Evaluation of Financial Problem

The provided project report discusses the importance of effective accounting systems and reporting in increasing profitability for an organization. It covers different costing methods such as absorption costing and highlights the merits and demerits of using planning tools to control future impacts. The report also references various studies on management accounting research, including the use of partial least squares structural equation modeling (PLS-SEM) and the impact of enterprise systems on management accounting.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
SECTION 1......................................................................................................................................1
P1: Information about management accounting and their significances................................1
P2: Various method of accounting reporting use in an organisation......................................3
M1: Benefits of using management accounting system.........................................................4
D1: Critical analysis of accounting and reporting system......................................................5
P3: Various costing method used to calculate net profit for the company.............................5
M2: Analysis about various types of accounting techniques.................................................8
D2: Reconciliation and interpretation of income statements.................................................8
SECTION 2......................................................................................................................................8
PART A...........................................................................................................................................8
P4: Advantage and disadvantage of using planning tools use in budgetary control..............8
M3: Analysis of planning tools..............................................................................................9
D3: Critical analysis of financial problems............................................................................9
PART B............................................................................................................................................9
P5: Different types of financial problems and measure to overcome them...........................9
M4: Evaluation of financial problem...................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Accounting is an essential aspect for an organisation to record and evaluate various financial
transactions those are being done in a financial period of time. Management use to provide right
direction to their business so that future aims and objectives can be attain in more quick time.
The primary motive of an organisation to make use of all necessary information to record in their
respective formats by using appropriate accounting systems and reporting methods. This project
is divided into two sections. In the initial parts, vital information about benefits and analysis of
using both reporting and accounting systems are discussed under this project. While the other
sections are examining various costing methods those are use for the calculation of net
profitability for an organisation. Whereas advantage and disadvantage of using planning tools are
explained in more effective manner. Certain analysis related with financial issues and measure to
overcome those is mentioned in this project (Burritt and et. al., 2011).
SECTION 1
P1: Information about management accounting and their significances
Nowadays, it has been determine that management is always trying to make use of
appropriate accounting software that would be effective enough to record and analyse financial
transactions that are being done in an accounting period of time. All collected information from
various sources are taken into consideration while making preparation of various important data
into their respective set format. The primary motive of account managers of the cited company is
taking certain responsibility to keep material accounting data in regards to investors, customers
as well as other outside stakeholders. They are helpful for parties to take necessary decision in
respect to get more optimistic outcome in coming time. By the helpful of accounting systems
which enable managers to targets on an significant aspects that can assist an organization to
bring maximum growth opportunities to the company (Chen and et. al., 2011). There are few
benefits in case manager’s uses to adopt management accounting systems are discussed
underneath:
Enhance their overall efficiency: This seems to be utmost important chance of increasing
wide range of business activities in regards to attain desire aims and objective within a set period
of time.
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Evaluate performance: It assist managers to analyse the overall performance and growth
potential for employees by making comparison with actual results through taking standard
outcomes.
Valuable management control: In case company make use of appropriate management
accounting system, the managers can assist and control their overall expenses those are incurred
during the time of production process so that their overall performances can be management in
more effective manner (Soin and Collier, 2013).
Management accounting Financial Accounting
Under this accounting system that is helpful
in delivering material data with the use of
appropriate accounting policies and strategies
in respect to attain business in effective
manner.
In this particular accounting which is
beneficial in formulation of final account
with the aim of delivering financial
information for an organisation as well as
outside parties.
This will guide to analyse both financial and
non-financial data about their ongoing
business activities.
Under this, accountant would be able to
analyse only financial information about the
company.
The primary aims of management accounting
are to manage and develop effective decision
through delivering crucial data on regular
basis.
The basic purpose is to provide financial data
to external as well as internal department of
an organisation.
According to this report which is prepared to
fulfil requirements as useful example to the
company.
It is more necessary form company side to
prepare financial records on yearly basis.
Types of accounting system
Price optimisation: According to this particular accounting system which would be
useful for a managers to determine an effective prices for increase interest and value to their
stakeholders and customers at the same point of time. The overall perception of customers can
easily be determined that what they think about different prices of products that are being set by
an organisation.
Cost accounting system: As per this system, management would be able to collect all
necessary information about cost and expenses that are incur during the time of production
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process. Its main objective of adopting these kind of systems is to overcome the costs and all
resources those are use on maximum level. These are directly related with the production process
of an organisation.
Inventory management system: This seems to be more useful system which is use to
track appropriate movement of product those are being used in their operation management of
production of products and services. By the help of this particular accounting Systems Company
would be able to determine level of inventory present in warehouse in order to avoid situation of
wastage in manufacturing of products and services during the time (Vakalfotis, Ballantine and
Wall, 2013).
Job costing system: It refers to be utmost important accounting tools under which the
total cost allocated for the objective of finishing particular project activities are taken into
account. This will assist in deciding the cost to a customer’s which is required to execute a
particular project or goods.
