Management Accounting Research and Practice

The assignment provides a comprehensive review of management accounting research and practice, covering topics including strategic management accounting, control systems, and the relationship between theory and practice. It discusses studies on management accounting in various contexts, such as lean manufacturing environments and non-profit organizations. The assignment also touches upon issues related to the gap between research and practice in management accounting.

Management
Accounting

Table of Contents
FROM: MANAGEMENT ACCOUNTING OFFICER..................................................................1
TO,...................................................................................................................................................1
GENERAL MANAGER..................................................................................................................1
UNICORN GROCERY COMPANY.............................................................................................1
SUB: MANAGEMENT ACCOUNTING SYSTEM .....................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Concept of MA and it related application.............................................................................1
P2: Techniques of management accounting reporting................................................................3
M1: Advantages of accounting system ......................................................................................5
D1: Critically evaluate Reporting system ..................................................................................5
TASK 2............................................................................................................................................6
P3: Different costing method to determine Net profitability......................................................6
M2: Different accounting techniques..........................................................................................8
D2: Critical evaluation of income statements ............................................................................8
TASK 3............................................................................................................................................8
P4: Benefits and limitation of using planning tools....................................................................8
M3: Critically evaluation of planning techniques.....................................................................11
D3: Effective tools to reduce financial issues...........................................................................12
TASK 4..........................................................................................................................................12
P5: Financial issues which are present in organisation and measures to reduce them..............12
M4: Analysis of financial problems..........................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
UNICORN GROCERY COMPANY
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management accounting is basically, define as one of the important techniques that
provide valuable accounting data to carry out various management operation. Such as planning,
controlling, analysing and effective decision making. It help managers to determine problems,
prepare plan, decision making, use of available resource etc. It is used to analyse the modern idea
of accounts as tool of management in relation to conventional time. The main objectives is to
increase the financial and statistical data so as to bring light on various stages of activities of an
organisation (Ahmad and Kamilah, 2013). This project report consists of various accounting
information and system which can be useful for the company in order to attain its long and short
term objectives. Other aspects of this project explain information about reporting system and
costing methods. All techniques aim at necessary control, such as financial controlling, budgeted
control process and efficiency in financial recording are brought inside the preview of
management accounting. At the end of this report, comparison with other company is discussed
that how they are solving financial issues.
TASK 1
P1: Concept of MA and it related application
Management accounting can be specify as, “ presentation of accounting information in
the way as to aid the management in formulation of various policies and recording of financial
transaction which are done by company in there daily operations”. On the other hand, any form
of accounting which determine a business to be conducted in more efficiently. It is concern with
valuable data that is useful for management in achieving their long term objectives (Bodie,
2013). It consists of various effective strategies for, selecting best alternative course of business
actions and for control by the evaluation and proper identification of performances. Hence, all
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those accounting data which directly or indirectly provide effective techniques to managers of
unicorn grocery to maximise its productivity.
Objectives of management accounting:
The main purpose of MA is to assure the management in order to carry out its necessary
role and responsibility in more effective manner. Some of them are discussed underneath:
 The systematic allocation of role for improvising of effective plans and budgets.
 The analysis of various transactions whether financial or physical to determine perfect
comparisons among forecasts sales and actual performances.
 The numerical interpretation of various statements is a ways that will be utmost important
to management in future planning and control of operations.
The MA consists of various types of financial information which is related with
accounting reporting such as cost accounting, inventory management etc. The Unicorn grocery
can attain is objectives by using more reliable and relevant data (DRURY, 2013). The financial
analysis is done by shareholders on the basis of annual report which is prepared by account
officers during the year. Profitability of company can affected if they are not using right kind of
accounting system. Overall, results collected from different department are determine through
implementing new strategies according to the set standards. “Unicorn grocery” need to look-after
its shareholders values who are known as sole partner of business (Management Accounting,
2016). As, they are responsible for motivating staffs and outside parties to invest under their
share so that goodwill of the company would increase. The main purpose of any business
enterprise such as “Unicorn Grocery” to maximum profit from its limited resources so that future
goals can be achieved. It has been seen that resources are very crucial for the company to
increase huge profit and control extra wastage. Few of accounting system are more effect for
company's to manage its extra costs and ensure that minimum cost can incurred. Managers of
Unicorn plc can determine their total cost which are used in production of goods and services.
