Management Accounting Report: Tools, Methods, and Performance Analysis

This report provides an in-depth analysis of management accounting principles and their application within Nisa Ltd, a small retail business. The report begins by outlining the essential requirements of management accounting systems, including standard costing, cost accounting, job costing, inventory management, control accounting, and financial accounting. It then explores various management accounting methods, such as product costing, cost allocations, inventory costing, and planning tools for performance measurement. The report further delves into different costing methods, with a focus on marginal and absorption costing, and provides a critical evaluation of budgetary control systems. The content also covers the importance of management accounting systems for small businesses, emphasizing their role in forecasting, decision-making, and enhancing overall business efficiency. The report highlights the significance of financial statement analysis, planning tools, and strategic management in achieving business goals. Overall, the report aims to equip learners with a comprehensive understanding of management accounting tools and techniques for effective business operations and long-term sustainability.

Management
Accounting
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Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1) Management accounting and its different systems' essential requirements..........................3
P2) Different management accounting methods..........................................................................5
TASK 2............................................................................................................................................6
P3) Various costing methods and differences between marginal and absorption costing...........6
TASK 3............................................................................................................................................6
P4) Critical evaluation on budgetary control systems.................................................................6
P5) Management accounting systems..........................................................................................6
CONCLUSION................................................................................................................................6
REFERENCE...................................................................................................................................7
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INTRODUCTION
Management accounting is multidisciplinary approach that is useful for expansion of
organization and increasing its efficiency. Therefore, management of entire business operations
that affects balance of production and distribution system of entity. The present report is based
on understanding different management accounting tools of Nisa Ltd. It is retail sector small
scale organization of UK that provides clothing, food and drink services of customers. Various
management accounting tools and systems can be described for forecasting and decision making
related to further implementation of firm. In this regard, several costing methods and their
described can be expressed for proper price determination. However, critical evaluation on
budgeting is to be considered through this assignment. Along with this, various aspects for
expansion of small size business and enhancing its quality services are to be defined by studying
this report. Hence, learners are able to understand applying different tools and techniques of
management accounting for overall business activities' effectiveness.
TASK 1
P1) Management accounting and its different systems' essential requirements
Management accounting is one of the crucial system for expansion of small business unit
and increasing efficiency for qualitative services. In accordance to this, overall business activities
get impacted as well remains able to creating positive environment of firm at large scale.
However, several tools and techniques are applied for enhancing efficiency of firm at firm. It is
useful for optimum utilization of resources and fund that impacts on productivity and
profitability of retail sector company (Anwar and et.al., 2016). Including this, management
accountant of firm recognizes business and employees' performance to build up relationship
among employees as well helpful for spreading wide scope of organization to gain their best
contribution for working in team. Therefore, business, marketing and competitive strategies of
organization can be enhanced at high level. In this regard, adequate utilization of resources can
be gained. Moreover, management accountant of company identifies all financial statements
including income statement, balance sheet, profit and loss account, cash flow and fund flow. On
the basis of these tools different ideas are created for implementing action plans that impacts on
company's effectiveness. It affects customer satisfaction and increasing in positive feelings of
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consumers towards organization's effectiveness. Along with this, effective market value for
entity and products produced by company can be effective (Armitage and Webb, 2013). Thus,
high level of production and profit earning capacity of firm can be achieved efficiently. In this
process, management accounting is useful for applying different tools and techniques related to
enlargement of entity and increasing its market efficiency to sustain its good reputation for long
time period. Hence, management accounting is composition of different substances such as
costing, budgeting, income statements and business organization's operations that affects market
position of firm at large scale. It is interlinked with creating positive and developing atmosphere
of entity for various kinds of business operations (Berman, 2015). In accordance to this, varieties
of tools and techniques can be applied for enlargement of small scale enterprise also able to
enhance quality services of firm that impacts on organization's effectiveness. Therefore,
management accounting is useful for effectiveness of business entity and enhancing its efficiency
for long term sustainability of firm at high level.
