Management Accounting Report: IKEA Corporation Analysis

This report provides a comprehensive analysis of IKEA's management accounting practices. It begins with an introduction to management accounting and its application within IKEA, a multinational corporation. The report then delves into various management accounting systems used by IKEA, including cost accounting, inventory management, price optimization, and job costing, outlining their respective benefits. It further examines the different types of management accounting reports prepared by IKEA, such as performance reports, inventory reports, and cost accounting reports, and their purposes. The report also explores the advantages and disadvantages of different planning tools used for budgetary control and analyzes how IKEA adapts its management accounting systems to respond to financial problems. Finally, the report computes costs using marginal and absorption costing methods, providing a financial report that accurately interprets IKEA's business activities. The report concludes by evaluating how the discussed planning tools can effectively resolve financial problems and lead organizations to sustainable success.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management Accounting Systems:........................................................................................3
P2 Management Accounting Reports:........................................................................................5
M1 Evaluating benefits of discussed MA systems:....................................................................6
P3. Computing costs through applying suitable methods of cost-analysis to formulatye income
statements:...................................................................................................................................7
.....................................................................................................................................................9
...................................................................................................................................................10
...................................................................................................................................................10
...................................................................................................................................................11
M2. Accurately apply the range of management accounting techniques and produce
appropriate financial report.......................................................................................................11
D2. Produce financial report which accurately apply and interpret the business activities ...11
P4: Explaining major advantages & disadvantages of different types of planning tools used for
budgetary control:.....................................................................................................................11
M3: Analysing uses of different planning tools/methods and their application for preparing
and forecasting budgets:............................................................................................................12
P5 Comparing as to how corporations are effectively adapting MA systems for responding to
multiple financial problems:.....................................................................................................13
M4 Analysing about how as to respond financial problems, MA can lead entities towards
sustainable successes:................................................................................................................14
D3 Evaluating as to how discussed planning tools can respond effectively to resolving such
financial problems to lead organisations to sustainable success:..............................................14
CONCLUSION..............................................................................................................................14
REFRENCES.................................................................................................................................16

INTRODUCTION
Managing accounting is that kind of process which is there to identify, analyse, evaluate,
interpretation with expressing information to the managers in order to achieve goals and
objectives. This is there to refer over the cost that is there to make accounting of information
which has been helping over making decision more effective. It is refereed to as cost accounting
and information which has been helping to make decision making mechanism provide
effectiveness. Managing of farm work related to accounting is different from various other
method. This is there to provide an framework with detailed information that has been
concerning with financial and non-financial transactions.
This assignment is based over IKEA organization. It is an multinational corporation
which is originated from Sweden and headquarters is in Netherlands. It come into existence in
the year 1943. Vast range of product is being sold by the organization that is furnished furniture,
kitchen appliances, household furniture and also customized furniture according to clients
demand. Things to be covered in this report is based over various kinds of managerial accounting
system. Further various approaches is being used in order to handle reporting has to be
explained. Along with benefits and drawbacks that is planning mechanism which is being used
to maintain budgetary control. Final cost is there to make determination for using correct method
in reading income statement through marginal and absorption method.
TASK 1
P1 Management Accounting Systems:
Management accounting system is there to provide accounting information for
development over strategies which has been implementing managers for supporting day-to-day
operations. In simple words this allows management for conducting all tasks, with plaining,
scheduling, hiring and regulating with managing. Management is there to include process of
making a task happen through plaining, scheduling, hiring, managing and regulating. Managing
of accounting has to be focused over particular kind of accounting method which is there to play
significant role through various kinds of business establishment possible. Various accounting
system that can be used by IKEA are explained as follows:
 Cost accounting system: Under this kind of managing system it is reference is majorly
focused over costing system of production. This method is being used by the organization

