Management Accounting Report: Analysis of Nisa Retail's Operations

This report examines management accounting practices within Nisa Retail, a small UK-based retail business. It begins with an introduction to management accounting, its core functions, and its importance in organizational decision-making, covering financial transactions, resource allocation, and financial stability. Task 1 explains management accounting systems, including inventory accounting, ABC costing, accounting for lean, LIFO, FIFO, weighted average, cost accounting, job costing, batch costing, and price optimization. Task 2 focuses on the types of methods used to create management accounting reports, such as budget reports, payroll reports, manufacturing reports, accounts receivable reports, and job cost reports. Task 3 delves into the calculation of cost and net yield using marginal and absorption costing approaches, comparing their outcomes. Task 4 explores the use of various planning tools along with their merits and demerits. Task 5 compares management accounting systems and their role in responding to financial constraints. The report concludes with a summary of the findings and references.

Management
Accounting

Table of Contents
INTRODUCTION.......................................................................................................................3
TASK 1.......................................................................................................................................3
P1 Explanation of management accounting as well as essential requirements of various
systems of it............................................................................................................................3
P2 Explanation of different types of methods which are used in order to make management
accounting report....................................................................................................................4
TASK 2.......................................................................................................................................5
P3 Calculation of cost and net yield with the help of marginal absorption costing
approaches..............................................................................................................................5
TASK 3.......................................................................................................................................8
P4 Explaining uses of various kinds of planning tools along with merits and demerits .......8
TASK 4.....................................................................................................................................11
P5 Comparison between management accounting systems and there role in order to
respond financial constraints................................................................................................11
CONCLUSION.........................................................................................................................12
REFERENCES..........................................................................................................................13

INTRODUCTION
Management accounting is an approach which give accounting information which is
useful to the management(Wajeetongratana, 2016). So that management accounting is a core
function of any organisation. In this all the managerial decisions are taken such as policies
framing, deciding the techniques and using appropriate strategy, which are beneficial for the
success of business growth. In management accounting, company can identify, measures,
prepare and monitor each and every financial tractions and elements related to the
organisation. In this way every organisation can use such kind of managerial activity because
it helps the managers to effective allocation of resources and funds and make the firm more
financially stable. In this case study, Nisa retail store is selected which operate there retail
industry in UK and it is also a small business enterprise. Nisa operates and provides there
products and services in local level such as in UK. This report explain the management
accounting and there different management accounting system which are suitable to the Nisa
retail stores. It also explain the different methods which are used for making effective
management accounting reports. It also describes the different types of planning tools which
can used in effective budgetary control.
TASK 1
P1 Explanation of management accounting as well as essential requirements of various
systems of it
Management accounting is the process which help to record each and every
transaction which show the financial position of the organisation, it includes income
statement, cash flow statements, balance sheet etc.(Vosselman, 2014). Management
accounting provides all the sufficient information which provide clear, accurate and reliable
information as per the time for the Nisa retailer stores. If the finance managers have accurate
and reliable data or information they can make use such information for allocating the
resources in a right manner so that organisation can achieve there major goals in future. Nisa
retail stores is a small business enterprise which follow several kinds of systems and
approaches so that they can effectively allocate there resources, they are:
Inventory Accounting- Inventory management is a process by which inventory or stock
in an organisation can be managed effectively. By using such kind of approaches Nisa can
manage there stock and utilize it effectively for the production of there products and services.
If there is higher level of stock in an organisation it means that workplace is not in a good

condition, so that it is necessary to Nisa retailer to manage there stock effectively so that they
can enhance there profitability.
ABC costing- It is a process in which expenses and cost are determined in each and
every stage, which are essential for the Nisa retailer to manage there cost and expenses and
also determined that such cost and expenses are effectively managed or not.
Accounting for lean- This approach is based on such that in an organisation all waste
and unused expenses can be removed so that it can maintain the quality of services and
products. As per in Nisa retailer,company can eliminate all the unused expenses so that it help
them to make best quality of products and services. It is way by which management can
reduce there cost which make no impact in production or called unproductive and which not
give any kind of return in such production.
LIFO- It refers to last in first out rules, in this Nisa retail stores can sell all such
inventories which comes at the last time rather than using new level of stock. It is very rarely
used by the firm because this approach is less effective and does not give any kind of support
for earning the profits.
FIFO- It represent first in first out rule, in this stock and inventory are sold in first
time when they comes into the business(Tappura, Sievänen, Heikkilä, Jussila and Nenonen,
2015). It is considered as most usable approach which are adopted by every organisation. As
comparing with the LIFO method, FIFO method is better and it gives actual or appropriate
value of stock in Nisa retail stores.
Weighted average- In this approach, stock are valued in every organisation as per
there average value. In this way weighted average method is used to determine the average
value of stock with the help of LIFO and FIFO. So that weighted average method helps the
Nisa retailer stores to examined there average value of stock which are required in there
operational activity.
Cost accounting system- It is a framework which is used by the firm so that manager
can estimate the actual cost or cost per unit. It include profitability analysis, valuation of
inventory, cost control techniques, so that cost are managed by the manager effectively. For
example: Nisa retail store manage their cost by using appropriate techniques and determine
the requirement of cost in each departments.
Job costing system- It helps to identify and assign manufacturing costs to an individual
product. This system are use when product are produced which are different with each other.

