Barclays Financial Performance: A Management Accounting Perspective

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[MANAGEMENT ACCOUNTING]

INTRODUCTION
The main purpose of this assignment is to explain the significance of the management
accounting and highlight the monitoring and control of the finance with respect to the
organization. The management accounting report is dividing into two parts. The first part of
the report explains the essential requirements of management accounting and also throws
light on the management accounting system (Adler, 2013). It also critically evaluates the
integration of the management reporting & management accounting system within the
organizational process. Management accounting plays an essential role and helps the
business manager in the formulation of policies and decision-making.
The second part of the report analyses the planning tools and reflect upon the techniques of
benchmarking, discounted cash flow methods, break-even analysis and such other tools for
improving the financial performance of the Barclays. This is a multinational company that is
engaged in providing a wide range of investments, financial and banking services and
thereby provides effective services to their client in order to deal with the financial problem
and understand the aspect of wealth management (Barr and McClellan, 2018).

PART 1
TASK 1 PROVIDE AN UNDERSTANDING OF THE MANAGEMENT ACCOUNTING
SYSTEM AND ALSO CRITICALLY EVALUATE SO AS TO INTEGRATE THE MA
SYSTEM WITH THE ORGANIZATIONAL PROCESS
According to the Institute of cost and management accountant,
management accounting refers to the application of skills and
professional knowledge in the preparation of the accounting
information and assisting the manager in the formulation of the
business policies and control over the operations of the
undertakings. Thus, it includes various methods and concepts
necessary for effective planning (Helleiner, 2014).
Application of Management Accounting
Performance measurement
Various systems of management provide support in terms of
measuring employee’s performance and efficiency. The standard
costing set out the basis for comparing the standard with the actual
performance for the purpose of identifying the deviation and taking
corrective actions (Gabčanová, 2012).
Resource Allocation
The resources of the organization need to be allocated in an effective
and efficient manner with respect to the various division of the
enterprise. Moreover, it helps in fulfilling the organizational
objectives and ensuring long-term sustainability.
Presentation of financial statement
Management accounting provides relevant financial data to the
business manager and provides necessary information for the

purpose of presenting the financial position of the entity. This further
supports the decision-making and financial support of the enterprise
(Ekholm and Wallin, 2011).
Risk Assessment
It helps to identify and assess the various factors of the risk. A
mitigation strategy needs to be designed in order to reduce the
occurrence of the risk and could effectively be reduced to a certain
extent through effective management of the risk.
Following are the principles of management accounting
Designing and
compiling
It is important to compile the accounting
records, statement and other reports in an
integrated manner in order to meet the need
of a particular business. Thus, the system of
management accounting is designed in a
manner to collate and present the relevant
data in order to resolve the specific problem
(Coulbeck, 2012).
Management by
Exception
This refers to the style of business
management that helps in identifying the cases
that deviate from the norms. The system of
standard costing and budgetary control
mechanism helps the business manager so as to
find out the unfavourable deviation and take
timely actions.
Absorption of
overhead cost
The overhead cost needs to be absorbed on any
of the predetermined basis. The overhead cost I
management accounting is an aggregate of
indirect material, indirect expense and other
indirect labour. This will further help the
business manager at Barclay in order to achieve
the desired results in the most equitable
manner.

Control at the
source
accounting
The system of management accounting help in
putting controls at the point where expenses
are incurred. Thus, it provides a various system
that allows the organization to exercise proper
control over the material, employees and
service providing devices (Bienia and Li, 2011).
Controllable &
uncontrollable
costs
Management accounting does the cost
classification based on controllability and helps
the entity so as to make plan and strategies
with regard to uncontrollable costs. The
identification of such cost can provide effective
techniques so as to control the costs.
Different types of management accounting system
A management accounting system help in the preparation of the
confidential and statistical report that acts as an aid in decision-
making. An effective system of management accounting reaches
various department and help in identifying the key performance
indicators of the various parts of the business.
Several types of management accounting system are as follows:
Job Costing
System
This is a significant management
accounting system that helps in tracking
the costs and revenue of the specified job.
This system provides the number of jobs
that needs to be assigned to the individual
item of revenue and expenses. This system
is generally used by the organization that
produces various items that are sufficiently
different from each other and involves
significant cost (Barr and McClellan, 2018).
The accounting procedure for job costing is
as follows:

 Receiving Enquiry – the potential
customer regarding the price, quality and
time taken to produce the product makes
the enquiry.
 Estimated price – The procedure of job
costing also consider the aspect of
customer likes and dislikes.
 Receiving of Order – the order will only
be confirmed if the customer is assured
for the price.
 Production Order – the order for
production is placed at the start of the
process
 Recording of cost – The various elements
of the cost involved in production needs
to be appropriately recorded
 Completion of Job – after completion of
job costing, a report needs to be
forwarded to the accounting department
for final costing.
Price
Optimization
This system of management accounting helps in
conducting mathematical analysis and setting the
different prices to the different products and
services through different channels. Moreover,
competitive prices should be set in a manner
that helps in meeting the company's objectives
and maximizing the operating profits.
This system can help the manager at Barclay to
take better control over the prices of the
resources. the prices for the multiple products
are decided after assessing the fluctuation in
demand at different levels. Thus, the effective
implementation of this system will help the
organization to determine the pricing structure
and make policies regarding promotional pricing,
initial pricing and discount pricing (Adler, 2013).

Cost Accounting
System
Cost accounting plays a vital role in the decision-
making process of the organization. It is an
important basis for resource planning and
achieving cost efficiency. This system provides
the framework so as to estimate the cost,
valuation of the inventory and controlling the
costs. The estimation of the accurate cost is a
critical aspect in order to assess the profitability
of the operation (Bienia and Li, 2011). This, in the
simple sense, cost accounting help in measuring,
recording and reporting the product costs. It also
considers the integration of accounting into the
general ledger. An efficient cost accounting
system is evaluated by certain characteristics:
 Sustainability to the business
 It should be simple and easily understood
by the costing staff
 Ensure flexibility at the time of designing
 Installation of the system should be
effective.
Inventory
management
system
This system of management accounting helps in
supervising the flow of goods from facilities to
point of sale. This system is complex and keeps a
detailed record of each product.

Some of the inventory management techniques
are as follows:
Just in Time Approach – This method focuses on
the arrival of the raw material as and when it is
required in the production process. This
approach helps in finding out the systematic
buying pattern as well as meeting the
requirements of the customers. moreover, a
dispute with the suppliers can lead to stock out
issues that further creates a problem in the
production process (Ekholm and Wallin, 2011).
ABC Analysis - This method provides the
classification of the inventory into 3 categories as
A, B And C. The goods included in A category
represents high-value items with minimal quality,
category B indicates moderate value items while
Category C represents low value and high
quantity items.

Integration of management accounting into an organization
 Cost centre – A cost centre is often called the departments in
the company, are responsible for managing the costs, and are
not directly responsible for contributing to revenue and
investment decisions. the main role of the cost centre is to
keep a track on the expenses and also help the management to
utilize the resources in an efficient way (Ekholm and Wallin,
2011).
 Price setting – Management accounting help to collect the
relevant cost data for setting the product price (Gabčanová,
2012). Pricing decisions play an essential role in setting the
prices of the product. The price of the product includes all the
relevant cost incurred in the production of the goods. Thus, it is
important to set accurate and appropriate pricing in order to
become competitive in the industry.
 Decision-making – The integration of various management
accounting system into the organization process helps the
business manager in making decisions and thereby achieving
the target objectives in a better way.
 Departmental budget – The budgetary control technique of the
management accounting helps in preparation of the
departmental budget by collating different information from
the team. This will further help to measure the progress of the
departments on a regular basis (Helleiner, 2014).

Benefits of management accounting
Help the organization in determining and setting the goal
Help in reduction of the cost
Maximization of the overall profitability
Increase in the financial returns to the shareholders
Implementation of the plan in order to ensure the effective
operations of the business

TASK 2 APPLY A RANGE OF MANAGEMENT ACCOUNTING TECHNIQUES AND
PRODUCE APPROPRIATE FINANCIAL REPORTING DOCUMENTS
Marginal costing
This system of management accounting considers the variable costs
as the unit cost and thereby fixed costs are written off against the
contribution for the period (Jacobs, 2018). This system of
management accounting is easy to be understood by the
management as well as emphasize the impact of fixed cost on the
profit. It is easier to communicate the profitability of different
products segments.
Figure: Advantages of Marginal Costing
Source: Jacobs, 2018
Absorption Costing
The technique of absorption costing does not make any difference
between the fixed and variable overhead. The profit under this
technique is calculated after considering all manufacturing costs and