Management Accounting: Essential Requirements and Methods

This document provides an overview of management accounting and its essential requirements in NISA retail store. It explains different methods used for management accounting reporting and calculates cost using cost analysis to prepare income statements of marginal and absorption costing. The document also discusses the benefits and implications of management accounting systems and the integration of management accounting reports and systems.

MANAGEMENT ACCOUNTING

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Explaining management accounting and give the essential requirement of different types of
management accounting systems to NISA retail store................................................................1
P2 Explaining different methods used for management accounting reporting in NISA retail
store..............................................................................................................................................4
M1 Benefits and implication of the management accounting systems........................................5
D1 Critically examining the integration of management accounting reports and systems.........6
TASK 2............................................................................................................................................6
P3 Calculate cost using cost analysis to prepare income statements of marginal and absorption
costing explaining difference between them...............................................................................6
M2 Applying management accounting techniques and financial reporting documents..............8
D2 Interpretation of accurately applicable financial report for NISA Retail store......................9
TASK 3............................................................................................................................................9
P4 Explaining merits and demerits of types of planning tools used for budgetary control for
NISA............................................................................................................................................9
M3 use of various kinds of planning tools in producing adequate budgets for NISA Retail
store............................................................................................................................................11
D3 Analysing Planning tools leads to the sustainable success..................................................11
TASK 4..........................................................................................................................................11
P5 Comparing the ways in which NISA adapt management accounting systems to respond to
financial problems.....................................................................................................................11
M4 Evaluating the importance of management accounting systems in sustainable success and
overcoming financial obstacles..................................................................................................12
D4 Analysing the importance of planning tools in overcoming the financial problems of NISA
retail store..................................................................................................................................12
CONCLUSIONS...........................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is playing key role in organisation and helping decision
makers to understand in creating and using good management accounting information.
Management accounting help the management with providing them financial and non
financial information with assist them in making and implementing decisions. Good
management accounting system will include the techniques of accounting like that of cost to
volume profit analysis, marginal costing and absorption costing in producing the relevant
management report for informed decision making. The present report is based on NISA retail
store which is a small grocery store both retailer and wholesaler operating in UK. The report
will cover how NISA store is applying and using the management accounting techniques and
financial reporting. It will also cover the types of planning tools used for budgetary control
used and preparing income statements by calculating cost methods.
TASK 1
P1 Explaining management accounting and give the essential requirement of different types
of management accounting systems to NISA retail store.
From: Management accounting Officer
NISA store
To: GM
NISA store
Subject: Requirements within implicating the a variety of management accounting tools with
techniques
Introduction:
Sir,
It is hereby informed you that, NISA store is without fail generating positive earning
as well as creating a exclusive brand representation in the at hand opposition surroundings
where numerous huge retail store entity are making their existence. Therefore, in terms of
developing the working performances of NISA store the there is require to take on different
improvements in the budgetary systems, cost control technique with enhancing work
efficiency of the personnel. so, in keeping with various types of managements accounting
systems which are necessary used for following the NISA store operations such as:
1

Figure 1 Types of Management Accounting
[Source: Types of Management Accounting. 2017]
Activity management: Is a functional department in NISA store that monitor the largely
those activities which are performed by manager or workers in NISA store (Messner, 2016).
For this reason, there would be various types of functioning tasks which necessitate usual
look up such as manufacture and purchase of commodities and services. Though, by way of
the assist of normal execution managers could observe the employees in addition to inspire
them to create labours to give the excellence execute.
Investment management: during direct towards manage the obtained finances as of equity
of owner with the investment of shareholders and the duty, NISA store can employ that
funds in satisfactory method as well as think about the actual outputs they contain due to
those investments. Although, if NISA store is doing investments in innovative operational
activities as well as scheduling to create growth after that they must examine the definite
requirements of such funds.
Cost accounting/management: With observing the requirements of expenses plus capital at
2

