Comprehensive Management Accounting Report for Al Sham Automotive

This report examines management accounting principles and practices within the context of Al Sham Automotive Co. It begins by identifying core principles such as influence, relevance, value, trust, and integration, and then differentiates between financial and managerial accounting. The report explores the roles and responsibilities of accounting and financial managers, highlighting their contributions to decision-making and financial reporting. It also presents common accounting systems like cost, inventory, and lean accounting, and assesses their roles in planning, controlling, and managing business operations. Furthermore, the report discusses the significance of management accounting in preparing plans, making make-or-buy decisions, and forecasting cash flow, emphasizing its crucial role in enhancing business performance and achieving organizational goals. The report is a valuable resource for students seeking to understand the practical application of management accounting concepts.

Accounting

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................1
TASK 1......................................................................................................................................1
1. Identifying the principles of management accounting.......................................................1
2. Presenting the most common accounting systems used by organizations.........................5
3. Assessing the role of management accounting and methods that can be used for the
purpose of reporting...............................................................................................................6
4. Explaining the manner in which management accounting is integrated within an
organization............................................................................................................................8
CONCLUSION..........................................................................................................................8
REFERENCES.........................................................................................................................10

INTRODUCTION
In the present era, business unit places high level of emphasis on undertaking
managerial accounting tools and techniques. The rationale behind this, management
accounting tools provides input for the cost control and thereby helps in enhancing business
performance in monetary terms. Such accounting field also provides high level of assistance
in monitoring business activities and overall performance to a great extent. In this way,
managerial accounting aid in decision making and contributes in the attainment of
organizational goals and objectives. The present report is based on Al Sham Automotive Co,
which is operating in the small business segment of car industry. In this, report will highlight
the extent to which financial accounting varies from managerial. Besides this, it will provide
deeper insight about the aspects of management accounting and reporting. Further, report also
depicts the roles and responsibilities shared by accounting as well as financial manager
within the firm.
TASK 1
1. Identifying the principles of management accounting
Management accounting and reports provide managers with appropriate and timely
financial as well as statistical information. Hence, managerial reports assist in making day to
day and short-term decision that contributes in the growth of firm. Thus, managerial
accounting may be served as a process of analysing, interpreting and presenting information
in front of higher management team for decision making. By considering all such aspects Al
Sham Automotive Co lays emphasis on undertaking the tools and techniques of management
accounting.
Principles of management accounting: The main principles of management accounting
which are accepted at global level as follows:
 Influence:In management accounting, decision making aspect is based on effective
communication so it must be influential. Hence, managerial accounting improves

decision making to a great extent by serving useful information at all level. Such
principle lays high level of emphasis on integrated thinking and assists in
understanding the business areas in a prominent way. On the basis of decision makers
need relevant information is sourced and analysed under such field (Otley, 2016).
Hence, by taking into account all such aspects it can be said that recommendations are
highly useful for decision makers and helps in the formulation of competent strategic
framework. Relevance:The main focus of management accounting is on the relevancy aspect and
appropriateness of information. Thus, as per the needs of stakeholders such as
management, managerial accounting team gathers relevant information and prepared
the same for analysis. Hence, such principle facilitates balance between past, present
and future related information (The 4 Global Management Accounting Principles
Your Company Can Adopt, 2017). Along with this, it also tends to make focus on
getting information about financial, non-financial, environmental and social aspects.
This in turn helps in making appropriate decision for the business organization’s
success. Value:As per such principle, managers make focus on risk, cost, value generationand
potential of opportunities. Hence, scenario analysis is the most effectual techniques
that can be undertaken by the firm to evaluate the impact of opportunities and risks. In
this way, value principle of management accounting helps in assessing the ways
through which firm can grab the opportunity and mitigate risk level.
 Trust:It entails and place emphasis on improving the trust of stakeholder group. On
the basis of trust factor, it is highly required for firm to get feedback and give quick
response to the questions and complaints (Weetman, 2016). By doing this, business
unit can indulge trust, creditability and thereby would become able to improve
process as well as brand image. Integration: In accordance with such principle,information must be integrated with
all the departments. Moreover, without having integration informationfirm is not in
position to develop competent framework for the near future.
Difference between managerial and financial accounting are enumerated below:
Basis of difference Managerial accounting Financial accounting
Meaning It offers input to the managers This accounting system lays

