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Management Accounting of Harrods

   

Added on  2020-07-23

17 Pages4468 Words34 Views
MANAGEMENTACCOUNTING

Table of ContentsINTRODUCTION...........................................................................................................................1SECTION I......................................................................................................................................1LO 1.................................................................................................................................................11.1 Importance of management accounting in the decision making process.........................11.2 Different types of management accounting systems........................................................2LO 2.................................................................................................................................................32.1 Evaluation of benefits generated by different accounting systems adopted by Harrods..32.2 Use of absorption and variable costing techniques in management accounting..............5SECTION II.....................................................................................................................................7PART A...........................................................................................................................................7PART B............................................................................................................................................9CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................13

INTRODUCTION Management accounting system undertaken in an organisation assists the managerialteam to in its managing activities to be undertaken in that venture. It provides accurateinformation about the statistical as well as financial matters to the mangers in order to mangeday to day activities of a firm, ensuring short term decision making processes. These accountsare prepared on weekly or monthly basis, unlike financial accounts that are prepared annually. Itprovides a clear picture of an organisation to the concerned authorised personnel, such asdepartmental mangers and top executives of the firm. These accounts shows amount of cashavailable with a firm, the revenue generated from sales, pur5chase order with the venture, arecord of debtors as well as creditors, bad debts that are to be received in future and availabilityof inventory as well as raw material stock. The present venture undertaken in this report isHarrods, which is a London based luxury departmental store. SECTION ILO 11.1 Importance of management accounting in the decision making processManagement accounting assists the managers in undertaking minor as well as majordecision making processes in the context of operational activities of a venture, as it providesreport regarding the day to day activities that are being performed in that organisation. Theseinformation can be used by mentioned venture to make decisions regarding any uncertainsituations that may occur in a company on daily basis (Schaltegger and Burritt, 2017). Thevarious ways, in which the cited organisation can be benefited by adopting managementaccounting standards in decision making process is explained in detail as below:Cost analysis: The information generated from management accounts is used by theappointed managers at present firm to analyse the production cost that has been incurredin the manufacturing process of its products. The price of the product to be offered to thecustomers is decided or fixed in accordance with this production cost. This process ofdeciding costs for a product is termed as relevant cost analysis. Deciding target markets: After determining the costs, the venture need to decide theaudience to whom the products are needed to be sold. This target market can begenerated is a result of effective management accounting system maintained by Harrods.1

Accordingly, advertisement campaigns can be undertaken to achieve the target marketand generate more number of customers as a result (Cooper and Qu, 2017). Purchase analysing: As management accounting keeps a record of inventory stockavailable with the mentioned venture, thus, it enables the managers to make availabilityof raw materials as and when required. This is termed as analysing the purchase decisionsto be made by the management team. This analysis assist the venture in avoiding anykind of hindrances in the process of its production related activities. Growth and developmental decisions: Information included in management accountsassist the managers to have a clear concept about both the current operational activities ofcited firm and the future potentialities that lies with the company. Generating theseopportunities requires the mangers to undertake effective changes in the workings ofmentioned firm and impose decisions thereon to achieve its object of long term growth aswell as development (Ax and Greve, 2017). These are the major areas of operations where, management accounting assist themangers to undertake relevant decision making process in the present organisation, i.e. Harrods. 1.2 Different types of management accounting systemsThere are majorly four types of management accounting system that can be adopted bythe mentioned venture, i.e. Harrods, viz. Cost-accounting systems, inventory managementsystems, job-costing systems and price-optimising systems. A brief explanation of thesetechniques or systems is presented as under:Cost accounting system: As per this system of accounting, the cost of manufacturing aparticular product for mentioned venture is being calculated in order to undertakeprofitability analysis. It is of utmost importance for an organisation to determine the rateof profit that it generates by providing its products or services in the market. Inventory management systems: Inventory management of a venture refers to managingthe stock of the company. Analysis of inventories available with the cited firm, ensuresthat organisation to accordingly generate new orders and serve more customers and thus,bringing more and more profits. Keeping in record the availability of raw materials toconduct the production process in a smooth as well as effective manner helps the2

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