Detailed Management Accounting System Report for Unicorn Grocery Ltd

This report, prepared for Unicorn Grocery Ltd, provides a comprehensive overview of management accounting systems and their practical applications. It begins with an introduction to management accounting and its importance in organizational financial management, covering various types of accounting systems such as price optimization, job costing, inventory management, and cost accounting. The report then delves into different methods of management accounting reporting, emphasizing performance reporting, accounts receivable reports, inventory management reports, operating budget reports, and job cost reports. Furthermore, it explores marginal and absorption costing methods, analyzing management accounting tools and income statements. The report also examines the advantages and disadvantages of planning tools used for budgetary control, evaluates planning techniques, and critically analyzes financial problems, proposing measures to remove them. The conclusion summarizes the key findings and recommendations for improving Unicorn Grocery's financial performance, supported by references to relevant literature.

Management Accounting

Table of Contents
FROM: MANAGEMENT ACCOUNTING OFFICER..................................................................1
TO,...................................................................................................................................................1
GENERAL MANAGER..................................................................................................................1
UNICORN GROCERY LTD..........................................................................................................1
SUB: MANAGEMENT ACCOUNTING SYSTEM .....................................................................1
INTRODUCTION..........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Various types of management accounting system and its application.............................1
P2: Different methods of management accounting reporting.................................................3
M1: Benefits of using management accounting ....................................................................6
D1: Critical analysis of reporting system ..............................................................................6
TASK 2............................................................................................................................................6
P3 Marginal and absorption costing.......................................................................................6
M2: Analysing management accounting tools.......................................................................8
D2: Critical analysis of income statement .............................................................................8
TASK 3............................................................................................................................................8
P4: Advantages and disadvantages of different types of planning tools used for budgetary
control.....................................................................................................................................8
M3: Evaluation of planning techniques................................................................................11
D3: Critical analysis of financial problem............................................................................11
TASK 4..........................................................................................................................................12
P5 Various financial problems and measure to remove it....................................................12
M4: Analysis of financial problems.....................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
UNICORN GROCERY LTD
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management accounting is an essential aspects for an organisation to manage there every
day financial transactions (Christ and Burritt, 2013.). It consists of collection of statements from
various sources of the department. The primary motive of accounting is to record entries in more
systematic manner in order to attain long term objectives of an organization. Both accounting
and management are related with each other. The accounting is the measurement, processing and
evaluation of financial data regarding economic enterprises. Whereas, planning, organising,
controlling and providing right direction to the company is the primary role of administration.
Basically, it is a practical application of management tool to report financial position of
an organisation. The report present useful information about various types of accounting and
reporting system to Unicorn grocery Ltd. The company is having very small business operation
with total 70 employees. Evaluation of net profit that are determine by using various costing
methods. Use of planning tools in budgetary control and there benefits in delivering positive
outcomes for the company are discuss under this project. Examination of financial tools which
are use for the purpose of removing financial problems those are arises in an organisation. The
overall analyses helps in getting positive outcomes for the company in order to make better
future.
TASK 1
P1: Various types of management accounting system and its application
In every business organisation, it is necessary to have perfect accounting system in order
to achieve short and long term objectives (Dillard and Roslender, 2011). MA is well organise
application of positive tools and concepts in order processing historical and projected economic
information of an entity. It generally produce certain record about Unicorn grocery finance
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department whether they are using right kind of system to record there every day transactions.
Accounting produce complete image of cash flows those are require to manage economic
resources of an organisation. It is profession that consists partnering in decision making, future
planning and performance evaluation system.
These aspects are use prepare various accounts that are control in order to assist
performance of the company. It provide fast data collection to managers in respect to analyse
current position in front other competitors. It is helpful for recording transactions in systematic
manner so that chances of mistakes can be minimise. The target of the company is to control
extra cost of unicorn grocery so that profitability can be increase. Hence, it is the primary
responsibilities of managers save and protect costs of company by using certain tools and
techniques (Morales and Lambert, 2013). It will be easy to maintain future sustainability and
balance in performance of every departments in more effective and efficient manner. Account
officer is primary parties those are responsible for analysing proper financial statements of the
company so that future investment decisions can be made.
With this, certain risk can be mitigate those are affecting productivity at large scale.