hand will be need to monitor the expenditure requirements in the NISA store. Therefore,
there will be diverse functional departments which involve enhancement by the skilled in
creation of sufficient requirements of the expenses and finance for NISA store (Renz, 2016).
So, there will be a mixture of costing techniques for example activity based costing which
indicate the costs incurred at what time producing a component of manufactured goods such
as wages, compensation, rewards, gratuity above the workers or labours as well as pay for of
material, transactions among supplier etc be the major operational areas which requisite high
pricing or appraisal.
Taxation: There have been a range of functioning activities so as to take place throughout
the year like profits collecting and spending. Hence, these are the responsibilities of the NISA
store in filing the expected tax returns as well as remain up to date with the altering policies
and procedures in such manners. As a consequence, in favour of NISA store there will be
transactions connected with a range of products and service plus in background with that they
all contain diverse tax rates which are legislated by confined or central government in UK.
Thus, it will be essential in support of the accounting managers to formulate analysis of all
the levy charge has been rewarded by them as well as check such business.
Financial accounting: Management accounting is also the division of financial accounting
systems. From now, it can be said with the intention of if the inner authority of NISA store is
improved and strong than the firm be able to convene the outside requirements. Thats why,’
with the aid of management accounting tools convenient will be augment in presentation and
competence of NISA store as well as it will assist in getting better the output of business and
attractive employees to create the precious hard work in the background with attaining the
goals.
Internal Audit: frequently monitoring the company transaction on the source of periodical
audit which have to be prearranged twice or thrice in a year will help out NISA store to make
the enhanced study over the revenue and expenditures of all. So, there may be requirements
of different managers, auditor and book-keeping professionals in performing such tasks
(Fullerton, Kennedy and Widener, 2014). It might be supposed such techniques will facilitate
professionals in making adequate decisions to carry-on any duty or stop investing in non
profitable business operations.
3

P2 Explaining different methods used for management accounting reporting in NISA retail
store.
From: Management accounting Officer
NISA retail store
To: GM
NISA retail store
Subject: Requirements of implementing different reporting systems
Introduction:
Sir,
Within consideration by the various functional performances of the NISA Store it can
be supposed that readily available are requirements of having usual exposure from all the
department in NISA store which in turn obliging for business in utilising the effectual efforts
in company operation such as:
Illustration 2: Kinds of various accounting reports
Job Cost Report: This report is equipped on the source of analyse the job or routine made
throughout the phase as well as the operation of expenses for such functioning performance.
Hence, these techniques aid in recording each and every one the transactions which be
supposed to create the moving business activities. Accordingly, around will be expenses
which are applicable by means of the job cost report.
Inventory and Production Reports: book-keeping professionals require recording all the
transaction which are applicable to the manufacture and bring in of raw materials. for this
reason it would be helpful for NISA Retail store to carry out the real requirement of the
resources in the functioning conduct of NISA Retail store. It will be productive for
4
Job cost report
Accounts receivable aging
report
Inventory and
production report
Budget report
Management accounting

supervision the capital as well as dropping the wastage. On the other side in background with
the requirements and stress in NISA Retail store about products and services that there is
require containing appropriate storage of such goods (Pemsel and Wiewiora, 2013). As a
consequence, these information surround every single of the correlated in command linked
with the value or commodities and their price as well as the nature such as fresh or non
perishable. Consequently, these tasks need the staffing of the fit scrutiny teams who seem for
such requirements of products as well as evidence all the dealings of unit.
Budget Report: This technique belong to the evidence of the business which be to be made
surrounded by the decided restrictions as well as get-together the sufficient quantity of
earnings for making the extended term investments in the prospect. for this reason, this
method reimbursement managers in monitor all the working budgets such as currency, sale,
purchase etc. which in turn helps the definite in manufacture spending in the pertinent time
period.
Accounts Receivable Aging Report: There always will be a choice of debtors NISA Retail
store which are growing the amount overdue in the company's financial records. Hence, these
technique assist the firm in measuring the short term and long term amount outstanding that
be to be monitored by the professional as well as construct the effectual solution which in
turn helps in gaining the payments for such debts. Hence, it can be said that these reports
reimbursement NISA Store in manufacture the sufficient accounts of all the applicable
receivables for instance distributors, supplier and an assortment of functioning unit.
M1 Benefits and implication of the management accounting systems
Within agreement with the a mixture of remuneration of the management accounting
systems which be ready to lend a hand in attaining the business NISA Retail store objectives.
Therefore, readily available know how to be a variety of helpfulness of such activities which
lend a hand entity in meeting positive amount of revenue. It mostly facilitate in getting better
the money flows of NISA Retail store for example monitoring the inflows and outflows as
well as suggestive of manager in production productive efforts for to solve such related
obstacle. It has quite a lot of advantages such as:
 Be of assistance in falling the expenses and expenses incur in any tasks or
organisational operations.
5

