Management Accounting and Reporting: Methods, Tools, and Benefits

This document discusses the concept of management accounting and its essential requirements, including different types of management accounting systems. It also explores the methods used for management accounting reporting and how to calculate costs using suitable methods of cost examination. Additionally, it discusses the advantages and disadvantages of different planning tools used for budgetary control.

Management
accounting

Table of Contents
INTRODUCTION .....................................................................................................................3
TASK1.......................................................................................................................................3
P1 Management accounting and its essential requirements of different types of
management accounting systems...........................................................................................3
P2 Methods used for management accounting reporting.......................................................5
Task2..........................................................................................................................................6
P3 Calculating costs using suitable methods of cost examination to make an income
statement using marginal and absorption costs......................................................................6
Task3..........................................................................................................................................9
P4 Discuss advantages and disadvantages of different types of planning tools used for
budgetary control....................................................................................................................9
TASK4.....................................................................................................................................11
P5 Differentiate how enterprises are adapting management accounting system to respond
to financial problem..............................................................................................................11
CONCLUSION .......................................................................................................................12
REFERENCES ........................................................................................................................13
Books and journals ..............................................................................................................13

INTRODUCTION
Management accounting is that function of management which is related to
information of financials resources well as accounting function which help firm in identifying
accounting details of firm. It includes number of function which is related to communication
and management of different aspects of firm.it is slightly different from financial accounting
because it has major focus on controlling the coast of operations (Otley, 2016). This report is
considered on ASDA, where key aspects of firm will be evaluated in terms of management
accounting. ASDA is a British retail super giant which is operating in UK. This firm is
known for its operations and cost effective techniques in business operation. In this report,
there is explanation about management accounting, where different types of accounting
system will be discussed. The method which is used for management accounting reports will
also be identified. There are number of accounting system for calculating coast and analysis
for income statement will be identified. In the middle of this report, there is also discussion of
advantages and disadvantages of different budgeting tools. In the end of this report there will
be a comparison between accounting system to respond the financial system of organtional.
TASK1
P1 Management accounting and its essential requirements of different types of management
accounting systems
Management accounting is a process which is related to giving information to
accountants about the financial account of firm. This is to be done for identification of actual
performance of company e in a direction of its goals. This is also done for decision making
process buy analysis of cost account it which can be helpful in decreasing the product cost as
well as operation cost (Maas, Schaltegger and Crutzen, 2016).
According to institute of management account( IMA) “management accounting is that
profession which includes partnering in management decision making and device planning
for increasing the performance of management system and providing perfect financial report
and control system to manager for assisting the formulation and implementation of
organizational strategy on firm”
Management accounting is that function which has number of benefits and some are
also helpful for ASDA which are mentioned below:
Maximize profitability: Management accounting also helps in maximization of profits
in firm with the help of effective budgetary control and capital budgeting tools which
minimize cost of firm operation and brings effectiveness in work of firm. This all will help
firm in getting advantages and make firm less ordinary in performance of its functions. This
also builds chances for super profit of abnormal profit to organization (Hopper and Bui,
2016).
Increase efficiency: This help firms in getting advantage of increased efficiency this
is because this function help organtional in maintaining organtional activity and increase
performance of employees within firm. As they can control and known the cost which firm is
incurring and maintain function in cost effective manner which leads in increased efficiency
of firm.
Management style: Management style is a particular we which a manager do
accomplish the goals and objectives of the organization number of decisions plants and

