Management Accounting Research Trends

This assignment delves into recent research trends within the field of management accounting. It examines a collection of academic papers published between 2015 and 2017, covering diverse areas such as performance-based budgeting, agile cost management, managerialist perspectives, and the impact of digitalization on management accounting practices. The analysis highlights key findings and emerging themes in the field.

Management Accounting

Table of Contents
INTRODUCTION......................................................................................................................3
P1. Explaining management accounting and give the essential requirement of different
types of management accounting system...............................................................................3
P2 Explaining different methods which are used for management accounting reporting.....5
P3 Calculating cost by using marginal and absorption system..............................................5
P4 Explaining the advantage and disadvantages of different types of planning tools used
for the budgetary control........................................................................................................6
P5 Stating the management accounting system that is used to resolve financial problems...9
CONCLUSION........................................................................................................................12
REFERENCES.........................................................................................................................13

INTRODUCTION
Over the years, with the rising competitive challenges and market uncertainties, now-
a-days, managers started playing an important role in the business success. Managers gather
wide range of information to assess & examine the organizational performance, sales records,
cost sheets, financial reports and others for making suitable strategies & excellent growth
plans. This assignment will focus on the small sized business, Unicorn which is a retail
organization and delivering retail services to the consumers across UK. The present
assignment will emphasize upon different types of management accounting reporting and
systems, budgetary tools and absorption and marginal costing methods for figuring out the
cost of production, cost of goods sold and ascertainment of yield as well. Lastly, it will
presents analysis of various tools like ratio analysis, capital budgeting techniques and others
for the making appropriate plans for the betterment in future.
P1. Explaining management accounting and give the essential requirement of different types
of management accounting system
Management accounting is an special branch of accounting, in
which, accounting, numerical, statistical and financial information are
collected and thereafter, it is provided to the higher authority of the
Unicorn which includes executives, policy-makers, directors, Certified
financial officer, Certified Executive Officer and others for creating
business policies & decision-making. As per the IMA, it is defined as a
profession which incorporates participating in devising plans, system for
performance management, decision-making, expertise reporting and
implementing control to facilitate the top authority in successful execution
of the designed strategies (Renz, 2016). It is concerned with getting useful
and highly important financial information for assessing the business
performance using distinctive tools and techniques i.e. ratio analysis,
working capital decisions, investment analysis, trend analysis, fund flow
and cash flow analysis & others. In other words, it can be defined as a
form of accounting which enable and assist Unicorn’s managerial team to
conduct the business more efficiently and effectively. MA includes various
functions such as forecasting, policy formulation, strategies development,

improvement in organizational efficiency and others. Risk evaluation,
resource allocation, performance measurement and analysis are the key
objectives of the management accounting.
There are multiple of management accounting systems (MAS) which
can be employed by the Unicorn to give enough & adequate variety of
information to the managers for making better planning and decisions
(Cooper, Ezzamel and Qu, 2017). For devising strategies and decision-making
purpose, managers need accurate, reliable & prominent information to
analyze the performance & comparison with the target. The main goal of
MAS is to smoothen the workflow & regular processes to make it more
effective & efficient for the sustainable growth, discussed here as under:
Cost Accounting System: It is also termed as product costing
system which provides a framework that firms can utilize to determine the
total costs (TC) of Unicorn’s production, analyze profitability and helpful in
implementing better control over cost (Quattrone, 2016). Cost estimation and
analysis is of great significance for ensuring profitable operation by
generating higher sales revenues over cost incurred. At the same time,
CAS also provide great assistance to the corporation in valuing the
inventory of material, work-in-progress (WIP) and closing inventory as
well.
Job costing system: This system determines costs of
manufacturing for every job work performed by Unicorn by accumulating
the material, labor and direct and indirect overheads. It is important for
the firm, so that, managers can quote a right price from the customers in
order to cover all the expenditures incurred and gain good return (Malmi,
2016).
Price-optimization: Unsurprisingly, it is a very important or
essential system which is helpful for the managers to have good control
over the pricing decisions for different types of products & services. This
system focuses on demand modeling, what if tools and others to figure
out the impact of goods prices over the sales and profitability, thus, assist