P2: Various method of accounting reporting use in an organisation
In every business organisation, whether related with retail and production industry they are
able to attain their future aims and objectives in more effective manner. For the purpose of
getting proper analysis of their financial position they need to prepare reports on the basis of
collected information. Reporting is utmost important collection of financial data during an
accounting period of time. Every organisation those are operating is small or large sectors are
needed to adopt effective reporting system. By the help of using these reporting systems is
having wide range of benefits that are obtained by an organisation such as planning for future
decision, disbursement of important data and responsibility by the managers in order to improve
financial decision. This seems to provide more valuable opportunities to management of NERO
Ltd to attain their sustainability and financial growth for the company (Lukka and Vinnari,
2014).
There are large number of organisation which is held responsible for analysing their
performance through using job cost, budget performance and inventory management reporting.
Various kind of reports are having their certain crucial benefits to the company in near future
time. It also assist in maintain valuable communication and coordination between other
department that are responsibility for increase goodwill for the company. Reports are more
essential aspect for the company. Most of the investors and stakeholders make use of data in
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order to take crucial decision regarding capital investments into their upcoming projects. There
are various types of reporting method is needed to be analysed. Some of them are discussed
underneath:
Performance report: According to this particular report which is being prepared by the
company by taking certain information about past data and make comparison with using present
data. Such kind of reports is prepared on regular basis from collecting regular feedbacks from
employees. Such information is ascertainment of all problems that are present at the workplace.
This seems to be primary main role of managers is to apply various method and plan to attain
future aims and objectives in coming time.
Job cost report: It is known as one of the major reports that are associated with
controlling costs which a company need to deal with at the time of execution of any new
projects. Such kind of reports are useful for determining total cost a company is bearing to
produce a group of products during the period of one year (Zang, 2011).
Account receivable report: Such kind of report is useful for an organisation to analyse
total lists of unpaid invoice details of customers and credit memos. It is used to determine total
time duration which is needed to debtors to return their overdue amounts. By the help of this,
management of an organisation need to take crucial decision in relation to change in their credit
terms and condition and boost their collection duration process.
Inventory management report: As per this particular accounting report which is being
prepared by an organisation to manage and control overall flow of stock from the company. All
essential detail about opening and closing entries of inventory that are being kept by an
organisation are discussed under this report. There are some effective techniques that are
essential for the mangers to taken into account such as LIFO, FIFO, EOQ and Inventory turnover
ratios.
M1: Benefits of using management accounting system
According to the attainment of better outcomes for the company, it is essential for them to
make use of appropriate accounting systems that are able to attain more desirable outcomes in
near future times. All the above discussed accounting systems are having their own benefits and
limitation. Such as in case of using price optimisation system a company would be able to
determine customer perception that about various price they wants to be paid for their products.
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Whereas in case of inventory management system which is used to record and analysis various
data about stock position of the company are mentioned effectively under the reports.
D1: Critical analysis of accounting and reporting system
In accordance to increase profitability for Nero Ltd they need to make use of appropriate
methods and techniques that can have the ability to make company more better in coming period
of time. All those mentioned reports are having advantages that can help managers to increase
their overall growth and stability in coming future time. However, performance report is one of
the important reports which use by an organisation to analyse actual and standard outcomes that
is being followed during an accounting time. While account receivable is another important
report that is prepared to analyse total time duration debtors are taking to make payment of their
outstanding amounts (Moser, 2012).
P3: Various costing method used to calculate net profit for the company
Cost is an essential aspect for an organisation which is direct related with the production
process. It is the value of amount that is being charged by the company in accordance with the
getting something in return. This can attain in increasing overall growth and efficiency of the
company in more effective manner. There are various types of costing that can be used by an
organisation in order to attain more desirable outcomes in coming time. Some of them are
mentioned underneath:
Absorption costing: It is known as one of the most effective costing which is helpful to
increase the profitability position of the company (Absorption costing. 2012). These are related
with all manufacturing costs. Both variable and fixed costs are taken into account in order to
produce a product. Because of this it is known as full costing method. It does not taken into
account as more effective costing method for future decision making.
Marginal costing: It is said to be that particular cost which is applicable in the time of
production of one additional unit of products during the time. It is used to taken into account
only variable cost and fixed costs are not considered. It is more reliable and accurate costing
techniques which would provide more effective results for the company.
These two above costing is helpful in calculating net profit for the Nero Ltd through
preparing income statement of the company (Quattrone, 2016).
