Management Accounting Concepts and Practices

This management accounting assignment delves into fundamental concepts and practices within the field. Students are tasked with analyzing various aspects of management accounting, including cost-volume-profit (CVP) analysis, budgetary control, and strategic management accounting. The assignment utilizes a provided set of resources, including journal articles and online materials, to support the understanding and application of these concepts.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 & M1 Explain management accounting and give the essential requirements of different
types of management accounting systems for the chosen scenario........................................1
P2 & D1 Explain different methods used for management accounting reporting.................3
TASK 2............................................................................................................................................5
P3, M2 & D2 Income Statements as per the techniques of absorption and marginal costing5
TASK 3............................................................................................................................................8
P4,M3 & D3 Advantages and disadvantages of different types of planning tools used for
budgetary control for the chosen scenario..............................................................................8
Analysis over the use of different planning tools and their application for preparing a budget. 9
TASK 4..........................................................................................................................................10
P5 & M4 Compare how organisations are adapting management accounting systems to
respond to financial problems and elaborate the way through which Unicorn Grocery can
achieve sustainable success..................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is a branch of accounting which considers and combines the
method of accounting and the principles of management. Through this they can analyse the
organisational and its environmental situation in a better way which actually covers the entire
process with various steps that deals with the overall profitability and efficiency of process
which are carried on in an entity(Baldvinsdottir Mitchell and Nørreklit 2010). This report is
based on the case study of Unicorn Grocery which deals in sale of various grocery products. It is
basically a co-operative grocery store which deals in sale and purchase activity of daily usable
products. Cited entity is having its headquarters at Chorlton-cum-Hardy, Manchester, England.
In this report the income statements has been prepared through using the methods of absorption
and marginal costing. Further this report also presents the fact that how implementation of
management accounting techniques can be helpful in sustaining the sustainable development.
TASK 1
P1 & M1 Explain management accounting and give the essential requirements of different types
of management accounting systems for the chosen scenario
Definition: Management accounting is also known as a cost accounting management accounting
is the process of analysis and identify information to collect data and measuring,interpreting
same related data to communicate information for to convey of an organisation. Accounting
management provide of financial and non financial decision to regarding information to relate
planning and performance management system. Management accounting provide financial
report an control to assist management in the implement and formulating(Bennett Schaltegger
and Zvezdov 2013) . Interpreting of an entity strategies. There are two different key element of
cost accounting managerial and financial.
Types of cost accounting: There are various type of cost accounting cost accounting,inventory
management system job sharing system price optimizing system.
 Cost accounting system : Cost accounting system in this system is also called a costing
system or costing system is used to analysis profit of an organisation and to inventory
valuation and cost control of their products(Busco and Scapens 2011). Cost accounting is
the process of collecting various alternatives to recording summarizing
classifying ,allocating evaluating alternatives course of action and control of cost to
provide the detailed information the management needs to control operation planing for
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the future course of action. cost accounting help to preparation financial report in this
report to use not subject rules and use only general accepted accounting principles and
accounting information is commonly used in financial accounting information to facilities
making decision(Pipan and Czarniawska, 2010). There are two main accounting system
job order,process costing in a cost accounting system to a information allocation based on
the traditional system activity based cost system.
 Inventory management system: Inventory to also represent to stock goods or material and
such as term to stock and inventory, an inventory management system combines to use
of software barcode scanners ,printers and mobile devices to the management of
inventory like goods consumables suppliers stock. The goal of inventory accurately
under stock and overstock situations(Setthasakko 2010). inventory tracing quantities
across locations insight able to make inventory decision.
 There are various types benefits and function system to involves: to create purchases
order,create,to improve company workflow,inventory accuracy of an entity.
 Job creation system :In this process information about the cost associate with a special
product or service job . In this system to direct material,direct labours,overheads costs are
including to improve a cost creation system.
