Management Accounting Practices & Impact

This assignment delves into the realm of management accounting, examining various practices employed by organizations. It analyzes the impact of these practices on firm performance, considering factors such as lean manufacturing, environmental management, and supply chain management. The analysis draws upon academic research and real-world examples to illustrate the multifaceted nature of management accounting's influence.

Unit 5 Management
accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
P1 Management accounting definition and requirement of different types of accounting
system.....................................................................................................................................1
P2 Different types of methods which are used in management accounting reporting...........3
M1 Benifits of the management accounting system...............................................................5
D1 Evaluation of management accounting system and management accounting report is
integrated in the Harrods organisation...................................................................................6
P3 Analysis to prepare an P&L by marginal and absorption costs for Harrods organisation 6
M2 Range of management accounting and produce the financial reporting..........................8
D2 Range of business activities and accurate financial reports.............................................8
P4 Various planning for budgetary control and their advantages and disadvantages within
Harrods organisation..............................................................................................................8
M3 Analuyse the various planning and their preparation and forecasting budgets.............11
D3 Evaluation of planning tools for accounting respond to solve financial problems........11
P5 Compare the way of organisation are adapting management accounting system to respond
to financial system................................................................................................................11
M4 Analyse to responding problems, management accounting and they lead organition to
success..................................................................................................................................12
Conclusion.....................................................................................................................................12
REFERENCES..............................................................................................................................13
.......................................................................................................................................................14

INTRODUCTION
Management accounting is a process of making an accounts report and management
report that provide accurate financial information required by the managers to make daily basis
decisions. It is a profession that involves partnering in management decision making. This
present report is based on Harrods organisation which is located in London. It has 330
departments offer a wide range of products and services. In the products include clothing for
women, jewellery, electronics, toys, food, drink, beauty items, packaging gifts, housewares and
furniture and much more. In this present report different methods of management accounting
report and technique of cost analysis to prepare income statement are covered. Other than that
advantage & disadvantage of different types of planning for budgetary control and management
accounting systems to respond to financial issues are discussed.
P1 Management accounting definition and requirement of different types of accounting system
From: Management accounting officer
To: General manager of Harrods
Subject: Management accounting system
Introduction
This present task is based on management accounting definition and different types of
accounting system for the Harrods company. This report is according to requirement of
management accounting officer to general manager of Harrods and entire accounting system are
discussed.
Definition of management accounting :
Management accounting is a profession that involves partnering in management decision
making and it help managers to their day by day and short term decision making. Financial
accounting produces yearly report for stakeholders and generate monthly report for the
company's entire section and their employees. Management accounting report making some
following reports, that's are amount of money acquirable cash and orders in hand, sales income
generated, outstanding debts, account payable and receivable, raw material and inventory.
Types of management accounting system :
1. Cost accounting system
It is the main accounting system type of management accounting. This system is a used
by the companies to figure the entire expense of their products for gainfulness investigations,
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inventory valuation and cost control. It is based on organisation's entire cost of the products.
Harrods should have knowledge that which products are more profitable and which products are
not profitable in the business. There are two types of cost management accounting system. First
one is job order and second one is process costing. Job order costing is a cost accounting system
that roll up manufacturing costs separately for each job and process costing is based on entire
organisation's process (Management accounting, 2017). Cost accounting system is valuable
method of management accounting, because it is a process of make good costing and preparation
of cost report. It help company in increasing their profit and revenues.
2. Inventory management system
This system is managing by the organization for handling their products sale and
purchase. In this system company's entire data should be save and that's are sale and purchase
data, sales return, purchase return, deliveries, pending deliveries. Inventory system help company
in making their data safe and increasing value of the organisation. This is the best management
system for the organisation. Through inventory management organization can save their entire
data in the inventory, when company require in the future then it will help business in provide
proper solution, some issues can be solved and some threats can be finished by inventory
management system (Jennifer V. 2017).