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Quarter 1
Particulars Amount (in ￡)
Sales 66000
Less: Cost of sales
Opening inventory 0
production cost (78000*0.65) 50700
Less: Closing stock
(12000*0.65) 7800
42900 42900
Contribution 23100
Less:
Fixed overhead 16000
Fixed & selling expenses 5200
21200
Net profit 1900
Quarter- 2
Particulars Amount (in ￡)
Sales 74000
Less: Cost of sales
Opening inventory
(12000*0.65) 7800
production cost (66000*0.65) 42900
Less: Closing stock
(4000*0.65) 2600
48100
Contribution 25900
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Less:
Fixed overhead 16000
Fixed & selling expenses 5200
21200
Net profit 4700
Absorption costing for Quarter
1:
Particulars
Amount
(in ￡)
Sales 66000
Less: Cost of sales
production cost (78000*0.65) 50700 0
Semi-variable (78000*0.20) 15600
Total Variable cost 66300
Less: Closing stock 10200
56100
Gross profit 9900
Less: -400
9500
Selling and distribution as fixed 5200
Net Profit 4300
Absorption costing for Quarter
2:
Particulars
Sales 74000
Less: Cost of sales
Opening stock 10200
COGS (66000*0.20) 13200
production cost (66000*0.65) 42900
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Total Variable cost 66300
Less: Closing stock 3400
62900
Gross profit 11100
Less: selling expenses -2800
8300
Fixed expenses 5200
Net profit 3100
Working note
Fixed costs 16000
Budgeted cost of production
80000
per units
Budgeted fixed cost 0.2
Variable cost per units 0.65
(b): Evaluate variation in the gains:
It is an essential aspects for an organisation to evaluate net profit for the company, it has
been seen that both costing methods are delivering individual differences for an organisation.
These will be increase fixed costs adjusted accordingly (Wickramasinghe and Alawattage,
2012).
M2: Analysis about various types of accounting techniques
In accordance with making proper analysis of the company’s performance, it is necessary
to make use of appropriate accounting techniques. There are various types of tools and
techniques which are liable for the company to attain future aims and objectives in more quick
time. Such as financial planning tools, budget analysis, standard cost and historical costing.
These tools are more reliable and effectively helpful to attain more valuable growth for the
company in coming time.
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D2: Reconciliation and interpretation of income statements
Q1 Q2
Variable costing profit 1900 4700
Opening inventory 0 7800
Closing stock 7800 2600
Absorption costing profit 4300 3100
Opening inventory 0 10200
Closing stock 10200 3400
` From the above reconciliation, it has been found that the total absorption profit they are
able to earn is about 4300 and 3100 on their total sales amount.
SECTION 2
PART A
P4: Advantage and disadvantage of using planning tools use in budgetary control
Planning is an essential aspect for an organisation, it is used to make analysis of budgets
that are profitable for the company during the period of time. Some of them are discussed
underneath:
Forecasting tools: It is known as utmost important tools which is useful to estimate total
costs and expenses incurred during the period of time. They tends to required to be compare it
with previous performance in more reliable manner.
Advantages: This will be assist in maximising value to stakeholders and wealth
maximisation for the company.
Disadvantage: It would be hard to estimate future results. In some situations, it is not so
effective (Hansen, 2011).
Contingencies tools: It refers to as one of the most effective planning tools which is more
reliable to detect all kind of risks that are present with the company. This is done in accurate
manner to determine risk that are affecting overall productivity of an organisation.
Advantages: This happens to remain more similar in any sort of problems that are arises at
the time of making effective planning process.
Disadvantage: It is too costly and more difficult and time consuming activities for an
organisation.
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M3: Analysis of planning tools
In accordance to enhance efficiency of an organisation, it is the most effective tools to
make use of resources in effective manner. The company Nero Ltd can use the financial tools to
make valuation of costs and expenses that are incurred during manufacturing of products and
services.
D3: Critical analysis of financial problems
In every business organisation, it has been seen that financial issues are making huge
impacts on the performance of Nero Ltd. The responsibility of managers need to make use for
effective tools that can assist in resolving financial issues for an organisation.
PART B
P5: Different types of financial problems and measure to overcome them
In every business enterprises, it has been found that there are various financial issues that
are affecting overall growth and performance during the time. The major issues are:
Profit level: In case the company is not able to sell sufficient amount of products into the
market. Then it is hard to lead in order to make analysis of impacts on the profitability for an
organisation (Sisaye and Birnberg, 2012).
Product and quality services: It is mostly associated with overall reputation of Nero
Ltd. If they are not being able to manage their funds in well effective manner. This can create
more influences over the company.
These above mentioned issues can easily overcomes by using appropriate financial tools
and techniques. Some of them are discussed underneath:
Key performance indicators: It is consider as well organise valuation techniques that is
used by manager to analyse previous performance with to that in current time. This will assist the
company to analyse various aspects in order increase the company wealth.
Financial governance: It is stringent set of various rules and regulations those are issued
by local government to make ensure that financial processes can be manage in effective manner.
This will help an organisation to regulate their operations in more effective ways (Nitzl, 2016).
Nero Ltd Unicorn grocery
It is helpful to analyse their operations in
order to get more effective results by
The company is using cost accounting systems
to deal with all kind of financial issues those are
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following basic standards. arises in an organisation.
Financial governance is an effective tools to
resolve financial problems those are related
with their day-to-day operations.
With the use of KPI and benchmarking tools
they are able to resolve all kind of issues those
are making impacts on the businesses.
M4: Evaluation of financial problem
There are various financial issues that are affecting the productivity for an organisation.
Some of them can be resolve by using budgetary techniques, financial governance and
benchmarking tools. All these can be manage through using balance scorecard methods.
CONCLUSION
From the above project report, it has been concluded that management is always in search
of using most effective accounting system and reporting that are helpful in increase profitability
for an organisation. Various costing method can be used to calculate total net profit incur during
the time. With the help of merits and demerits of using planning tools company would be able to
control their future impacts.
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