Comprehensive Analysis of Management Accounting for Oshodi Plc Report

This report provides a comprehensive analysis of management accounting practices, using Oshodi Plc, a manufacturing company, as a case study. It begins with an introduction to management accounting and its essential requirements, including inventory management, cost accounting, price optimization, and job order costing systems. The report then explains different methods used for accounting reporting, such as budget reports, accounts receivable aging reports, inventory and manufacturing reports, and cost accounting reports. A comparative analysis of the benefits and applications of various management accounting systems is presented, followed by a critical evaluation of the integration between management accounting systems and accounting reporting within Oshodi Plc. The report further explores income statements using marginal and absorption costing, the application of management accounting techniques, and financial reporting documents. It also discusses different types of planning tools for budgetary control, the use of planning tools and their applications, and the adoption of management accounting systems for responding to financial problems. The conclusion summarizes the key findings and insights regarding management accounting within the context of Oshodi Plc.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
Task 1...............................................................................................................................................3
P1 Management accounting and its essential requirement..........................................................3
P2 Explain different method that is used by industry for reporting.............................................4
M1 Benefits of Management accounting system and its application..........................................6
D1 Critically evaluation of integration between management accounting system and
accounting reporting ...................................................................................................................7
TASK 2............................................................................................................................................8
P3 Income statement by using marginal costing and absorption costing....................................8
....................................................................................................................................................10
....................................................................................................................................................10
M2 Application of management accounting technique and financial reporting document ......10
D2 Financial reports that apply and data interpretation.............................................................11
TASK 3..........................................................................................................................................11
P4 Different types of planning tools can be used for budgetary control...................................11
M3 Uses of planning tools and its application...........................................................................13
Task 4.............................................................................................................................................13
P5 Adoption of management accounting system for responding financial problems...............13
M4 Management accounting leads to sustainable success........................................................15
D3 Planning tools for accounting respond.................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCE.................................................................................................................................17

INTRODUCTION
In management accounting managers of all organization uses different types of
accounting for the purpose of maintaining profit. Managers of business organization make
business decision regarding financial and non financial performance. It is important for
organization to manage the accounts properly by collecting accounting information and make
corrective business decisions (Peysakhova and Anyushenkova, 2018). To know about
management accounting and its importance Oshodi Plc has been taken that is a manufacturing
company which manufacturers JOJO fruit juice to customers. The management of such
organization management accounting for the purpose of getting profits. System of management
accounting, accounting reports and different kinds of planning tools will cover in this report that
helps to collect and analysis the accounting information within organization. Moreover, these
system helps to find out the problems and provide solution for the purpose of making profits.
Task 1
P1 Management accounting and its essential requirement
Management accounting are consider as collection of information and data that helps to
make day to day and short term management decision. It is a practice which is used by
organization to grow business continuously and increase profitability. Management accounting
system consider as internal system that helps to make business profits by applying different types
of management accounting system. System are the policies which helps business enterprises to
run a business successfully and it control business information that leads to organizational
objectives. In Oshodi Plc, mangers use different types of management accounting system that are
essential for organization as it helps to maintain the business information and work accordingly
(Granlund and Lukka, 2017). The different types of management accounting system are as
follows:
Inventory management system - This system is a combination of technology that
involves processes and procedure for maintaining or tracking the stock. By using this system
Oshodi Plc can manage stock that helps to place order accordingly. It required within
organization to manage the stock and monitor them affectively. It is used by all organization
where number of products are prepared and need to track inventory. Inventory is tracking by a