Essential requirements of management accounting systems:- There are different
management accounting systems applied for expansion of small scale enterprise and increasing
its high position in market to face competition at large scale (Bucci, 2014). However, it increases
business and competitive strategies of firm for long time periodicity. Several management
accounting systems and their essentials can be described as below:-
 Standard costing:- Under this process, management accounting of Nisa Ltd analyses
overall business operations and its performance that generates different ideas for further
implementation of small scale enterprise. In this process, forecasting and decision making
is presented to price determination (Burke, Corman and Story, 2016). Moreover, balance
between income and expenditure for business operations can be obtained. In addition to
this, estimation for incurring costs is determined that affects on production and
distribution system of firm. However, proper estimation and forecasting is applied for
expansion of small business unit. It is considered as a technique for following on
prepared action plan to increase efficiency of entity and presenting financial position of
firm for proper income statements.
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Cost accounting system: In this system, costing and price determination strategy is presented as
per which financial problem of small size enterprise can be overcome efficiently
Job Costing system: In this costing system assigning manufacturing costs to an individual
products, mainly job system is used only when the product manufactured are different from the
other ones.
Inventory management system: In this system, several tools and techniques are applied for
proper balance of production and distribution of goods.
inventory management is interlinked with several organizational functions related to expansion
of small size entity.
 Control accounting:- It is one of the essential tool of management accounting for
controlling over excess of production and wastage of raw materials. Therefore, control
accounting is useful for creating balance of production and distribution of goods.
Similarly, it is beneficial for increasing in income as well able to adequate expenditure.
However, cost control is liable for handling overall business activities and further
expenses and incurring price on business operations (Kreibich and et.al., 2014).
Therefore, control accounting is helpful for effective balance of expenditures and revenue
to enhance profit earning capacity of small scale enterprise for proper management.
Control accounting is measure their control over the financial statements and do not
ensure compliance with laws and regulations but rather are designed to help a company .
It can aid to provide validity an accuracy of its own financial statement.
 Financial accounting:- Through this approach, management accountant of Nisa Ltd
analyses financial accounting tools such as profit and loss account, balance sheet, income
statement and performance of organization. Therefore, on the basis of these components
several ideas are created for effective monetary performance as well increasing in
profitability can be achieved at high level (Lavia López and Hiebl, 2014). Apart from
this, financial statement analysis is useful to present organization's economic structure
that generates varieties of tools for increasing profit earning capacity of small scale
enterprise. It is a special branch of accounting that keeps track of a measure company
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financial statement and some transaction. All of such transaction are recorded,
summarized and presented for a financial reports and financial statements.
P2) Different management accounting Reports
There are different management accounting methods applied for overall business
operations' management. However, it is beneficial for adequate supplement of goods and services
that impacts on productivity and profitability of firm at high level (Macinati and Anessi-Pessina,
2014). In this regard, actual business performance is obtained for enlargement of entity and
enhancing its quality services. Thus, best use of resources and fund can be achieved to enhance
good financial position of organization. In accordance to this, various management accounting
methods can be expressed as:- Product costing and cost allocations:- Project manager and management accountant of
Nisa Ltd determines price incurred on business operations. However, it is done through
different methods for example; marginal, absorption, demand based and market value
costing. It presents income-expenses balance of entity that affects on monetary position
of firm. In this process, cost is decided by manager for production and supplement of
goods. However, allocation of fund can be gained efficiently to create balance of gained
revenue and incurred expenditures (McLaughlin and et.al., 2014). Therefore, product
costing and its effectiveness can be obtained through management accounting process. It
is interconnected with organization's effectiveness and also affects economic
performance of business organization. In accordance to this, adequate pricing for cost
efficiency is applied for allocating fund as well profitability of firm can be enhanced.
However, product costing including price determination on the basis of job order and
processing for expansion of small business unit. In this process, different tools are
applied for setting price of products to be supplied in market to achieve effective
customer satisfaction. It impacts on long term sustainability of product that affects on
competitive strategies of organization. Determining cost of inventory:- Pricing for inventories is determined through this
management accounting tool. It is connected for effective costing and valuable for
systematic production and supplement of goods. Along with this, inventories are get
managed to keep goods safe (McNamee and et.al., 2015). In this process, management
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accountant analyzes to store inventories at different places as warehouses, stores and
factories. On the basis of which, resource allocation is obtained and further production
and supplement of food and clothing is implemented. However, several ideas are
emerged for inventory management and controlling on its excess. Therefore, costs for
supplying goods and services are incurred on the basis of this productivity and
profitability of organization get impacted. In addition to this, inventory control
management is performed for systematic management of all resources and fund
allocation. Hence, management accounting methods are useful for management of all
inventories of Nisa Ltd that affects product quality and demand for goods. Including this,
management accounting component is liable to increase productivity and profitability that
is interrelated with market sustainability. Cost of inventory is to calculate the cost of
ending inventory using the retail inventory method such as, calculate the cost to retail
percentage. On the other hand calculate the cost of goods where available for sales. This
method is used by retailers that retailers that resell merchandise to estimate their ending
inventory blances.