It is considered as one of the major aspects that are essential for planning process.
Financial position of company is determine by using accounts related decision. All the necessary
information are identified through using various accounting reports which are formulated by
concern managers at that time (Herzig and et. al., 2011). Finance department is working for the
motive to generate more profit with less cost expending over expenses. They are responsible for
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managing the resources in well effective manner by using various tools and techniques which
will useful for company to plan their next targets. Some of them are discussed underneath:
Price optimisation: In an organisation like “Unicorn Grocery” they need to make use of
effective systems that are helpful in determine total prices for their products. It is based on
numerical value that are necessary for manager to identify how customers are reacting towards
various cost prices for commodity and services by using other transmission. The target of
company is to determine the price which can meet out customers needs such as increasing
operational cost during the year.
Cost accounting system: Cost is utmost important aspect for Unicorn grocery as they
need to make use resources during the production process. It is considers as more effective
matter to financial accounting. It includes application of job costs, product, process and operation
costs. In order to analyse actual cost company uses various methods such as normal, standard
and actual costing methods.
Inventory management system: There are various techniques such as FIFO and LIFO to
record their stock positions that are being kept by Unicorn grocery during the time. It is used to
control and record necessary detail information of stock into various statements. It will be
helpful for analysing total availability of stock with the company (Kotas, Richard-Nixon and
Burns, 2012). There are various techniques which are used to record inventory data are EOQ,
contingency planning and regular auditing.
Job costing system: It is said to be activity of recording costs of production of job, rather
than its complete process. It will help to track cost of each job, keep data which is frequently
more accurate to operations of the business. Unicorn grocery deal in various products that are
needed to be record on the basis of making groups of small segments.
Essential of management accounting can be identified by its decision making capabilities
in order to attain its future objectives.
P2: Techniques of management accounting reporting
Accounting reports are known as combination of statistical data that are originated from
accounting records of Unicorn grocery. These statements consists of various reports such as
income statements balance sheets etc. Bargaining and maintaining concrete and professional
financial practices which is important for growth and stability of a business. In other words,
reporting is a formal report of the financial activities and position of a specific organisation.
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Under this information are presented in well plan and sequence manner in order to understand it
in easy way. In an every business organisation, reporting is considered as vital part which is use
to take valuable decision regarding financial position of the company.
It is formulated by using correct accounting reporting system that can help them to
acquire more positive results in coming future (Quinn, 2014). Those transaction which are
related with the company daily operation are initially analysed before transferring it to accounts
book. It is required to do so because maximum of the important decisions are relies on those
entries which are posted by managers in its initial stages. Management accounting is totally
responsible for collection of data from entire department those are working for the same
objectives. It also determine various factors which are affecting the profitability and growth of
Unicorn grocery. Those are external and internal aspects of environment that exist in any
decision making process. While, analysis or preparing report for company different sources such
as social and cultural condition are also need to be taken into consideration. The reporting help to
find out correct position of company, its costs bearing capacity and other aspects related with the
betterment of company. After making necessary analysis, top management make approval of
reports and then it presented in front of various investors to make there valuable look and take
active part in providing capital support to them (Ward, 2012). It is associated with company
performance, growth level and investments that are identified during report preparation. The
accounts department are working for the common objectives to look-after all necessary data with
the use of information from different activities, situations and other valuable investments
policies. The results collected from recording of transaction are very useful in guiding company
from going in wrong direction. Because it required necessary skills and ability to manage their
daily transactions. The reporting is done by summarising the current and past year data after
making perfect comparison between them. The performance and sustainability is entirely depend
upon the types of system a company is using in their business operation. It will be essential for
higher managers to present a complete strategies that can provide the company to attain its goal
in quick time. With the use of effective reporting system management can determine the Unicorn
plc present year performance. Some reporting techniques are:
Inventory management reporting: It is associated with recording and management of
stocks of the company. It is used to determine stock position of company by using various
techniques such as LIFO and FIFO methods and EOQ techniques (Renz, 2016).