system which is used by company to maintain the a fixed limit of stock and make profits for
organization. It considers different methods which are as defined:
FIFO: This method is used to sold the inventory which is ordered firstly.
LIFO: It is used by organization to sold good which is purchased recently.
AVCO: This particular method is also used by organization to sold the goods at average
cost.
From the above methods Oshodi Plc is using LIFO method beacause of getting lower
taxable income and higher return than FIFO.
Cost accounting system - This system is useful for organization as it helps to get the cost
of business activities and other expenses which are incurred by organization. It required in
Oshodi Plc company to get cost information about manufacturing of JOJO fruit juice. It helps to
decide the cost of fruit juice accordingly by analysing the all expenses. Accountant of Oshodi Plc
records, classify, summarize and analysis the cost of product and services that helps to maintain
profitability. Moreover, it required to control the budgetary cost in which limited resources of
particular projects are considered and it helps to get cost of organization (Gibassier, Rodrigue
and Arjaliès, 2018).
Price optimization system - Every organization wanted to set the prices of products and
services which is render by themselves. According to management, prices of product and
services should be reasonable that can cover all cost of manufacturing product and services and
should be optimum for customers. It required for Oshodi Plc in order to set the prices of JOJO
fruit juice that helps to earn profits. Therefore, this system is helpful for organization to set the
prices of products and services and maintain profitability. The management of selected company
attracts customers by deciding the prices of JOJO fruit juice that helps to get more profits.
Job order costing - To allocate the cost with specific batch of products are involve in job
order costing system. The main purpose of such system is accumulation of cost in particular
batch which are different from other batches. This make sure that incurred cost of products and
services is reasonable while comparing from cost of other products. It is required for JOJO fruit
juice company to divide the cost in to specific batches and maintain profits. Therefore,
management of JOJO fruit juice assign the cost of juice in to specific batch and earn higher
profits (Berger, 2018).

P2 Explain different method that is used by industry for reporting
Accounting reports are prepared by business entity that consider financial information,
taken from the accounting record of a business. It helps to maintain all records of financial
transaction which are important for organization. The management of Oshodi Plc focuses on
financial transactions and prepares accounting reports by considering all transactions. This is
important for business organization to perform accounting reports end of the quarter and year
that helps to make business decision accordingly. In Oshodi Plc manager prepares such reports
by using their skills and work experience that helps to maintain business performance effectively
and states profitability (Arnaboldi, Lapsley and Steccolini, 2015). The description of
management accounting reports is as mentioned:
Budget reports - This report is an internal report that is used by management to compare
the budgeted performance of company with actual performance. It helps to achieve business
goals during a period by preparing budget reports. As budgets are financial goals which is based
on estimations and future projections which is prepared by organizations to get actual
performance of company. Estimated projects are often inaccurate that can differ from financial
performance of a business entity. In Oshodi Plc, management prepares budget reports by
estimating the cost of organization. It has different sections which is depend on financial needs
and data available for the business of Oshodi Plc company. It involves various information
within the organisation such as cost of goods sold, revenues, income and operating expenses that
helps to decide the financial performance of selected company.
Account receivable Aging report - This is one of the most essential report which is used
by organization to collect payment from creditors. This tool also used to manage cash flow when
organization has extended credit to customers. It is prepared in the format of columns of invoices
that consider late payment day like 30 days, 60 days and 90 days in which creditors has to make
credit payment. This is helpful for Oshodi Plc as manager prepare ageing report in which they
consider collection process. It also helpful to get credit payment from unpaid customers that
helps to continue business efficiently.
Inventory and manufacturing report - All the companies prepare such report for the
purpose of maintaining inventory. It helps to keep physical maintenance and tracking of
inventory properly. Oshodi Plc prepare such report by focusing on inventory waste, labour cost
and overhead cost that helps to improve business performance within organization. The main aim

of such report is to manage stock which is used to prepare fruit juice and prepare a report of all
expenses and material that helps to achieve business goals. Therefore, inventory report is useful
for business organization to maintain the records of all stock and increase profitability (Jollands,
Akroyd and Sawabe, 2018).
Cost accounting reports - This report is essential for organization that provides side by
side view of total cost that occurred within organization. It considers all cost of products and
services which is provided by organization to maintain the business at up position. In Oshodi Plc
manager prepares cost accounting report due to manufacturing the JOJO fruit juice. It helps
business organization to improve the profitability by maintaining the cost of products. If
organization does not prepare such report, then it cannot get actual cost of product while
producing products and services. As result they cannot make correct business decision due to
lack of cost accounting reports. The management of Oshodi Plc gather financial information,
gather them and make correct financial business decision by preparing cost accounting reports.
Therefore, this report is helpful for firms to maintain cost of each products and services for the
purpose of earning profits (Braam and Peeters, 2018).
M1 Benefits of Management accounting system and its application
Systems Benefits and application
Cost accounting system It is beneficial for organization to assess the production's cost and
other cost which is arises while working. Oshodi Plc applying
such system to monitor and control the cost of business activities.
Price optimization It is helpful to set the prices of products and services within
organization that gives more advantages to business. By applying
such system Oshodi Plc set prices of JOJO fruit juice that helps to
increase number of customers and make profits.
Inventory management
system
This system is helpful for Oshodi Plc as manager are tracking the
inventory and place order accordingly. By application of this
system manager can make correct business decision for inventory
within business industry.
Job order costing system It helps for businesses to allocate the cost in to specific batches
and maintain the productivity and profitability of business

