Management Accounting Principles and Tools: A Case Study of Nasty Gal Vintage

Unit-5
Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1.Describing principles of management accounting...................................................................1
2.Management accounting and Management accounting system role........................................2
3. Calculating income statement using marginal and absorption costing for showing role of
these statements in organisation growth and success. ................................................................3
4.Determining role of management accounting within organisation..........................................4
5.Advantages of function to the organisation.............................................................................5
6.Concluding that shows the importance of management accounting........................................6
PART 2............................................................................................................................................6
1. Benefits and limitations of various planning tools used in budgetary control-.......................6
2. Comparison between Nasty Gal vintage and Marks and sp in adopting management
accounting system.......................................................................................................................8
3. Recommendation to Nasty Gal Vintage for its business growth and success.........................9
CONCLUSION................................................................................................................................9
REFERENCES .............................................................................................................................10

INTRODUCTION
Management accounting is a strategic framework used by an enterprise to achieve its
organisational goals. This report is divided into two sections. Section one consist generally
accepted principles of management accounting and various tools followed by concern such as
job costing, inventory management and price optimisation (Argenti, 2018). Income statement of
Nasty Gal Vintage, deals in apparel industry founded in the year 2006 using absorption and
marginal costing approach which shows calculation of two months. Functions and significance
of management accounting is also being discussed. Section two includes concept and various
budgetary techniques used in planning. Comparison of policies adopted regarding management
accounting between Nasty Gal vintage and Marks and Spencer is elaborated in the below section.
For success of Nasty Gray vintage there are few strategies which are required to undertake,
advising the same is also included in the report given under.
MAIN BODY
1.Describing principles of management accounting.
Management accounting refers to the process of analysing cost and it includes rendering
information related to financial data to the managers useful in decision making. It is an internal
process of an organisation which is used to take quality decisions of an enterprise. Principles
refers to the guidelines which signifies how to do and in which manner things will take place,
some of the principles of management accounting are given as below-
A. Designing and integrating- Information of accounting is planned in a way which includes
creating, organising data in organised manner which helps to reach conclusions by integrating all
the records maintained.
B. Management by Exception- It includes techniques of budgetary control and standard
costing tools which aids in finding deviations either favourable or unfavourable (Astuty and
Pasaribu, 2021). If found unfavourable, revision of strategies and procedures are taken in this
regard.
C. Inflation accounting- Inflation is defined as general increase in price level which requires to
be adjusted to know the money value in real terms. For gaining money stability it is necessary to

adopt inflation accounting. Actual financial health of an enterprise can be revealed by adopting
the techniques of inflation accounting.
2.Management accounting and Management accounting system role.
Every enterprise focuses on present performance and comparing those performance with
the standards set. Management accounting is a process of supplying information required to take
judgement. Information is presented in the form of charts, figures and tables. With respect to
Nasty Gal Vintage,it adopts various accounting system which can be discussed as given below-
 Price optimising system- This is a model based on mathematics which assist in
analysing the impact of change in prices on demand. Quantity demanded is affected by
change in price so this system helps to know about the customer's demand and
preferences through which Nasty Gal vintage is able to adopt huge market share and
perform its marketing activities easily (Caglio and Ditillo, 2021).
 Job costing system- It is a method used to keep track on each activity of the production
process and finding the cost of each task. Nasty Gal Vintage is involves in assembling
data of each component such as direct material, labour and overhead and sum all the costs
to know about the expenses incurred to evaluate reasonable profits of the firm.
 Inventory management system- In this system it monitors the flow of inventory by
using several tools of stock management. Economic order quantity and just in time helps
to know manage inventory level. Nasty Gal Vintage is adopting just in time which
enables to supply stock as and when required which reduces ideal stock cost and
decreases piling of stock.
 Cost accounting system- It is a framework helps to know the individual cost of each
product through which Nasty Gal vintage take corrective decisions about each product
whether to remove or control the cost of stock (Ervural,Evren and Delen, 2018).
3. Calculating income statement using marginal and absorption costing for showing role of these
statements in organisation growth and success.
Cost is termed as expenses incurred while manufacturing a particular product
(Hutahayan, 2020). Nasty Gal vintage income statement by using marginal costing and