Business Management Accounting Report: Unicorn Grocery

This report delves into the significance of management accounting for Unicorn Grocery, a medium-sized co-operative grocery store in Manchester, England. It explores the differences between financial and management accounting, highlighting the importance of the latter in making informed business decisions. The report examines various management accounting systems, including inventory control, cost accounting, job costing, and price optimization. It also covers essential management accounting reports, such as budget reports, account receiving aging reports, job cost reports, and inventory and manufacturing reports. Furthermore, the report discusses cost calculation techniques like marginal costing and absorption costing, providing a detailed profit and loss statement using absorption costing. The analysis emphasizes the benefits of management accounting in reducing expenses, improving cash flow, and enhancing financial returns, ultimately contributing to the sustainable growth of the organization and its ability to respond to financial challenges. The report also covers the advantages and disadvantages of different types of planning tools used for budgetary control and adapting management accounting systems in response to financial problems.

BUSINESS
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting and its importance in Unicorn grocery.........................................1
P2. Various methods required for management accounting reports for Unicorn grocery..........3
M1...............................................................................................................................................4
D1................................................................................................................................................4
P3. Cost calculation using technique of cost analysis.................................................................5
TASK 2............................................................................................................................................7
M2...............................................................................................................................................7
TASK 3............................................................................................................................................7
P4 Advantages and disadvantages of different types of planning tools used for budgetary
control.........................................................................................................................................7
M3...............................................................................................................................................9
P5. Adapting management accounting systems in response of financial problems....................9
TASK 4..........................................................................................................................................11
M4.............................................................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business can be understood as organisational entity involved in the provision of
providing goods and services to consumers. Management of business is important for the
companies growth and attaining customer satisfaction (Amidu, Effah and Abor, 2011). It teaches
organisation about the efficient and effective ways of doing business that includes
communication, effective use of resources and various other things. It is done so as to fulfil the
needs and demands of organisation. There are various functions that are operating in a business
so it is important for the organisation to manage all these by fulfilling all their requirements.
Unicorn Grocery is a medium sized company that is located in Manchester England. It is a
grocery store that is of Co-operative type. It sells food items, household, body care and general
grocery item. It is having turnover of around 7 million pounds. This report showcases that
management accounting is essential for the company. It highlights the appropriate techniques of
doing cost analysis and different types of planning tools for budgetary control. It also showcases
the importance of accounting system to respond to financial problems in the organisational
functionalities and hence lead to sustainable growth of an organisation.
TASK 1
P1. Management accounting and its importance in Unicorn grocery.
Financial accounting is basically a special branch for managing accounts which are
responsible for keeping the records of all the economical transactions of the financial status of
the Unicorn grocery. Management accounting refers combination of accounting, finance and
management with business skills and techniques. It uses information such as revenue, cash flow
and debts so as to produce reports and statistics that helps in making day to day management and
business decisions. It involves both financial and non financial data (Askarany and Yazdifar,
2010).
For this system there is also another type of accounting which is called management
accounting or even managerial computing where there are managers which are required to use
some kind of provisions for analysing the information for basically informing the people who
would be required to take some kind of decisions so they need to be aware of all this information
before they decide that matter. This is basically responsible for helping the management system
by improving their performance and controlling their functions. This type of accounting is
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generally required for providing financial as well as non-financial type of decision making to
give information to the managers (Baldvinsdottir, Mitchell and Nørreklit, 2010).
There is vast difference between financial accounting and management accounting which
can be explained in several ways.
 In financial acc. There would be shareholders, creditors as well as public regulations
which are used for public measures of reporting which is management acc. only
managers in this organisation are allowed and confidentially authorised to account for
information and use them and not any other person.
 Financial field is basically historic in nature while management field consist of
information which is actually looking for forward looking aspects.
 In this company, financial accountancy is cased-based in nature while management
accountancy has information which is in model-based format with the degree of
abstraction for extending support to generic methods of decision making.
 While revenue accounting would be computing some kind of reference for its general
financial account standards, mean while management accounting data is basically
collected by creating some reference to the needs of manager which would be used often
for getting statistics for management system.
There can be different type of management accounting system for this company which
basically helps in carrying out execution of the process of the company (Bodie, 2013). The
various types of system present in the organisation are mentioned below.
Inventory control: This type of stock control can be defined as an activity for checking shop's
stock. This is basically used for management logistics and also for supplying chain management
operations. Here the technological system and technical program software would be required to
manage inventory for providing source to their chain.
Cost accounting: This type of processing is used for collecting, recording, analysing as well as
summarizing course of actions as well as control of costs. Their aim is to advice the management
system for any kind of action which would be most appropriate dependent on its efficiency of
cost and its capability. This accounting gives detailed information for its cost expenditure and
also how the management would be needed to control current operations and plans for future
plans.