organization. By using this system manager of Oshodi Plc
allocate cost according to special batches that helps to achieve
business goals.
D1 Critically evaluation of integration between management accounting system and accounting
reporting
Type of reporting Integration with organizational processes
Budget reports and
price optimization
system
It is integrated with Oshodi Plc company as it make path for the
purpose of organizational activities to concentrate on targeted results
and achieve objectives in better way by busing price optimization
management system and budget reports. Such organization prepare
estimated budget and compare with actual results that helps to manage
business activities (Lachmann, Knauer and Trapp, 2013).
Account receivable
aging report and job
order costing system
The integration between organizational activities of Oshodi Plc that it
helps to achieve goals by making efforts towards timely collection of
accounts receivable and proper collection of policy that is monitored
time to time by knowing the accuracy.
Cost reports and cost
accounting system
It is integrated with Oshodi Plc as by using cost accounting system it
achieves cost objective and cost reports helps to make easier to decide
pricing strategy of company. Moreover, it helps to reduce the cost of
overall product within selected organization.
Inventory
manufacturing report
and inventory
management system
The integration between processes consider in Oshodi Plc that
provides better management of stock level and manufacturing cost of
further purchased material can be managed.
Therefore, all reports and management accounting system are integrated with Oshodi Plc
that helps to make correct decision by applying accounting system. It helps to set the prices of

products, cost of products and gives information about material which are available within
organization. If organization use all accounting system and prepare reports then it can achieve
business objectives easily.
TASK 2
P3 Income statement by using marginal costing and absorption costing
Cost – This means expenses which are arises within organization while running a
business is known as cost. It includes all expenses such as fixed, variable and semi variable.
Oshodi Plc is spending money on various thing that is consider as cost. Moreover, it helps to
make business decision by defining organizational profits (Soltes, 2014).
Marginal costing – This is a method of calculating profit which is used by Oshodi
company. It considers variable cost such as material cost, direct labour cost, direct expenses and
variable production overhead that increase profitability of company.
Income statement by using marginal costing method
For December month

Absorption costing – This is a method of costing which cover both fixed and variable
cost as production cost. This is important method which is used by Oshodi Plc for the purpose of
financial reporting and tax reporting within organization.
Income statement by using Absorption costing method

M2 Application of management accounting technique and financial reporting document
Techniques of management accounting are useful for organization it helps to define the
profitability using different accounting management system. Oshodi Plc is using both technique
such as marginal and absorption costing that helps to get different profits. It also suggests which
method is best or suitable for getting higher profits. Manager of selected company prepare
relevant financial report by evaluating expenses and income of business organization and get
maximum profits. Therefore, by applying accounting technique organization can prepare
financial reports that defines profits of such company (Commerford, Hatfield and Houston,
2018).

D2 Financial reports that apply and data interpretation
An annual report that consider all information regarding income and expenses of
company and prepares a main document is consider as financial report. It is prepared by
managers at end of the year in order to know profitability. Oshodi Plc preparing JOJO fruit juice
and accountant of such organization prepare financial reports that shows profits. By using
absorption costing technique Oshodi Plc is getting 79000 profit in November month and in
December it is getting higher profit that is 83000. And marginal costing states 61000 as profit in
the November month and in December it earned 101000 as profit which is higher than prior
month (Kober, Subraamanniam and Watson, 2012).
TASK 3
P4 Different types of planning tools can be used for budgetary control
Estimation of income and expenses under a fixed period of time is consider as budget.
This budget helps business organization to take corrective actions by setting the goals. It is pre
estimation of income and expenses which can occur in company while running a business. In
other words, this is a process of creating a plan to spend the money and make sounding decision
for the purpose of achieving business objectives. Such as, manager of Oshodi Plc analysis
business information and set a budget for their business activities that helps to accomplish
business objectives. On the other side, budget is a planning source that helps business
organization to develop a financial plan that defines various operations during fixed period of
time.
Planning tool is a technique that is used by company to know the budget and control such
budget. If budget of any business activities is excess, then manager can adjust with other
activities where is needed. In Oshodi Plc, accountant set a budget and control the excessive
budgets by using different types of planning tools.
Different types of planning tools and their merits and demerits are as follows:
Capital budget: It contains capital receipts and payments which is used by company to
know the capital profits. In this budget, managers allocate money for the purpose of maintaining
long term or fixed assets like land, machinery, building etc. Manager of Oshodi Plc prepare such
report by focusing on juice machine, building and other fixed assets that helps to give long term