3. Job costing system
This system involves the process of accumulating information about the costs associated
with a specific production or service job. Job costing system is useful for determining the
accuracy of organisation's estimating system. This system require to accumulate the following
three types of information : 1. Direct materials, 2. Directs labour and 3. Overhead. In the
organisation when company prepare the job cost then it is according to direct material, and
direct material is based on the raw material. Further, they prepare the report of dicer labour,
because labour is the main cost of the organization and then they focus on the overhead that
employee's productivity is good or not. If their productivity found not good as the company
required, then they less their budget in the system. So this is the best system of the management
accounting and it will help business in decreasing cost and increasing profit.
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4. Price optimising system
This the main part of management accounting system, and very valuable method of the
same. Price optimising is very essential system in each and every organisation. It is the based on
how customers will response of the organisation's products price. When company set the
different price of their different prices, but they should know that what will the response of the
customers against their product's price and which product price attract to them which price can
not be attract to them. So price optimising is very useful in the organisation and through this
system company can set their prices according to customers need. Product's prices should be
affordable and attractive, so customers will visit the store and but the product which they want.
This four types of management accounting are very useful in the Harrods organisations,
because they also use this types of method in preparing account report, financial statement etc.
Through this entire method Harrods will reach on the top will be able to beat their competitor,
who are doing their business in the market. There are different advantage of this four
management system. It will help company in increasing their profit revenue and brand value in
the market.
P2 Different types of methods which are used in management accounting reporting
From: Management accounting officer
To: General manager of Harrods
Subject: Management accounting system
Introduction
In this present task different types of method which used in management accounting
reporting is covered and other than that its usefulness in the Harrods is discussed.
Definition of management accounting reporting
Management accounting reporting is portion of making sure that organisation has
complete the presentation of how business performance and what finance condition of the
organisation. This report help Harrods company owner and managers of monitor the
performance of the organization and prepared rarely throughout accounting periods as required.
Management accounting reporting methods
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1. Budget report
This report is based on performance of the organisation, if the company's business is
large enough, then managers need to analyse their department's performance. In the organisation
there are different types of department for the different types of task and work. This is report is
very important in the business, because lot of budget will invest in department and their
employees. Company handle the entire employees productivity. When managers found that
employee's productivity is not match according to their requirement then they can reduce the
budget in that types of department who can not achieve the same. When they found that
employees achieve their target and goals according to company;s requirement, ad they are able to
get their productivity then managers can increase budget for their department.
2. Account receivable aging report
This report is prepare by the cash flow of the company. When they set their goals and
target then they must know about their customer's profile. Account receivable;e aging report is
based on customer's outstanding amount, which are not paid by the customers in require time. In
the organisation, some time customers are not able to pay their outstanding amount in the require
time, so organisation has ton power that they can take serious actin against that types of
customers. First company provide the credit to their customers then they make a report of the
customers who paid their outstanding amount and who not paid their outstanding amount in the
require time, They they will able to take an action against that types of customers. Further,
managers Wil get the outstanding amount from their customers who not paid in the time.
3. Job cost report
This report provides expense for a specific project and productivity of the entire
employees. When company set the target and goals according to their employees then its a very
important thing for the employees. This is the responsibility of the employees that they will work
according to allotted the target. Some of the employee can not be able to achieve the target and
goals which provide by the organisation to them (Fullerton and Widener 2014). They will see the
productivity of each and every employees. Job cost report shows the high profitable department
of the organisation. So the company can focus on that departments instead of wasting Money and
time on jobs with less profit margins (Chenhall and Moers 2015). In organisations. manager will
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determining about high profitable department and low profitable department, then they evalute
that which department is more valuable for thier business. Further, entire determination, they
decide that invest their time and money on high department's employees and will not invest on
low profitable department. This is the best and valuable report for the company which help in
increasing organisation's profit, decreasing their waste cost. So it is the main report in
management accounting report which beneficial for the organisation in term of high profitability
and revenues (Fullerton and Widener 2013).