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Job costing: This is required for keeping a track record of all the costs and revenues which is
generated through the job and also enables some standardized reporting format for profitability
of the job (Brandau and et. al., 2013). For the accounting system costing is very much required
for helping and encouraging job as it allows job numbers to be assigned to individual items of
expenses and costs.
Price Optimization: This is a mathematical calculation done by the organisation for
determination of how the customers would need to respond for providing different prices and its
items and facilities of different channels. They need to find prices which will find the objectives
for maximizing operation profits.
P2. Various methods required for management accounting reports for Unicorn grocery.
Managerial accounting report is basically used for providing help in small business
owners and also to managers which would monitor this company's activities as well as
performance that are prepared properly with continuous monitoring in the accounting period as
needed by the client (Chiarini, 2012). On the dependency of the type of project which is provided
to be done and also time sensitivity of the information in which manager would be required
accept requests report on the quarterly basis. Types of management accounting is discussed
below.
Budget Report: This report is required for helping business holders for analysing their
activities and performance. In case their business becomes big enough then their managers are
required to analyse the whole department's performance very keenly and also control their costs.
Their calculated budget for the period is usually dependent on real expenses from the previous
years. There are cases when some small business as a whole is substantially over budget in one
year then it would not easy for that company to trim its costs and also avail that budget for future
needs which would increase to an accurate level. This company's owner and manager also
provide incentive to the employees and provide some budget to the firm in order to provide
bonus to the employees for meeting their personal needs.
Account Receiving Ageing: This type of account is needed for receiving some sging
report which will be a critical reporting tool for organising of managing cash flow for this
company that would basically extend credit to their customers. This report breaks down to the
customer so that they calculate the amount of money they have owned. Many of the aging
reports basically include separate columns for invoices which can include any number of days.
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Manager needs to use this aging report for finding any kind of problems that may arise with the
company collection method (Chiwamit, Modell and Yang, 2014). When there would be
significant number of customers which are unable to pay their balance cost then the firm would
require to tighten their policies of credit. Periodically their analysis for the accounts of receivable
aging would help in keeping the collection of the department from overlooking the old debts.
Job Cost Report: This is required to show some expenses for special type of project
which would basically match with the estimate of the economic revenue such that this company
will be able to evaluate its profitability of the job. This is used for identification of higher earning
areas in the business of this company so that they can focus on its efforts instead of wasting their
time and money on unnecessary things which has low profit margins. These reports are basically
used for analysing some expenses where the project in progress would use the managers to
correct areas of waste before reducing the cost escalate.
Inventory and Manufacturing: There is this company with some kind of physical
inventory which make use of managerial accounting report for making their construction method
more appropriate. These reports generally be used for including items such as inventory waste as
well as hourly labour cost and so on. There are managers which would compare different
assembly systems inside the company for seeing whether one can improve the offers of bonuses
to the better performing departments.
M1.
There are various benefits of management accounting system and its numerous
applications which could be used for Unicorn grocery's context. They would be used for
reducing expenses, help in improving the firm's cash flow system, provide better ways of taking
business decisions and even required for increasing financial returns. These factors are mostly
used for creating a firm position and get a competitive advantage.
D1.
Management accounting and management reporting are related to each other according to
organisational context which explains all the types of expenditure which would be incurred by
this organisation in addition to determine the help and support extended by this report which will
be made and then later these decisions can be taken on the basis of this by the management so
they would eliminate and deviate decisions which would be removed. This is because these
objectives can be accomplished and would ultimately benefit the company for long terms. Also
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this would help the employees to be motivated and improve their standard of performance
according to the demands of the customer (France, 2010).
TASK 2
P3. Cost calculation using technique of cost analysis.
Marginal cost is basically termed as variable costing where production of the cost of item
is calculated as sum of its direct material cost where direct labour cost is also included and with
that variable production overhead cost comes. By all these factors ultimately volume of the
production and sales would increase with adding up of total variable costs which would rise the
proportionately. This type of costing is accounting for system where variables are charged to cost
units and fixed types of cost will be written in full against some aggregation contribution. This is
also used in decision making. The key reason for this is marginal costing would allow
management's attention to be focused on changes which will result from decision under
consideration (Gates, Nicolas and Walker, 2012).
Absorption costing is a method for building up full product cost and that also with
addition of direct costs and cause proportion of production which can overhead costs by means
of one from many number of absorption rates.