for the formulation of policies,
plan and strategies. Hence, such
system is highly significant
which in turn ensures the
smooth functioning of business
operations.
emphasis on the preparation of
financial statements. The main
motive behind such accounting
is to provide all the related
parties with appropriate
financial information.
Compulsion In the case of managerial
accounting, it is not compulsory
for the managers to prepare
reports(Messner, 2016).
Unlike managerial, private and
public firms require to employ
the system of financial
accounting.
Information Such accounting system serves
both financial and non-financial
information for decision
making.
Field of financial accounting
only offers financial
information to the stakeholders
for decision making.
Motive The main objective of firm
behind undertaking managerial
accounting practices is to assist
managers on various matters
(Difference between financial
and managerial accounting,
2017).
Objective of financial
accounting lays high level of
emphasis on meeting the needs
of outsiders such as suppliers,
investors, government etc.
Format Under managerial accounting,
no specific format is followed
by the managers.
In financial accounting, reports
or statements are prepared and
presented in a highly structured
way with appropriate format.
Reporting Managerial reports furnish
complete and detailed
information about various
fields.
It gives summarized
information regarding the
financial position and
performance of firm.
Publishing and auditing
requirements
There is no need of publishing
and auditing under managerial
accounting.
Financial reports must be
published after auditing by a
statutory auditor.
Hence, by taking into account all the above depicted aspects it can be stated that
financial and managerial accounting differs on the basis of various aspects.
Roles and responsibilities of managers at different levels are as follows:

Accounting manager:
 In the business unit, manager plays a vital role in assessing and ensuring that
transactions are in line with policy, regulatory as well as other requirements.
 Along with this, manager also makes efforts in relation to assessing, maintaining as
well as exceeding the minimum amount of sales (Duties & Responsibilities of an
Account Manager, 2017). For this purpose, manager continuously makes assessment
of actual performance in against to set standards. Hence, after assessing the causesof
deviations, manager tries to take strategic measure that helps in getting the desired
level of outcome or success.
 Reporting: It is the accountability of manager to prepare various reports regarding
quarterly sales, annual forecast etc and present the same to higher management.
Financial manager: In the business unit, financial manager performs several roles and carry
out responsibilities such as:
 Finance managers role is highly significantwithin the firm as they prepare financial
statements and business activity report.
 In addition to this, managers makesassessment and monitoring of the financial details
to identify the extent to which legal requirements are met.
 Financial managerperforms most important function within the business unit in
relation to allocation of funds. At the time offund allocation, financial manager
considers several aspects such as size of firm, growth capability, status of asset and
mode of raising funds etc (Role of a Financial Manager,2017). All such aspects help
manager in making allocation of fund in such a manner as it is used optimally.
 Profit earning and maximization is the prime function of an organization.In this, it is
the accountability of manager to assess the factors which have greater impact on
firm’s profitability. Such factors include pricing, competition, state of economy,
demand & supply mechanism, cost and output. Thus, it is the duty of manager to
assess the factors that closely influence profit margin or level and find out the
alternative.
 Accountabilities of financial manager include evaluation of financial reports which in
turn helps in assessing the ways through which cost can be reduced (Weygandt,
Kimmel and Kieso, 2015).

 Further, it is the duty of financial manager to analysethe market trend and identify the
opportunities for expansion. Thus, referring the all such aspects it can be presented
that financial manager role is highly effectual in making monetary decisions.
2. Presenting the most common accounting systems used by organizations
With the motive to attain success over competitors Al Sham Automotive is planning
to undertake MA tools and techniques.The main reason behind this, system of MA furnishes
appropriate information to the managers for planning, controlling and managing the
operations of business. Thus, MA facilitates optimum utilization of resources by eliminating
the waste to a great extent. Hence, MA system that can be undertaken by Al Sham
Automotives are depicted below:
 Cost accounting:It implies for the process of recording, classification, recording,
analysis, summarization, allocation as well as evaluation of various alternatives. Cost
accounting is the most effectual system which assists in identifying and advising the
most appropriate action through which financial efficiency as well as capability can
be raised. By employing such system manager can determine cost of product, process
and objects to a great extent (Chenhall and Moers, 2015). Moreover, such system
helps in assessing the cost incurred by Al Sham Automotive for manufacturing one
car. By dividing the total expenses from number of cars manufactured business
organization can determine per unit cost. Thus, by adding the profit margin in per unit
cost Al Sham Automotive can determine price level and becomes able to attain
profitability. Further, such system also helps firm in assessing as well as reporting
cost of inventory and COGS.
 Inventory accounting: By using such system business unit can plan or track the
inventory level or associated activities. Thus, by making focus on bar code tracking
system firm can track the level of stock in a prominent way. Moreover, in this, each
inventory item is tagged with a bar code which provides information about when
stock is brought into or moved out from warehouse (Otley and Emmanuel, 2013).
Along with this,there is several othersystems that can be undertaken by Al Sham
Automotive for identifying the level of inventory such as raw partsneedto be
maintained within the firm for ensuring the smooth functioning of operations such as
EOQ, JIT etc. By applying such tools and techniques firm can assess the level or
holding and ordering cost. In this way, by using inventory related tools car
manufacturing company can exert control on cost level to the significant level.