However, management accounting plays crucial role in delivering positive outcomes by
implementing correct and reliable systems. In order to take valuable decision-making in respect
to reduce expenditure for the company by this growth can be enhance. They prepare reports
taking necessary information about every departments. These particular reports are presented in
front of shareholders and other investors those are one of the responsible parties involve in
investment decision-making.
Importance of MA:
 The main aims is to control total cost of production and at the same point of time helps in
increasing efficiency of employees.
 There are various techniques of management accounting those are having perfect validity,
reliability by which better decision can be done. It is crucial for the managers to make certain decision regarding future sustainability.
Types of Management accounting system:
There are various types of accounting system those are effective for manager to analyse
various aspects of an organisation (Granlund, 2011.). It is mostly relies on normal financial
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statements that consists of income statements, balance sheet and cash flow statements. Some of
them are:
Price optimisation system: It is important system which is being use by the company in
order to determine reaction of customers regarding various prices for there products and services.
It is helpful in order to analyse the prices that a company is going to meet its objectives like
increasing operating profits. Under this, manager can evaluate demand of customers at several
prices level. It is important techniques which is useful in statistical strategic making. It is
necessary for accounts department to forecast the demand of products at various price level.
Job costing system: It is refers as one of the crucial methods of recording the costs of
producing a job, in-spite of processing (Kotas, 2014). With the help of this particular costing, a
project accountant need to evaluate total cost of a job data. Maximum industries are effective
techniques in order to determine total time and date for manufacturing products. A particular job
can be define as a particular projects formulated by one individual or a single units produce in a
lot size.
Inventory management system: It is known as one of the crucial accounting system
which is responsible for managing and controlling stock of the company. It is a key factor of
supply chain management that present flow of stock from manufacturers to warehouses. By the
help of this particular system, it can provide guidelines to record inventories in the books of
accounts. However, it is necessary for Unicorn grocery to make report on the basis of closing and
opening balance of stock items that are kept during the period of time.
Cost accounting system: According to this particular system which is responsible for
making necessary information about the total cost incur by unicorn grocery during the period of
time (Grabner and Moers, 2013). Its primary objectives is to generate maximum profit, cost
control and various major points those are use at the time of manufacturing process. Some cost
records are maintain on the basis of standard, normal and standard costs. Moreover, managers
require to use certain cost effective aspects in respect to utilise resources of the company.
P2: Different methods of management accounting reporting
Reporting to management is a essential process of providing data to various stages of
departments. It is done so to analyse effectiveness of there responsibilities and can be helpful in
taking corrective actions, if require at any point of time. It consists of useful detail data about
present performance and position that are being carried out by the company during the time. It
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formulate internal growth of stakeholders as anticipate to external parties. The outcomes of
management accounting reporting can helpful in formulating crucial decision in favour of the
company. It is known as systematic analysis of economic events those are affecting total cash
flows which are done by company during the time.
The accountant is associate with reporting of information in front of external parties those
are responsible for taking necessary steps on the basis of current year performances. It is
consider as one of the important tool for investors for making necessary planning for there
capital investments in up coming projects. It is term as complete statements of transactions those
are done in an accounting year by unicorn grocery (Lennox, Francis and Wang, 2011). The detail
of information is collected from various financial statements such as profit and loss account,
balance sheet and cash flow statements. After collecting data from all these statements, a well
organise report is prepared. It consists of various company's strength and weakness that are
presented out of complete analyse. This particular report is submitted to the investors for making
there investment decision on the basis of there current position. It is an essential aspect of
communication system that is use by shareholders to take critical decision in order to increase
better future. By the help of perfect reporting system that is more vital for analysing performance
on the basis of past and previous year data.
Through useful reporting system which is more detail information regarding stability of
the company. It is made after consulting with all those departments those are working for the
same motive. Some departments which are working at in an organisation are HR, marketing,
operation and finance department. The modification of data at higher level to lower level of the
department (Pärl, 2012). There are various process which is needed to record data into the books
of accounts. Reports are more vital part for every business concern whether operating at small or
large scale. On the basis of reporting information about financial position of the company's in
more effective manner in order to generate maximum profitability during the year. Basically,
these information are presenting maximum chances of growth and sustainability for future
planning. It is concern as necessary part of getting cost effective analysis by coming impacts
those are affecting productivity. It is continuous process which are needed to be follow at regular
interval on a yearly basis.
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Hence, it is necessary to have a well organise reporting statement that can guide the
managers to provide accurate direction to the company in the ways of there aims and objectives.