Statement of profit and loss using absorption costing
Quarter 1
No. Of units £/unit £ £
Sales 66.000 1 66.000
less Cost of sales
Opening inventory 0 0.85 0
+Production 78.000 0.85 66.300
66.300
-closing inventory (12.000) 0.85 (10.200) (56.100)
Gross profit 9.900
less Expenses
Selling &Administration costs (5.200)
Profit 4.700
-Under absorption (2.800)
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Reconciled profit 1.900
Quarter2
No. Of
units
£/unit £ £
Sales 74.000 1 74.000
less Cost of sales
Opening inventory 12.000 0.85 10.200
+Production 66.000 0.85 56.100
66.300
-closing inventory (4.000) 0.85 (3.400) (62.900)
Gross profit 11.100
less Expenses
Selling &Administration costs (5.200)
Profit 5.900
Statement of profit and loss using marginal costing
Quarter 1
No. Of units £/unit £ £
Sales 66.000 1 66.000
less Cost of sales
Opening inventory 0 0.65 0
+Production 78.000 0.65 50.700
50.700
-closing inventory 12.000 0.65 (7.800) (42.900)
Contribution 23.100
-fixed costs (16.000)
-selling &administration (5.200)
Profit 1900
Quarter 2
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No. Of units £/unit £ £
Sales 74.000 1 74.000
less Cost of sales
Opening inventory 12.000 0.65 7.800
+Production 66.000 0.65 42.900
50.700
-closing inventory 4.000 0.65 2.600 (48.100)
Contribution 25.900
-Fixed costs (1.600)
-selling &administration (5.200)
Profit 4.700
b)Absorbed =(66.000×£0.20)=13.200
Total fixed cost=16.000
Under absorption(2.800)
c)Profit under absorption
Q1
4.700
(2.800)
1.900
Fix=16.000
66.000×0.20=13.200
Under absorption (2.800)
Q2
5.900
(1.200)
4.700
74.000×0.20=14.800
Fix=16.000
Under absorption=1.200
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M2.
Unicorn groceries uses various techniques so as to produce a finance related document
that gives the clear picture of how goals and objectives of an organisation will be fulfilled in time
without facing any financial difficulty (Hammad, Jusoh and Yen Nee Oon, 2010). Financial
planning, financial statement analysis, cost accounting, fund flow analysis, cash flow analysis,
standard costing, marginal costing, Budgetary control, Revaluation accounting, decision making
accounting, management information system, statical techniques, management reporting,
Historical cost accounting, ratio analysis helps company in providing appropriate financial
reporting document.
TASK 3
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P4 Advantages and disadvantages of different types of planning tools used for budgetary control.
Budgetary control is a technique in which actual results are compared to the budget of the
organisation (Ihantola, and Kihn, 2011). Any differences in these two are to be managed by the
Account management who has the control to make changes in the original budget. This helps
manager to monitor organisational function.
Advantages of budgetary control are as follows:
 It forces management to see to the future plans of the organisation and makes plans
accordingly and hence making detailed plans for each and every functional unit of an
organisation.
 It promotes coordination and communication hence clearly defines the area of
responsibility of each individual.
 Improves the usage of available resources.
Disadvantages of budgetary control:
 It can be seen as pressure device used by management that results in bad labour relations.
 Leads to departmental conflict.
 Managers over estimate costs sometimes.
Planning tools for budgetary control:
 Cash flow budget: It is the flow of budget in an organisational activities. It can be
termed as the inflow and outflow for a business in a limited period of time. It helps to
ensure that enterprise has sufficient cash to operate. Different forecasts of sales and
production are used to create budget based on the various spending and receiving of cash.
Advantages of this tool:
 It helps company to maintain sufficient cash to operate its different function.
 It helps to understand the amount of money company is taking and what are the needs of
future.
 It helps to predict and forecast companies financial health.
Disadvantages of this tools:
 It forces employee to work under prescribed limit according to the budget.
 It reduces the innovation and change speed.
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 Operational budget: This budget is an expression for companies planned operations in a
particular period of time. These are of three types that is sales or revenue budget, expense
budget and project budget.
Advantages of operational budget:
 It helps to focus on the income that will be generated from companies operations.
 It helps to anticipate the expense of an organisation in its operations.
 It helps to forecast or estimate the profit of an organisation.
 It is used to manage expenses on manufacturing and production.
Disadvantages of this tool:
 It restricts the manager from thing beyond the limits.
 It forces managers to make cost cuts that sometimes may not be beneficial for the
employees.
 Master Budget: It is the overall budget that is required by an organisation in order to
have its various functions operating in a proper manner.
Advantage of this tool:
 It gives the clear picture of what is the financial condition of the company.
 It gives the idea of what are the financial needs of each and every department in an
organisation.
 It provides accurate information about the overall profit of an organisation.
Disadvantages of this tool:
 It hampers development plan of an organisation.
 It makes operational plans too much rigid.
 It is difficult to understand and make.
P5. Adapting management accounting systems in response of financial problems.
Management accounting system helps an Nero Ltd. to collect financial data from
business activities like sales and marketing data, shift in inventory, changes in raw material cost
etc (Kaplan and Atkinson, 2015). This helps company in formulating informations to analyse the
financial conditions and requirements of an organisation. It is of different types like cost
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