For example: Nisa use the job costing accounting system by which firm can make appropriate
recording of cost which are related to manufacturing of products.
Batch costing system- It is a type of specific order costing techniques in which
numbers of units are products, but the produced units are different from the batch. For
example: Nisa company produced number of same products but all are not same in the
distributive areas like US, UK etc.
Price optimisation system- It is mathematical tool which help to analysis the
customers responses as per the change in price of products. By using this techniques, Nisa
identify the customer's demand and preferences as per the changes of the price of products.
For example: Nisa company launch 30 new household products which are not same as peer
their price. Hence, company focus to the demand of the customers that in which price they
will agree to pay for the products.
P2 Explanation of different types of methods which are used in order to make management
accounting report
For ever business it is essential to prepare a financial statements such as income
statements, cash flow statements, balance sheet etc. By using such statements all the data and
informations are collected and record which help the managers to make an effective business
accounting report. In management accounting reports, all the information which help the
business to make an effective decision plan, policy can be made in the report which is based
on the accounting period. In Nisa retail stores there various methods which are used in to
managing the there accounting reports, they are:
Budget Report- Budget report are such report which include all the information and
data related to the fund which are required for the organisation. In Nisa retail stores, budget
report are prepared to estimate the fund requirement that how much money are required in
future for effective running of the business. So that budget report help to examine the future
performance and effective fund allocation for fulfilment of such performance in
future(Schaltegger, Gibassier and Zvezdov, 2013).
Payroll report- Payroll report includes all the expenditure which are paid by the
organisation to there employee in a form of wages, salary, bonus etc. So that all such kind of
expenses which increase the employee work-performance can recorded in this type of report.
In this way, all such expenditure can be treated as expenses account and take difference by
making income statements.

Manufacturing Report- In this type of report, it include all the expenses which are
spend in the manufacturing activity. In this way Nisa retailer can make complete record of all
the expenses which they are spend in there manufacturing activity such as providing products
and services. In this way, if it also includes various records such expenses which are done to
meet the raw material from suppliers, expenditure in regards to labour charges, techniques
changes etc. In this way all the cost are treated as manufacturing expenditure(Renz, 2016).
Report of account receivables- As per such report, it included all the information in
which Nisa can received the money at end of the accounting period. In this way, if a company
can receive higher receivables than the profit earning capacity of the company will also be
higher but in opposite if the receivables rate is lower than company is not is a position to earn
profit more. So that the profit rate is also lower in this condition. A company can receive there
receivables in the from of money received by debtors, sale on credit, or sales by cash etc.
Job cost report- There is another accounting report which is used by the Nisa retailer
is the report of job costing. In this report which is related to the job are recorded in it. It
require the company's financial position so that manager can determine that in which position
company can stand, is it good or not. In this way, each and every task are allotted in different
departments, and such all the information related to each task can be recorded in this report.
This report also include the total expenses which are occurred to make an effective task from
each department(Otley and Emmanuel, 2013).
TASK 2
P3 Calculation of cost and net yield with the help of marginal absorption costing approaches
To analysis the company's financial position, every business can prepare there
financial statements such as profit and loss account, balance sheet, cash flow statement etc. In
this way, Nisa retailer stores can also prepare such kind of financial statements to estimate
there actual performance at the end of the accounting period. To determine the cost and net
profit Nisa retailer stores can follow two type of approaches such as marginal costing
approach and absorption costing approach. In this methods, all the expenditure and income
can be listed in a proper form so that it can help to identify that the company is in profit
condition or not(Lavia López and Hiebl, 2014). So that to analysis the cost d net profit Nisa
can used two methods. In marginal costing method only direct and variable cost are
considered but in absorption costing method, it include all the expenses which are used in to
determine the net profit in the company. Calculation of net profit by using marginal and
absorption methods are as follow:

By using absorption approach
By using marginal approach
Interpretation
From the above solution, it can describes that final income of Nisa retail store is
different in the both income statements. As per the marginal method net profit is higher as
compare to the absorption method which is £9300. The variable approach is the scheme
which regard only those expenditure which are immediately receive in business enterprise and
move as per the plane of yield. Separated from this, by considering absorption costing

approach Nisa retail store having fewer net profit which track to bring down gain point in the
whole retail industry of UK.
In most of the business organisation enterpriser exercise absorption costing method
rather than marginal approach of costing to measure fiscal execution in the sector where it
doing economic activities (Kaplan and Atkinson, 2015). The rational motive backside that it
consider absorption system is that, Nisa retail store can ascertain actual profit by deducting all
kind of expenditures which at the workplace. Marginal costing is less uses because here the
management can not deduct actual position of the firm. Hence, it can be said that when Nisa
retail store uses both the methods then value of net profit take issue.
Difference between above two mentioned costing approaches
Basis For Comparison Marginal Costing Absorption Costing
Meaning Marginal costing is
techniques by which it can
use to ascertained the total
cost of production in an
organization.
It includes the apportionment
of the total costs to the cost
centre so that it can assess or
determine the total cost of
production in an
organisation(Morales and
Lambert, 2013).
Cost Recognition In this method, variable cost
is take into the consideration
to calculate the product cost
and fixed cost is used to
calculate the period cost in
the organisation.
In this method both fixed and
variable cost are to be taken
into consideration to
calculates product cost.
Classification of overheads In marginal costing fixed and
variable both overheads are to
be taken.
In absorption method,
production, administration
and selling & distribution
overheads are to be taken in
any calculations.
Profitability In this method, profitability is
measured by using profit
volume ratio.
In this method, by making
inclusion of fixed cost,
profitability of any

organisation may be affected.
Cost per Unit In this method, there in any
variance between opening and
closing stock, it may does not
make any affect in cost per
unit of an organisation(Hiebl,
2014).
In the this method, variance
which are generated in
between opening and closing
stock may affect the cost per
unit of any organisation.
Highlights The main factor is
contribution per unit which is
highlight in this method.
In this the main factor which
is highlight is net profit per
unit.
Cost data In this method, the cost data
is presented to outline total
contribution of each product.
In this method, cost data is
presented in a conventional
way.
TASK 3
P4 Explaining uses of various kinds of planning tools along with merits and demerits
Capital budgeting tools- The tool by which company can take the decision that how
much money can be invested or not. When Nisa retail stores using techniques is one project to
another project, which require different type methods which provide the project more
beneficial and profitable in future(Fullerton, Kennedy and Widener, 2014). In this way there
various capital budgeting methods can use such as Internal rate of return, Net present value,
payback period etc. In this we can take an example of internal rate of return and net present
value which is as follows:
Internal Rate of Return
Year Cash flow of machine A Cash flow of machine B
Investment -265250 -265250
1 25642 36254
2 55966 56245
3 54566 95642

4 145632 136524
5 165914 189526
IRR 15.12% 20.18%
Advantage and disadvantages: The main advantage of capital budgeting is that it help to
take the profitable decision so that it can generate higher return from the potential investment.
In this way Nisa can assess there return and profitability by using capital budgeting. The
another advantage of financial ratio analysis is that it helps in comparing the companies of
different size with each other. Main limitation of capital budgeting is that in capital budgeting,
cash discounting factor is not considered in a firm. Another drawback of ratio analysis is that
accounting standards allow different accounting policies so that in this way ratio analysis is
less useful in such conditions.
Analysis of financial ration- By analysing the financial ratio Nisa retail stores can
estimate the financial position of the company. By using financial ratio, company can also
determine liquidity position, current ratio, net asset turnover etc. in a company(Fullerton,
Kennedy and Widener, 2013). There are various ration used in analysis of financial ratio such
as profitability, solvency, liquidity, investor etc. Some of the example are:
Name of financial ratios Formula to calculate ratios Value and outcomes
Stock at the end of year 65841
Net revenue 165789
Stock turnover ratio stock / net revenue 0.40
Fixed assets 114568
Net revenue 165789
Fixed assets turnover ratio Fixed assets / net revenue 0.69
Total assets 135897

Net revenue 165789
Total assets turnover ratio Total assets / net revenue 0.82
Net yield 96578
Number of outstanding equity
shares 100000
EPS
Net yield / outstanding equity
shares 0.97
Net yield 36542
Net revenue 165789
Net yield ratio Net yield / net revenue * 100 22.04%
Advantage and Disadvantages: The main advantage of financial ratio is that it help the
organisation to identify there performance and there drawback is that ratio is based on
historical or past performance of the firm, on the basis of past performance, future can be
estimated(DRURY, 2013).
Budgeting- It is a process which help the Nisa retail store for making an effective
planning of funds so that on the basis of such plan company manage all the funds for the
future purpose. In budgeting various aspects are determined such as net cash position, number
of units etc. In this cash budget and labour cost budget are using as an example:
Cash Budget
Particulars January February March April May June
Opening balance 3652 4862 5982 6524 7562 8952
Revenue 4560 5624 4562 6954 8954 9540
Debtors 1452 1942 2451 2654 1874 1954
Cash inflow A 9664 12428 12995 16132 18390 20446
Purchase of raw materials 3562 4562 5695 6245 7852 7562