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Operational budget reporting: This particular system is used to get necessary detail
about the expenses that are incur by company during one accounting year. The purpose of
preparing this report is to analyse total costs used by company over production of products and
services. In the way to get more accurate results, managers need to use actual cost because it
provide more close results from given resources.
Job costing reporting: Such reporting is based on production of products in a lot or
group size. It will help to analyse product manufacturing date, timing and sequences of
assembling (ter Bogt and van Helden, 2012). The profit is collected from given information are
included under this job costing report in a given year.
Performance report: The entire results are based on financial performances of the
company. This particular report is based on information related with the past and previous year
data. It gets evaluated though making proper comparison and filling loopholes that are arises in
that reporting process.
Account receivable reports: It is considered with the lists of unpaid customers details
statements and credit memos by using data ranges to analyse which payment is overdue. The
aging is sorted by taking customer names and itemizes every statement by its name and date.
M1: Advantages of accounting system
With the use of MA system owners of have the option to get competitive benefits by
developing cost allocation techniques (P. Tucker and D. Lowe, 2014). The major advantages is
that it help to reduce expenses which are mostly used by company during production process.
Improve cash-flows is another important benefits of using management accounting. Financial
return will increase so that future planning can be done. Or mostly crucial thing is to make
decision for further growth. All these advantages are more effectively used in order to attain
profitability and efficiency of the company.
D1: Critically evaluate Reporting system
In company's like Unicorn grocery, the mangers need to analyse their accounting data
though using financial tools. It main purpose of data evaluation is done in order to attain growth
an sustainability in coming future. On the basis of their reporting, higher authorities use to make
necessary decision whether their plan would get success if they going with these reporting
systems. Some of them are job cost reporting which is use to determine cost taken by each unit
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product of a product. While inventory reporting will help to analysed total reserve of stock
available with the company.
TASK 2
P3: Different costing method to determine Net profitability
Costing is related with the production of product and services by the company with its
resources. The cost can be varies according to the changes in quality and supply demand. It can
be determine by various factors those are affecting the growth and performance of the company.
Although there are various methods to by which costs can be identified (Dillard and Roslender,
2011). Some are related with manufacturing process and financial position. In the way, to
produce product the company may also incur certain other costs such as normal, standard and
actual cost. All of these are related directly or indirectly with cost of production. Basically, such
cost includes variable cost, fixed cost and other overhead costs which are associated with the
production. The main objectives or impact are seen in financial statements of the company. The
Unicorn grocery is having various costing option which can help them to analysis net
profit for the year. Some of them are explain as under:
Marginal costing: It is associated with those cost which are used by the company during
production of one additional units. The situation and variables inputs are remain same. It is
directly related with the cost of production (Nixon and Burns, 2012). When managers calculated
marginal cost the results which are generated are represented by prime cost. The main part of this
costing is that it does not considered fixed costs. That results help managers to get information
about profit and volume level of company.
Absorption costing: It is said that all industry cost are absorbed with the unit produced.
It means that the costs of a complete finish units in a stock will consists of direct material, labour
and combination of both. Under this costing fixed cost are considered to determine net profit for
the company. Some other costs are absorbed with the extra unit of production.
Difference between above two:
Basis Absorption costing Marginal costing
Stock valuation Under this costing method company used
to considered total cost which are incur at
the time or production.
According to this costing, only
marginal costs are valued
during manufacturing process
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of product.
Sustainability This type of costing methods are relies
mainly on external reporting of accounts
atmosphere.
In this costing methods, are
based on internal reporting of
inside environment.
Basis of decision If managers are using this particular
method they can take decision on the basis
of net profit.
By the use of this costing
method future decision are
based on contribution per
units.
Effects of cost per
units
With the use of this costing method cost of
production will increase and cost per unit
get reduced.
Cost per unit will remain
unchanged at any level of
production.
Objectives It is based on long term pricing policies
and costs.
It relies on short term
planning, controlling and
decision.