business in setting a right price that not only drive good return but also
will be affordable from the consumer perspective and encourage them to
buy the Unicorn’s offerings (Price optimization, 2015).
Inventory management system: In the modern days, companies
design various system applications for the managing inventory
sophistically by streamlining the stock managing plans and policies. In the
earlier times, companies were administrating their stock via bin card and
Cardex system, whilst, now-a-days, the manual system has been replaced
by the inventory management system. Unicorn can use the software like
ERP (Enterprise Resource Planning) & others which help executives to
keep track of their inventories, orders, vendors & others and thereby
assure adequate level of inventory in the warehouse (Balcik, Bozkir and
Kundakcioglu, 2016). It warns the organization before reaching the danger
level, so that, on-time order can be placed for maintaining it at a sufficient
level.
P2 Explaining different methods which are used for management accounting reporting
Manager of Unicorn Ltd needs to lay emphasis on preparing all the below mentioned
reports which in turn provides deeper insight to the higher management about company’s
performance. Moreover, such report contains information about the areas that are not
performing in a well manner. By identifying the performance level manager can assess the
training needs of personnel in an effectual way.
 Cost report: This report includes information about the several areas where money is
spent by the firm. In this, by making evaluation of expenditures in against to the
previous year trend can be assessed by the manger. Moreover, cost is sum of all the
expenses which are incurred by firm to offer products or services. In this, cost report
clearly indicates the expense area that accounts for higher spending. In this, by
making evaluation of cost effective way of performing activities Unicorn can control
cost level and thereby would become able to generate higher profit margin.
 Responsibility centre’s report: In order to achieve target within the time frame now
company focuses on building various responsibility centres such as sales, profit etc.
Hence, higher authority of each responsibility centre has accountability to meet target
significantly. For instance: Manager of profit responsibility centre is responsible for

attaining margin in line with the standard target (Noordin, Zainuddin and Mail, 2017).
If deviations occur in the performance of concerned responsibility centre then higher
management takes input regarding this. Hence, such report enables business
organization to take measure for improvement purpose.
 Budget report: This report furnishes information about the performance of each
department such as operational, marketing etc. Hence, such report clearly presents
information about department which in turn fails to meet budgeted figures. In this
way, such framework helps company in undertaking effectual measure for making
improvement in the performance of personnel (Renz, 2016). By employing budget
report manager of Unicorn can evaluate the efficiency level of each department. This
in turn helps company in determining suitable pay according to the efficiency level of
personnel.
All these three reports are highly significant which acts as a guide and helps management
department of Unicorn n making highly profitable decisions.
P3 Calculating cost by using marginal and absorption system
Marginal costing: Such costing technique provides high level of assistance to the
manager of firm in ascertaining the total cost of production. In this, manager considers
variable cost as product cost. On the contrary to this, fixed cost is recognized as period
because marginal costing method segregates cost into static and non-static (Mansor and et.al.,
2016). In this, profitability is measured and evaluated by firm through the means of PV ratio.
Further, closing inventory does not have high level of impact on cost per unit of output.
Hence, such technique clearly highlights the contribution of each product.
Absorption costing: In this, cost is apportioned by manager in accordance with cost
centre. Under this, both fixed and variable cost is undertaken for the determination of price.
Along with this, overhead cost level can be distinguished into production, administration,
selling and distribution etc. In absorption costing, profitability of firm is highly affected due
to the inclusion of fixed cost (Mansor and et.al., 2016). Besides this, variance which takes
place in the closing and opening stock has greater impact on per unit cost. Absorption costing
method presents clear picture of net profit in a conventional way.
Calculation of cost using absorption costing
Particulars Budgeted Actual

