Comparison of Organisations and Management Accounting

The assignment compares the use of management accounting techniques in two companies, identifying similarities and differences between their approaches to financial planning and analysis. It highlights the importance of regular monitoring and standard-setting for effective management accounting.

Management Accounting

Table of Contents
From: Management Accounting Officer..........................................................................................1
To,....................................................................................................................................................1
General Manager, Unicorn Grocery................................................................................................1
Subject: Management Accounting System .....................................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting system and its use....................................................................1
P2. Various accounting system reporting...............................................................................3
M1: Benefits of management accounting system ..................................................................6
D1: Evaluation of accounting system reporting.....................................................................6
TASK2.............................................................................................................................................6
P3: Different costing method used by company to get net profit ..........................................6
M2: Techniques of accounting .............................................................................................8
D2: Results analysis which is collected from above income statements................................9
TASK 3............................................................................................................................................9
P4: Advantages and disadvantage of using planning tools....................................................9
M3: Analysis of planning tools............................................................................................11
D3: Analysis of tools that is used for solving financial issues.............................................11
TASK4...........................................................................................................................................11
P5: Comparison of organisation about how they face financial issues................................11
M4: Evaluation of financial issues.......................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................12

From: Management Accounting Officer
To,
General Manager, Unicorn Grocery
Subject: Management Accounting System
INTRODUCTION
Management and accounting; both are interrelated with each other. Accounting is related
with collection, summarising, analysis and recording of financial transactions. While, on the
other hand, management helps to regulate those accounting information in more systematic and
plan ways in order to attain there long and short term goals (Ahadiat, 2013). It is considered as
an important part of any business organisation by which all valuable information are recorded
and controlled by the managers in an effective manner. The prime objective of using accounting
system in business is to increase maximum profit with available resources. The report is prepared
by keeping all matters in the right direction. It consists of various accounting and reporting
systems that are helpful for company in attaining their future targets. Further, this report provides
information about how costing techniques can be useful for company to analyse their net profits.
The understanding of various planning tools used in budgetary control process are explained
clearly. At the end, this report provides information about financial issues faced by organization
through making comparison among two companies.
TASK 1
P1. Management accounting system and its use
Management accounting is known as a systematic method to plan and control various
functions of departments. It provides information for setting right option and strategies for a
systematised standard targets. It is also used to report variance analysis among actual
performances and standards by taking corrective actions (Ahmad and Kamilah, 2013) . By this
way, it is considered as the prime part of accounting system that facilitates the decision making
process of management process.
Accounting system consists of every accounting technique that may be helpful for
management in discharging their functional aspects such as planning, organizing, directing and
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controlling. Management accounting can be observed as a practical tool that is aimed at
resolving day-to-day financial issues which is arises in an organisation. These problems makes
the top administration to face difficulties in taking effective decision in most private and public
sectors enterprises. In competitive business market scenario, and within a public sectors that is
increasingly target upon effectiveness, creating values for money and best accounting practices.
All of them are responsible for both management and accounting. It is orientated towards the
coming future.
It is basically related with the provision of data to managers to help them plan, evaluate
and manage various activities (Baldvinsdottir, Mitchell and Nørreklit, 2010). Unicorn Grocery
requires an essential accounting service function which can help them to organise their business
transactions in an effective manner. It target of management accounting system is to improve the
future performance of organisation, managers would require information regarding sales trends,
profitability, inventory position and performance of salespeople. All these are determined by
using effective accounting systems. The tasks of management accounting are related with
furnishing of accounting information to the management for making its decision on that basis. It
also helps in improvising the efficiency and attaining organisational aim and objectives. Some of
the main characteristics of using MA system are: Effective decision making system: It will help to provide accounting data by which
higher authorities can take effective policy decision (DRURY, 2013). Cause and effect analysis: According to this, if there is any loss, the reasons for the loss
are probed. While, if there is profit then various factors like different expenses, current
assets and other share capital are analysed.
 Taking more valuable decision: It would help to guide right and more accurate
information to the management about the performances of the company. On that basis
necessary decision are taken.
The accounting systems which can be useful for Unicorn Grocery are discussed as below:
Costing accounting system: It is considers as a framework used by company's to
determine the total cost of their goods and services in profit evaluation, stock analysis and cost
control. Identification of correct cost of product is vary critical for operation profits
(Management Accounting, 2016). In the ways to estimate cost of production various other costs
are also analysed such as normal, standard and actual costing.
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Price optimisation system: It is known as an important model use in numerical
programs which is used to determine how demand changes at different price level. After that
combine the overall data with information on costs and other inventory level to suggest prices
that will improve profit for the company. It is all done to know customers reactions over the
various product prices set by using various modes.