 Lean accounting: Al Sham Automotive can measure as well as motivate excellent
business practices by employing the system of lean accounting. This system focuses
on the elimination of wastage from the accounting system and makes reporting aspect
faster (Fullerton, Kennedy and Widener, 2014). Moreover, it offers appropriate, timey
and understandable information that manager can use for decision-making purpose.
Lean accounting system renders information about both operational as well as
financial aspects and gives input for strategy development.
3. Assessing the role of management accounting and methods that can be used for the
purpose of reporting
(Source: Management accounting and its importance, 2016)
Now, role of management accounting is increased significantly as compared to the
prior years. The rationale behind this, in the competitive environment firm can get success
only when it reduces the cost and provides customers with quality products or services at
affordable prices. Thus, AL sham Automotivealso needs to employ management accounting
techniques as it has high level of significance in the following way:
 Helps in the preparation of plan:Managerial accounting focuses on analysing present
as well as future aspects of business. Thus, it can be presented that management
accounting tools helps in making proper forecast of future (Suomala, Lyly-Yrjänäinen
and Lukka, 2014). This inturn helps in developing highly suitable plan and thereby
assists in gaining competitive edge over others.
 Assists in make or buy decision: Field of MA includes discussion regarding the make
or buy decision. For instance: Al Sham Automotive can use MA tools and thereby
identifywhether they should manufacture parts of car in-house or buy from
others.Thus, it can be said that by doing make or buy analysis firm can identify the
activity which in turn helps it in attaining more profit.

 Provides assistance in forecasting cash flow:By applying MA tools Al sham
Automotive can assess the sources from which revenue will be generated by it in the
near future. Along with this, it also helps manager in assessing whether revenue will
increase or decrease in the near future (Management accounting and its importance,
2016). Further, techniques of MA also help in assessing the expenditure which will be
incurred by Al Sham Automotive manufacturing company in the near future. All such
aspects show that system of MA helps in making proper forecast of both inflows as
well as outflows and thereby assists in developing suitable financial plan.
 Understanding performance variances:System or techniques of MA provides high
level of assistance in analysing the areas of business unit that demand for
improvement. Thus, analytical techniques of MA help management in relation to
build on positive variance and managing the negative one.
 Analysing rate of return: By using the tools of MA, business unit can analyse the
expected return on investment (Fullerton, Kennedy and Widener, 2013). For instance:
Al Sham Automotive can determine BEP point, years needs to cover initial
investment, cash flows etc which are the main aspects for the purpose of decision
making.
Thus, it can be depicted that management accounting system covers wide range of tools
and assists in making decision regarding cost reduction as well as profit planning.
Managerial reports: By preparing the below mentioned reports manager of Al Sham
Automotive can develop competent plan for the upcoming time period such as:
 Job costing report:This report is highly prominent because it provides deeper insight
about the company’s profitability on the basis of job.Hence, by using the technique of
job costing Al sham Automotive company can assess the revenue generated through
the performance of each job. In this way, by making comparison of revenue generated
business unit can assess the profitability which is associated with specific job. Thus,
by undertake job costing report manager of concerned manufacturing company can
assess the segment which is highly profitable (Types of Managerial Accounting
Reports, 2017). Further, it also entails the segment which is facing issues and that
needs to be addressed for the attainment of high profit margin. Thus, by using such
report manager of the car company can take strategic decisions and would become
able to run business operations successfully.

