Management Accounting in Tesco

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO1 and LO2...................................................................................................................................1
LO3 and LO4...................................................................................................................................1
SCENARIO 2: PART A..................................................................................................................1
Evaluation of different planning tools.........................................................................................1
PART B............................................................................................................................................4
Comparing how organisation is responding towards financial problems...................................4
Financial statements analysis .....................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Management accounting is the process of presenting the financial data into useful information
which helps the managers in their decision making procedure. It involves a detailed analysis of
cost related and finance related data of an organization for drawing a meaningful information
that could used by management in formulating rationale decisions regarding policies and
strategies for enhancing their productivity, profitability and stability. The management
accountant prepares a comprehensive reports meant for the internal purpose in which complete
analysis of entire organization is provided related to the costs, expenses and it also highlights the
responsibility centres which are over consuming the company's resources in relation to their
productivity.
The present project report is going to cover the management accounting in Tesco, a
multinational supermarket retailer based in the United Kingdom . It mainly deals in groceries and
general merchandise. The company is headquartered in Welwyn Garden City, UK. It is a public
limited company and is listed on the London Stock Exchange and FTSE 100 component. The
study is going to highlight an explanation of management accounting, its role and its principles.
It will also cover different management accounting system and their roles along with the tools
and techniques of management accounting for presenting calculation from income statement and
balance sheet. Further, it will show the benefits of integrated management accounting system in
Tesco. The other segment of report will cover different planning tools used in management
accounting that could effectively be used for facing the financial problems in the organization.
LO1 and LO2
Covered in PPT.
LO3 and LO4
SCENARIO 2: PART A
Evaluation of different planning tools
Management accounting is is used for the internal purpose of organisation. It includes the
management accounts which are used for making decision in organisation. Planning tools are
those which are used for improving the performance of organisation by making the various
statements and budgets. The planning tools are used to provide understanding to the organisation
about the variation in the budgeted figures and actual to improve the performance accordingly.
1

Cash flow statement
The cash flow statement provides clarity regarding the inflows and outflows of cash in
effectual manner for a particular time period. The cash flow statement is useful as it helps
company to plan its income and expenses to be incurred in a better manner. The cash flow
statement is quite useful for business as it provides with inflows and outflows in effective
manner.
Advantages
 It is helpful as it helps to make cash forecast and cash position is planned by the
company's management in a better manner.
 The internal management is benefited as company will be able to make financial policy to
be adopted in future as it applies all information to funds (Lean, Ang and Smyth, 2015).
 The cash position is effectively revealed with the help of cash flow statement. It helps to
see whether there is increase or decrease in cash. This helps management to plan out
things (Cash Flow Statement: Features, Importance and Advantages, 2017).
Disadvantages
 Major disadvantage of cash flow statement is that only movement of cash flow can be
ascertained. However, it does not provide reason behind change in cash position.
 The cash flow statement only records items which either decreases cash or increase the
same (Lean, Ang and Smyth, 2015). It ignores all other items which are important to be
noted for analysing financial position.
 It is made only at the end of accounting period and as a result, major items which are
changed in between year are not accounted for (Ioannou and Serafeim, 2015).
CVP Analysis
CVP (Cost Volume Profit) analysis is one of the important technique and planning tool as
it provides clarity regarding volume of production required by company to accomplish breakeven
point (Alawattage and Wickramasinghe, 2018). The costs and volume and profit are analysed
which provides whether company may be able to attain break even sales or not. By meeting
breakeven point, company makes no profit no loss. Hence, above breakeven point, profits start to
float in.
Advantages
2