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
Income statements through Absorption costing
Particulars Amount
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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
From above calculation, Unicorn grocery is having two of the important decision which
are useful for them to determine the actual profit generated by during the year (Morales and
Lambert, 2013). For this they may use both absorption and marginal costing to determine actual
net profit for the company. The one which provide more accurate outcome is been selected by
the managers.
M2: Different accounting techniques
` In order to get reliability, company can adopt various new techniques which can help
them to attain their targets in well organised manner. Some of them are control techniques: in
this techniques both standard and budgetary control techniques are used by management.
Statistical and graphical tools are used in order to make information more meaningful so that top
authorities can take necessary decision. Reporting can also be considered as one of the vital
techniques that provide data at different level of departments. All these important techniques are
more useful for taking valuable decision regarding performance analysis of the company.
D2: Critical evaluation of income statements
According to the above mentioned data which is used in order to calculated net profit by
using two of the best methods such as absorption and marginal costing. Both these methods are
more effectively used by the company, the results was more different from either of them. If they
are going with absorption costing they are 7500 of net profit with 500 units of actual sales.
Likewise, if they are using marginal costing they are incurring 7800 of profit with the same level
of units. By comparing both of them total earning is generated was around 300. The best option
for Unicorn grocery is to go with marginal costing.
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TASK 3
P4: Benefits and limitation of using planning tools
The performance of company is decided by using effective planning tools. As because
they are useful and accurate to in decision making process. The stability and growth are based on
financial statements that are drawn from using necessary tools in it. But before determine
planning tools first of all it is important to know about budgets and its control measures.
Budgets are considered as an estimation of total profit which is based on company's total
revenue and expenditure incurred during the particular period of time. The main purpose of
budget preparation is to have effective used of funds in the business (Baldvinsdottir, Mitchell
and Nørreklit, 2010). It is a kind of system for allocating necessary capital that are based on
expenses required in a fair and transparent manner in order to avoid collective gap and horizontal
imbalance.
Budgetary control: It is related with the utilisation of comprehensive method of
budgeting to assists top level departments in carrying out its regular functions such as planning,
coordination and effective control (Budgetary Control, 2017). It mainly associated with
following aspects:
 It will help to divide organisation on functional basis into various sub sections which are
considered as budget point.
 It is responsible for preparation of individual budgets for every budget points.
 Difference of actual level of activities in accordance to other related budgets.
The prime objective of unicorn grocery is to maintain proper balance and control among
various operations which are perform by company with its available data. It entirely based on
perfect control mechanism that help the department to regulate its daily business operation so
that future aims and goals.
Process of budgetary control:
Establishment of a strategies or target of performance: Under this step, an estimation
of ideas which are required for the better company position are determine by using a correct
budget plan. It consists of various activities of businesses that are essential for the development
of growth opportunities for the company (Fullerton, Kennedy and Widener, 2013).
Record the actual performances: All the main decision are relies on the techniques and
tool used by the company under their budget preparation. They need to first record actual
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performances of each and every department so that any estimation of exact data can be
determined
Comparison of actual with the planned: The next stages in budgetary control process is
to be compare outcome from actual performances with the planned one. It will help to analyse
various variable costs and budgeted costs of sales. It is mainly based on actual and standard
costs.
Determine difference, or other variance: The other process is to review the difference
that are present after actual and standard performances. For this purpose, a person is appointed in
relation to judge results collected from variance of actual budget with budgeted one.
Respond immediately, if required: It if related with final process in budgetary control
that consists of reviews and evaluation of data collected. If any changes are required in it are
changes under this process.
Planning tools which are used by managers are:
Operational budgets: This particular budgets are responsible for analysing cost and
expenses that are incurred by company during production process (Cinquini and Tenucci, 2010).
How company is using their cost over other production of extra units. On the other hand, it is
known as annual budgets of an events that are based on various situation in which budgets are
classified.
Advantages
The profitability of company can be achieved by using regular report on monthly, yearly
basis.
Disadvantage
It is different to prepared as it required more costs and time.