Inventory management system: It is known as one of the important systems that is used
to track stock level, order summary and sales deliveries details (Bodie, 2013). It is mostly used
under production units where large number of data are recorded or dispatch. This will be
considered as an effective system to determine the current stock position with company.
Job costing system: It is used by managers of Unicorn Grocery to track the cost of lobar
used on a job. It is related with overhead costs to more than costs pools incur during production
of each lot of product. It is mostly used when goods manufactured is completely different form
one another.
Diagram: Four types of Management accounting systems
P2. Various accounting system reporting
In an organisation, management accounting report is an essential aspect for the
betterment of company's growth and stability. As, it help managers of an organisation to make
necessary decisions which are crucial for the operation of business activities (Cinquini and
Tenucci, 2010). Such reports provided necessary information to the mangers of different
department and can help them to take valuable decisions that may have a intense effect on the
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Costing accounting system Price optimisation system
Inventory management system Job costing system
Types of Management Accounting system

business performances. The information which is used in formulation of perfect reporting is by
collecting data from financial and non-financial sources. The accounting records of unicorn
grocery is taken into consideration for decision-making. Some of the useful data is collected
from various financial statements analysis such as income statements and company's current year
balance sheet (Dillard and Roslender, 2011). The growth and stability of an organisation
performance is mostly depend upon the type of methods used by the company in their business
operations. It is formal report which summarised by using various financial activities of a
particular organisation. In this report, a well organise plan is prepared in order to increase the
goodwill and market share of the company.
In that context accounting reporting can be considered as an important tool. In the ways
to analyse proper sequences of results company need a well organise system that can give perfect
picture financial position. It is observe in an organisation the reporting of data is considered as
one of the important task that need to be plan according to the perfect management accounting
system. The report are taken as base for any decision that are taken in favour of company's
growth. It is prepared by using accurate accounting reporting system that help Unicorn grocery
to attain more reliable outcomes in future. The basis objective of an organisation is to make long
term plan that can provide them more chance of net profit during the coming time. In this
context, reporting system will be considered as important tool for the managers to take
investment decision on those basis.
The reporting analyse is required by all those company's to manage and control there
daily financial transaction (Fullerton, Kennedy and Widener, 2013). It is the responsibility of
accounts officer to analyse the statements before posting it to company final account. It is
important to do so because all the necessary changes and mistakes can be rectified in early
phases. Because, if any mistake is found after transferring it into books of accounts then there is
not any ways to overcome those mistakes. The management looks after entire statements before
issuing it to the market for further extension. As, most of the team member as well as
organisational member's are working for the same objectives to increase as much profit as they
can from the given resources. There are some of the important factors which are affecting the
profitability of business. Such as internal and external factors. Both these factors are need to be
analyse before making any posting of entries into financial statements because it will affect
decisions that taken in order to earn maximum revenues. During, reporting of transaction various
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aspects such as social as well as cultural are need to be determine (Herzig and et. al., 2012.). The
reporting system help analyse current position of company through estimating total costs, and
expenses that are used in production of products and services. Because, all those are related with
the company reputation. With the entire evaluation of report, that is collected from various level
of organisation departments are presented to board of directors for the further approval. The
shares are issues by company by analysing various report that are present by the management
regarding the profitability and current year position in the market. The base of this is to gain
maximum competitive analysis over other competitors. It is related with the company
performances, growth in the market and capital investments made by various departments. Some
of the important techniques are:
Performance reporting: In order to make an effective decision company need to
prepared a performance report that consists of various analysis of financial aspects of unicorn
grocery. It is prepared by taking information about current and past year data.
Account receivables report: This report consists of a perfect lists of customers unpaid
information reports and credit memos through using wide range of information related with
payment which is not received by company. It includes detail of customers names and group of
statements that shows every data with the name and dates.
Operational budget reporting: This report is based on effective details regarding all
expenses that are incur by company in an one financial year. The main objectives of preparing
such kind of results is determine total costs used by company during manufacturing of products
and services (Routledge, 2014). Recording is done by each units of production done by company
with the use of weakly, monthly and yearly reporting systems.
Job costing reporting: It is related with lot size production of product and services by
unicorn grocery. It is easy to get detail information about a group of product manufactured
during the year. Information such as production date, timing and lot size number, all are under
this particular report.
Inventory management reporting: Those information related with the maintain and
controlling of information about current stock position of the company are maintained under this
report. There are various other measure which are used by managers to determine the exact
position of stock. Some of them are EOQ techniques, LIFO and FIFO, ABC costing etc.
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M1: Benefits of management accounting system
It has been seen that by the use of accounting system the management can have the
option to gain maximum advantages with its limited resources. In accordance to get maximum
outcomes the above techniques can be more effectively used (Luft and Shields, 2010). The
important advantages from implementing accounting techniques is to reduce expenses which are
incur by company over the production process. Improve in cash-flows, maximum chance of
getting financial return so that future planning can be attain. The management ensure that
company should make provision toward company growth and sustainability.