organized work which will help a manager to exercise its security within the organization.
Number of factors which changed the management styles which are internal and external
internal factors are policies, priorities and corporate culture within the organization where
external factors are customers, suppliers, competitors, economy and the law where the
organization working (Way, Jimmieson and Bordia, 2016).
Organizational structure: organizational structure is that system which outline how
the all activities within the organization will be directed in order to achieve the goals and
objective of organization it includes number of activity which prescribed the rules and
responsibilities of every individual within the organization the organizational structure also
determine how the information flow within the organization and each level of company. In
case of Asda, company follows centralized structure where all information is in the head of
Central security for higher level of management ( Neubert, Hunter and Tolentino, 2016).
System use in management accounting
Price Optimisation System: It is calculation instrument which is used in management
accounting for identification of proper response to customer by managing different prices of
product. This system help firm in determining the prices of the product according to the cost
implemented on them. the main objective of the system is to maximize the profit structured
product where organisation easily get it cost in product and profit for running its operation
and future growth (Otley, 2016)
Inventory Management System: This is system which includes adequate and perfect
combination of software and hardware with predetermined combination of process and
procedures which are useful to company in monitoring and identifying goods. This also helps
form in categorising all the assets of company in different categories like raw material and
finished goods. This help company in identifying inventory management system using
information for proper arrangement of inventory in organisation where there is identification
of product related information (Armitage, Webb and Glynn, 2016).
Cost Accounting System: cost accounting system is that part of management
accounting which is related to formation of number of cost structure for identification of cost
in share by the firm on manufacturing and other important functions which are related to
product. There are number of charts like revenue chat, sales charts and marginal cost chart
which are formed under this function. This is an important part of management accounting as
it helps finding associate cost of product which form implemented on product for getting the
profit (Malina, 2017).
Job Costing System: This is related to identifying the information about the expenses
and revenues related to some specific functions of organisation and services which are related
to production of a product. The provided information can be helpful for company in
maintaining structure of the job it includes all the expenses related to performance of the
specific task in a given job. These expenses will be evaluated for identifying the cost in care
in performance of job and other decisions related to pricing of product compensation for
labour and many more. This is important part of every company have great impact on profit
identification and calculation of growth for company (Hopper and Bui, 2016).

P2 Methods used for management accounting reporting
Management accounting reporting
Management accounting reporting system is weather reporting system which provide
information about number of functions which are related to organisation working. These are
reports which are related to number of stakeholders in organisation for sharing their benefits
towards organisation. These reports are generally in form of cash flow financial accounts and
other management reports including cost accounting reporting and performance reporting
which are essential to show the performance of organisation to different stakeholders (Nitzl,
2016).
Inventory management report: These kinds of reports are related to goods and
services of from which ship sales two different customers in market these report include the
detailed information about inflow and outflow of inventory as well as their internal
management in organisation. Report includes detail information of inventory from raw
material to finished good. These are important part of ASDA as this help in managing
inventory in organisation for increasing profitability. There is a specific process for
inventory management report which start with creating a column for inventory items then
creative kolam for description after that assign the prices to each item where differentiation
can be made according to price then it is the turn of creating a column for remaining stock
which will help in identification of stock left with then enlarge step there is selection of a
time frame. (Maas, Schaltegger and Crutzen, 2016).
Account receivable ageing report Account receivables aging report is also an
important part of organisation like ASDA this is because this report is related to effective
management of current assets of organisation which are debtors. This report includes
collection of invoices identifying their dates and recognising old used from the invoices. This
system also include the information about directors of company and help form in notifying
this that ask about their payment by which company can utilise its current assets accordingly
and can increase its debtors turnover ratio for increasing profitability and effective cash flow
in organisation (Weetman, 2019)
Performance report: Performance report is that part of management accounting
reporting system which is formulated for analysing and identifying the actual performance of
staff while working on their respective jobs. This is the major report which is important for
stakeholders of organisation as employee performance is directly related to productivity in
organisation. This report include the complete analysis of performance done by employees in
organisation where company can take decisions related to their termination or appraisal. This
report is also act as a baseline for motivation techniques used by an organisation as
performance of employee guide the organisation that which level of motivation is required
for increasing performance of employee (Herremans and Nazari, 2016).
Cost accounting report: Cost accounting report is also act as an important part of
reporting management accounting system as it includes identification of cost which are
related to number of functions in organisation which year by the company for generating
revenue and increasing the growth of organisation. Decision financial document which
contain of cashless system and other cost accounting measurement accounts which are related

