Detailed Management Accounting Report for Unicorn Retail Store (2024)

This report provides a comprehensive analysis of management accounting practices within Unicorn Retail, a small UK-based retail enterprise. It begins with an introduction to management accounting, emphasizing its role in financial statement development, monitoring, and management. The report then delves into various management accounting systems, including cost accounting, financial accounting, activity management, and taxation, along with techniques like job costing, price optimization, and inventory management. It further explores different reporting methods such as budget reports, inventory and production reports, and job cost reports. The report also calculates income statements using both marginal and absorption costing methods, highlighting their differences. Additionally, it discusses the advantages and disadvantages of planning tools used for budgetary control and examines the adaptation of management accounting techniques to overcome financial crises. The report concludes by summarizing the key findings and insights regarding the application of management accounting in the context of Unicorn Retail.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and different types of management accounting systems..........1
P2 Different methods use for reporting of management accounting......................................4
M1...........................................................................................................................................6
D1...........................................................................................................................................6
TASK 2............................................................................................................................................7
P3 Income statement of marginal and absorption costing along with differences.................7
M2...........................................................................................................................................9
D2.........................................................................................................................................10
TASK 3..........................................................................................................................................10
P4 Advantages and disadvantages of different planning tools used for budgetary control.10
M3.........................................................................................................................................12
TASK 4..........................................................................................................................................12
P5 Adaptation of management accounting techniques to overcome the financial crisis.....12
M4.........................................................................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
For achievement of an effective and favourable internal strength in accordance with
business operations and economic situation, it is essential for organisation to manage all
commercial transaction. By using various techniques of management accounting companies
will get benefits in achievement of adequate control and monitoring over the usage of effective
financial tasks. Management accounting is process used for development, monitoring and
management of companies financial statements (Hilton, and Platt, 2013). Present report is based
on analysis of Unicorn retail store which is small business enterprise in UK having less than 50
employees at workplace. Various accounting systems, budgeting and important techniques of
reporting have been discussed that assist Unicorn retail store in analysis of business strength and
key areas which are required to be improved. Further, income statement on the basis of
marginal absorption costing methods are also calculated by using company's financial data. In
addition to this, advantage and disadvantages of different kinds of budgets which are prepared by
organisation have been discussed which can be used by management for budgetary control.
TASK 1
P1 Management accounting and different types of management accounting systems.
From: Management accounting officer
To: General manager of Unicorn retail store
Subject: management accounting systems
Introduction:
This report is made to provide information that Unicorn retail enterprise is continuously
getting a positive and favourable earning in market. Strong brand image has been achieved by
organisation in retail industry due to high quality and moderate prices of products. In order to
improve the operational and financial performance of business enterprise, there is requirement
to use some specific techniques for controlling the cost and needs to improve the budgetary
systems as well as increasing efficiency of staff at workplace (Ward, 2012). Management
accounting is the process which can be used for preparation and formulation of financial
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reports which provide accurate and timely financial and statistical business information
required by managers in order to make day to day and short terms decisions. This provision of
accounting information need to be used for informing better inform management before they
always decide matters within business enterprise. Which helps them in controlling and
managing performance of controlling functions. Some important management accounting
systems are mentioned below:
Cost accounting: It is considered as process can be used to record, classify, analyse, summarize
and allocating costs associated with a process and then developing various important courses.
This system will provide support to Unicorn store in monitoring requirement of cost and
financial resources (Wickramasinghe and Alawattage, 2012). It involves various important
costing methods like activity based method of costing which clearly determines the expenses
made by company for production of single unit of product. Expenses will involve salary ,
compensation, rewards and other labour cost. It also determines cost of raw material and
important dealing with suppliers etc which are key operational units that needs huge cost.
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Illustration 1: Management accounting systems
(Source: Atkinson and et.al,. 2001)

Financial accounting: Management accounting framework is analysed as part of financial
system which is used to control and manage company's financial information. However, it could
be stated that when internal strength of Unicorn will be better, then it will be able to meet out
its external requirements (Soin and Collier, 2013). By getting adopting these management
tools, performance and efficiency of business tends to grow in market. It will also provide
positive impact on its productivity and deliver motivation to employees at workplace for
performing better to achieve common objectives.
Activity management: As per findings, this system of management accounting is important
because it is can be used to monitor and control the important business activities which are
performed by managers to control financial position (Banerjee, 2012). Further, there are
various types of important operational activities that requires continuous control and
monitoring such as manufacturing and buying inventories etc. Through continuous execution
and monitoring of performance, manager will be able to improve financial strength of
enterprise. They can also improve quality of employees performance and also provide them
motivation for making efforts in providing quality outcomes. Through this, supervisor achieve
competencies to monitor allocation and effective utilization of resources for manufacturing of
products and taking down the wastage.
Taxation: There are various operational business activities which can be taken place during the
year such as gathering revenues and expenses (Taipaleenmäki and Ikäheimo, 2013). This
system can be used in management for monitoring amount of tax they need to pay on purchase
of tax rates. In unicorn retail store, it helps managers in analysing the amount expenditure
which is made by company on payment of tax and helps in making decisions to reduce tax
rates.