profits. In Oshodi Plc manager can control the expenditure which can affect long term business
decision and also provides strategic direction to such industry.
Merits – It helps to make capital budget decision by focusing on long term assets that
determines risk while running business activities. Moreover, it helps to generate investment
opportunities for Oshodi Plc. It increases wealth of shareholders in Oshodi Plc and create a large
business market that helps to increase sale of corporate industry (Apostolou and et. al., 2018).
Demerits – Long term decision may be irreversible within business firm that can reduce
profits. Techniques which are used for preparing such budget are basis on assumptions not real.
Moreover, it take time much to prepare such budget and not easy for company to consider all
long term assets.
Operating budget: This budget contains operating activities of business organization
that involves company expenses, expected income and expected cost for definite period. In case
Oshodi Plc budgets focuses on operational activities of business entity that ensure day to day
business activities. Costs are related to maintenance expenses, sales cost and running a business
that helps to decide the day to day business performance. Manager of selected company uses
operating budget to perform day to day business activities in effective manner and complete
targets.
Merits: This budget helps small business to allocate money in to short term for achieving
business goals. It is helpful for Oshodi Plc as it is flexible that can accept changes for improving
the business performance. It focuses on routine transactions that helps to create more business
opportunities and accomplish day to day targets.
Demerits: This is time required budget that takes more time to prepare this budget.
Therefore, it may be difficult for Oshodi Plc to prepare operating budget on daily basis and get
profitability of such organization.
Master budget: This is sum total of all divisional budgets which is prepared by all
department within organization. It consider as major tool within corporate sector that helps to
make financial planning, cash flow forecast, balance sheet and profit and loss account of
business entity. Manager of Oshodi Plc prepare master budget for a year and reach at a level in a
particular period. With the help of master budget chosen company make financial plan and work
accordingly for the purpose of expanding business in fixed amounts (About master budget,
2019).

Merits – It helps to motivate employees and planning in advance that leads to
organization success. By using Master budget Oshodi Plc can achieve business goals and run a
business effectively. Moreover, it helps to make continuous improvement in business.
Demerits – Master budget is difficult to update so it may be barrier for Oshodi Plc to
make changes according to income and expenses. It is rigid in nature due to pressure from top
management that leads to low revenues estimates and higher expenses estimates.
M3 Uses of planning tools and its application
Planning tools are important for organization because it control over excess budget and
maintain the profitability. Planning tools such as master budget, capital and operating budget are
used by Oshodi Plc to make future plans for the purpose of getting higher profits. Its main object
is to target more people and forecast budget ahead. Therefore, by using above mentioned
planning tools manager can make right decision and run business continuously.
Task 4
P5 Adoption of management accounting system for responding financial problems
Management accounting system are useful for organization as it finds the financial
problem which is using by organization and then give a solution of such problems. A situation
where profits of a business entity are reducing, consider as financial problem. In this situation
company face money related problem that arises while working within industry. Therefore, it is
important for business organization to use proper management system for the purpose of solving
financial problems. These problem can be solved by managers by selecting an appropriate
accounting system. The profits margin of Oshodi Plc is reducing continuously while providing
JOJO fruit juice. It is facing different types financial problem which are as follows:
Missed payments - This problems arises when customer get products and services on
credit and at the time of payment they do not pay or pays less amount than actual. When
customer unable to pay credit amount then organization faces financial problems. Such as
Oshodi plc has good relations with customers and its provides JOJO fruit juice to them at credit
of 30 days, 60 days and 90 days. After completion of credit period customers does not pay or pay
less money. As result it faces financial problem.
High spending and low return - This means organization spends money on their
necessities and other needs for the purpose of getting same of more than investment. If it does