for measuring of goods for inventory/stock valuation, cost benefit analysis and cost
management purposes. The cost accounting method helps to measure the cost of goods
that are essential to the organization of sustainable operations. This is helpful in
monitoring of manufacturing cost related activities. IKEA is required to be incorporated
through method that has been practising to help tracking of expense for manufacturing of
operations.
 Inventory management system: This has been forming accounting framework that is
related over creating effectiveness within management of an organization's stocks like
raw materials, finished products and within an organization. Also it helps in assisting of
inventory within the management system and decisions should be taken regarding
procuring of raw materials with the capacity of production. Since it helps to recognize
the quality of inventory in stores. The correct accounting system will assist the company
in determining the supply of raw materials, finished products and other inventories
decisions. As in IKEA company, inventory accounting system could be used in their
function to determine the quality of materials and also finished products within the
organization (Johnstone, 2018).
 Price optimisation system: In this kind of system accounting mechanism has been
helping for assessing price of good and services to be provided. Price management is that
method which is helpful in assessing of customers response over various price rates. As
there is no price management program within IKEA it becomes hard for determining of
correct prices of its products. In correspondence accounting it is very much essential for
an organization to have correct price of product and services. Thus, IKEA 's
implementation of the price optimization system helps to allocate effective products'
prices within the corporation.
 Job costing system: As per this MA system it has been helping over assessing separate
job costs over various operations. Job costing is that kind of framework which is used in
providing of accurate details within the job costs and within the capacity of business
organizations for making sensible decision. Generally accounting system has an very
important role for controlling job costs. In other words method through which labour
costing uses within the business sector this is used for evaluating production of cost to be
surpassed the prices of materials which increases profit within an organization. This

method can be implied by IKEA Ltd for the purpose to determine costs that is job
assigning through various operations.
P2 Management Accounting Reports:
Various approaches are there that is being used for preparing of management accounting
report within an organization. This can be done for monitoring of financial and non-financial
results. IKEA is there to prepare an management accounting report for supporting of distinct
accounting system. The various reports and its summary is been explained as follows:
 Performance report – These report is there for depiction and actual performance foe
covering of various aspects that is there within an organization that is being used to carry
out research by the employee. In this report certain effects is there for an outcome that
has been resulting to make comparison possible through budget. This could serve to
assess the difference between the two statistics and between outputs of employees, along
with justification and further that can be used by management of the company for the
implementation of strategies that will eventually help to resolve these differences and
assist to achieve the goals set. IKEA is an small organization that sells furniture. It is an
manufacturing organization and the report is being used for monitoring of performance of
employees and assuring quality within the product. Over all benefit is the study which is
seen in a manner that enabling of employee is done to make effective use of terms top
contribute with better products (Khosiev and et. al., 2019).
 Inventory report – This method is there for collecting information that is there to
provide information through quantities of raw materials and finished products that is
located in IKEA warehouse. Respective organization is there which makes preparing of
report of inventory raw materials and product. Implementation of report is provided over
making data assistance which lead over data obtaining and type through procedure of
storage. This same as in IKEA may also compile a report on the management of raw
materials and also ready furniture (Kostyukova and et. al., 2018).
 Account receivable ageing report – In this kind of managing accounting that is being
related wit provisions that has been organizing data with debts through including of
debtors. Most of the business is being provided through information over dates that is
related to payments. Main purpose of such kind of study helps in assisting of organization

to be recovered from debtors. Business company shall prepare an account
receivable ageing report to collect details on the overall amount owed on the market from
specific debtors.
 Cost accounting report – This is there to make covering of cost and all activities that
has been carried through production of particular product. As per the scenario of IKEA
managing of team with such corporation is there for utilizing accounting report which is
required to capture production of items. Such study has been assisting over enterprise
over evaluating both cost and profit. Accounting report has been formed applying of two
methods of cost processing.
In relation to this costs specific job has been ordering of charged that has been
performing job which is regarded to be cost specific. This can understood as Management
personnel in IKEA utilization of such report in order to make recording costs to be acquired
which has made conducting of job to be specified through manufacturing of furniture with
specific kind of customer. In this process IKEA is there to make transfer of costs incurred
performing process which can be manufacture within specific portion within furniture. The main
objective behind developing of report in assisting organization with recognition of overall cost
which is being monitored and assists further (Messner, 2016).
M1 Evaluating benefits of discussed MA systems:
As it has been described above various kinds of accounting system within managing
accounting and there benefits has been discussed as follows:
Type of management
accounting system
Benefits of management accounting system
Cost accounting system This accounting system is used for helping to provide information
over costs through various operations. An organization is therefore
being managed over costs that includes various activities thorugh
cost accounting system.
Inventory management
system
This kind of framework is having various advantages over the
management of stocks that has helped the organization is taking
decision regarding purchase and manufacturing of finished goods.
This makes effective optimization through inventory costs that

makes storing and handling costs possible.
Price optimisation system In this kind of accounting system IKEA is there for setting of
accuracy in price of furniture. Prize optimization system has been
helping in recognising behaviour of customer at various level
offered by respective organization.
Job costing system This is another framework that is advantageous over the
organization that makes calculation of job costs. Also this system
helps in recording of costs with more acceptance that makes actual
cost and forecast cost to be analysed.
P3. Computing costs through applying suitable methods of cost-analysis to formulatye income
statements:
Marginal costing in this kind method contribution is being made for assessing over the
costs that has been classified separately over the costs and fixed costs.
Absorption Costing: Under absorption of costing product overheads has been fixed
through variable regarding absorption to make derivation of gross profit figure.