 Advantageous in maintaining the money flow of definite as well as increase the
productivity.
 Helps in sufficient decision making over and above solution for overcome and
financial issue.
 It aid firm in contain sufficient amount or return which will be based on the
investment made by NISA store.
D1 Critically examining the integration of management accounting reports and systems
In consideration the management accounting systems at hand will be power of various
tools such as currency management, inventory management in addition to budgeted controls.
consequently, in the reporting technique convenient has be influence of a range of reporting
techniques which one after another used to put in direct information of such activities which
supposed in NISA Retail store. for this reason, it know how to be supposed that NISA Retail
store have got to focus over measure the transaction and present information over the same
(Hopper and Bui, 2016). Hence, it will be advantageous for professionals to create the
required change in such performance as well as it also improve the work good organization of
workforce towards achieve NISA Retail store aims.
TASK 2
P3 Calculate cost using cost analysis to prepare income statements of marginal and
absorption costing explaining difference between them
Marginal costing: This technique be of assistance in measuring the profits and expenditure
incurred more than the functioning activities of business for the duration of assessments
year. For this reason, it considers the direct expense such as material costs, labour costs
in addition to overhead expenses. as a consequence, the computation for the NISA store's
income statement scheduled the basis of Marginal Costing technique such as:
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PARTICULARS
Sale revenue on production 600*35 2100
Cost 700*13 9100
Less: cl. Inventory 100*13 1300
variable expenses 7800
per unit contribution 13200
less: variable overheads on sales 600*1 600
less: fixed expenses
overheads for production 2000
fixed cost on selling 600
fixed cost administrative 700 3900
NP 9300
Income statement of
Unicorn retail store on the basis of
Marginal costing
Amount
(£)
Amount
(£)
Explanation: In agreement by means of the on top of listed table that reflect operational
activities of the NISA Retail Store which is in turn among investigation the various costs
and gains of NISA Retail store. Hence, the sales revenue of the NISA Retail store was
2100 on the charge of 35 per unit which embrace the cost of 9100 at the rate of 13 per
units. From now, the finishing inventory of the NISA Retail store which was outstanding
at the ending of the year is 100 units valued at the rate of 13 per unit. Nevertheless, the
gross profit margin/ contribution of the firm are 13200 which include conclusion of
Variable expenses moreover all the production costs commencing sales. Additionally,
the more calculation for net profit which indicate with the intention of changeable
overheads and fixed overheads must be abridged from such payment and the last Net
Profit edge was at 9300 has been calculated.
Absorption Costing: This technique help the person in computing the sufficient expenses
incur for such process. For this reason, the examination will be base over computing the
full manufacture costs which help in adding together the straight costs as well as
balanced of manufacture spending (Lock, 2014). Thus, the manufacture costs will be
compute over the number of transparency rates. Hence, readily available will be income
statement for NISA Retail store which point out the capacity for net profit.
7

PARTICULARS
Sale revenue on production 600*35 2100
Cost 700*16 11200
Less: cl. Inventory 100*16 -1600
Less: production overheads fixed -100
Cost of production 9500
per unit contribution 11500
less: variable overheads on sales 600*1 600
less: fixed expenses
fixed cost on selling 600
fixed cost administrative 700 1900
NP 9600
Income statement of
Unicorn retail store on the basis of
Absorption costing
Amount
(£)
Amount
(£)
Analysis: into harmony by means of the table listed on top of which point out the calculation
for NISA retail store with the help of using Absorption costing techniques. for this
reason, such techniques will be advantageous for in having the plenty amount of net
profit. On the other hand, the adding together up begin from sale of 600 units at 35
exchange price which fetch the proceeds of the organisation form 2100 and then there
will be deduction of cost, ultimate inventory and fixed manufacture overheads which
convey the full amount payment for 11500. After encompass such involvement per unit
all the expenditure will be deductible on or after the outstanding amount which brings
the Net profit for 9600 in that order.
M2 Applying management accounting techniques and financial reporting documents.
From: Management accounting Officer
NISA retail store
To: GM
NISA retail store
Subject: Implementation of financial reports to cure with obstacles
Introduction:
Sir,
This hereby is to inform you that, in command to encompass the sufficient financial
enlargement of NISA Retail Store there is need to implementations reporting techniques which
in turn lend a hand NISA Retail store in encompass improved execution over such tasks. for this
8

