Comprehensive Management Accounting Report: Osholdi Plc Case Study

This report provides a comprehensive analysis of management accounting practices within Osholdi Plc, a manufacturing company specializing in fruit juice. It begins by defining management accounting and its importance in business decision-making, outlining various systems such as cost accounting, inventory management, job costing, and price optimization, and explaining their requirements and benefits within the context of the company. The report then details different types of management accounting reports, including budget reports, accounts receivable reports, inventory management reports, and performance reports, highlighting their functions and how Osholdi Plc utilizes them for internal control and strategic planning. Furthermore, the report discusses the benefits of these management accounting systems, such as improved cost control, inventory accuracy, and pricing strategies. The analysis underscores how these tools support Osholdi Plc in optimizing operations, managing finances, and responding to market challenges effectively, providing insights into how management accounting drives business success in the FMCG industry.

MANAGEMENT
ACCOUNTING

Table of Contents

INTRODUCTION
Management accounting is explained as a mechanism for formulating reports and
financial records that incorporates factual data so that suitable choices could be adopted by
management within an enterprise (Alyousef and Mickan, 2016) . A business entity can devise
revenue statements and records on a periodic basis through the use of management accounting. It
allows to structure the organisational practice in an effective manner. Management Accounting is
so essential as it operates as a pier between the component of finance as well as other business
components. It supports corporation's controlling structure. This study mainly explain the main
concept of management accounting and it's different systems, reports and other concerned
approaches in the context of Osholdi Plc. The company is manufacturer company and specifies
into JOJO fruit juice across all ages people. The study also covers planning tools for controlling
organisation's budgetary activities along with merits and limitations, comparative analysis of
entities applying planning tools and systems, and analysis of how managing officials respond to
financial issues through planning tools.
TASK 1
P1 Management accounting theory and a variety of management accounting related systems and
their requirements:
Management accounting is fundamental business process that is described as the overall
organisational activities action and execution of the business plan is effective to control the
business model and structure. With the help of the management accounting a business can
formulate and implement the business strategies regarding the business activities and control it
by implementing the manner of execution of it. Oshodi plc is a manufacturing organisation of
healthy drinks like juice, energy drinks that apply this management techniques into account to
perform better in the FMCG market industry. The management of the company applies the
various business tactics in the business to manage the adverse situation of the firm. Company
formulate the business strategies by considering all the industry standardisation (Arnaboldi,
Busco and Cuganesan, 2017). This techniques aid business owners to make the right decision in
the firm that help in figure out the accurate sales and profit. Management accounting provides
the real time data and outcome as it is totally based on the operational business activities that
may effect in current or immediately related to business norms.
1

Management Accounting System is systematic procedure that assist in setting up
quantitative and financial reports to help in decision-making related to business process and
strategies. It is internal method that emphasises in analysing and evaluating the business
processes for ad mistrial purpose. Management accounting system help in the managerial process
and assist in making the business policy as per the industry standers. Oshodi plc regulate this
system to know the efficiency of the business that provides useful data and information in
respect to estimated future income and expenditure such as budget, sales forecast (Brierley and
Gwilliam, 2017). Management accounting makes proper contributions in institution fund
prediction and plan the business and financial strategies. It also support to action that leads in
coordinating the method applied in preparation of the budget, tracking the financial aspects or
feature and regulate processes of the business by evaluating and measuring it. Following are
fundamental systems of management accounting as described below:
Cost Accounting System: It represents the cost process that monitoring and converting
raw materials or supplying products into finished goods. It is elaborated composition of the cost
that is used in firm to find out the total cost of manufactured goods and services for valuation of
the closing stock material, cost controlling method and profitableness of the commercial
enterprise unit. The companies are extended using this management accounting structure to
administrate and supervise the business operations or actions as flow of the production can be
acknowledged via production levels like work in progress of certain percentage. Oshodi plc
Improves the quality of the drinks item and set the prices for particular season. Company has
also adapted this system to lower cost of the flavoured item to enhance the sales in the other
season like winter ans rainy weather. This particular accounting system is helpful for deciding
the operational business expenses incurred for the specific time period during the manufacture of
products. Computing of accurate costs at each stage of production may gives more celerity to
management of an organisation in terms of which products are profitable or which are loss
making (Chandler, 2017).
Inventory management system: It defines the application of this processes to assure the
accessibility and availability of stock list that comprises of material, work in progress and
finished stock. It may also ensure its convenience at right time with right product. This is a
management system that described firm's property and material related reports that are kept in
storage facilities or factories. Inventory management is elementary for a managers and workers
2