Moreover, there are various accounting techniques that needs to be used by Unicorn manager
such as:
Job costing: Important management accounting technique that enable unicorn to track the
costs and revenues through Job and also enables standardized reporting of business profitability
through job (Williams, 2014). This accounting techniques is used to record and analyse amount
labour cost incurred by organisation on manufacturing or selling of products and services in
retail stores. It must allows job numbers that will be assigned to individuals items of expenses
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and revenues.
Price optimization: It involves utilization of mathematical analysis by organisation to analyse
that how customers will react to different product prices via different mediums. Through this,
manager will be able to determines the prices that organisation needs to adopt for maximizing
high sales and achievement of profitability (Kotas, 2014).
Inventory management: It is also considered as management accounting tool or system which
needs to be used by company to gain proper information about expenditure and requirement of
inventory at workplace (Merchant, 2012). It helps managers of unicorn store to analyse
amount of inventory available for regulation of business operations. Through this, manager can
easily make decision about requirement of inventory in the future. It helps in reducing
expenses of store by avoiding additional purchase.
P2 Different methods use for reporting of management accounting
From: Management accounting officer
To: General manager of Unicorn retail store
Subject: Reports of management accounting
Introduction
This report is made to draw your attention towards key requirement of management
accounting reports for contentious monitoring of business financial data and information. These
reports are needs to be prepared by managers as it helps them in taking various financial
decisions and control financial position of enterprise in market. After analysis of functional
performance of enterprise it is identified that there is requirement of continuous reporting by all
departments in business. Some key management accounting reports are mentioned below:
Budget report: It is an internal report that could be used by management in order compare the
estimated, budgeted projections with the actual performance number that is achieved during
specified time period. These are usually being formulated for making comparison how close
the performance of budget was to the actual performance during an financial year. These
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important business techniques provides benefits to the managers in monitoring all important
and operational budgets such as sales budget, cash, purchase (DRURY, 2013). This will help
unicorn retail enterprise in effective allocation of resources and reduction in wastage of amount
of resources.
Inventory and production reports: Findings states that professional of management
accounting in Unicorn retail needs to record all important commercial transaction that is
completely relevant with manufacturing and actual cost of materials. However, it can be
beneficial for managers to identify actual requirement of financial resources within important
operational business activities of business operations (Arroyo, 2012). It can be appropriate for
enterprise in managing resources and reduction in wastage of funds within operational business
activities of enterprise. Proper allocation of resource will be effective for managers and
controlling task performed by managers within enterprise. Further, these reports will enclose all
important and relevant information which is associated with goods quality and their prices
along with the nature such as perishable and non perishable. In addition to this, these task
requires essential information that needs to be attempted by management for accomplishment of
business objectives.
Job cost reports: This type of management accounting is used for listing of each job which are
performed by employees and list the total expenditure which has been incurred on the job in
previous period. These cost reports is also broken down in various important categories such as
labour, material, subcontractor, field overhead and liquidated damages etc. Hence, these
important techniques have been considered as effective as it helps in recording of all business
transactions carried out to make effective business activities more effective (Li and et.al,
2012).
Accounts receivable ageing report: In this report, unpaid customer invoices are identified
along with the unused credit memos according to date. It is considered as primary business tool
which has been used by collection of personnel to demonstrate to the management about
invoices which are overdue for making payment (Maas, Schaltegger and Crutzen, 2016). It
helps Unicorn retail in making long terms and short term debts that requires to be monitored
and controlled by managers. They should take effective measures in order to make effective
solutions which is in turn helps in provding payment for such type of debts.
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However, these important report will assist unicorn business enterprise in creating appropriate
records of commercial business transactions with stakeholders such as suppliers, customers,
distributors and other operational units.
M1
In accordance with this, there are various important benefits of management accounting
systems which assists in achievement of economic objectives. Management account systems
provide support in improvement of company's cash inflow and through these managers will be
able to perform activities like monitoring cash inflows and the outflows. Further, suggest
authorities in taking effective and overall business decisions. Some key merits are mentioned
below:
 Provide support in decreasing operating cost which tends to raise profitability.
 Effective in maintaining cash flow of business as well as increase in profitability. It also
provides support in making effective business decisions and provide solutions for
overcoming the major financial problems (Ramljak and Rogošić, 2012).
 Management accounting provide support in achievement of an effective and appropriate
amount of return which has been based upon business investment which has been made
by the Unicorn store.
 It will be effective and favourable accounting technique that usually consists all
important business information like operating costs, labour cost, and cost of inventories.
It provides assistance in making an effective analysis of requirement of funds.
D1
Through analysis of management accounting systems, it is identified that there are
various influences of tools like inventory control, cash management and the control over
budgets. However, there are various important techniques of reporting that will be used by
Unicorn retail store for preparation of reports of some important activities which are held in
business. Critics of study provides understanding that, Unicorn retail store should effective
concentrate upon over measurement of commercial transaction and appropriate presentation of
business reports over the same (Klychova and et.al, 2015). Further, it can also be beneficial for
accountants to create or input some changes in those important activities. Further, it also tends to
enhance the work efficiencies of staff towards accomplishment of business activities and
objectives.