 Pricing optimizing: Pricing optimising system are analysis mathematical information
programs that calculate different price levels combine that various data and information
on costs and inventory level to prices to improve profits(Weißenberger and Angelkort,
2011) .in this system analysis the value of product to buy and seller and manage all
impacting profitability to measuring pricing strategies.
Difference method use in management accounting: There are different method are explained:
 Financial planning: the main objective of entity is hight profit to achieve by make proper
sound panning to considered best object achieving business objectives. financial planning
to helps to utilisation resources in better way.
 Fund flow analysis: Thought analysis of movement of fund one period to another the
fund is properly or not in a year when compared to past year. The working capital change
fund are also find out this any sis
 Decision making accounting: The decision making accounting system is free flow
communication within the entity is effective functioning or business. And the
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management can design the information system hence which all employee of an entity
can access the information using discharging their duties and to access the different types
of quality decision
 Management reporting: The management of reporting is the prepare on the specific
accounting report to related basic concept of contents are including this report(Kaplan
and Atkinson 2015). Content of profit loss account and balance sheet and other basic
data and information to be submitted the same before top management. The prepare a
report disclose the are positive and negative strength ,weakness in different area of
financial and operating activity. In this activity to identify, hight useful to management
for excising control and decision making.
 Ratio analysis: The ratio analysis is a used to management in the discharge or basic
functions of planning coordinating ,forecasting and effective control. the way for
business activity by undertaking appraisal of target the physical(Dillard and Roslender
2011).
 Cost accounting: The cost accounting method thought represent current data in
product ,process department wise to comparison two cost enables management decisions
to the reasons responsible difference various cost (Cost-Volume Profit Analysis.).
 Marginal-costing: In this method used marginal costing techniques in which fix the
product selling price,section of best sales mix strategies, to select use of product related
sources of raw materials. To make a buying decision which is based on cost of variable
and contribution.
P2 & D1 Explain different methods used for management accounting reporting
Management accounting reports prepared by every type of an enterprise to evaluate the
performance of their company. Management accounting reports can be made on quarterly,
monthly or on a daily basis.
Types of Management accounting reports which can be used by the Unicorn grocery
 Budget report:Budgets are made by small business enterprises or help them to study and
evaluate the performance of their company. Every enterprise owner evaluate the budget
and try to minimize the cost or expenses of the enterprise,if the budget is very large then
it is evaluated by mangers according to the department wise(van der Meer-Kooistra and
Vosselman 2012). After the budget get prepared every enterprise owner try to cut down
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or trim the cost of the budget. In some budgets the incentives given by the enterprises to
its employees also comes under the budget.
 Accounts receivable: Accounts receivable is a critical tool available for the enterprises to
evaluate or to know how the enterprise is managing its cash flow activity from its
debtors(Quinn 2011). Under this the enterprise evaluate or study to know what is the
problem arising from the process of collecting money from the debtors and try to remove
if any hurdle get found and to make the policy more effective the enterprise tighten its
policy of collecting money from the customers.
 Job cost reports:Job cost reports are prepared for evaluating the profitability of a job or to
measure what revenue is created in the organisation by that particular job. This is done by
the firms to calculate the more profitable jobs of the enterprise and than focusing on that
jobs rather than wasting time on the jobs with low profitable jobs. This help the
organisation in identifying the higher earning areas of the enterprise and also to analyse
the expenses before a project can be started this help the managers to reduce or eliminate
the waste of the project.
 Inventory and manufacturing: Inventory and manufacturing accounting reports are used
by the enterprises to reduce the cost related with the storage of inventory like inventory
waste ,overhead cost and labour cost related with the inventory(Shah Malik and Malik
2011). This help the enterprises in making their process of holding inventory more
efficient. This report make the enterprise in holding their cost with minimum cost.