Direct material cost 3600.00 4200.00
Direct labor cost 3000.00 3500.00
Variable production overheads 1200.00 1400.00
Fixed production overheads 1800.00 2000.00
Total cost of production 9600.00 11100.00
Add: Opening stock
less: closing stock 2400.00 1585.71
Cost of sales 7200.00 9514.29
Selling cost per unit 16 15.86
Computation of net profit
Particulars
Budgeted
figures (in £)
Actual
figures (in
£)
Sales revenue 14000 21000
less: Cost of goods sold 7200.00 9514.29
Gross profit 6800.00 11485.71
Less: indirect expenditures
Variable sales overheads 450 600
Administrative overheads 800 700
Selling cost 400 600
Total indirect expenditures 1650 1900
Net profit 5150.00 9585.71
Profitability (per unit ) 11.44 15.98

Calculating cost marginal costing
Particulars Budgeted Actual
Direct material 3600.00 4200.00
Direct labor 3000.00 3500.00
Variable production overheads 1200.00 1400.00
Total cost of production 7800.00 9100.00
Add: Beginning inventory
less: closing inventory 1950.00 1300.00
Cost of sale 5850.00 7800.00
Cost of sale/unit 13 13
Income statement on the basis of marginal costing method

Profitability per unit 14.44 18.83
P4 Explaining the advantage and disadvantages of different types of planning tools used for
the budgetary control
There are multitudes of budgetary tools which Unicorn can apply in
their organization for making budgets through forecasting future and
thereafter, analyze the same with the actual results for taking remedial
measures.
Incremental budgeting:
As the name implies itself, it is a traditional method of budgetary
planning which makes budgets for every year by making little bit changes
with adding some incremental amount in the existing budgeted figures for
the income & expenditures (De Campos and Rodrigues, 2016). In this, managers
believed that Unicorn’s department will continue the trading functions in

future at the current level or in case of amendments in any operation,
some amount are added to the current value.
Advantages:
1. It is very easy for Unicorn to make budgets as it does not comprise
any complex calculation.
2. This approach does not present huge deviations in the current and
historical budgeted figures.
3. It follows equality principle in the resource allocation system among
all the departments as they are given a same amount of increase
over the past year (Ohemeng, 2016).
Limitations:
1. It considers marginal changes however, in the dynamic market
place, real situation may be too different and bring major structural
changes, economic fluctuations, volatility in the market & others.
2. It lacks innovative practices because it does not offer any kind of
incentive to the management for cost reduction which boosts
spending level.
3. Perpetual resource allocation systems can result in wastage or
inefficient utilization of resource because, Unicorn’s management
team can allocate high resource to a department however, they
may not require it for the continual of operations.
Zero-based budgeting:
In contrast to the incremental, this method justify each & every
element of revenue & expenditure which Unicorn will expected to
generate or supposed to pay in the upcoming years through an analysis of
the prevailing market conditions to create budget (Sehgal, 2017). Unlike
traditional method, it does not use past year’s budget as use zero as base

and emphasizes on task identification & assessing its funding requirement
regardless to that of current period’s budget.
Benefits:
1. It relooks and revises the expense and revenues after
examining the prevailing situation in the retail industry for the
accurate prediction.
2. It drives benefits to the firm by paying attention to the cost
reduction so as to attain significant improvement in
performance (Mauro, Cinquini and Grossi, 2016).
3. It avoids unproductive function from the business and takes
into account the market changes by accounting for inflation &
other changes.
4. It boosts staff motivation by welcoming the in decision-making
and build an effective communication system for the
coordination among various departments.
Limitations:
 Unlike traditional method, Unicorn’s managerial team will need a
lengthy time to assess the current market conditions and
fluctuations for predicting the prospective changes in income &
expense.
 It is very difficult to construct, therefore, need excellent managerial
skills & expertise for preparing the budget. Many-times, it also
requires to conduct training to boost the competent skills among
managers.
 It is a resource-intensive method which needs lots of efforts & time
to draw a new budget and it also can be gamed by several
managers so as to get more resources for their divisional functions
which decline co-operational level.