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For achievement of specified target it is required for professional of organisation to make
effective and operational planning that will be helpful business enterprise in increasing
performance and achievement of stability in capital.
TASK 2
P3 Income statement of marginal and absorption costing along with differences.
Marginal costing: It is important technique of costing which the marginal cost that is
variable cost has been charged towards important business units of costs. Further, fixed cost of
the period has been completely written off against contribution (Tappura and et.al., 2015). It is
an important technique that provide support in measurement of appropriate incomes and
expenses which has been incurred over the operational business activities within a financial year.
It also provides direct assess to information about labour costs, material and effective overhead
expenses. However, income statements for unicorn retail store has been made on the basis of
marginal costing such as:
Table 1: income statement based on marginal costing
Interpretation: From the above stated table, operational business activities of retail business
enterprise Unicorn has been reflected effectively. This will provide support in analysing variable
and fixed cost which are involved in calculation of income. From the above analysis, it is
interpreted that revenue achieved by organisation from sale of products and services is 17500 on
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the basis of 35 for per unit of goods. It also includes the cost of 7000 at the rate of effective and
13 per units/. However, it is also analysed that closing stock of last year is 100 units which has
been valued at 13 per units. From this, it is identified that gross profits of company is 10500 .
Fixed expenses made by organisation are valued at 3000 which is deduced from gross profits to
get net profits which is valued at 7500.
Absorption costing method: These are the important business techniques that helps individuals
in computation of adequate which has been incurred by organisation from their business
operations (Vakalfotis, Ballantine and Wall, 2013). However, this is an important analysis
which depends upon the calculation of overall cost of productions. It assists in adding up direct
cost and the equal proportionate of production business overheads. However, production cost
has been calculated on the basis of overhead rates. However, there is an appropriate income
statement for the unicorn retail store has been formulated with the help of indicate net profit
earned by organisation.
Interpretation: from the above stated table, it has been analysed that the revenue which is
generated by sale of products and service is 500 units on the basis of selling prices 35 and this
is amounted to 17500. For the calculation of gross profits, amount variable cost which is 8400
which is deducted which along with the variable sales overheads which is amounted to 1700.
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After deduction of overhead gross profit earned by Unicorn retail amount to 10800 . After
achieving such contribution, per unit of sales will be deductible from remaining amount which
brings out net profit for 7800 respectively. Further, this is also considered as all the costs such
as variable and fixed at the time of calculation. It is considered as important techniques which
has been used for calculation of overall cost such as variable and fixed in measurement. The
main purpose behind implementation of this management accounting technique is to recognise
expenses within all departments which are required to be financed. However, in present case it
has been suggested towards the managers to implicate this important business technique
because it directs reflect the sufficient amount of net profits.
M2
From: the management accounting officer
Unicorn retail store.
To: general managerial
Subject: Application of financial statements to remove obstacles
Introduction:
Sir,
It is to inform you that in order to have the adequate and effective financial growth of
Unicorn retail store, there is requirement of implementation of reporting techniques which in
turn also helps the organisation in achievement of better execution over important business
tasks. However, it will be possible along with the utilisation of effective several techniques of
reporting such as:
 Operating report
 Cash flow report
 Sales budgets
 Purchase budgets
As per the above mentioned, that is measurement were made in absorption and marginal
costing statements. Further, it has been suggested to the professionals that they should
implement these types of methods in analysing expenses and revenues to gather important
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information. Further, there will be an influence of such important transaction that will be
effective profitable to carry out the entity in accordance with rise in collection of capital.
D2
Critical analysis provided understanding that income statement of retail business
enterprise has been calculated with the help of two different cost accounting techniques which
are marginal as well as absorption costing method. From statement, it was identified that
marginal costing has stated net profit of 7500 because it involves deduction of both variable and
fixed overheads from sales revenue. Apart from this, absorption costing was also effective
because it has provide net profit of around 7800 which is more than marginal costing because it
is does not involve some variable cost as operating expenses. Moreover, it is stated if company
needs to earn adequate profitability, absorption costing method should be applied in formulation
of income statement. Further, main purpose behind implementation of this absorption costing
technique because it is helpful for the important entity in terms of generating sufficient amount
of net profits that will provide positive implication on business operations.
TASK 3
P4 Advantages and disadvantages of different planning tools used for budgetary control.
Purchase budgets: It involve amount which is fixed by organisation for purchasing inventory
and raw material for purchasing inventories within a specific accounting period. Further, budget
has been prepared to reduce additional expenses on purchasing raw materials.
Merits:
 Helps in reducing the expenditure on purchasing raw materials.
 Provide actual estimation about financial resources required to meet the requirement
inventories (Groot and Selto, 2013).
Demerits:
 Required more time and important methods for development of budgets.
 There is need to calculate various cost and overhead which requires lot of experience in
order to make the financial statements.
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