4. Inventory and manufacturing report
This report is based on the organisation's entire data. That data can be sales, purchase,
sales return, purchase return, raw material, deliveries, pending deliveries and outstanding
amount. This entire data is prepare by inventory and manufacturing report. Other than that when
company produce their product, then they prepare a report for the raw material, labour and
consumed material (Ax and Greve 2017). When organization produce their product and ready to
sale in the market then they should know the market price and about the customers response, so
it will help to fix price and satisfy the customers. Further, company sale their product in the
market and a report is making by the managers which all about sales and purchase. In that report
they will set the price and customers list which can be profitable for the organisation. Through
the inventory and manufacturing report company will get the lot of profits and will be able to
achieve their target and goals which set by the managers (D. and Schaltegger 2015).
These are four types of report which can be beneficial for the organisation and it will help
company in increasing their profitability, revenue and value in the market. This is the best report
of the organisation for productivity and budget (Alawattage and Uddin 2017).
M1 Benifits of the management accounting system
When company use the management accounting, they gets the lot of benefits form the
system. One of the major benefit is they will able to make a account report easily. Second benefit
from the management accounting is organisation can make the effective income statement of
their business. Through that income statement company can evaluate the entire thing of the
business. They can reduce the waste money which are cost in the business. Harrods get the lot of
benefits from the management accounting and able to invest their fund on effective plan
(Grunewald and Bastian 2014).
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D1 Evaluation of management accounting system and management accounting report is
integrated in the Harrods organisation
Harrods needs the management accounting system and management accounting reporting
for their business. This both are the valuable thing for the company, because its make a good
environment in the business (Mokhtar and Zulkifli 2016). It is increase the organisation's profit,
revenues and brand value in the market. Harrods using this both of method in their business and
can be able in provide bests services to their customers. They set the best price according to
customers and their income. So it is the evaluate that both method are very effective method for
the organisations.
P3 Analysis to prepare an P&L by marginal and absorption costs for Harrods organisation
For the making a report of income statements for the Harrods organisation, there are
different methods available in the management accounting. Company able to know that business
is generating profit up to which extent in the market. In order to formulating income statement
account for Harrods organisation. There are two methods are taken into account i.e. absorption as
well as marginal. Then. such statement along with interpretation are stated as below:
Income statement by marginal costing :
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From the above report it is conclude that organisation is able tom earn sales worth of
21000 at the end of accounting period. It generates on this value of revenue which is worth of
9300 GBP. There are some outcomes, which can be said that, management of Harrods company
can reduce entire variable expenditure in the year (Cokins 2014). As it further, In the next time
when managers such expenses then can enhance net profit of business in next years.
Income statement by absorption costing :
According to absorption costing here is P&L account prepared, it can be observed that at the
same revenue i.e. 21000 GBP, net income earned by Harrods organisation is 9600 GBP. Here is
few difference can be seen when comparing it with marginal techniques. Number of costs differ
in both the techniques is basic reason of the difference. Marginal costing consists of onlyn
variable expenditure incurred in the company whereas absorption consists of variable and fixed
both. Almost organisations using second technique at the tome of preparing income statements,
because that covers entire expenses associate in the organisation (Bodie and Marcus 2014).
Difference between marginal costing and absorption costing mentioned below :
 Marginal costing is decision making technique for the entire cost of production is known
as marginal costing. Absorption costing is an entire costs to the cost centre for determine
the total cost of production is known as absorption costing (Otley, 2015).
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 Cost recognition of the marginal costing is considered as product cost when fixed cost is
considers as period cost. Absorption costing is both and variable cost is consider as
product cost.
 Marginal costings profitability is measure by profit volume ratio and absorption costings
profitability due to the inclusion of fixed cost,profitability gets affected.
 Marginal costings classification of overheads is fixed and variable. Absorption costings
production, selling and administration.