D1: Evaluation of accounting system reporting
In an organisation such as Unicorn grocery, they can increase the goodwill and market
position by the use of financial information so that objectives can be achieved. The efficiency in
work and measure to increase profitability is done in order to fulfil company's important need. In
this relation there are various reporting system which are responsible for making there plan more
successful. Inventory management reports are used to record information about stock position
available with the company. While, other report such as performances and job costing and
account receivable reports are also with the department to gain maximum advantages in coming
future.
TASK2
P3: Different costing method used by company to get net profit
Most of the company's are planning their business activities with the use of various
resources. The cost of production is determine by the company with the use of various costing
methods. As, it has been observed that costing is said to be that cost which are incur by company
over the production of every units (Macintosh and Quattrone, 2010). According to demand and
supply cost can be varied. It is associated with various factors which are affecting profitability
position of the company. In this context there are so many types of costing methods which is
useful in business. Few costing methods are associated with production process that are directly
or indirectly impact financial position. In this way, company can also use some costing methods
such as normal, standard and actual costing. These all are related with direct material, labour and
other overhead costs. Generally, costing includes variable cost which are changes with the
change in one extra unit of product, fixed costs that remain always same with the change in units
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and semi-variable costs that is related both fixed and variables. It major impact are seen over
other areas of financial statements. The costs which is used in Unicorn grocery in order to
determine there net profit fr the years are:
Absorption costing: It is considered as those costing which are directed related with
manufacturing or product and services (Morales and Lambert, 2013). Under this costs both
variable and fixed costs are considered. But the impacts are varied because of changes in actual
sales units. It simply explains that few other costs get absorbed with the production of one extra
units.
Marginal costing: It refers as those costing which are related with the production of one
additional units with the same units. The output incurred after implementing marginal costs in
the production process are represented by prime costs. One of the major aspects of this costing
method is that it does not advised fixed costs. This will provide information about total
contribution per unit used and out of which how much profit it generated by department.
Difference among both costing methods
Basis Absorption costing Marginal costing
Valuation of
inventory
With this costs unicorn company may
determine total costs that are required
during production of products.
Only marginal costs are valued
during production of various
goods and services.
Effects of cost per
units
If the department is using this
techniques, cost per unit will get reduces
with the production.
In this situation, cost per unit
will not alter at any level of
manufacturing.
Objectives It is related with company's future
pricing strategies and costs.
It is based on short term
management planning and
controlling.
Sustainability
aspects
It is based on external reporting of
accounts data.
Internal reporting is considered
as primary aspects of future
sustainability.
Decision-making Net profit is the base of decision-
making.
Contribution per unit is
considered as to take valuable
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decision.
Income statements through Absorption costing
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
Less:
Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
Calculation of marginal costing through using Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2 - 7800
Closing stock: 100*13 - 1300 -6500
Contribution 11000
Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
Total Profit / Loss 7500
In order to get more reliable informations, unicorn grocery is having two important
costing methods to determine net profit for the company. One is marginal costing and other is
absorption costing. Both are considered as important tools for taking necessary decision
regarding which one is perfect to determine more accurate outcome to the company. The one
which is more effective and sufficiently provided healthy profit is taken into accounts.
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M2: Techniques of accounting
Every organisation is planning to gain maximum advantages with its limited resources. In
this relation they are always in search of best and effective techniques which can fulfil their
requirements (Nixon and Burns, 2012). As, accounting techniques is an important part of
business enterprise by which they can attain their desire goal without making any extra expenses.
Some techniques such as standard and budgetary control tools, numerical and graphical
techniques which is used by company to take better decision in relation increase market
goodwill.
D2: Results analysis which is collected from above income statements
As per the above information it has been found that profits of company can computed by
using various methods. Absorption and marginal costing is considered as one of them. Both these
methods are more effectively implemented by the company because these are provided sufficient
results to the managers. If they are using absorption costing they incur profit of 7500 and with
the marginal costing it will be 7800 with the same level of units. The margin of 300 is calculated
from both the methods but marginal costing is more effectively applicable for Unicorn grocery as
they are more accurate.
TASK 3
P4: Advantages and disadvantage of using planning tools
The best part of management accounting is that it provide necessary information and
support to entire departments about there current position. Planning tools are considered as one
the major tool used by organization to analyse performances of Unicorn grocery. Because, in
order to take more effective decision they need to analyse various accounting statements to check
stability position during the year ( Tucker and Lowe, 2014). Before going to judge discussed
important planning tools it is necessary to know about budgetary control system:
Budgets for company are known as an estimation of future costs and expenses that are
going to be used by Unicorn grocery in there daily business operations. The main purpose of
budget is to estimate overall costs and use of capital in future investments. It is an important
system that is used to project total growth level and further production with the available
resources.
