Report on Management Accounting System for Unicorn Grocery

This report provides a comprehensive analysis of the management accounting system for Unicorn Grocery. It begins with an introduction to management accounting and its significance, followed by an examination of various reporting methods and their importance. The report delves into different costing methods used to determine net profit and evaluates accounting techniques. Furthermore, it explores the advantages and disadvantages of planning tools in budgetary control, along with a critical analysis of financial problems and potential solutions. The report covers key areas such as delegation of control, qualitative information, and different types of accounting systems like cost accounting, price optimization, job costing, and inventory management. It also discusses performance reporting, account receivable reports, inventory management reports, and operating budgets. Overall, the report offers a critical evaluation of accounting information and its role in decision-making, providing valuable insights into financial management practices for the company.

Management Accounting

Table of Contents
FROM: MANAGEMENT ACCOUNTING OFFICER..................................................................1
TO,...................................................................................................................................................1
GENERAL MANAGER..................................................................................................................1
UNICORN GROCERY COMPANY..............................................................................................1
SUB: MANAGEMENT ACCOUNTING SYSTEM .....................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting system and its essential use......................................................1
P2. Various methods used for management accounting reporting ........................................3
M1: Advantages of management accounting.........................................................................5
D1: Critical evaluation of reporting system ..........................................................................5
TASK 2............................................................................................................................................6
P3: Different costing methods using in order to get net profit ..............................................6
M2: Evaluation of accounting techniques..............................................................................8
D2: Critical evaluation of income statements........................................................................8
TASK 3............................................................................................................................................8
P4: Advantages and disadvantage of using planning tools in budgetary control ..................8
M3: Evaluation of planning tools.........................................................................................10
D3: Critical analysis of financial problems..........................................................................10
TASK 4..........................................................................................................................................11
P5: Different measures to overcome financial issues...........................................................11
M4: Analysis of financial problems.....................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
UNICORN GROCERY COMPANY
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management accounting is an effect aspects of an organisation. It provide necessary
information by using appropriate techniques for making interpretation of accounting data those
are done by company during an accounting year. Here, accounting should serve the
requirements of management as they are concern with decision making. Managers in every
situation of organisation need data regarding every business activity to make plan, properly in
order to attain organisational aims and objectives (Tappura and et. al., 2015). This project report
consists of various information about accounting and reporting system. In order to calculate the
net profit for company, several costing methods are used. It also examines planning tools which
are used in budgetary controlling. This particular report also provides information about financial
issues and crucial measure to overcome them. Overall project explains critical evaluation of
accounting information which can be crucial for the purpose of taking valuable decision.
TASK 1
P1. Management accounting system and its essential use
Management accounting is related with accounting data which is useful for Unicorn
grocery to manager their day-to-day operations. On the other hand, it is any form of accounting
that enables a business to conducted more accurately in respect to financial transactions. The
accounting information is arranged in such a manner and deliver management for effective
control to attain the aims of business. Hence, it is related with data collection from various
sources such as internal and external sources. The collected data is analysed, process, interpret
ate and communicated for use within an organisation (Renz, 2016). All these are done in order to
take necessary decision regarding future growth and profitability of Unicorn grocery . Account
managers can uses all these necessary information of accounting data in accordance to make
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better future for unicorn grocery. The target of the company is to attain their short-term and long
term aims. It provide essential outcome to the concern organisation about their financial
performances during one year of working. Every information which is generated by company is
need to be summarised into various books such as ledger, trail balance and other records. All
those entries which are recorded into these statements are sum up together and posted into a final
statements. This particular statements is overlooked by various investors and shareholders for
taking investment decision-making.
They used to examine company's current year performance, total cash flow generated by
them as well as sales capacity, account receivable and outstanding debts etc. It is the
responsibility of accounts managers to make proper entries and present it in well organised
format so that it is easy for outside parties to make there critical decisions (Fullerton, Kennedy
and Widener, 2014). It can impact the profitability, if information mentioned into statements are
not appropriate. In order to overcome these issues manager uses effective accounting systems.
With the used of accounting system all those problems can be solved those are coming at the
time of decision making.
Significance of management accounting
There are various advantages of MA those are explained underneath:
 Delegation of control: In current time, the function of management is no longer become
personal. It helps unicorn grocery in proper delegation of authorities for attainment of
vision and mission of businesses.