Management can use management accounting and reporting system in the enterprise in
following areas:
 Relevant cost analysis: Management Accounting and reporting provide enterprise the
relevant in formation related to the cost related with each decision and helps the
management in making more efficient decision for the enterprise. Like if the Unicorn
grocery wants do the advertising of its products than there are various methods available
to them for advertising each related with its cost and benefits so this evaluation will help
the Unicorn grocery management in making a efficient decision for the advertising of
their products(Contrafatto and Burn 2013). This can also be used by the enterprise to
making other decisions like adding a new product line in the enterprise will proof
beneficial or not.
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 Activity based costing methods :Activity based costing helps the enterprise in making a
decision that what will be the customers of the products or to whom the company will
serve it services. It is basically a method used for analysing which customers will proof
more beneficial to the company(Lukka and Modell 2010). Once the customers get
known by the firm or when the company is able to identify its more beneficial customers
the company will than focus the advertising efforts on that customers.
 Make or buy analysis :One of the more important use of management accounting that it
helps the enterprise in making a decision about make or buy the equipments needed in the
manufacturing process. If making a product will proof more expensive and costly to the
enterprise than in this situation it will be better for the enterprise to buy it from the
outside on the other hand if making equipments in the enterprise is very cheap for the
firm than the company should produce the same in the enterprise.
 Utilizing the data: The information provided by the management accounting and
reporting system can be further used by the enterprise in making decision relating to the
growth and development of the enterprise(Setthasakko 2010). The management
accounting and reporting give the manager important information and the manager of the
company can use the same in guiding the future of the company.
TASK 2
P3, M2 & D2 Income Statements as per the techniques of absorption and marginal costing
Marginal costing: Marginal costing is a costing method used in decision making of an
organisation. Marginal costing calculates or measure the changes arises in cost by making a new
additional product. Marginal cost is that cost which can be avoided by not making the additional
unit of product. Basically an increase and decrease in the total cost of production by making a
new product is known as marginal costing. If the price increases the company will not produce
the product on the other hand if the price decreases than it will proof beneficial for the company
to making that additional unit of product.
Absorption costing: Absorption costing is the cost which arise on a product or the price of a
product including all indirected expenses and direct cost. Absorption costing is the calculated
cost arises in manufacturing a product include all expenses from raw material to labour cost and
many more all comes under the absorption costing(Sánchez-Rodríguez and Spraakman 2012).
Absorption costing include all the direct expenses incur on making a product. All utility costs for
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making a product come under this. All direct expenses which can be included anything comes
under this. Absorption costing does not include fixed cost for calculating the cost of the product.
Calculation of Net Profit using Marginal costing
Calculation of Net Profit using Absorption costing
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TASK 3
P4,M3 & D3 Advantages and disadvantages of different types of planning tools
used for budgetary control for the chosen scenario
Budgetary Control: It is a tool in which budget are prepared for the future period and they are
compared with the actual performance for finding out variance if any arises.
ADVANTAGED OF BUDGETARY CONTROL
It helps in defining the goals, procedure and policies for the organization . There should
be some definite aim to achieve the goals otherwise it hampers all the other aims .It helps in
allocating better co-ordination between different departments of the organization.
If the performance of the organization is below the expected level than it helps the
management in finding out the responsibility(Dillard and Roslender 2011). It helps in reducing
the cost of production by eliminating the wasteful products. It helps in facilitating centralized
control with decentralized activities of the organization. Budgetary is an effective methods for
achieving the activities of the organization because it sets target thus each and every department
is forced to work effectively and efficiently to achieve these targets.
It brings efficiency in the economy by promoting cost consequences among the
employees. It helps in smooth running of the business activities as all the activities are planned in
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advance(van der Meer-Kooistra and Vosselman2012). It helps management as to where the
problem is arising and how than problem can be solved without delay in an effective manner.
DISADVANTAGES OF BUDGETARY CONTROL
When there is inflation in the economy is is difficult to prepare the budgets for the
economy. Budget requires Heavey expenditure to prepare the budgets which small companies
cannot afford.
Budgets are prepared for the future period which is always uncertain in future the
economic conditions can change which will bring ups and down in the budget(Kaplan and
Atkinson 2015). Thus future uncertainties may minimize the use of budgetary control devices.