to carry out the need for particular stock and supplies in a proper manner. In the case of Oshodi
plc executive of the company is mandated to effectively preserve inventory registers of stock of
material inward and outward so that stock can be premeditated as per the demand of the
customer so that it can be mandated to be purchased, listed or refined for upcoming use. In
addition, any ambiguity in inventory management could be addressed by using this accounting
system. It may includes two types of stock:
 FIFO represents first in first out strategy that is used in the FMCG business to proceeded
the goods (Endenich, Schlichting and Trapp, 2016).
 LIFO represents Last in first out strategy which is used in any business. But the last unit
is cost less than previous one , it may also processed the goods to lower the cost of
material.
Job costing system: Job costing is a system of gathering the cost related content which is
connected with especial goods. This system allocates total manufacture cost over the particular
unit of product This management accounting system comprises of the mechanism of analysing
many business process costs that incur during the production of goods or services. Broadly
talking, this is a method which categorizes the costs of production and manufacturing budget
items, work force and material requirements such that genuine costs could be simply recognized.
The firm has a sharp division in connection with Oshodi plc that could be accountable for
managing the costs of the company that is concerned with a product or goods. This techniques
help in determines completed task within specific time in terms of job completed.
Price Optimisation system: The price optimization describes the numerical approaches
through all the organisational activities and function that determine by the management of the
company. It is considered as how customers will act to various costs of its products and goods.
This system helps in analysing customers response at assorted pricing stages of the particular
goods. It is management accounting scheme that used to maintain the normal prices of a firm
refined products (Fleischman and Parker, 2017). By using this mechanism, it become easy to
evaluate the particular rates for various products. In the context of the business Oshodi plc
applying this tools can readily identify the total expenses affiliated with specific drinks while
making it. This system help in the control the expenses related to particular product.
3

P2 Describe several types of management accounting reporting:
It is process that refer to accumulation of financial data and information from the
financial records of the enterprises by commercial enterprise manager in order to make daily
business decisions. These are periodic reports to the manager that includes several types of
reports such as budget, financial aspects related to business decision that taken by divisional
head and furnish the detail to management. Managerial accounting reporting is a report includes
mercantile activity evidence and their procedures. Oshodi plc prepares the reports on month by
month to know the business progress in past time or it may be created as per business's
requirements. All such accounting reports are being used by companies to develop the business
plan and implement the strategies as per consideration of business policies. Following are the
management accounting reports that is prepared by the oshodi plc as under:
Budget Report: This type of accounting reports considered as a helping tool. It can
properly regulate, track and analyse the disbursement of their funds of a particular enterprises
(Hoque, 2018). This report is the normative reports of a organization that yield by the
management to compare figuring out the budgeted estimation of particular unit data with actual
execution of the business activities of the a business. It is an inner document that is chiefly used
by the management in order to analysis the enterprise is capable to meet its strategies object or
not. Management can make a differentiation between fiscal data and budgeted computation. In
the Oshodi plc, internal stakeholder makes analyses of these reports to ascertain variances in the
actual performance and budgeted projected data so they can make appropriate decision in the
business.
Account receivable reports: It is a reports that is yields by those company which are
deals in the credit with its customers. This report is associated with providing the detailed
information to management regarding the overdue with customer. So management get to know
about the credit period and dues with customer. Oshodi plc is create this report to line the
financial record of the owed money with consumer. Main motto behind this report is to help the
organisation in accumulation the due amount from individual. It is really beneficial report for the
business tighten the credit policy against those who are not paying the money in given time.
Inventory management report: This is the report that is defined as the application of
this processes to insure the accessibility of stock quantity that consist of raw material, work in
progress and finished stock. It may also assure its suitability at right time with right place. This is
4

a management system that described firm's material related reports that are kept in storage
facilities. Inventory management is primary reports to know order level of inventory for a
managers to conveyance particular stock and supplies in a proper manner. Oshodi plc prepares
reports for the detail provision of inventory required to fabricate the goods and services.
Moreover, this report is also useful to analyze the accurate position of inventory whether it is at
stores or in transit and it also render the data regarding variable and fix expense in the physical
process of stock (Hyndman and Lapsley, 2016).
Performance report: In almost firms performance report is utilized to measure the
overall performance of firm along with persons who are working in the organization. This
reports track the organization performance in a proper mode. In this report, manager set the
aggregate mark regarding the objects and financial goals that needful to be fulfill by the end of
the year. Performance reports compare the actual performance with set data related to future.
Oshodi plc makes this report to measurement the efforts that are made by the individual in order
to execute the assigned tasks in the conferred time period. Management prepares this reports to
assess the skillfulness of worker and their operational business process. So that they can make
further decisions as per future demand of the organization.
M1 benefits of management Accounting systems
Cost accounting system
 Accounting system is helpful for deciding the operational business expenses incurred for
the specific time period and measure the effectiveness of assorted processes.
 It will assist to convey further improvements regarding quality and cost.
 This will address in reduction of price of particular product and services by using the
available resources in the firm.
Inventory management system
 This will help in improving accuracy in the re order of material.
 It help save monetary fund and time (Hyndman and Lapsley, 2016).
Price optimisation system
 This will help to determine the activeness of person based on various active prices level.
 It help Oshodi plc to minimize its operating cost with acceptance of foremost prices of
manufactured quantity.
Job costing system
5