 The profitability of every single sale will seem to be higher under marginal costing, while
profitability will appear to be lower under absorption costing.
M2 Range of management accounting and produce the financial reporting
There is a two types of costing in the Harrods organisation. Both are the best costing for
the company. If they want to more valuable costing method then they should go for the
absorption costing method, Because it is the very important and more beneficial method of the
costing. In this method organisation can easily get the entire data and profit. Range of
management accounting is very high and through it company can increase their profit, revenues
and brand value in the market.
D2 Range of business activities and accurate financial reports
When Harrods use this types of costing and management accounting system and report
then they should to do a lot of activities in their business. So they can achieve their target and
goals easily. There are two types of costing, but if harrods will use the absorption costing then
their business range will be very high and they will get the most of important value from the
market (Järvenpää and Länsiluoto 2016).
P4 Various planning for budgetary control and their advantages and disadvantages within
Harrods organisation
In the organisation they need to control their budgetary system through some
strategies and planning. A system of management control in which net income and spending are
compared with planned income and spending, so that company can see if plans are being
followed and if those plans require to be changes for make a profit (Mohd-Jamal and Tayles
2014). Organisation set the goals and target then they prepare a report of budget. Further, they
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decide that how to reduce some waste cost and earn more profit from their products and services
in the business (Gómez-Juaristi and Mateos 2018). They make a plan for the control their
budget and reduce their costing in the business. There are different strategies for the budgeting
control. It help company in increasing their profitability and revenues and decreasing the waste
cost in the business. Budgetary control refers to how well managers utilize budgets to monitor
and control costs and operations in a given accounting period. This is process for managers to set
some financial performance goals with budget, compare the real results, and adjust performance,
as it is required (Herzfeld and Litovitz 2013). Budgeting is the formulation of strategy for
required profit and goals. Companies may establish budget for departments, projects, units or
entrie organisation. Budget usually serve some control purposes in the business as they help
manager's coordinating resources, help define the requirement in entire control system, its
provide clear guidelines about the company's resources and expatiations. They facilitate
performance evaluations of managers and departments (Hao nd Kanatzidis 2014). There are
some planning for budgetary control which are mentioned below:
1. Financial budget
This budget is based on the company's expectations to get it cash for the coming time
period and how it plans to spend it (Wang and Zhang 2013). A financial budget clear that how
business gets and spends their fund on a corporate scale, including revenues from the core
business plus income and costs from capital expenditures. This budget uses is for the buy new
assets, pay expenses, dividends to their stakeholders and repay debts. Financial budgets has some
following types, which can be planning for the budgetary control: First one is cash budget,
second one is capital expenditure budget, and third one is balance sheet budget. Cash budget is
the very important types of the financial budget, because it is manage the entire fund of the
company. In this budget, organisation manage their fund according to requirement in the
department. This budget provides an important control in the business and it is able to meet its
current obligations. It is the budget which shows the availability of the excess cash, and plan for
the making new investment in the business. Capital expenditure budget based on assets such as
new plants, land or machinery. They set their budget according to requirement, but some time
they require some land, machinery or new plants for the accomplish their target and goals.
Harrods pay close attention to such budget because of the large investment with capital
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expenditure. The balance sheet budget is the most important type of the financial budget, because
it is the data of entries budgeting system. Through balance sheet budget company will see the
entire other budgets. This budget system purpose is the control to ensure that another budget
mesh properly and yield results that are in the best interest of the Harrods organisation.
Advantages and disadvantages of financial budget:
 Financial awareness of the spending and earnings of the business. This budget will help
company in increasing their profit and revenues, but main disadvantage of financial
budget is requirement of more research, time and knowledge.
 Through this budget, organisation get the best business opportunity and financial budget
for a business is to recognise opportunities that can help market and expand the business
in another areas. Company must pay those in accounting departments or the consultants
you hire, so its cost increases by that employees.