to identification of cost, this is important for ASDA Company is operating in a highly
competitive market where differentiation is a main motive of company and for this company
have to use effective costing reports (Suryanto, 2016)
Therefore, it can be seen that Tesco is various reports in management accounting
system which help in utilising resources effectively eliminating function of organisation. It
also helps in maintaining motivation in them.
Task2
P3 Calculating costs using suitable methods of cost examination to make an income
statement using marginal and absorption costs
Income statement: there are three major important statements of a company which
are related to its performance and show the financial performance of the company in a given
financial year. These statements are known as income statement, this statement is supported
by two other financial statements which are balance sheet and cash flow. These all account
show the profit and loss of the company bye determining the relationship between expenses
and revenues of firm. This relationship helps company in identification of profit and a given
financial year. This help form in identification of profit and listening itself on security
exchange board where it can show it performance to investor and attract investment in
organization
Absorption cost: Absorption causes that method which includes marginal costing
populations for identification of fixed and variable costs related to production of goods and
services in an organization. This method is also known for identification of actual cost of
product which has form in identifying prices of their products and services for selling them in
market.

PESTLE

Task3
P4 Discuss advantages and disadvantages of different types of planning tools used for
budgetary control
For a business it is important to design a good budget so that it can improve its
financial position and attract more and more customer towards organisation. Budgetary
control process identifying information about the business processes which help in preparing
analysing tools for performance with a specific time limit (Cools, M., Stouthuysen, K. and
Van den Abbeele, A., 2017) . Number of shoes which can be used by the firm like as the for
guiding in achieving the objectives way to take effective decisions in organisation can use
number of function like capital budgeting cash budgeting and many more which can help it in
identifying effective material for cost control. In relation with ASDA, it uses budgetary
control & planning gears efficiently so that battles and errors do not rise in upcoming. So,
types of planning tools which are used by chosen firm are mentioned below-
Capital Budget
Capital budgeting is that process of business which is used evaluating production
investment organisation this is related to big investment of company construction of new
plant for projects that would require capital budgeting before they are approved or reject.
This includes assessment of prospective projects right time test inflow and outflow which
will helpful in determining whether the required distance would be generated from the project
for implementing huge investment (Sponem, S. and Lambert, C., 2016).
 Advantages: This Helpful to ASDA in identify this and impact of the project which is
going to be started by company. It is also advantage that help in decision making
process about the investment opportunity of company write various techniques and
tools.
 Disadvantages: This tool takes long time in decision and it is a majority of
invisibility in nature where number of factors is invisible under this. It is also complex
task to apply this tool on activities where there is hindrance of some cost and
changing factors of environment in that. This technique also assumes number of
factors which are not reality based and if it is compared to reality there is complete
difference in factors and it also required skilled professionals which are impossible for
company like ASDA to find by minimising the cost of product.
Cash Budget
Cash budget is that tool which helpful in anticipating the cash analysis of organisation
and identifying the influence outflow of the cash within the organisation in different
activities. This help form in identifying the requirement of cash and management of investors
for operating activities of organisation. In context of ASDA, the firm prepare its cash budget
and analyse different requirement of cash in each and every activity where it present the cash
flow within organisation for maintaining future operation as well as current operations
smoothly (Kerzner, H., 2017).
 Advantages: Company to avoid can manage cash flow organisation where there is no
pending due because of errors or omissions. It is also helpful taking touch with reality

