Asda's Use of Management Accounting for Financial Stability & Success

This report provides a detailed analysis of management accounting practices at Asda, a leading supermarket chain. It covers the essential requirements and benefits of different management accounting systems, including job costing, cost accounting, inventory management, and price optimization. Th...Read More

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Explaining management accounting and essential requirement of its system along with
benefits...................................................................................................................................1
Explaining different methods used for management accounting reporting used by Asda.....3
Calculating costs using appropriate techniques of cost analysis............................................4
Explaining Explain the advantages and disadvantages of different types of planning tools used
for budgetary control..............................................................................................................4
Comparing how organization are adopting management accounting system to respond
financial problem....................................................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Management accounting refers to the process of providing information and resources for
the purpose of making strategic decision. Present business environment is continuously
fluctuating which requires firm to pay attention on getting significant implementation of
management accounting for gaining competitive edge. The preset report is based on Asda which
is considered to be second largest supermarket chain. The current report will comprise
management accounting and essential requirements of different types of management accounting
system along with its benefits. It will give emphasis on different methods used for management
accounting reporting. It will give emphasis on calculating cost analysis techniques through
preparing income statement of marginal and absorption. The present study will comprise
advantages and disadvantages of different types of planning tools used for budgetary control.
Present report will involve how organization solve financial problem with help of management
accounting system for sustainable success.
MAIN BODY
Explaining management accounting and essential requirement of its system along with benefits
Management Accounting is one of the significant procedure which is highly concerned with
providing key insights about organizational monetary and non financial aspects for the purpose
of decision. There are number reason for which company applies Management Accounting
(MA) as it leads to distinguishing, examining, deciphering and imparting data for providing
instructions in order to make sound decision (Mahroqi and Matriano, 2021). Asda as being
operator in the international market require firm to get the information for establishing
coordination and assisting in monitoring overall resources for optimum utilization. There are
number of benefits which can be derived by Asda through applying MA into the internal process
in turn higher stability by eliminating performance hindering factor can become possible.
Management Accounting System (MAS) is related with systematic procedure which is
concerned with influencing organizational resources to ensure accomplishment of organizational
goals. Asda as being part of global as well domestic market need to give higher emphasis on
developing relevant application of MAS for deriving distinct kinds of benefits.
Job Costing System (JCS)
It is one of the crucial process which leads to obtain the information regarding cost and
profitability related with particular job (What is the Job Costing System? 2021). Asda conduct its
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operational activities on larger scale which needs it to give emphasis on having job costing
system so that proper evaluation can be exerted effectively. It can be useful in having
appropriate information related with each job so that eliminating non crucial factors to gain
profitability can become possible.
Cost Accounting System (CAS)
it is accumulating information related with the costs associated with having particular
specific process. Asda can take this system into consideration for ascertaining cost with gaining
appropriate ability to assess the proper cost in turn accurate formulation of price can become
possible. It can provide assistance in having ability to recognize unproductive areas which can
eliminated to reduce cos.
Inventory Management Systems (IMS)
It is one of the significant system of MA which leads to get the ability to track goods h
throughout the supply chain. Asda can attain the relevant ability to ensure proper level of
purchasing, distributing and selling in turn meeting market forces can become possible.
Price Optimization System (POS)
The particular system of MA is associated with having information regarding customer
responses to the changing price level (Berg and Madsen, 2020). The specified organization in
order to have leading position need to emphasized on setting accurate price for attracting larger
customers.
Benefits of management accounting system
Pros of JCS
 Asda can become able to receive capabilities to estimate cost of similar jobs so that
determination of prevailing unprofitable area can become possible.
 Flexibility, accessibility and accuracy prevailing in each task of company can be
assessed to have proper functioning of each task to attain profitability.
Merits of CAS
 It helps in ascertaining cost structure in order to improve efficiency by formulating
accurate budget so that comparing performance to execute modified action can become
possible.
 Asda can get guidance in pricing strategy through covering all the cost incurred for
gaining higher profitability.
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Benefits of IMS
 It leads to reduce the inaccuracy for enhancing productivity in operational activities
 Data security and cost saving can be done properly for having larger revenue through
attracting higher customers.
Advantages of POS
 Price cohesion warranty for making decision quicker based on obtained data in form of
monetary & non financial.
 Market transparency and dull control in business processing can be achieved.
Explaining different methods used for management accounting reporting used by Asda
There are different kinds of reporting which are prepared by organization for having significant
information in turn higher profitability and sustainability can be derived. (Wall and Leitner,
2021) Asda as being an international organization which need to take several aspects into
process for having depth insights to formulate proper decision leading to success.
Budget report is managerial accounting report are critical in measuring company's performance
for making grand scheme in turn higher efficiency to move towards success can become
possible.
 Account receivable aging report is related with extending or declining credit in turn
proper ability to maintain sufficient can become possible (Amara and Benelifa, 2017).