reason, this can be possible with the use of several reporting techniques such as:
 Sales budgets
 Operating report
 Cash flow budgets/report
 Purchase budgets
D2 Interpretation of accurately applicable financial report for NISA Retail store
The profits statement of the NISA Store has be considered by means of the help of
two differentiation assessment techniques such as marginal and absorption. Therefore
marginal concepts convey the end equilibrium for 9300 which was the left over net profit
behind deducting all the charge on or after the sales and revenue. At the same time as
computing the net profit from absorption techniques the remaining profit can be got by the
operational manager such as 9600. Thats why it can be thought that in accordance with’
contain the sufficient income convenient is require to put into practice the Absorption costing
techniques.
TASK 3
P4 Explaining merits and demerits of types of planning tools used for budgetary control for
NISA
Incremental budgeting
In this type of budgetary control technique previous year budget or actual
performance is taken as base and then incremental amounts are added for the new budget
year. In incremental budgeting the resource allocation is based on the previous years
(Henderson and et.al., 2017). This help in making small changes in the existing budgets for
arriving at new budgets by only adding to arrive at the new budgeted numbers. Previous years’
budget becomes the base for current year budget and current years budget is taken as the base’
to prepare next year's budget and resource are allocated accordingly. The advantages and
disadvantages of incremental budgeting are as follows:
Advantages
Simplicity- as in this last years budget is taken as the base so this is very easy and simple to’
understand as the accountant already knows about the last year's budget. So this budget is
also easy to compare with others and easiest to put in practice.
9

Gradual change- as last year's budget is taken as the base and into that some amount is added
so this is very stable budget from one period to other (Guinea, 2016). Incremental budget
allow gradual change in NISA and there will not be much problem as budget of previous year
is taken as base.
Flexibility- all the changes can be seen clearly and new policy also can be implemented
quickly. So incremental budgeting is flexible to implement.
Avoid conflict- the problems and conflict between the departments are minimised as there are
no different budgets for them. It is easier to keep all the departments on the same level to
avoid conflicts among them.
Disadvantages
No incentives- it does not provide employees to be creative so without any innovation they
do not get the incentives from management.
Activity based budgeting
In this kind of budgeting system all the budget is allocated on the bases of activities in
the organisation and Activity based costing is an accounting means which assist in identify
the activities which a firm execute and assigns indirect cost to products (Drake, Roulstone
and Thornock, 2016). It recognises the association among the costs, activities and products.
Advantage:
Accurate product cost: Activity based costing brings accuracy and reliability in product cost
determination through focusing on cause and effect relationship in the cost concurrence.
Information about cost behaviour Activity based costing helps in identifying the real nature
of cost behaviour and support in minimising the cost and find out the activities which do not
add value to the product.
Disadvantage:
Expensive and complex: Activity based costing is having many cost pools and as a result can
be additional composite than traditional product.
Selection of drivers: several problems come into view in the functioning of Activity based
costing system, such as collection of expenditure drivers, assignment of ordinary costs,
altering cost driver rates etc.
Zero base budgeting
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Zero based costing is the process of budgeting in which different expenses are
warranted intended for all new period (Collier, 2016). It is started from a Zero based and all
the function within an organisation is analysed with its needs and costs.
Advantages:
Mostly help out the firm in distribution of financial statement for the expenses and also make
available a projection of appropriate funds for the performance that needs to be proficient.
Disadvantages:
Expensive and complex Zero based costing has a lot of cost pool and as a result can be
additional compound than usual product.
M3 use of various kinds of planning tools in producing adequate budgets for NISA Retail
store
Strategic plans: The strategic plan normally engages planning at the peak institutional level
of an association. Strategic plans describe the organizations long-term vision and how the’
association propose to create its vision a authenticity.
Operational tools: These are in addition well thought-out as main tools with the intention of
requirements to be implementing by the NISA retails store in order to plan their financial
plan.
D3 Analysing Planning tools leads to the sustainable success
There are a range of development tools like deliberate; planned that also helps the firm
in creation suitable share of reducing the price of operation within the association as well as
attainment of sustainable enlargement in company functions.
TASK 4
P5 Comparing the ways in which NISA adapt management accounting systems to respond to
financial problems.
Financial governance:
There are obligation of managing the financial domination of NISA Store such as
implementation of an assortment of guidelines and procedure in the organisation which in
turn imitate the better managements of such process (Collier, 2015). Hence, it can be said that
the managers, directors, supervisors as well as different managerial heads in the firm must
make better carrying out as well as get hold of the management quality. The major function
of financial governance are the requirements which all the financial process should be
11