 Qualitative information: It is necessary to do so because, it would concentrate on the
actual problem to deliberate and attain particular solution for hard issues.
Types of accounting system:
 Cost accounting system: In this accounting is said to be the framework which is used by
unicorn grocery to determine cost of their products for making profitability analysis,
stock valuation and measures to control extra costs. It can help the company to examine
cost of sales and reduce excess of wastage which are arises in an organisation.
 Price optimisation system: According to this system plenty of valuable decision are
made in accordance with the specific costs for a product and services manufactured by
unicorn grocery. By this, response of customers are analysed about the prices fixed by
company for their products it will be effective from them to attain operating profits.
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 Job costing system: It is an effective system which is used when goods are developed on
the basis of particular customer demand. Every product that is produced is related to a
job. The job order must collect and track with lot size and data of manufacturing.
 Inventory management system: It is a kind of technical software which is used by
managers to detect there stock position, orders, sales and deliveries. In case of
production, it is more effective in creating work order charts, bill of assets and other
aspects related with inventories. It can be more effective for unicorn grocery as they are
related with manufacturing sector.
P2. Various methods used for management accounting reporting
It a system of communication, basically in the written form of information which should
be brought to the attention of different levels of management who use them to take valuable
decision. In other words, management reporting is the process of delivering necessary data to top
management of unicorn grocery. It mainly consists of interpretation, suggestion and finding with
encouraging evidence in the form of other reports. The reporting systems are generally, useful to
the administration for effective planning and control. It is continuous system of reporting which
is better guidance for prompt decision making. Thus, it is essential to have a perfect reporting
system that can present positive outcome for the company.
The main purpose of reporting system is to obtain required data associated with the
business to discharge its managerial operations such as planning, organising, controlling and
directing etc. from this it can ensure operational efficiency of the concern business. It facilitate
proper allocation of resources (Jansen, 2011).
With the use of this, it is easy to secure details knowledge between people those are
associated in different field of work in an organisation. It has been noticed that growth and future
sustainability is important aspects for accounting managers. For this, they required to have well
effective reporting system that can help them to make entries and maintain their daily
transactions. It can be more helpful for account managers in order to take crucial decision for the
success of unicorn grocery business operations. This report is made by collecting every
information from different books of accounts and all departments. Such as operational, HR,
Finance and sales or production departments. The total lists of information is transfer to final
report of the company (Ward, 2012). The investors or stakeholder of unicorn grocery used to
analyse several statements in order to take their investment decision. The future of unicorn
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grocery is totally depend upon these statements which is prepared by collecting information from
every departments. The data collected for evaluation of reports are taken from internal as well as
external sources. It is crucial for them to identify data in positive manner. More perfect data is
collected from different records to analyse performance of unicorn grocery during the time of
decision-making. Stakeholder uses these information such as profit and loss statement, balance
sheet and cash-flow. By taking into consideration they used to make there investment plan
proposal.
The primary goal is to increase maximum output from their investments. Proper reporting
is more crucial for the company as they can maximise their growth chances with that. It has been
observed that it is associated with financial activities and all those financial transaction which are
done by unicorn grocery during the time. It can also help in enhancing reputation of the company
in front of other competitors. It is necessary to prepare specific reporting that does not similar to
other companies which are working as a same line of units.
Importance of reporting system:
 Efficient in managing control system: In this particular system, a target is set in prior.
The major task of managers is to look after the employee whether they are working as per
the organisational objectives (Vasile and Man, 2012). Reporting can help them to
determine their correct position and working status. Beneficial in profit generation: with the help of report operations of business and total
level of operations can be determined. It is useful for companies to make estimation of
total cost and sales generated during the year. By this, an idea about total profit can be
examine.
Types of reporting system:
Performance reporting system: As per this system, financial data are determined in
such a manner as that it would be indicate current time financial performance of unicorn grocery.
It consists of accounting information of the company as well as staffs those are working in it.
Account receivable report: This particular report is prepared for analysing total lists of
unpaid customers and bills as per the allotted date (Van der Stede, 2011). It will be effective in
analysing total estimated time required to recovery the amount.
