.[Online]. Available
through: <https://www.fool.com/knowledge-center/advantages-disadvantages-of-using-
a-static-budget.aspx>.
14