managed as according to a rigorous set of regulations and then backed with the exact
reporting capabilities.
Key performance indicators:
In direct to add to the job good organization in the building as well as attractive
employees to create expensive labours there is require expanding diverse presentation
indicator which in turn helps the firm in examine the sufficient requirements of the labours.
Hence, this will be beneficial in improving the quality of work (Campbell and et.al. 2014).
The key performance indicators are measurable value of how effectively that company is
achieving all aims and objectives which they need to evaluate their success.
Benchmarking:
Into order to improve the employment competence in the premises as well as
interesting workers to make expensive efforts there is necessitate expanding various
performances display which in turn helps the firm in scrutinize the enough requirements of
the hard work. For this reason, this will be advantageous in recovering the quality of work. In
benchmarking the companys processes and performance are indicated according to the’
industries set guidelines.
M4 Evaluating the importance of management accounting systems in sustainable success and
overcoming financial obstacles
During direct to have the sufficient decision making as well as contain the improved
sustainable enlargement there is need to put into practice various administration costing
techniques such as budgeting and the performance indicator (Bennett and James eds., 2017).
Consequently, such capacity will help in motivating staff in the functioning activities in firm
which in turn helpful for overcoming monetary problems.
D4 Analysing the importance of planning tools in overcoming the financial problems of
NISA retail store
through the facilitate of different performance judgment such as budgets for each
everyday jobs which in turn accommodating for making the sufficient decision for
administration. So, this will help in monitoring or implement all the business objectives of the
entity (Agrawal and Cooper, 2017).
CONCLUSIONS
From the above mentioned report it has been concluded which are appropriate with
the mixture of working aspect of NISA retail store in UK which has the exploitation of
12

various accounting techniques. And so, there were argument support on the more than a few
equipment and techniques which are applicable with the assessment, budgeting and the
financial problems. Hence, there will be necessary to make the sufficient decision making
which in turn advantageous in enhancing the job performance of the firm. supplementary
readily available has been a dimension of proceeds statement with the assist of marginal and
incorporation costing techniques which reproduce that the absorption system must be used by
professional as it bring most constructive results such as 9600. Other it will be optional to the
administration in circumstance with motivating the workforce for manufacture the important
hard work through the assist of various performance appraisals such as benchmarking, key
performance indicators, financial governance.
13

REFERENCES
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scandals: Evidence from top management, CFO and auditor turnover. Quarterly Journal of
Finance, 7(01), p.1650014.
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Campbell, J. D. and et.al. 2014. Burden of multiple sclerosis on direct, indirect costs and
quality of life: National US estimates. Multiple sclerosis and related disorders. 3(2). pp.227-
236.
Collier, P. M., 2015. Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Collier, P., 2016. Accounting For Managers Interpreting Accounting Information For
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Drake, M. S., Roulstone, D. T. and Thornock, J. R., 2016. The usefulness of historical
accounting reports. Journal of Accounting and Economics. 61(2). pp.448-464.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting
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Guinea, F. A., 2016. Study regarding the impact of cultural factors on management
accounting systems. The Audit Financiar journal.14(144).
Henderson, B. and et.al., 2017. Marginal costs of abating greenhouse gases in the global
ruminant livestock sector. Mitigation and Adaptation Strategies for Global Change.22(1).
pp.199-224.
Hopper, T. and Bui, B., 2016. Has management accounting research been critical?.
Management Accounting Research.31. pp.10-30.
Lock, M. D., 2014. The essentials of project management. Ashgate Publishing, Ltd..
Messner, M., 2016. Does industry matter? How industry context shapes management
accounting practice. Management Accounting Research. 31. pp.103-111.
Pemsel, S. and Wiewiora, A., 2013. Project management office a knowledge broker in
project-based organisations. International Journal of Project Management, 31(1). pp.31-42.
Renz, D.O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
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