 Planning tools for performance measures for projects:- Management accountant of Nisa
Ltd prepares planning on the basis of recognizing business performance. Similarly, it is
valuable for implementing action plans measuring organizational structure. However,
effective project management is presented including recognizing performance and
increasing efficiency of firm at large scale (Moriarty and et.al., 2015). In this regard,
different goals and determinations are presented as per which varieties of ideas are
created for task accomplishment. It influences productivity and market position of entity
related to further business operations. In addition to this, planning tools including
forecasting and decision making process related to expansion of small scale enterprise
and enhancing quality services that is related to achieve customer satisfaction at
maximum level. Moreover, evaluation of business performance is obtained related to
operations and enlargement of entity thoroughly. In this process, various planning tools
are applied for overall management of Nisa Ltd activities (Nishizaki, Matoba and Nitta,
2014). Therefore, through this management accounting method, increasing in efficiency
for organization and quality services are presented that affects on market value of firm.
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However, as per this performance evaluation, different tools and techniques are applied
including costing and budgeting. On behalf of which, several ideas are generated that
affects business and competitive strategies at high level.
Therefore, above mentioned management accounting methods are useful for applying
different strategies to increase business and competitive strategies for effective customer
satisfaction and enhancing presenting actual business performance. Further, these are basic
elements which remains able to expand small scale enterprise as well efficiency of firm can be
increased at large scale. Including this, it is useful for effective business performance and proper
market value for long term sustainability (Sugimoto and et.al., 2015). Moreover, proper strategic
management related to reducing risks and creating positive environment of entity can be
obtained through coordination of employees in team work. Therefore, management accounting
methods are useful to present actual business performance and making decisions for further
operations.
TASK 2
P3) Various costing methods and differences between marginal and absorption costing
Costing is technique for price determination as well prepares income statement that
presents financial position of Nisa Ltd. It is useful approach for production and supplement of
goods and services (Tang, 2015). There are several costing methods applied for further business
operations. For example; marginal, absorption, demand based and competition related. In this
regard, marginal and absorption costing can be described in brief as follows:-
Marginal costing:- Through this costing method, income statement is prepared in simple
manner. In this process, gross profit margin is deducted with cost incurred on variable overheads.
However, it is useful for short term decision-making process that is also effective for getting
adjusted towards uncertain changes occur at workplace. In addition to this, as per this method,
various innovative ideas are created for effective price determination as well valuable for
financial development of small scale enterprise (Anwar and et.al., 2016). However, management
accountant of Nisa Ltd interprets following income statement for further business operations as:-
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Interpretation:- It has been recognized that cost incurred for selling products is 6600 and
further gained revenue is 21000. Therefore, Nisa Ltd gains gross profit as 14400. On the basis of
this positive outcome, it can be foretasted that company can increase increase its profitability
effectively in future time. Afterwards, net profit margin is obtained by deducting gross profit to
expenses incurred for variable overheads. In accordance to this, it has evaluated that variable
expenditure is 1800 therefore, net profit for organization is 12600. In this process, it is identified
that organization has effective financial position as per several tools and techniques can be
applied for further implementation. Thus, marginal costing method is suitable for decision-
making process related to effectiveness of small scale enterprise.
Absorption costing:- This costing method is appropriate for long term decision-making
process. Under which, for determining net profit, gained gross profit is deducted with total cost
incurred on fixed and variable overheads (Berman, 2015). Therefore, profit margin is determined
in effective manner therefore systematic management of all goods and services can be gained
that affects on productivity and profitability of firm. However, absorption costing is beneficial
for expansion of small scale enterprise and increasing its efficiency can be achieved efficiently.