M2. Accurately apply the range of management accounting techniques and produce appropriate
financial report
On applying this marginal and absorption costing methods profit of both the organization
is being computed over a period of three year. It is given in that Marwa Limited's profit is using
over the marginal costs within three years that is £ 65400, £ 123,850 and £96,900 separately.
Also on the other hand, profit of Aarwa Limited is being applied for absorbing of cost
method that is £83,600, £124,892 and £ 22,000 respectively. Here differences in profit figures
are due to over and under absorption of fixed overheads.
D2. Produce financial report which accurately apply and interpret the business activities
This has been constructed over the computation of higher profit for the first year that is
there for Aarwa Ltd and for second year as well. On the other hand Marwa Limited is based
over profit that has increased within the last year. Certain changes has been made within the
profit that is due over operational production costs which makes difference in profit which has
been figuring to both organizations (Phan, Baird and Su, 2017).
P4: Explaining major advantages & disadvantages of different types of planning tools used for
budgetary control:
Budgetary control: It helps in making of reorganization of methods that is being used to establish
financial targets and comparison is made to generate outcomes. Focusing over various form has
resulted into plaining tools and defining that has been explained below:
Rolling budget: This is been described over managing of financial plan that is made over
comparison scale that has to be used in previous year. This is carried out in previous year's
budget which has been finishing for beginning phase within accounting cycle. Budget is there to
compass all aspects of finances which has been attempting for making estimation possible. In
IKEA limited utilization of budget has made efficiency to view effectiveness of economic
resources. This budget has certain benefits and drawbacks, described below:

 Advantages: This has been making benefits for an organization by reducing complexity.
In this scheduling of task preparation is being rolled out in same manner of previous year.
 Disadvantages- The main thing of this budget statement is appropriation of corporation is
not there to make crucial decision.
Flexible Budget: this approach is being refereed to as the budgeting. In this title has been actin as
the budget. Under this financial transaction has to be modified through various needs of user
group. In IKEA this type of budget is been drawn with those business activities that is there to
make changes possible in future.
 Advantages: Key feature benefit that is gained out of this budget is to create appropriates.
For example in specific financial year error is there over keeping subsequent modification
within accounts.
 Disadvantages: Biggest issue budget statement which has become difficult for comparing
impact of final data. This empowers fraud as staff members us there to create actual
performance (Quattrone, 2016).
Fixed budget: This is being recognized as major form of budgeting most rigid budget nature
which has been allowing modification to be made. In IKEA limited, manager is required to
follow budget within segment where ordinary and subsequent changes is made.
 Advantages- As no future changes to be made within the fixed budget which is not of
complex over goals employees. Less chances manipulation with additional changes
 Disadvantages- In this rigidity within the budget is there that creates major disadvantage
of budget that is complicating the task. Also making changes due to some significant
changes required.
M3: Analysing uses of different planning tools/methods and their application for preparing and
forecasting budgets:
Preparing a budget it is required fro plaining tool that is refereed through improving
effectiveness over an business which has been making improvement of working possible.
Plaining of tools has been playing important role that processes budget. This has been involving
master budget, cash budget, flexible and various other kinds of budget. It helps in using of
plaining tools, managing effectiveness with estimation that has likely been performed decision
accordingly. This making effectiveness through strategies and policies at base level.

P5 Comparing as to how corporations are effectively adapting MA systems for responding to
multiple financial problems:
Financial Problems: This is been classified over the issues that has made arising over formation
of an organization. If there is lack of effectiveness within supervision various kinds of issues has
to be faced that includes performance of issues which involves failure fro performing of various
business operations. Following are several kind of financial issues/problems that IKEA are
continuously facing, as follows:
Increasing cost storage handling costs of inventories: IKEA has been facing issues that is
regarding costs through inventory and storage. Manager of an organization is able to make
determination of root cause in which problem and due organization has increased costs of goods
that has been sold which has been impacting cost inventories.
Declining sales figures: In an organization sales figure has been continuously been decline the
organizations profitability level that has been decreasing. IKEA mangers has been unable to deal
with issues. This resulted into declining of sales and impacting shares price of organization.
Along with planning tools there are several significant techniques which may assist
managers of IKEA to handle these issues. Thus managers have to focus of these techniques to
allocate the areas which are causing such discussed issues, as follows:
Key performance indicators: This has been described over important components that has been
outlined. In simple words emphasizes of various aspects leading to gain impressive performance.
Such factors can be financial and non financial depending on nature. KPIs involve GP margin,
NP margin and different kind of fiscal ratios that is having non-financial KPI involves client
relationship and brand value (Schaltegger, 2018).
Benchmarking: This is regarded as that set of elements that is linked over contrasting of
financial and non-finance elements in an organization. This has resulted into corporation that is
required to gain efficiency.
Financial Governance: It is regarded as a mechanism by which financial information for a
given time timespan is tracked in an uniform way that could be used to help
in addressing financial problems. This mechanism acts as effective tracking strategy for
organizations to allocate all those components that lead to lower or reduced performance. It
combines all the governing policies which can help to put strict controlling over organisation's
performance.