Inventory management report: With the use of this report, managers can estimate that
how much of total inventories available to the company. It can be useful tools to manage and
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control the stocks. By the use of certain tools and techniques like turnover ratios, ABC costing it
can be possible.
Job costing report: It consists of total costs which is linked with manufacturing of
products during the year. It includes every information related with labour variance, material and
expenditure which are used in it (Parker, 2012). The main purpose of using this reports is to
evaluate total cost which is incur by company with each lot size of product.
Operating budget: This specific report is related with manufacturing cost that is directly
associated with income and expenditure for unicorn grocery. This kind of report is to estimate
actual cost which is incur at the time of producing one extra units.
M1: Advantages of management accounting
In an organisation, without any particular reason account managers cannot make use of
any system that can affect performance of the business. In order to maximise profitability of the
company they need to use effective accounting system. It can be useful for recording there daily
transaction in well organised manner. With this, opportunities of getting maximum output can be
increased. The most effectual aspects of using management accounting is that it helps in
maximising efficiency and productivity of the company.
D1: Critical evaluation of reporting system
As, unicorn grocery required a system through which their every day financial
transactions can be recorded in well systematic ways. The managers and other employees of
department is performing there roles in effective manner in the ways to provide more valuable
outcomes for the company. The reporting system can provide good chances of increasing
profitability and growth up to a extent. The main objectives of using this reporting is to identify
performance of unicorn grocery as well as their employees those are performing there task in
favour of the company.
TASK 2
P3: Different costing methods using in order to get net profit
Cost is said to be that amount which is generated by company for manufacturing goods
and services. It is basically, presented in financial and non-financial terms. It also includes
valuation of effects, resources, utility consumed and risk associated with that particular product.
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Costing is the process of total estimation of costs which is related with a specific good or
business venture. The scope of of cost accounting is smaller as compare to management
accounting (Otley and Emmanuel, 2013). Under this, primary target is based on cost and its
deals with collection, analysis, relevance interpretation and effective measure to various issues of
management. In case of production, research and accounting a cost is the total value of amount
that has been used to develop something or deliver a service. It has been seen in recent past times
that companies are moved to adopt ABC costing by requirements to improve costing accuracy.
There are also various costing method those are crucial for the company to determine
profitability of an organization. Some of them are:
Absorption costing: Under this costing, the cost of products is estimated after
considering the total cost. It is used to take both fixed and variable costs. Hence, this method is
also termed as traditional costing. The variable costs are varies to the product where as fixed
costs are apportioned over other products during production process.
Marginal costing: It is known as that process whereby costs are categorised into fixed
and variable and with that such division so many managerial decisions are taken into
consideration (Macintosh and Quattrone, 2010). It varies with additional unit produced by
company with the same resources. In this costing, variable cost alter whereas, fixed cost remain
unchanged. Valuation of stocks is done at variable costs only.
Comparison between both of them
Absorption costing Marginal costing
In this costing method, cost data is represented
into into conventional pattern.
Under this, cost data are shown to highlight the
contribution per units of each products.
If the company is going with this cost, they
need to considered both fixed and variable
cost.
Only variable costs are taken into account for
product as well as stock valuation.
Fixed costs are varies with cost of production.
Every product bears a economical share of
fixed costs through which profitability can be
enhanced.
In this method period costs are taken into
account. The PV ratios is calculated for the
purpose of determining profitability of the
company.
Difference in profitability under both costing methods are discussed underneath:
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 No beginning and ending inventory: In this condition, income statements under both
absorption and marginal costing are equal (Lukka and Vinnari, 2014).
 When opening inventories are equal to closing: Under this, profit under two methods
will be equally provided fixed cost component in same amount.
Calculation through marginal costing using
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2 - 7800
Closing stock: 100*13 - 1300 -6500
Contribution 11000
Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
Total Profit / Loss 7500
Computation of Net profit by using absorption costing
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
Less:
Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
The above calculation is done by using both absorption and marginal costing methods.
From both the results are getting varied. But in order to take necessary decision by keeping
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future target Unicorn grocery need to select that costing method whcih is more reliable and
accurate (Kotas, 2014). However, after analysing both techniques, it has been found that
marginal costing is more effective as they are ignoring fixed costs during computation of net
profit.