Activity based budgeting:
ABB method is a contemporary technique which adjusts the past
period’s budgets for inflation & other possible changes. The different in
this method from the prior two is that every cost is recorded properly and
thereafter allocated only to those elements from which the revenues has
been obtained (Sehgal, 2017).
Benefits
 The main importance of the ABB is that it helps to find out the
product cost accurately & reliably because it considers the cause
and effect relationship among various activities.
 It will also facilitates policy makers in appropriate price fixing
decisions, because, overhead allocations in this method is made on
the basis of relevant cost driver (De Campos and Rodrigues, 2016).
 Monitoring & controlling functions helps in controlling excessive
overheads and drive better yield.
Limitations:
 Some-times, it might be difficult to select an appropriate cost-driver
for each activity.
 It is not suitable for small scale manufacturing business because it is
a costly approach which need large information & time-consuming
as well.
 It seems complex to examine costs on the basis of various activities.
P5 Stating the management accounting system that is used to resolve financial problems
Financial problems are the part of business organization which manager is required to
handle for getting the desired level of outcome or success. Moreover, monetary problems
have high level of impact on the profitability aspect of firm. In this, by undertaking suitable
management tool Unicorn can develop suitable framework for the near future. Hence, main
techniques that help in overcoming financial issues in an effectual way is enumerated below:

 Budget: By preparing budget Unicorn Ltd can manage inflow and outflow in the best
possible way. Business unit can avoid uncertain business situations by framing highly
competent plan. Firm can develop highly suitable budget by taking into account the
zero base technique. On the basis of such tool manager starts with zero base without
undertaking past years framework. In this, manager allocates fund to each activity
after making assessment of the cost effective ways to perform it (Glover and Kim,
2016). This aspect shows that budget which is prepared according to zero base
technique is highly realistic and thereby helps in co-ordinate all the activities more
effectively. In this way, by preparing appropriate budget Unicorn Ltd can achieve
success because it facilitates optimum use of funds.
 Variance analysis: In managerial accounting, variance analysis tool imply for the
deviations that take place in the financial performance of firm. Hence, by using
variance analysis tool manager can investigate the level of variance through the
comparison of actual performance in against to the planned figures. Such tool enables
firm to investigate the causes of variances and thereby take action for attaining
suitable outcome. It is highly effectual tool which in turn helps in evaluating the
performance level of each department (Zhao and Patten, 2016). For instance: By
making assessment it has been identified that actual and standard amount of office
expenses are £1200 and £1000 significantly. Thus, by doing assessment manager
evaluated that deviation of £200 occurred in office expenditure. It indicates that
Unicorn Ltd should make control on the area of such expenses. In this way, by
framing suitable budget and circulating it each level Unicorn Ltd can control the level
of expense to a great extent.
 Ratio analysis: Unicorn Ltd can make effectual use of funds by using ratio analysis
technique. The rationale behind this, such technique offers opportunity to the firm to
evaluate profitability, liquidity and solvency aspect in against to the past years. This
in turn provides quick indication to the firm about the area where control in needed.
Moreover, according to the ideal current ratio firm must have 2 current assets in
against to 1 liability. It indicates that Unicorn Ltd has enough assets for meeting the
obligations.
On the other side, quick ratio must be in line with standard figure such as .5:1. Hence,
such aspect presents that Unicorn Ltd has enough assets that can easily be convertible into
cash. Further, .5:1 debt-equity ratio shows that capital structure of company is optimal.