Labour charges 2653 3652 4856 5698 6245 4522
Creditors 1254 1465 1987 2657 3654 6575
Cash outflow B 7469 9679 12538 14600 17751 18659
Net cash available (A –
B) 2195 2749 457 1532 639 1787
Labour hour budget
Labour or wages Month 1 Month 2 Month 3
Number of items to be produced in next period 2897 3549 4685
Labour hours per item 2 2 3
Total labour hours required in next period 5794 7098 14055
Cost or expense on each labour hour 8 8 9
Total expenses on labour 46352 56784 126495
Advantage and Disadvantages: Budget helps the Nisa retail store to determine the funds for
the future financial performance, it includes requirement of heavy strategies and techniques
which make the future performance more better(Cullen, Tsamenyi, Bernon and Gorst, 2013).
Another advantage of this method is that it has definite planning, it also enhance the
efficiency of the firm, in budgetary control there will be proper communication in all level of
management. But there are some drawback is that budgets are based on the past financial data
and company will not perform same as past, it is not necessary.

TASK 4
P5 Comparison between management accounting systems and there role in order to respond
financial constraints
In the firm there are many problems arise such as manufacturing, employees,
management, financial, cost problem etc. To reduce such kind of problems there are many
tools and techniques which are adopted by the mangers. They are as follows:
Lean accounting- Lean accounting basically focus on reducing the cost by eliminating
unwanted items in production activity. So that Nisa retail stores also use lean accounting so
that they can reduce there cost problem by eliminating such expenses which are unwanted or
unproductive. In other words, it includes all such expenses which give no return is production
activity. So that by using the lean accounting Lisa retail stores can achieve economies in scale
and also enhance there profitability(Cooper, Ezzamel and Qu, 2017).
ABC Costing- ABC costing is a techniques which is adopted by the small business to
remove the problems which is related to the cost level of each activity of a process. By using
such cost techniques, firm can able to take right course of action and reduce such kind of
problems that a business can faced.
Accounting for stock- In a business when a level of stock and inventories are higher,
which denotes that company does not have effective sell of there products and services. So
that in such condition Nisa can face less efficiency in sell of products and services, so that
stock accounting is used by a company, which reduce the level of stock from a company and
by using proper and effective utilization of inventory it helps to enhance the profitability and
turnover during the year.
Budgetary control- Budgetary control is a techniques which are used to estimates and
make full control over the various expenditure so that by effectively allocating the funds in a
right areas which are really needed, can be done. In this way, budgetary control make a full
control in funds so that they can use in future more effectively. By using this techniques Nisa
retail stores can control or manage there budget for accomplishment of there performance in
future(Brandau, Endenich, Trapp and Hoffjan, 2013).
Bench marking- It is a process in which one company make comparison to the another
company. Hence, by measuring the performance level and strategies of the Nisa company
they make comparison with their competitors so that they can increase their efficiency.
Key performance indicators- It is a process by which company will meet their goals
and objectives by measuring the success of organisation, employees etc. Hence, by measuring

the working style of Nisa company and analysis the employees efficiency, firm can resolve
their financial issues.
Financial governance- It include all the requirement of financial process by which
company can manage their performance and funds. Nisa also try to adopt various governance
strategies so that they can manage their funds effectively and solver all the financial problems
in an organisation.
Hence all are the financial tools and techniques which are essential in management
accounting systems which provide sufficient information related to the firm. On the basis of
all the various kind of accounting approaches, a firm can identify there cost, expenditure,
revenue, wastage cost which make no impact in return. It is highly helpful to provide the
accounting information and also show the overall information and transaction related to the
expenses during the accounting period(Bodie, 2013).
CONCLUSION
By analysing the project report of management accounting it has been assessed that, In
Nisa retail stores, it is necessary for the company to make complete records of each and every
transaction at the end of there accounting period. It is also necessary that company should
maintain the management accounting system in day- to- day transactions. It has been
concluded that Nisa which is small retail store in UK, should also make an essential
accounting system such as inventory accounting, ABS Costing, Accounting for lean and also
used LIFO and FIFO or weighted average method for the valuation of there cost. It also
describes the various report which are essential to Nisa retail store so that company can
improve there management accounting report. It can be concluded that when Nisa retail store
going to assess and determine net profit differs while using absorption and variable or
marginal approaches of costing. At the end of report it can be depicted that budget, financial
ratios as well as capital budgeting these three planning tools helps to the Nisa retail store in
order to control over and budget and enhance net cash position(Armstrong, 2014).

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