as form can know the current position of cash flow where it can analyse profit and
loss ratio which is going to be happen in future by identifying the flow of cash. Form
can also identified financial position as cash flow with the signs that where the farmer
standing and what is the help of form according to market and predetermined
standard.
 Disadvantages: Cash budget also promote negative things like have has managers
and other technical staff prepare a cash budget can do easily steel of assets and other
things which are related to firm. This tool also rise in hindrance where form started
losing its confidence on spending money it is good in bad times but if habit of
manager then it can also act negatively on performance of employees as well as
managing resources in organisation.
Opening budget
Opening budget is that tool of organisation which is used by farm while it wants to
predict the expenditure as well as identify the revenue for future knowledge.
 Advantages: This will increase the probability that company can achieve its goals
and objective on time this is because of formulation of a good plan and strategy in this
this also help company e in identifying its strength and weaknesses which can be used
by company for achievement of goals and objectives on time. ASDA can use this
function for identification of problems and avoiding the impossible release by using
effective remedies and actions for organisation (Otley, D., 2016).
 Disadvantages: this tool also have some disadvantages which are r di motivate the
staff as if targets are set to difficult to achieve then they will made employees
performance down and can lead to de motivation in employees because of non
achievement of there is an also issue in planning as it seems unnecessary and
additional works which receive lower priority in organisation and will lead to lack of
cooperation between department and functions which also gives rise to conflicts.
After the analysis of above mentioned information it can be said that budgetary
control management accounting which is which have to be used by organisation for
increasing the performance and identifying the opportunities in business environment and
getting benefits from this opportunities.
TASK4
P5 Differentiate how enterprises are adapting management accounting system to respond to
financial problem
In an organisation, there are number of financial problems but these can easily tackle with the
help of capital and asset of the firm at every face. These problems arise because of economic
crisis changing of friends and less cash budget of it is important for a firm to determine and
analyse a proper budget and external environment for solving these problem in running the
business more effectively. To avoid financial problem companies need to manage its
resources as well as money it can fulfil the future requirement. Hear Tesco and ASDA are
evaluated where they will be compared for their management of resources and increased
demand of companies for effective performance towards goals and objective (Flower, J.,
2016).

Ratio Analysis: Ratio analysis also play important role in solving financial problems
of entities Tesco use this method for getting accurate performance of employee and
management of assets and liability in the organisation where ASDA use this function for
showing the relationship between forms different factors and detect the financial issue in this
sector and take decision according to problem. Ratio analysis with help the organisation in
reducing the financial problem as it will identify the ratio of assets and liabilities within the
organisation which directly farming knowing the financial position and reacting according to
the ratio on it.
Sales: It is impossible for an organisation to sell its product continuously in a
particular market so in context of ASDA, international for the company to prepare financial
accounts and budgeting systems which can useful in analysis of sales status of the product. If
It is talk about Tesco then it used to identify the sales report of salesman from different
department and use this information to formulate plans and techniques which help firm in
decision making process. Sales services will also help organisation in identifying future of
financial position within the organisation this is because if there is down fall in sale then it
will reduce the financial stability of firm and vice versa.
Benchmarking: Benchmarking is the best method for identifying the financial risk in
the organisation where this methodology is used and adopted by different organisation for
performing at good scale as well as setting standard for their products and services. Both
ASDA and Tesco use this for improving their situation in unexpected financial problems and
get maximum benefit of this by comparing their performance from my present and past
situations (Oyman, O., Intel Corp, 2018).
Non-measurable expenses: Because of no control over the expenses of the
organisation there are rising of number of financial problems and this leads to increase the
sales expenditure of organisation at higher level. Tesco vision five profit oriented company
which have a power to increase expenditure as well as manage the firms account system to
improve their efficiency dramatically. If it is talk about ASDA, then it uses planning tools for
identifying the expenses and controlling the expenditure of organisation (Hopper, T. and Bui,
B., 2016).
After the detailed analysis of above information it can be seen that there are different
methods of management accounting. Therefore, it is must for organisation to do analysis of
suitable methods and use them for increasing the performance of organised solving the
financial issues related to them.
In context of ASDA, it can be seen that oraganization is performing at global level so
their is various options with organtion to examin currebt sutuation in market and use proper
method to sole this problem. Here it can use ratio analysis for identifiction of various fiancial
factor and maging the performace or organtion agains various odds in busines enaviroamnt.
Tesco is using cost accounting syste, in fuanctioning because it help firmin
management of cost as well as identify various factors which futher help in cost reduction.
ASDA is using inventory management system which is helpful to organisation in
management of inventory and is coampletley different from Tesco.

CONCLUSION
It can be concluded from above mentioned report that management accounting is an
important part of organisation as it help in identifying various tools and techniques which can
be used for reducing the cost of the production as well as product and determine a good price
of the product of organisation there are a number of tools which can be used for management
accounting like cost report performance report price optimisation system inventory
management system job costing system which will help form in identification of different
factors which are related to cost of the product. This will also help organisation in managing
the interest of stakeholders and attracting more and more investment to earth organisation
with profitability and productivity in operations.

REFERENCES
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Kerzner, H., 2017. Project management: a systems approach to planning, scheduling, and
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