Budgetary control is a management tool and thus it cannot replace the management in decision
making process because it is a substitute for management.
The budgetary control will succeed if there is support of the top management and if there
is no support of the top management than the budgetary process will not succeed(Dillard and
Roslender 2011). The success of budget depends upon the team work and if there is no co-
ordination between the team members than the budgets will not be achieved for the economy.
Budgets can be developed keeping in view the current organizational structure. This
organization structure may be inappropriate for current conditions(What is Budgetary control?.
2017). The correlation and co-ordination of various budget is expensive so small organization
cannot use this budget as a cost control technique.
Analysis over the use of different planning tools and their application for preparing a budget
 Future Forecasting- Budgetary control is a device which is helpful in future estimation of
the budgets and these budgets can be prepared in advance.
 Cost Aggregation- To minimise the cost of different activities in Work Breakdown
structure and it also helps to reduce the risk and increase the productivity in the
organization. The work package cost are higher for higher level of WBS and ultimately
for the entire project(Sánchez-Rodríguez and Spraakman 2012).
 Reserve Analysis- It is a technique to review the project manage plan to identify the risk
factor involved. Cost estimation plan includes contingency reserves to account for cost
uncertainty.
 Expert Judgement – Project manager is responsible for monitoring and controlling the
project work and thus the judgement of of the manager to find out the performance level
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of the employees so that it can be evaluated and thus necessary actions could be taken
improve the performance level and this will be solved from the judgement and decision
of the expertise in budgeting and particularly in the area of interest(Bennett Schaltegger
and Zvezdov 2013).
 Historical Relationship-It means including data from past references or from other
projects in which cost are known for some or similar type of the activities.
 Funding Limit Reconciliation- The expenditure of fund should be reconciled with any
funding limits on the commitments of the fund for the projects which are undertaken .
 Government Policies- Budgets are made for different policies of the government like tax.
Tax is a compulsory payment which is imposed by the government and balance of
payment .BOP is a systematic transition between the import and export policies of the
government(Renz 2016). It is categorised into two parts monetary polity and fiscal
policy. Monetary policy indicates the flow of money in the economy and fiscal policy
indicates the taxation policy which the government impose in the economy.
Planning tool for accounts to solve problems to leads to organizational success.
The success of any organization depend upon its functioning the procedure it follows in
the organization and the co-ordination between different activities and employees of the
organization(Macintosh and Quattrone 2010). The skill and competence level of the employees
who are working in the organization how effectively and efficiently they are using the resources
of the organization for the long term success of the organization.
Helping organization to use updated technology the use of different new software and
application. The process involves certain phases from planning, evaluating, monitoring and
control of the business activities in the organization. Problem solving enhances the area of
interest of the employees because employees feel satisfied that is someone in the organization to
solve their problems.
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TASK 4
P5 & M4 Compare how organisations are adapting management accounting
systems to respond to financial problems and elaborate the way through
which Unicorn Grocery can achieve sustainable success
Management accounting System is now a days used by many organisations.
Like unicorn the Agmet also uses the same for calculating or analysing the performance of their
enterprise.
Unicorn Grocery use the accounting management and reporting to making important
decisions like buying and making of product. Other than this how the guidance can be done
about the company's growth or other than this following important decisions are taken by the
information grasped by the accounting management and reporting system(Herbert and Seal
2012). Relevant cost analysis can be done by accounting report system other than this efficient
decision can be made by the unicorn grocery by following the accounting report system. The
firm can analyse what are the main hurdles or drawbacks of its current collecting policy from
debtors and the firm can then try to remove these hurdles and can make their collecting policy
more effective and efficient.
Same like the unicorn the Agmet uses the accounting report system for taking the
efficient decision or same as the unicorn but the Agmet uses it for other purposes also like how
to manage all the activities of the enterprise(Kaplan and Atkinson 2015). How to make effective
and efficient use of human resources and other resources available in the enterprise. How
company can improve its collecting policy from debtors.