M2: Evaluation of accounting techniques
It has been analysed that company can attain their targeted aims and objectives with
perfect planning and strategies. For this purpose they need to make use of appropriate techniques
which can help them in attaining those goals. There are so many mistakes and errors which are
always their with unicorn grocery that can be overcome by using effective tools. Such as
conservatism is a policies of anticipating future losses but not future gains. Expenses and debts at
the time they uncertain about results this techniques is more useful. Other is materiality in which
all the material aspects are needed to be disclosed.
D2: Critical evaluation of income statements
As per the above calculation, it has been observed that unicorn grocery can use two of the
most effective costing methods in order to get evaluate there net profit. It has been seen that both
these methods are reliable in delivering more accurate results as compare to other methods. If
company is using absorption costing they are getting net profit of 7800. whereas, with the use of
marginal costing they are incurring a profit of 7500. The main point of difference is about 300
which is arises because of fixed cost treatment. The outcomes are more positive and suitable for
taking necessary decision.
TASK 3
P4: Advantages and disadvantage of using planning tools in budgetary control
Budget: It refers to sum of money which is allocated in different areas of department of
an organisation after estimating future revenues and expenditures incurred in the process of
achieving desired objectives (Herzig and et. al. 2012). It forces managers to determine the
conditions that may change in working environment and encourages him to determine problem
before they occur.
Budgetary control: In order to control and monitor budget, the manager of an
organisation need to set standards for future period and thereafter compare the actual
performance with the standard performance which helps in identifying the reason behind failure
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or success of operation. The manager need to plan about how to utilize resources in effective and
efficient way that will bring positive outcome.
Process of budgetary control: Consult with concern managers: In order achieve desired goals and objectives the
managers of an organisation need to consult with each other and decide whether the
budget is required to manage cost and expenses in their departments (DRURY, 2013). Do effective assumption: The managers of different departments need to make
assumptions on the basis of collecting feedback in order to avoid future losses. Fixed organisational data for budget to attain objectives: In order to assist managers to
make plan according to the standards then they should required to collect and assemble
data from different departments which helps in achieving desired targets. Measurement of data with budgeted: Making comparison of actual data with the
standard data enables the manager of Unicorn company to measure the overall
performance of an organisation. This will help an organisation in getting possibilities of
future growth with limited resources. Review analysis: The manager need to review above mentioned steps and check whether
steps are followed in proper manner or not and if any problem occur then manager should
need to implement corrective measures as early as possible in order to bring positive
result.
Forecasting tools: It refers to using past data to direct future activities. It means
Forecasting is done on the basis of behaviour, skills and knowledge of management which are
required in managing future activities.
Advantages: It helps the company in determining desired objectives with the help of which manager
can predict the amount of sales and revenue they are achieving in future (Boyns and
Edwards, 2013).
Disadvantages:
 It fails to make exact estimation relating to expenses that to be incurred by company in
future which makes adverse impact on the profitability of an organisation.
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Scenario tools: It helps in assisting managers through planning, functional and
operational management in order to evaluate alternative options according to the requirement of
situation.
Advantages: It helps the managers in getting new ideas about selection, opportunities and execution
which is uncertain (Bodie, 2013).
Disadvantages:
 The biggest disadvantage is that it consume more time and chances of getting accurate
result is low.
Contingency planning tools: It enable the manager to react in complex situation in order
to achieve desired targets in effective and efficient manner.
Advantages: Saving cost for an organisation.
Disadvantages:
 Due to complex situation, the complicated plan also need to be taken which may difficult
to understand by members of an organisation (Bennett, Schaltegger and Zvezdov, 2013).
M3: Evaluation of planning tools
In order to increase the efficiency and productivity of the company unicorn grocery need
to use their resources in well manner. In this process, planning tools can be more crucial in
providing necessary action to the given information. Some of them are forecasting tools as it can
be useful in estimating future sales and revenue of the company that they are targeted. Another
important tools are scenario analysis which is used according to the requirement of company.
Contingency tools are more reliable as they work as backup plan for unicorn grocery.
D3: Critical analysis of financial problems
There are so many financial issues which are present in an organisation. Because of this,
profitability can get affected. It is the primary role of managers to detect those issues and make
proper solution to them. Some of them are overspending which is arises because of salesmen in
most shops do not provide information about price of a product. Lack of assets allocation which
create more burden on companies (Balanced Scorecard Basics, 2017). To manage all these
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