Asda operating in specified industry need to focus on gaining sufficient information
related its debtors in turn significant processing to decline situation related with bad
debts, delayed payments, etc. it can lead to make relevant processing of having effective
credit policy in order to ensure higher profitability.
 Cost managerial accounting report is basically related with assessing expenses of
prevailing areas in turn eliminating and reducing non crucial aspect for gaining leading
position can become possible. Asda can get accurate insights for achieving higher level
of progress by maintaining its financial position stable.
 Performance report is another kind of report which is concerned with ensuring
appropriate standardized performance (Maheshwari, Maheshwari and Maheshwari,
2021). It can permit Asda to compare its current performance with previous in respect to
gain higher level of efficiency to meet predetermined objectives. It can be useful in
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appraising human resource, ascertaining variance, etc. for the purpose of executing
suitable approaches for making changes.
 Other managerial reports such a competitors' analysis, project, situational analysis, etc. in
turn better insights to reach sound performance can become possible. It can permitAsda
to derive sufficient level of functioning through implementing suitable approaches to
gain success.
On the basis of this it can be interpreted that having such mentioned managerial accounting
report can be beneficial in gaining success through making strategic management decision.
Management accounting systems and reports are integrated with overall organizational
processing which leads to have optimum utilization of resources (TRUHACHEV,
KOSTYUKOVA and BOBRISHEV, 2017). It is useful in comparing performance of enterprise
to identified deviation and its causes so that appropriate course of action can be implemented to
improve performance. It can help to set in coordination among all the functional areas to
increase performance of enterprise. This can lead to increase efficiency in operational and other
parts to incline profitability and liquidity of business.
Calculating costs using appropriate techniques of cost analysis
Income statement as per the absorption costing and the marginal costing technique
(Enclosed in PPT)
Explaining Explain the advantages and disadvantages of different types of planning tools used
for budgetary control
Budget is concerned with formulation of estimated statement comprising revenue and
expenses over specified period. It is important for the specified organization to focus on having
appropriate information which can be helpful in gaining road map for moving towards success.\
having planning tool can be beneficial in gaining success through properly identifying
requirement and managing activities accordingly. (NGUYEN and LE, 2020)
Cash budget
It shows expected cash receipts and expenses so that identifying financial health of firm can
become possible. Asda is one of the larger company which needs enterprise to develop relevant
processing of having cash in turn better decision to coordinate with prevailing issues can be
done effectively.
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Benefits
 The one of the significant benefit is to get the insights regarding avoiding debt through
recognizing unforeseen circumstances (Abdusalomova, 2019).
 Specified organization can become more resourceful for being touch with reality. The
specified organization is able to compare its estimated profitability as compared to
previous year. It leads to gain higher productiveness.
 Communicating financial position through enabling management of Asda to ensure that
optimum utilization of resources to overcome prevailing challenges can become
possible.
 Identifying accurate requirement of funds at initial stage becomes possible by executing
cash budget into process.
Drawbacks
 It limits the spending power of organization which might affect the credibility position of
enterprise which leads to influence fund-raising capacity of enterprise.
 This might affect the accurate decision-making of business that lead to affect and
facilitates delegation of authority which has adverse impact on business processing.
 It can affect the functioning of business by diverting its attention form other crucial area
that can affect Asda financial position in enterprise.
Activity based budgeting
The particular form of the budget tend record, analyze and monitor activities that tend to
result into expenditure of company. (Taylor, 2020) Asda can derive number of benefits and
drawbacks by applying this kind of budget into internal process. There are number of advantages
& limitations which can impact the business processing of specified organization.
Advantages
 There are several advantages which can be obtained by firm by executing this specific
course of action.
 The one of the crucial pro that can lead an enterprise towards growth & development is
gaining ability to evaluate each aspect in turn proper competitive edge can be
maintained.
 The particular type of budget is essential for the company to eliminate the bottlenecks
that tend to affect efficiency of Asda in positive manner. Activity based budgeting can be
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useful in having ability to improve relationship which can increase performance of
company.
Disadvantages
 There are various disadvantages which are required to be identified by enterprise for
ahving significant processing. It inclines complexity into internal processes due to
resource consumption in higher manner.
 It is basically short term technique which might not suitable for Asda. The main reason
behind this is noncompliance with economies of scale.
Zero based budgeting
It involves developing budgeting from scratch every time in turn higher ability to
coordinate with changing circumstances can become possible. Asda can receive various
advantages & limitations through implementing ZBB into internal processing.
Merits
 Asda can become able to build cost benefit analysis which can prioritize optimum
utilization of resources. The specified company can gain strengths by formulating
transparency into strategic planning.
 It enhances accuracy & efficiency in order to ensure that proper coordination &
communication becomes possible.
 Reducing irrelevant aspects which can positively affect the business process in turn
higher level of efficiency and profitability can be derived.