Regarding this following table has been made in comparison to entities Antique Furniture
UK and IKEA.
IKEA Antique Furniture UK
IKEA has been facing issues that has made
increasing of storage and handling costs. This
has made declining sales and profitability.
Antique Furniture UK has facing problems
which has made increasing operational costs
over issues relating to profit declining.
Corporation is there for making applicability of
KPI that has made benchmarking over
identifying responsibility related to such
issues.
In this case of Antique Furniture increasing of
financial governance organization is required
to use financial governance is the main reason
to increase operational costs.
Inventories in management system has been
making optimization to be applied in order to
resolve with seeking problems.
Cost accounting system is required to be
applied in order to catch root cause over the
issues to minimise operational costs.
M4 Analysing about how as to respond financial problems, MA can lead entities towards
sustainable successes:
Financial issue of an organization is based over generally facing those kinds of obstacles
that has been impacting corporation success. Every corporation minimizing the issue and
responding over them is time-frame that can be achieved to determine goals with objectives.
D3 Evaluating as to how discussed planning tools can respond effectively to resolving such
financial problems to lead organisations to sustainable success:
Managing personal panning tools has to be effectively supporting system that has been
responding smoothly over issues related to finance. This can be understood through example that
can be used by IKEA this is made for evaluating of organizational conditions. It makes critical
elements of financial problem to be assessed. Also it makes solution to be provided over
problems to be raised (Tan, 2019).

CONCLUSION
From the above file it can be concluded that MA has been using different methods and
system that is leading over making success of an organization possible. In this system key
success of an organization is helping in adapting within an organization. Management should be
applied plaining tools response over financial issues in which plaining tools with protective
framework has to be prepared over financial issues for assuring of sustainability of success.
Applying of MA system with plaining tools should be optimized and efficiency of issues and
response.

REFRENCES
Books and journals
Datar, S.M. and Rajan, M., 2018. Horngren's cost accounting: A managerial emphasis.
Dekker, H.C., 2016. On the boundaries between intrafirm and interfirm management accounting
research. Management Accounting Research. 31. pp.86-99.
Johnstone, L., 2018. Theorising and modelling social control in environmental management
accounting research. Social and Environmental Accountability Journal. 38(1). pp.30-48.
Khosiev, B.N and et. al., 2019. Development of a brand promotion strategy: management
accounting and comprehensive analysis. Indo American Journal of Pharmaceutical
Sciences. 6(5). pp.10060-10068.
Kostyukova, E.I and et. al., T.A., 2018. Improvement cost management system for management
accounting. Research Journal of Pharmaceutical, Biological and Chemical Sciences.
9(2). pp.775-779.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment,
management accounting, control, and reporting. Journal of Cleaner Production.136.
pp.237-248.
Messner, M., 2016. Does industry matter? How industry context shapes management accounting
practice. Management Accounting Research. 31. pp.103-111.
Nuhu, N.A., Baird, K. and Appuhami, R., 2016. The association between the use of management
accounting practices with organizational change and organizational
performance. Advances in Management Accounting. 26. pp.67-98.
Phan, T.N., Baird, K. and Su, S., 2017. The use and effectiveness of environmental management
accounting. Australasian Journal of Environmental Management. 24(4). pp.355-374.
Quattrone, P., 2016. Management accounting goes digital: Will the move make it
wiser?. Management Accounting Research. 31. pp.118-122.
Schaltegger, S., 2018. Linking environmental management accounting: A reflection on (missing)
links to sustainability and planetary boundaries. Social and Environmental
Accountability Journal. 38(1). pp.19-29.
Tan, H.C., 2019. Using a structured collaborative learning approach in a case-based management
accounting course. Journal of Accounting Education. 49. p.100638.