 Increase the communicating tools, but they are the most expensive tools for the business.
 Through financial budget, financial planning will be increase, but there are lot of task
created by this planning and its a very difficult to handle.
2. Operating budgets
This type of budget is the very important and expression of the company's planned
operations for a specific time. Harrods should use this budget in their business for the achieving
target and goals which set by the managers and organisation. It is the very valuable type of the
budgeting system, because through operating budget, organisation's entire department can be
control. There are different types of benefits which can be get by the operating budgets.
Operating budget is based on company's entire departments, employees and their operation task.
That task complete by the employees in profession way according to their profile. When
organisation want to achieve their target and goals then they make a department for the entire
operational work (Li and Yu 2016). Further, they start the gives different task to all employees
according to their profile and skills. When company hire the employee for operational work, they
provide them some work and they see their productivity according to time. Some department's
productivity is good for the organisation but some department's productivity is not match from
the business's target. So they reduce the budget on less profitability department and increase their
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budget on high profitability department. Harrods also can use the operating budget system for
their business and earn the more profit and revenues from this budget system.
Advantages and disadvantages of Operating budgets:
 Managing current expenses in good way, but in the Harrods organisation need a lot of
employees and system for the operating budget. There are different requirement in the
operational department, which can be expensive for the business.
 Through operating budget Harrods can use this budget system and manage the entire
operational work smoothly. For accomplish the task, they need to more employees in the
department and they need to make some another department for different task.
 Good accountability in the business. This process is very useful in the organisation. Some
wrong accounts report can create the issue which can not solve easily by the staff.
M3 Analuyse the various planning and their preparation and forecasting budgets
There are two planning for the business tools and preparation for the budget planning.
They are more beneficial for the business and Harrods organisation. Financial and operating
budget is the most important for the Harrods organisation, because it is the retails company and
in the retail business, they need to accomplish their operational work and focus on financial
department.
D3 Evaluation of planning tools for accounting respond to solve financial problems
In the Harrods company they use the planning tools and through this, they can solve the
lot of problem in their business. They can solve their fund issues, operational issues, marketing
issues and customer's satisfaction problem. This entire solution provide buy the planning tools
and accounting.
P5 Compare the way of organisation are adapting management accounting system to respond to
financial system
When company prepare the planning and ready to work according to it, then they
face different types of problems and issues. Due to this issues, they can not be able to accomplish
their work on time at their workplace. So there are some way, if organisation will adapt it, then
their accounting system will be very good.
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Balance scorecard - This is the approach which used to analyse business performance only is
referred as balanced scorecard. It has the different kind of the perspective which include
financial, customers, learning and growth as well as internal business process. Organisation want
to get more profit from their business , so they need to more fund and they should arrange the
fund from different types of sources. If Harrods will use the balance card management
accounting system, it will be very valuable for the business. Through this system their business
can easily make the entire reports for their business.
Financial governance - It is the system from company can easily solve their financial issues or
problems. Financial governance system is based on organisation finance and their fund. It will
help them in increasing their safety of fund and profitability. Other than that use of such
resources at the workplace is also evaluated by this specific method. This is the effective method
for the Harrods company and it Will more beneficial for the organisation.
M4 Analyse to responding problems, management accounting and they lead organition to
success
There are two different accounting system for the Harrods company. Balance scorecard
and financial governance, both are the problem solving management accounting for the
organisation. They both accounting system will help in Harrod's success. So it is the more
beneficial accounting system for the organisation.
Conclusion
In this report it has been recognised about management accounting system, management
accounting reporting, and their types. Through this entire report it is conclude that Harrods can
know about their benefit which get by the management accounting system and reporting system.
Along with this it is also conclude about their income statement and different types of budgetary
planning, which plays the vital role in the organisation.
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Herzfeld K. F. and Litovitz T. A. 2013. Absorption and dispersion of ultrasonic waves (Vol. 7).
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