Demerits
 This is one of the time-consuming process which is considered to be an expenses'
activity.
 Lack of expertise tend to require high requirement of manpower which can adversely
affect Asda activities.
Comparing how organization are adopting management accounting system to respond financial
problem
In the current era, there are several issues which are required to be taken identified for having
smooth functioning. For the purpose of eliminating adverse impact of this financial problem
organization can use following techniques.
Balance score card
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It is the strategic performance tool which is well-structured and used for tracking
activities to execute appropriate action (7 Benefits of a Balanced Scorecard, 2020). There are
several benefits of applying balance scorecard into company activities for improving quality of
business. It can lead to have strategic planing, improved communicating and executing,
management information, performance reporting, etc. on the other side, limitations are lack of
modification, requires lot of data, etc.
Bench marking
It is the process of comparing business practice and performance standard which can be
obtained by comparing present performance wit previous. There are several pros which can be
helpful in improving situation of lacking areas it includes gaining independent perspective,
removing performance gap, having standard quality of efforts, continuous improvement, etc. It
can be beneficial in eliminating and overcoming financial barriers. On the other side there are
few drawbacks which involves lack of customers satisfaction, understanding, higher
dependency, insufficient information, etc.
Financial governance
it refers to the way a company collects, manages, monitors and control financial
information. Its is one of the significant process that is required to be executed for compliance
with operational and other performance criteria imposed by law. This provides benefits like
having faster & expertise completion of financial processes. The particular technique can
enhance trustworthiness and credibility in market which resolves prevailing issues. On the other
side, drawbacks includes lack of coordination, high rate of interest, etc.
Variance analysis
it is the method of studying deviation of actual behavior versus forecast outcomes. It
is crucial approach which helps in resolving existing issues in turn indicating business
governance. Executing this method can be helpful in gaining distinct competitive advantages
which comprises identifying budgeted problems., revenue, managerial issues, etc. On the other
side, it leads to affect efficiency as has adverse components like costly, lengthy, etc process.
Key Performance Indicators
These are both financial and non financial which lead to affect firm by proving depth insights
through focusing on growth rate, profitability, client per margin, etc. kind of standards which
helps in solving problems.
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ASDA TESCO
 It has problem of high cost which is
reduced by applying cost accounting
system it leads in increasing
performance.
 The company has issue of inventory
management which can lead to affect
its revenue generating capacity. It is
resolved by applying IMS.
 It uses bench marking and financial
governance to overcome prevailing
issues in turn higher quality with
maintaining declined cost can become
possible.
 This uses key performance indicator &
variance analysis to eliminate non
crucial aspect to get leading position.
CONCLUSION
From the above report it can be concluded that management accounting is important for
gaining success. The current report has comprises MAS involves job costing, cost accounting,
inventory management system, etc. The present report has involved information related with
cost analysis technique like marginal & absorption. Current report has comprised cash, activity
and zero based budgeting. It has given focus on financial governance, variance analysis, etc
technique to resolve financial problem.
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REFERENCES
Books and Journals
Abdusalomova, N., 2019. PROBLEMS OF MANAGEMENT ACCOUNTING AND WAYS TO
SOLVE THEM. International Finance and Accounting. 2019(3). p.2.
Amara, T. and Benelifa, S., 2017. The impact of external and internal factors on the management
accounting practices. International Journal of Finance and Accounting . 6(2). pp.46-58.
Berg, T. and Madsen, D.Ø., 2020. The historical evolution and popularity of activity-based
thinking in management accounting. Journal of Accounting & Organizational Change.
Maheshwari, S.N., Maheshwari, S.K. and Maheshwari, M.S.K., 2021. Principles of Management
Accounting. Sultan Chand & Sons.
Mahroqi, R.M.A.A. and Matriano, M.T., 2021. Examining the Effect of Budgetary Controls on
the Financial Performance of Oman Telecommunication Company. Advances in Social
Sciences Research Journal. 8(6).
NGUYEN, H.Q. and LE, O.T.T., 2020. Factors affecting the intention to apply management
accounting in enterprises in Vietnam. The Journal of Asian Finance, Economics, and
Business. 7(6). pp.95-107.
Taylor, R., 2020. Budgetary Control and Standard Costs. In The Accountant’s Magazine (pp.
129-137). Routledge.
TRUHACHEV, V.I., KOSTYUKOVA, E.I. and BOBRISHEV, A.N., 2017. Development of
management accounting in Russia. Revista Espacios, 38(27).
Wall, F. and Leitner, S., 2021. Agent-based computational economics in management
accounting research: Opportunities and difficulties. Journal of Management Accounting
Research. 33(3). pp.189-212.
Online
7 Benefits of a Balanced Scorecard. 2020. [Online]. Available through:
<https://bernardmarr.com/7-benefits-of-a-balanced-scorecard/>.
What is the Job Costing System? 2021. [Online]. Available through: <[Online]. Available
through:>
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