Examples:
Sales budget:
Particulars March April May June
Sales units 12000 21500 25500 30800
Selling price p.u. 12.8 12.8 12.8 12.8
Total sales value ($) 153600 275200 326400 394240
Production budgetary:
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Particulars April May June
Forecast sales in units 12000 21500 25500
Add: closing sock 4500 5450 6160
Total units 16500 26950 31660
Less: opening stock 4220 4480 5210
Production units 12280 22470 26450
Cost P.U. 8 8 8
Total cost of production 98240 179760 211600
Purchase budget:
Calculation of purchases for Quarter ending December, 2016
Particulars October November December Quarter
Sales ($) 55000 60000 62000 177000
Add: closing stock 4250 5500 5200 5200
Total 59250 65500 67200 173200
Less: Opening stock 4000 4250 5500 4000
Purchases (units) 55250 61250 61700 169200
Static budget: It is refers as that budget which cannot varies with the changes in total
quantity and size. It is anticipated costs based on inputs and outputs that are collected by the time
of various new situations.
Advantages
It is useful in more complex kind of situation in which values are taken on assumption
basis.
Disadvantage:
It is considered as inappropriate techniques to measure cost to the company. Because of
having very limited sources.
Cash budget: It is related with that cost which are collected by the company from
various activities such as operating, investing and financing (Luft and Shields, 2010). The main
purpose of using this budget is to analyse the total cash inflows and outflows done during the
year.
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Advantages
Positive results are generated by using effective data regarding cash-flows that are used
by managers in order to analyse their company performances.
Disadvantage
It is not as effective as other budget because if payback time is reached the there is no any
use of this budgets.
M3: Critically evaluation of planning techniques
For the making of any business more successful, planning tools are more effectively
used. In order to get more better outcomes they need to analyse performance of the company by
using master budgets, cash budgets and many more. Some other are operating budget which is
helpful in analysing total sales and cost expenditure done by company over production of each
units. The maximum profitability targets can only be attain by using cash budgets and static
budget too.
D3: Effective tools to reduce financial issues
In an organisation, they are facing various financial issues which are affecting the
profitability of the company. The major impacts are seen over sustainability of company as they
are not able to fulfil their necessary requirements. For this purpose, company is using balance
scorecard to reduce some sorts of issues so that there objectives can be attain on time.
TASK 4
P5: Financial issues which are present in organisation and measures to reduce them.
It has been found that most of the company's such Unicorn grocery they are facing the
problem of less profit which lead to affect their performance and growth in the market. They are
not able to attain competitive advantages from other (Macintosh and Quattrone, 2010). The
issues are associated with financial as well as non-financial. It is need to be solve in more quick
time so that maximum results can be attained. Some of ways to determine those issues are with
the help of proper comparison with others.
Comparison among 4com and unicorn grocery
Unicorn grocery 4Com plc
The major target of the company is on its Because of small scale operation they need to
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operational areas where maximum chance of
problem can be arises.
target there entire level with effective decision
making system.
Analysis of data is based on historical and
present year performances that are collected by
the managers.
Monitoring of performance by using KIP and
other financial techniques that are essentials for
detecting issues.
Under this, top level management need analyse
actual performance with the standard so that
valid conclusion can be drawn.
Continuous analysis of financial information
are done by mangers so that less chance of
problems can be arises.
M4: Analysis of financial problems
The major issues are associated with the risk that are present in an organisation project.
There is a variety of risk which consists of financial risk, political risk and regulatory risk and
other external risk related with development of company's goodwill. The concern management is
responsible for determining various risk so that maximum profitability can be attain. Some of
them are Key performance indicators, financial governance and benchmarking which are used by
company to solve various financial problems which are present in an organisation.
CONCLUSION
From the above mentioned project, it has been concluded that management accounting is
an essential aspects of any business to manage their business performances. The project
summarises various accounting and reporting system which are useful for increasing profitability
of the company. Few costing methods are also being used in order to analyse net profit of the
company. Further, this will explain various planning tools that is used in budget preparation with
its advantages and disadvantage. Comparison with other company regrading various financial
problems and measures to overcome those are discussed under this project.
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