Some reporting systems those are prepare by management accountant are mention underneath:
Performance reporting system: According to this particular system, report is prepare by
using completer detail about unicorn grocery performance and current situation that are exists
during the time. These data must be gather from past as well as present year as a primary
sources. On the basis of these report, investors use to make there necessary decision regarding
whether investment under this company is beneficial for them in long time.
Account receivable report: As per this particular report which is prepare after
evaluating data about all those unpaid customers and records those are mention on the basis of
particular entry date. It is consider as one of the major techniques which is useful in identify
total time require to recover those amounts. The report is known as one of the primary
techniques which is helpful in collection of personnel to analyse total invoice overdue for
making payment.
Inventory management report: Under this reporting, every information related with the
stock position of Unicorn grocery (Michalak, 2011). It is the importance task of managers to
record entries in proper manner on the basis of collected data. These information can be
evaluated by using opening and closing data of inventories that are purchase during the time.
There are various tools and techniques those are use for the purpose of recording stock details in
the books of accounts. Some of them are EOQ , inventory turnover ratio and ABC costing.
Operating budget report: According to this particular reporting, unicorn grocery can
use to estimate total operating expenses those are incur by company during the time. It provide
complete information about total income and expenses during production of product and
services. It is essential aspects for accountant to make plan to reduce extra costs which are being
done by at closing of an accounting year.
Job cost report: It is known as accounting process of allotting the costs which are being
use for a particular job in an organisation. This particular term is entirely helpful in the
construction sectors and it is found to be more effective report for Unicorn grocery in order to
manager there expenses and costs. It is a complete list of each job which is being incur in a
particular period of time.
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M1: Benefits of using management accounting
In every business organisation, it is necessary for the managers to use perfect accounting
system that are helpful in attaining future aims and objectives of an organisation. It is necessary
to making financial transaction which are effective for the taking crucial decision making in
order to make sustainability for an organisation (DRURY, 2013). This can be useful in utilising
resources in appropriate manner. It is refers to the process of developing the management
accounts and also prepare reports which give effective and perfect statistical as well as financial
information to employers. It is necessary for organisation top use the different accounting system
like for an instance job costing. Price optimisation etc. These all are helpful in increasing profit
level and effectiveness of firm.
D1: Critical analysis of reporting system
It has been seen that for every business concern, it is essential to prepare reports in order
to make effective decision making for making bright future for unicorn grocery. It is applicable
for both small or large organisation those are dealing in wide range of transaction those are done
in a single day time (Håkansson, Kraus and Lind, 2010.). Evaluation of growth stability and also
performance both are major objectives by using the reporting system. It is necessary for Unicorn
company to develop an effective finance report through using present and previous information
so that firm can determine its overall performance level. Job cost reporting and performance
report is an effective techniques which is helpful in recording of transactions.
TASK 2
P3 Marginal and absorption costing
Costing plays an important role in every business to deliver the products and services to
end customers and earn adequate amount of profit. For this purpose, management of Unicorn
grocery use two methods absorption and marginal costing which helps in determination of the
cost regarding different products (Hopwood,Unerman and Fries, 2010). This helps in preparation
of the effective strategies. Large number of functions which are performed by the costing
methods are recording, evaluation, examine and drawing out valid conclusions regarding
different aspects which helps in controlling the cost. These are the accounting techniques which
are used by company regarding identification of fixed and variable costs. This contributes in
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ascertainment of production cost which is going to incur while producing the goods. Both the
methods which are used by Unicorn grocery are Marginal and Absorption costing.
Marginal costing: This method is used by organisation regarding determination of the
cost which is going to incur by company while producing one more unit of product. This is the
effective method which is used by the management of Unicorn grocery regarding determination
of change which happens in total cost of production. This improves the decision making of the
manager regarding production of more units or not.
Absorption costing: It is the effective method which helps in calculation of the cost
including direct and indirect expenses. Direct cost includes the cost of such materials which are
necessary regarding the production of product like raw materials, labour cost etc. Indirect cost
includes the cost which is supportive in completion of the product like rent etc.