Hence, by evaluating financials in against to such standard measures company can evaluate
its performance level (Cardinaels, 2016). For instance: Current ratio of Unicorn Ltd
decreased from 1.20:1 to .90. It present that retail business unit does not have enough funds
for meeting the current liabilities. In this, by making control on assets such as cash, bank
balance etc Unicorn Ltd can strengthen the financial performance.
In addition to this, ratio analysis tool enables firm to identify its financial position and
performance level in against to the competitors. For example: NP margin of Unicorn and its
rival firm such as NISA accounts for 4% and 4.8%. By considering this, it can be stated that
NP margin of Unicorn is lower than NISA. Hence, Unicorn Ltd is required to make focus on
controlling indirect expenses. Further, Unicorn retail store can enhance sales revenue by
focusing on promotional aspects. Thus, by focusing on both such aspects Unicorn Ltd can
improve profitability aspect significantly.
 Capital budgeting: Business entity can make evaluation of profitability aspect by
taking into consideration the capital budgeting tools. Moreover, investment appraisal
techniques assist manager in assessing the extent to project is viable in financial
terms. Hence, attractiveness of project can be identified by the manager by
undertaking investment appraisal tools. Usually, manager faces difficulty in making
selection of project from several alternatives. In this, by using capital budgeting tools
such as payback period, net present value, internal and average rate of return manager
can select suitable proposal. Moreover, payback period entails the time period within
initial investment can be recovered. In accordance with such aspect manager should
invest money in the project which has less payback period.
Along with this, net present value technique provides deeper insight to the manager about
returns that are associated with the investment proposal. Hence, by deducting initial
investment from discounted cash inflow manager of Unicorn Ltd get the value of NPV.
According to the selection criteria manager should select project which has higher NPV
(Otley, 2016). Further, IRR method assists in identifying return that is associated with project
in the form of %. Further, ARR method helps in getting information about average return.
Thus, by considering the selection criteria manager of Unicorn Ltd can select suitable
investment proposal and thereby becomes able to avoid financial difficulties in the best
possible way.

 Marginal costing: Unicorn Ltd can take suitable decision regarding offerings and
price by adopting marginal costing system. Such method allows firm to assess the
units of products or services which they need to offer for attaining the situation of no
profit no loss. By dividing fixed cost from contribution retail business unit can
identify break-even level or point. In addition to this, such method also provides
assistance to the business organization in identifying the units need to offer for getting
the desired level of margin. Along with this, marginal costing methods help in
evaluating the level of marginal of safety and thereby aid in decision making.
 Inventory management system: By using inventory management tools and techniques
manager of Unicorn Ltd can avoid financial discrepancies more effectively. Hence, by
undertaking economic order quantity method manager of Unicorn Ltd can ensure
proper inventory level. This in turn offers both monetary and non-monetary and
monetary benefits to the firm. Moreover, in the case of insufficient inventory
customer satisfaction and thereby profitability aspect is highly influences (Malmi,
2016). Along with this, holding and ordering costs are the main elements that have
direct impact on financials. In this, by identifying the suitable inventory level Unicorn
Ltd can restricts high holding and ordering cost.
Hence, manager of Unicorn Ltd can deal with the monetary problems in an effectual way
by employing the above depicted techniques. Moreover, all such techniques help in making
control on overspending as well as assist in making suitable decision. In this way, managerial
accounting help company in gaining competitive by making optimum use of financial
resources.
CONCLUSION
By summing up this report, it has been concluded that management accounting tool is
highly significant which in turn helps in enhancing business performance. It can be
summarized from the report that Unicorn can make effectual control on expenses by using
budgetary control system. Moreover, it offers opportunity to the firm to assess deviations and
thereby take strategic action for making optimum use of finance. Besides this, it can be
inferred that by preparing and presenting the report of each department manager can provide
input for decision making. It can be seen in the report that by using financial tools and
techniques accounting personnel can take profitable decisions. Hence, by employing the

techniques of management accounting owner of Unicorn can develop suitable framework and
thereby would become able to meet organizational goals.

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Online