not get return which it has invested, then it faces financial problems like low capital and low
return. Such as manager of Oshodi Plc spends money on machines, infrastructure, designs, staffs,
raw material and other for the purpose of getting return. It is facing low earning problems due to
high investment and low income by running business activities.
It considers different techniques which is used to respond on such problem
KPI - A tool which is utilize by company to measure the financial and non financial
performance of company is known as Key performance indicator. It helps business organization
to maintain financial and non financial performance of company and make correct business
decisions. Manager of Oshodi uses this tool to solve financial problems that is high spending and
low income. By using this tool manager of chosen company focuses on financial performance
which states current ratio, quick ratio, working capital ratio, debt equity ratio, gross profit ratio
etc. and non financial performance such management and human resource, product and service
quality and brand awareness. It helps to achieve business objectives by involving all financial
and non financial indicators. Moreover, by using this tool manager give appraisals to well
performer (Ferry and et. al., 2018).
Benchmarking - To address the financial problem this is another tool that helps to
compare with other organization in similar sector and make business decision accordingly.
Oshodi Plc is using Benchmarking to compare with other organization and helps to take
corrective actions for the purpose of solving financial issues. On the other side, this tool solves
financial problem that is missed payment. It helps to maintain records and monitor business
activities to solve that problems.
Financial governance - Informations are collecting, managing, monitoring and
controlling by corporate governance to solve the financial problems are consider in financial
problems. This is helpful to know the financial information and make rules accordingly, so that
financial problems can be sort out. By using this Oshodi Plc can track the financial transactions,
manage business operations for sorting the financial issues within organization. Rules and
regulations suggests Oshodi Plc to focus on financial transaction by solving the problems (Evans,
Burritt and Guthrie, 2013).
Comparison of Oshodi Plc and Airdri
Basis TPG Oshodi Plc
Problem This is a manufacturing Such organization is also facing

organization which is facing
missed payment financial problem
due to giving credit to customer
and receiving a few amount or not
any amount that reduces profits of
business organization.
financial problem due to having high
spending on infrastructure, design and
other item that creates financial issues
within organization.
Identified problems This problem is identified by KPI
technique that states financial and
non financial performance of such
company.
This problem is identified by using
benchmarking tool that helped to
compare with other organization and
manager make business policy
accordingly.
System Cost accounting system is used by
such organization that helps to
solve financial problem. By using
this manager can maintain records
of all transactions and maintain
business activities effectively.
To solve the financial problem
organization uses inventory
management as well as price
optimization system that helps to
keeping records of inventory and set
the prices of JOJO fruit juice.
M4 Management accounting leads to sustainable success
It is true that management accounting helps to identify, analysis and monitor the activities
which is performing by business organization. It gives true and fair result towards accounting
transaction that helps to make correct business decision. It leads to sustainable success such as
manager of Oshodi Plc collect financial data and prepare financial reports that shows right path
and profitability. Moreover, it helps to solve the financial problems which is facing by Oshodi
Plc and suggest how it can be solve by using appropriate accounting system that leads to
sustainable organization success.
D3 Planning tools for accounting respond
Organizations are using different types of planning tools such as master budget, capital
budget, cash budget etc. that helps to make fast business decision and run a business effectively.
The manager of Oshodi Plc are uses such tools to find out the financial problems and provide

solution accordingly. For example, Oshodi Plc is facing low profits situation due to high
spending and low income. In this situation, manager will use cost accounting system that will
helps to maintain records of all cost and solve financial problems. Therefore, planning tools are
used for the purpose of solving financial problems.
CONCLUSION
From the above report it can be concluded that management accounting is used by all size
of business that helps to maintain proper records of financial transactions. Accounting system
helps corporate firm to collect and monitor the information and increase profitability. Planning
tools are technique of business entity that helps to solve the financial problems and maintain the
right business decision. The main purpose of business organization is to analysis and evaluate
data and make correct decision. On the other hand, KPI and benchmarking is a technique which
is used by company to identify the financial problems and system are used to respond on such
problems.

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About master budget. 2019. Available through:
<https://efinancemanagement.com/budgeting/master-budget>