Difference between absorption and marginal costing
Absorption costing Marginal costing
Production, administration and selling and
distribution
Fixed and variable
This helps in allotment of total cost to different
cost centres
It is decision making method which helps in
calculation of cost of production
Due to acceptance of fixed cost, profitability
gets affected
This helps in measuring profitability
Computation of Net profit by using absorption costing
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
Less:
Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
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Total Profit / Loss 7800
Calculation through marginal costing using
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2 - 7800
Closing stock: 100*13 - 1300 -6500
Contribution 11000
Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
Total Profit / Loss 7500
M2: Analysing management accounting tools
In an organization, it is necessary to have perfect accounting techniques to record and
manage operations of the department (Kotas, 2014). It is crucial to make analyse of accounting
systems by using appropriate techniques such as financial planning as well as financial statement
analysis. Cost accounting techniques is another useful techniques by which every possible results
can be attain with proper utilisation of accounting data. The Unicorn business firm can generate
more profit level with the helps of using effective techniques. Conservatism is an effective
technique used by cited firm.
D2: Critical analysis of income statement
According to the computation of net profit, unicorn grocery is having two of the
important costing methods such as absorption and marginal costing. The outcomes are different
from each methods (Lambert and Sponem, 2012). With absorption costing method they are
getting profit of 9600 whereas, by marginal cost they are incurring 9300 profit. The difference of
300 is arises because of fixed costs. From given information and data,to evaluate the income
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statements, Unicorn business firm using the two various methods like for an instance absorption
and also costing methods. This is helpful in preparing a plan of future investment with the help
of determining an actual net profit with these two methods of costing.
TASK 3
P4: Advantages and disadvantages of different types of planning tools used for budgetary control
Budget: It is financial plan which prepared by the management of Unicorn grocery for a
definite period of time. This includes the preparation of budgets regarding sales, revenue, cost
and expenses, assets, liabilities, cash flows etc. These budgets are working as plans which helps
the company regarding estimation of their investments in future. Large number of benefits are
derived by the management of Unicorn grocery regarding provide direction to their employees in
performance of their different functions. These budgets are works as standards which helps in
achievement of their predetermined targets.
Budgetary control: Budgets plays the vital role in the process of monitor and control the
function of Unicorn grocery (Li and et. al., 2012). It is considered as the important technique
which is used by the manager regarding the control on costs and operations of employees. These
budgets also helps in determination of the financial targets which enhance the working capacity
of employees and provides opportunity to management regarding accomplishment of their
objectives
Process of budgetary control
Budgetary control includes the process which requires to adopt by the managers of
Unicorn grocery. The steps of such process is define below:
 Inquire with other division managers: This includes the process of communicate with
the managers of other department to identify the need of different budgets which provide
direction regarding the performance of functions of Unicorn grocery.
 Find out effective assumption: This step includes the process of getting appropriate
conclusion from the information which are attain from different departments like finance,
HR etc.
 Fix data for budget to achieve targets: This includes the preparation of budget with the
help of available information which shows the targets which are required to achieve by
employees.
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 Comparison of budgets with actual: It is the important process which helps in
determination of deviation from the standards. This provides opportunity regarding
solving the problems.
 Review: This includes the process of review the budgets with the help of feedbacks of
employees and make appropriate changes which improves the efficiency of budgets.
Planning tools: Planning is the important factor which contributes in growth activities of
Unicorn grocery. This helps the company processes to be more profitable. Planning provides
shape of business activities as per the mission and vision of organisation. These tools have their
own advantages and disadvantages. Such different planning tools are define below:
Forecasting tool: This tool is used by the manager of Unicorn grocery regarding
assumption of future operations. For the purpose of forecasting, past information is used to plan
about future performances and objectives. This tool plays an important role in internal
management and improves the decision making power and knowledge of manager.
Advantages
 Helps in evaluation of the predetermined targets
 Helps in ascertainment of cost and revenue receive in future period of time
 Helps in determination of the objectives
 Provide direction to employees regarding completion of their objectives
Disadvantages
 Future data based on assumption which does not provide accurate view
 These forecasted information is not true
Scenario analysis: This evaluation helps in consideration of the important variable
which are changed on same time. This analysis is similar to situational evaluation. This provides
opportunity to manager of Unicorn grocery to make their decisions on the basis of actual trends.
Advantages
 This analysis helps in generation of more appropriate ideas for future operations
 This analysis provides actual view regarding future transactions
 This tool has large importance in improving the enhance of performance of employees
Disadvantages
 It is not much effective when the policies becomes change
 This does not provide opportunity regarding effective results from existing resources
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