In this system, management accountant of organization evaluates following income statement as
per which long term, decision-making process is applied for further implementation:-
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Interpretation:- As per above expressed absorption costing, it is determined for
calculating net profit through absorption costing, gross profit is deducted with total cost incurred
on expenses including variable and fixed. Therefore, gross profit is evaluated as 14400 and
further variable expense is incurred on business operations is 1800. Similarly, fixed expenditure
incurred on expenses is 3300. Therefore, total cost incurred on expenditure is 5100. Further, net
profit is determined by deducting gross profit to total expenditure. Thus, net profit is obtained as
9300. Hence, it can be foretasted that in future time organization can increase its profitability that
affects productivity and effective market position for long term sustainability. Therefore,
expansion of small scale enterprise can be achieved at high level. In this process, ideas can be
generated for long term sustainability of entity at to sustain attraction of customer towards goods
and services provided by small scale enterprise.
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Comparison between marginal and absorption costing:- By comparing marginal to
absorption costing, the main variance between both costing methods is determined as profit
variance (Kreibich and et.al., 2014). In this regard, on the basis of this costing methods, income
statement is prepared that is useful for decision-making process to increase profit earning
capability of Nisa Ltd. Therefore, difference between marginal and absorption costing is
recognized through following tabular form comparison:-
Bases Marginal costing Absorption costing
Profit variance For determining net profit,
gross profit is deducted with
variable cost on expenditures
For evaluating net profit, gross
profit is deducted from total
cost incurred on total
expenditures including fixed
and variable.
Suitable time period for
decision-making process
Appropriate for short term
time
Able to take decisions for long
term decision-making process
Thus, main difference between marginal and absorption costing is profit variation for
preparing income statement. It is interrelated with decision making process as well different
ideas are generated for further business operations. In addition to this, various tools and
techniques are applied to present financial position of entity and decision-making for further
business operations. Therefore, marginal costing is suitable for short term decision-making as
well absorption costing is effective for long term sustainability of firm (Moriarty and et.al.,
2015). Including this, marginal costing is valuable to reduce problems occur at workplace while
absorption costing is appropriate for increasing competitive strategies of organization. However,
various techniques are applied for price determination as well economic structure of firm can be
prepared as per which further implementation can be gained efficiently. Including this, marginal
costing approach believes that only variable expenditures are valuable for determining net profit.
However, absorption costing is related to decision-making process for creating effectiveness of
firm and increasing efficiency of firm at high level. In this regard, it has been evaluated that
marginal costing is appropriate for short term decision-making while absorption costing is
related to long term decision-making process (Tang, 2015). In addition to this, costing is
effective for proper price determination as well able to increase profitability of small scale
enterprise effectively.
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TASK 3
P4) Critical evaluation on budgetary control systems
Budgeting is considered as a useful approach for forecasting and decision making for
operating business activities systematically. Therefore, management accountant of Nisa Ltd
analyzes entire business operations as per which several ideas are generated to be implemented
in future time. It is interrelated with effectiveness of firm and increasing its efficiency for proper
production and distribution of goods (Lavia and Hiebl, 2014). However, small scale organization
can develop its strategy for facing competition through attracting customers at high level. It
impacts on productivity and profit earning capability of firm. Therefore, best use of resources
and fund is obtained through this process. In accordance to this, budgetary control system is
useful for controlling over excess production and wastage of raw materials. Along with this,
budgeting is beneficial for planning procedure including decision making related to expansion of
small scale organization and enhancing service qualities of firm. Therefore, effectiveness of
organization can be gained at high level. It is helpful to create positive and peaceful atmosphere
of entity by encouraging employees for better work performance and contribute for working in
team. However, critical evaluation on budgeting and budgetary control system can be understood
as follows:-
Positive aspects of budgetary control system:- It is helpful to forecasts and making
decisions related to preparing planning for further business operations. Including this, effective
planning procedure is implemented for applying various techniques to expand Nisa Ltd and
enhancing service qualities of firm at high level (McNamee and et.al., 2015). In this regard,
characteristics of organization can be expressed briefly as below:-
 Useful to present actual business performance including various operations of the
organization
 Preparing strategies for increasing productivity and profitability of firm
 Helpful for adequate utilization of resources and fund
 Valuable for effectiveness of entity and increasing its efficiency at high level
 Proper planning procedure and decision-making process for effective action planning
 Increases strength to face competition as well impacts on competitive strategies
 Key component for short term and long term decision-making
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