 Budget report:In the context of Al Sham Automotive, by undertaking budget report
manager can do analysis of departmental performance and control cost. In addition to
this, by undertaking budget report owners as well as managers can provide personnel
with suitable incentives and enhance their motivational aspect. Hence, for achieving
specific financial goals some of the budgeted amount is given to the employees such
as bonuses.
 Operating budget report: It covers information regarding the expected revenue and
expenses pertaining to the specific time period. Operating budget report allows
manager and production supervisors to examine variances by making comparison of
actual performance with standards. This in turn helps manager in making estimation
of monthly profitthrough the comparison of expected sales revenue as well as
expenditure (Williams, 2014). Thus, it can be presented that operating budget is the
most effectual tools which provide assistance in making effectual planning of
expenditure over the time frame.
 Accounts receivable aging: This report is critical tool which in turn provides
assistance in managing the cash flow for companies. Moreover, such report entails the
time -period within which firm will recover amount from debtors. It clearly indicates
that customers are able to pay their balances or not. Hence, by making evaluation of
suchaspect Al Sham Automotive can assess that there is a requirement to tighten the
creditpolicies or not.
Hence, it can be stated that management accounting reporting offers highly valuable
information toAl Sham Automotive. By considering such reportsfirm can get necessary
information and take strategic move for running the successful business operations as well as
functions.
4. Explaining the manner in which management accounting is integrated within an
organization
From assessment, it has been identified that management accounting system is highly
integrated within the organization. Moreover, it focuses on each & every department and
thereby helps in developing plan which in turn may result into organizational success.
Standard costing system is one of the main examples of MA that facilitates effectual
judgement (Chenhall and Moers, 2015). Under standard costing system, manager makes
comparison of actual results with the budgeted figures and thereby helps in assessing
deviation. For instance: If selling & distribution expenses of Al sham Automotive is higher

than the budgeted amount then manager needs to make efforts in relation to identifying
causes behind the deviations occurred. In this way, strategic move which will be taken by the
firm helps in improving the performance of both sales department and overall organization
(Fullerton, Kennedy and Widener, 2013). Moreover, cost reduction and control is one of the
main motives of business unit. This aspect shows that, standing costing of management
accounting assists in integrating performance within the business unit.
(Source: Otley and Emmanuel, 2013)
Along with this, balance scorecard is one of the most effectual techniques thatare
integrated in Al Sham Automotive. Moreover, it majorly includes learning & growth,
business processes, customers and finance. By using such technique, firm can attain objective
and measure the performance in an appropriate manner.Thus, by undertaking all such
perspectives manufacturing company can assess the factors that are hindering company’s
performance. Along with this, it also helps in tracking future aspects and outline strategic
changes that contribute in firm’s success. Hence, balance scorecard technique may be served
as a map which in turn helps in identifying where value needs to be added in the organization.
The rationale behind this, financial or stewardship aspect lays emphasis on assessing
the aspect that monetary resources are used by the firm to a great extent or not. Beside this,
finance perspective helps in evaluating the monetary position or performance of firm.
Further, customer & stakeholder perspective measures the level of customer satisfactionand
retention.In addition to this, while measuring efficiency and quality Al sham
Automotiveneeds to make focus on internalprocess perspectives (Otley and Emmanuel,
2013). Along with this, learning & growth aspect can be measured by manufacturing
company on the basis of infrastructure, culture and technology. In this way, balance scorecard
technique covers wide organizational aspects and assists in taking strategic action for success.
Thus, it can be stated that balance scorecard, standard costing system etc. are the main tools
that helps in integrating functions with organizational goals.

CONCLUSION
By summing up this report, it has been articulated that principle of management
accounting are highly prominent which in turn helps in preparing suitable reports. Besides
this, it can be inferred that by employing MA tools and techniques Al Sham Automotive can
make forecast of cash flows, cost, profit etc. It can be seen in the report that effectual long
term strategic plan is highly based on budget, job costing and operating budget reports.
Hence, by making assessment of all such reports Al Sham Automotive can take decision for
the near future. Further, it can be summarized that accounting manager carriesout several
responsibilities and assist higher manager in decision making. It can be stated from overall
evaluation that MA methods are highly integrated within the firm and facilitates the
formulation of competent plan. Hence, MA system is highly significant for Al Sham
Automotive which helps in enhancingefficiency, performance and process to a great extent.
REFERENCES
Books and Journals
Chenhall, R. H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, Organizations and
Society. 47.pp.1-13.
Demski, J., 2013. Managerial uses of accounting information. Springer Science & Business
Media.
Fullerton, R. R., Kennedy, F. A. and Widener, S. K., 2013. Management accounting and
control practices in a lean manufacturing environment. Accounting, Organizations and
Society. 38(1). pp.50-71.
Fullerton, R. R., Kennedy, F. A. and Widener, S. K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting
practices. Journal of Operations Management. 32(7). pp.414-428.
Messner, M., 2016. Does industry matter? How industry context shapes management
accounting practice. Management Accounting Research. 31. pp.103-111.