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Budgetary control: This particular system is used to considered as broad tools of
budgets that provide proper assistance to top management in order to carry out is daily business
operations (Quinn, 2014). It will also help to control and formulate functions like planning and
controlling. There are various process which used by management in order to make budget plan.
Procedures of Budgetary-control-accounting:
Formation of plan and performance: In this process, total estimation of ideas that are
required in order to fulfil better company performances with the use of accurate budget plan.
Performances of individual as well as organisation are relies mainly on the strategies prepared by
department.
Recording of actual performances: The major decision are based on the techniques that
is used while preparation of budgets. Under this, actual costs are considered in order to prepare
budget.
Comparing actual performance with planned: The another process in budgetary
control is determine by using actual performances with those of planned. Different analyse is
done on the basis of variable cost and standard costs (Renz, 2016).
Evaluate differences and other variances: Some other procedures is used to reviews by
using deviation in actual and standard performances. In this regard, a well qualified individual
are appointed in order to provide more reliable data which are collected from actual and
budgeted figures.
Provide necessary feedback: It is final steps in budgetary control that is related with
proper feedback and review that is collected from entire evaluation of accounting records. If any
changes are need to done in the budgets are rectified under this stages.
Planning tools are as follows:
Static Budget: It is said to be that budget which remain constant with the change in total
quantity and size. In kind kind of new observation this costs are determine over input and output
data collection.
Advantages
It is considered as more difficult condition under which values are taken on hypothesis.
Disadvantage
For decision it is not that much effect as compare to other budgets.
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Cash budget: It is associated with those cost that a company incur over production of product of
product with the use of various activities. Such as investing, operating and financing etc.
Advantages
It is used to determine cash-inflows and outflow during the years.
Disadvantage
It is more fluctuating because of difference in variances.
Operating budget: It related with company expenses that are used in in business
operation. The total cost incur during one year time by Unicorn company are recorded in this
budgets so that future control measures can be planned.
Advantages
By the use of this budget profitability can be analyse through using daily report.
Disadvantage
It is more time consuming as compare to other budgets. Because, various sales details and
variance analyse are required.
M3: Analysis of planning tools
In order to make effective plan budget are considered as one of the important tools. By
this Unicorn company can get more reliable results according to their set objectives. The
performance can be analysed by using master budgets, operating budgets, cash budgets and so
many other one. Planning tools can provide company a great chance to invest their capital in new
projects (Ward, 2012). Or to control their extra costs that is incur over production of product and
services. Fro sustainability, it is essential to use accurate tools and techniques that can guide the
company in going toward right direction.
D3: Analysis of tools that is used for solving financial issues
It has been observed that financial problems are affecting the profitability and efficiency
of the company. They are not able to plan their future mission because there impact. The most
important part of this issues is that it affect growth and performances of an organisation. To
reduce such issues company's are using various methods such as balance scorecard to overcome
the impact of financial problems. The market position and stability is also get affected because of
those issues.
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TASK4
P5: Comparison of organisation about how they face financial issues
It is considered as most crucial issues for an organisation that they are not able to attain
the goals. The main issues is associated with financial impact over the performances of unicorn
grocery. According to the financial issues they are not able to cop-up with the current market
situations. This will also make them away from achieving competitive advantages over the other
company's. There are various techniques which can be used by organisation to solve financial
issues. Such as:
Key performance indicators: It is used to determine the financial position of company
on regular basis so that less chances of mistakes can be arises (ter Bogt and van Helden, 2012).
Financial governance: It related with government regulation which every company need
to follow in managing their business operations.
Benchmarking: Another important techniques that works according to the set standard
that are already made by business entity.
Sollatek Unicorn grocery
As, they are working as small business
operation so every level of department are
equally working.
The prime target of company is working with
the support of operational areas where,
maximum number of issues are arises.
KPI is used as important tool for solving
financial issues in this company.
Information is related with historical data
collected from current year performances.
Regular monitoring is done so that less chances
of mistakes can be arises.
Actual performance is measured with standard.
M4: Evaluation of financial issues
It has been found that financial issues can be analyse by using various techniques. These
will help them to increase profitability and other growth chances. Some techniques like KPI
which is used to determine company's current and previous year and make comparison to find
right solution for those gaps that are there is it. Other one is related with financial governance
that need to be followed according to the government regulation.
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CONCLUSION
From this project report it has been concluded that management accounting is an useful
techniques that can provided necessary information about company's current year position.
Under this report, as a account officer it a has been targeted to present various information about
accounting system and reporting that are needful for betterment of performances. It also
summarise with various planning tools and costing methods. At last, comparison of company's
with other to analyse their financial issues.
REFERENCES
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Books and Journals:
Online
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