 Benefit to Oshodi plc is to computation of processing cost fruit juice at any level.
 It will also help in diminution of copying of efforts and attempts.
D1 Integration of management accounting system and report within business processes
All of the above are the reports and system that are created by the management of the
oshodi plc in order to perform the business plan in proper manner. Inventory management report
is base on the integration stored processing unit and price optimization is a system that set a
proper price for product. In addition to, account receivable reports prepared to analysis the owed
money as per the predefined credit policy (Inaam and Khamoussi, 2016).
TASK 2
P3 Appropriate costing technique to prepare income statement
Absorption costing – It is a costing method that making decision by consisting of direct
cost as well as absorption cost. Through this method manager can get profits and make further
decisions.
6

Marginal Costing – The particular method to calculate cost and profit margin by
consisting of extra units of results. There are consisting of variable cost to make decision and
consider fixed cost that are predicted with certain period of time (Järvinen, 2016).
7

M2 Application of management accounting technique and financial reporting document
The particular methods are using to measuring the costs as well as profits by creating
financial reporting documents. For these documents applying two methods such as absorption
costing method and marginal costing method.
D2 Financial reports that apply and interpret data for business activities
As per the income statements it has been analysed that in November and December using
marginal costing method and get result is 61000 and 101000. Through absorption costing method
get result of 129000 and 143000.
TASK 3
P4 Advantages and disadvantages of different types of planning tools
Budget - This is considered merely as an estimate of the costs that arise inside the
organisation when producing and distributing the goods. It will utilise by every type of
organisation for predict their income as well expenses (Laine, T., Korhonen, Suomala, P. and
Rantamaa, 2016). Budget can help to present situation of company and their further activities
based on the budget. Mostly companies appoint accountant who will produce budget report after
consulting with manager regarding all departments. In Osholdi Plc managers analysis business
8

activities of all section then set budget for the product of JOJO fruit juice and also using last
budget.
Budgetary Control – It is the procedure of analysing several actual results with
budgeted amounts for the business for the future period and standards set then examination the
set budgeted amounts with the actual performance for measuring variances.
Planning tools are defined as equipment that is utilised by the company to control excess
budget and generate more profit for the company. Through these tools arrange the productivity
as well as profitability in reference to company. The management of Osholdi Plc can use several
planning tools that are discussed below:
Cash Budget - These kinds of budgets are primarily utilised by managers to understand
the inflow and outflow of companies over a defined duration such as a monthly, quarterly and
yearly. The primary aim is to establish the good condition to provide status of company
regarding to cash. In Osholdi Plc manager utilise this planning tool in order to receive net cash
inflow and outflow for the reason of making further business decision. When company does not
use this budget so cannot collect information regarding to inflow and outflow. Furthermore
through this budget organisation easily get their goals and objectives (Nuhu, Baird and
Appuhami, 2016).
Advantage – The particular budget provides various advantages to Osholdi Plc -
 Stay in touch with reality – The approach of cash budget, provide actual situation of
company. It will provides financial statements, bills, obligation and each expenditure that
expand by the company. Quickly recognise potential deficits – Through cash budget a company easily identify
their deficit if they will have enough cash to meet obligation. If there finds out any trigger
so it will sort out and assure about to meet estimates of budget.
Disadvantage – Cash budget become reason of distortions due to cannot provide accurate
profit of company. The result of cash inflow may be wrong while developing budget.
Operating budget – It is preparing on annual basis to predict the total value of resources
for a reason of presenting business activities efficiently. The operation budget has been defined
as financial tool to meet with company's debt responsibilities and sustain growth in particular
period of time. In osholdi plc manager use this budget where consist of fixed cost like juice
machines and other fixed expenses.
9

Advantage: With the help of this budget easily allocating monetary income for short time
and long time. It also provides financial freedom to improve business capacity.
Disadvantage: Through this budget provide information may be wrong and get result
wrong (Oldroyd, 2017).
Master budget – It is summary of all budget that will help to different types of business
to facilitate planning and control business operations. Through this budget manager of Osholdi
plc arrange proper records as well as all the transactions to complete business activities. In
present time company introduce their new product in the market so manufacturing JOJO juice to
attracts customers and influence for getting such products.
Advantage: Through this budget easily recognise plan and problems to complete the
purpose of business in ongoing way. It provides advantage to Osholdi plc to settle the excess
amount with minimum budget.
Disadvantage: It is most expensive method and need more time to set business activities
as per requirement of this budget. It is difficult to update due to company and make decision
(Parker and Northcott, 2016).
M3 Use of planning tools and its application for preparing and forecasting budgets
Most of the companies have been used various types of planning tools like cash budget,
Operating budget and master budget in order to set the future plans for set earnings. On the basis
of these tools a company prepare different types of budget that is related to different
departments. By implementation these tools Osholdi plc estimate about future activities and
planning accordingly. The manager of Osholdi Plc analysis of business operations through these
tools and develop plans to arrange profit margin in effective manner.
TASK 4
P5 Organizations are adopting management accounting system to respond financial problems
Managerial accounting instruments help analyse the problems and solve them by
applying efficient alternatives and methods. This section includes the use of distinct accounting
management schemes to solve the organization's economic problems. Osholdi Plc is
manufacturing company and having their specialisation in production of JOJO fruit juice. Ever
after specializing in manufacturing organization, the financial issues are faced. The fundamental
cause for this is an improper understanding of the use of accounting instruments (Ross, 2017).
10