Unicorn uses the management ans accounting report system to keep check on the
activities of the enterprise at the same time how these activities can be done better by the
enterprise to get more profitable results with the minimum cost and how these activities can be
proof more profitable to the enterprise(marginal cost. 2017). The Agmet uses the same reporting
system for achieving better results like more profitability with the minimum cost associate with
each operation and how to get more powerful image in the market than its competitors. The
unicorn can make the better use of accounting management and report system to get optimum
results from all of its job activities.
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The objective of maximum profit with minimum cost can be better achieved by using the
accounting report system in an efficient manner. By using management accounting the enterprise
can delete all the jobs with low or no profit creation and can give attention to the jobs creating
high profit for the enterprise the managers can give their close attention to the jobs relating with
or which create high revenue for the company.
The Agmet uses the management accounting system for effective decision making and to
eliminate the efforts which does not give or generate any benefit for the enterprise(Shah Malik
and Malik 201). Overall the management accounting is used by various types of the organisation
but the main difference is that different types of organisation uses the same technique for their
different kind of objectives some use to maximise the profitability of their enterprise while other
use the same for minimising the cost of their business operation
Sustainable success means achieving the growth of the enterprise by focusing on its key
factors like human resource and many other. A firm or and enterprise can never achieve success
unless it does on give proper attention to the needs and wants of its employees. It can be said that
to achieve success all the key elements which contribute to the success should be given proper
attention by the management. All the needs and wants of its human resource should be well
served by every enterprise because the dissatisfy employee will leave the enterprise and because
of this the enterprise can face the problem of stability and this will affect the goodwill of the
enterprise also so it is well advisable to the enterprise to satisfy all the human needs of its
enterprise and also give proper chances of success to its employees and to get a task force having
lots of qualities.
Use of management accounting in achieving sustainable growth
Management accounting helps the enterprise in various ways for achieving the growth by
giving information about all the activities of the enterprise(pipan and Czarniawska 2010). By
knowing all the information about all the activities of the department the management can make
necessary changes in them like after knowing that the current collecting policy of enterprise is
not useful or there are many hurdles in that process than the management can try to tighten the
credit collecting policy and at the same time can do some modifications in that same applies on
the other activities of the organisation (Sánchez-Rodríguez and Spraakman 2012). By collecting
all the regarding all the activities of the enterprise the management can do the necessary changes
for achieving better and good results with minimum cost.
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 Key performance indicator: In order to respond to financial problems firm can use KPI
and under this some parameters can be set for each KPI and actual results can be
compared with it to identify whether financial problem comes in existence. If it occurred
then to what extent it create financial related problem for the business firm. Benchmarking: Under this approach usually firm determine objectives and comparing
actual with objectives financial problem is identified and action plan is prepared
immediately to solve the problem. Budgetary control: Different sort of budgets are prepared by the business firm to control
different activities of the business and to ensure that there is no scarcity of fund in
performance of the specific operations. If expenses exceed cash inflow amount then cost
curtail strategy is prepared and implemented in the business. Financial governance: Under financial governance roles and responsibility of
individuals that are looking after and use funds is determined. This, ensure that there are
liable people that will respond to financial problem immediately by control expenses or
arranging funds from varied sources of finance.
CONCLUSION
As per the above mentioned provisions and facts in the report it can be ascertained that
there are a few techniques in management accounting which can be used by Unicorn Grocery for
the management of financial resources and other non financial sources which are available in the
financial and organisational structure of cited enterprise. Further in this report the method
through which management accounting and its principles can help Unicorn Grocery in
achievement of sustainable success and sustainable development. Further this report also provide
some general information about the methods of forecasting and various benefits attached with it.
Overall view of this report can provide some information and data about the methods of
absorption and marginal costing which mentions that how these methods can provide different
figures of net profits because of their different principles for calculating operating and net profit
of any firm.
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