Comprehensive Report on Management Accounting for Business Decisions

This report provides a comprehensive overview of management accounting, focusing on its application within the context of Palmer and Harvey, a UK-based wholesale, distribution, and retail marketing company. The report begins with an introduction to management accounting, differentiating it from financial accounting and highlighting its role in business decision-making, planning, and control. It then explores various management accounting systems, including traditional cost accounting, cost accounting, transfer pricing, and lean accounting, analyzing their strengths and weaknesses and applicability to the chosen scenario. The report further delves into management accounting reporting methods, including income statements prepared using marginal and absorption costing techniques, and contrasts these approaches. Planning tools used in management accounting, along with their advantages and disadvantages, are also discussed. The analysis emphasizes the importance of management accounting in improving cash flow, making business decisions, analyzing performance, reducing expenses, and increasing financial returns. The report concludes by summarizing the key findings and emphasizing the critical role of effective management accounting for business success.

University
MANAGEMENT ACCOUNTING
Name

Table of Contents
Introduction: ...............................................................................................................................................3
TASK 1..........................................................................................................................................................4
P1 Explanation of management accounting and giving the essential requirements of different types of
management accounting systems to the chosen scenario: ...................................................................4
Business Report......................................................................................................................................5
P2 Explanation of different methods used for management accounting reporting that can also be
used for the chosen scenario:.................................................................................................................9
Task 2.........................................................................................................................................................12
P3 Preparing income statement by taking base of two techniques of managmenet accounting and
calculate marginal and absorption costing...........................................................................................12
TASK 3........................................................................................................................................................14
P4 Explanation the difference between the two management accounting techniques:...........................14
Task 4.........................................................................................................................................................15
P5 Explanation of the use of planning tools used in management accounting and their overall
advantages and disadvantages.............................................................................................................15
Conclusion:................................................................................................................................................17
References.................................................................................................................................................18
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Introduction:
In this assignment, a report shall be presented to the general manager regarding various aspects
of the functioning of management accounting in the organization. The various aspects of
management accounting in the organization shall be analyzed and a detailed report shall be
presented to the manager that is general manager. For the convenience of the study, the
organization, Palmer and Harvey has been chosen for the study. The study further shall relate to
management accounting and management accounting system together with different costing
techniques and reporting to enable the organization implement them and get positive desired
results. The organization has been the fifth largest privately owned business organization the
land of UK and it is mainly related to the business of wholesale marketing, distribution and retail
marketing. The company was first established as a confectionary and tobacco supplying
company and later it, extended all of its business activities over the whole of United Kingdoms.
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TASK 1
P1 Explanation of management accounting and giving the essential requirements of different
types of management accounting systems to the chosen scenario:
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Business Report
From: Managing accounting officer
To: General Manager
Subject: Systems of management accounting
Date: 6th December 2018
Introduction
Introduction:
This part of the study shall deal with explanation of various management accounting
techniques and methods and shall explain the importance of different types of management
accounting systems. A report shall be presented to the general manager regarding various
aspects of the functioning of management accounting in the organization. The various
importance of management accounting shall be linked with the current scenario. Further this
part shall also deal with the elaboration of the concept of management accounting and its
importance for various business organizations, including the chosen organization. The
elaboration of different management accounting methods that can be used for the given
organization shall also be explained in various parts of this study.
Management Accounting can be termed to be that tool which helps and aids the organization in
taking different kind of decision. The field of management accounting is mainly related to
identification of various facts and terms related to the business which aids the managers and
whole management body in making different kind of decision and to solve out different kind of
issues (Zimmerman and Yahya-Zadeh, 2011). This field of accounting is mainly related to
supply of various kind of financial and non financial information to the overall body of
management of the organization. The tool mainly consists of various activities related to
decision making, planning of actions and reporting various kinds of actions and aspects to the
whole management body.
Different types of management accounting procedures and management accounting systems can
be explained here, in this part of study. Management accounting system consists of mainly for
types of management accounting (Herbert and Seal, 2012). They consist of Lean accounting,
Traditional cost accounting, Throughput accounting and Transfer pricing. The explanation of
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different kind of accounting systems can be further elaborated and contemplated as follows:
 Traditional cost accounting- This can be said to be one of the oldest, rather the oldest
mode of management accounting. In the system, the costing systems were done and the
calculations were based upon primitive terms. This proved to be problematic for many
business organizations (Pipan and Czarniawska, 2010). Still, this system can be termed
to be advantageous as it more commonly used and people are more accustomed to this
system of management accounting. It can be said that if the organization Palmer and
Harvey faces any kind of issue related to its newly accepted strategy, then the
organization can shift to this strategy which shall help the organization to get rid of the
issues that are coming in the way off the regular operation of the company. Cost accounting system: At the workplace of every organisation, cost is very essential as
well as crucial part. The reason behind this is that, expenses create direct impact on
profitability and business perfection of Harrods Limited. On the basis of this specific
system, accountant able to make calculation of total expenditures incurred for producing
and selling retail items. Along with this, the expenses are to be shows by segregating in
different ways like fixed, variable, production, semi-variable etc. In addition to this, key
components involved under this system are like overheads, labour as well as material.
Moreover, it consists of target costing, environmental, activity based, throughput,
standard cost accounting etc (Messner, 2016). Considering to this, cost incurred for
selling and distributing every unit is determined easily in Harrods. Therefore, decisions
for considering pricing method is taken in proper and fruitful manner. Hence, essential
need of cost accounting is to derive cost of production and make correction accordingly,
if required.
 Transfer pricing- It is mainly used for deciding about the taxation based upon various
transactions carried on between various business organizations. This can be done when
the organization are commonly owned by a single person or entity. This kind of
management accounting system is mainly used and employed in different translations
that are carried on between various big corporate houses held or managed under a single
head. For example: The various branches or sisters concerns under Palmer and Harvey
can also make use of this particular system in order to deal with various taxation system
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and policies (Baldvinsdottir et al. 2010).
Figure 1: Different types of management accounting systems
(Source: Self Developed)
Importance of management Accounting: Improving and estimating the overall cash flow of the organization- Management
accounting and its methods helps the organization to efficiently use up and maintain
cash balance. Further it helps in ensuring proper cash liquidity at the hands of the
organization. Management Accounting sees through and helps in the preparation of the
budgets for the organization. Management Accounting analyzed different other budgets
of the organization and helps out the management accountants to prepare a master
budget (Ward, 2012). This master budget gives necessary data regarding the other
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budgets and helps the organization to monitor overall all the operations and flow of cash
inside and outside of the organization. Thus, in this manner, management accounting
aids the organization in controlling and managing the cash balance and flow from its
hands. Helping in taking up various kind of business related decisions- It can be said that
management accounting also helps the business organization to make different kind of
decision. It can be said most of time, it is seen that the managers depend on only
qualitative information and data sources in order to make different kind of discussions.
They rely on such kind of data which somehow related to some assumptions and fail to
give accurate data. This gap is met by management Accounting. This aspect of
accounting helps the organization by providing with various quantitative data from
which decision can be made more accurately and easily. Further the decisions tend to be
more perfect and accurate as per the current scenario. Analyzing the performance and analyzing the deviation in the overall performance of
the organization- Management Accounting further helps out the organization to identify
any kind of shortcomings that have appeared in the way of the daily operation of the
organization. Management Accounting helps to identify and recognize the deviations
take place between performance and planning, and helps the organizations to take
different kind of alternatives in order to rectify all those deviations (Lukka and Modell,
2010). It also aids the organization to allocate different kind of resources for getting rid
of all the deviations that come in way of the operations of the organization. Reducing expense and making different kind of forecasts: Management Accounting also
helps the organization to monitor on its overall costs and helps the organization to
control all of its costs. Management Accounting helps the organization to monitor
overall of its costs and income sources and helps the management and the costs
accountants to plan up all of its activities so that the costs can be keep under control and
the organization can earn a considerable amount of profit. Further, management
accounting also helps the organization to make various kinds of forecasts related to the
future time period. Management Accounting warns the organization about different kind
of negative things that may arrive in the future and also helps the organization in
sending different kind of opportunities that may arrive at the hands of the organization
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in future time period. Thus, it can be said that management accounting helps the
organization in many ways.
 Increasing financial returns to the organization: Management accounting further aids
the organization to increase and boost up the level of returns for the organization. This
means that accurate management accounting helps the organization to boost up its
overall level of profits. Management Accounting helps the organization to analyze the
overall demands of the products in the market and the overall performance made by the
rivals of the company (Bodie, 2013). This helps the company to arrange and manage all
of its operations, production and sales which helps to boost its profits. Further
management accounting also aids the organization in identifying the profitable projects
where the organization can invest and earn considerable amount of profits. Thus it can
be said that management accounting helps the organization in different kind of ways.
Management Accounting should thus be effectively used by the business organization in
order to gain an upper hand over the other firms present in the organization. This tool
not only helps to analyze the overall health of the host company but also helps the
management to analyze the overall performance made by other companies. This helps
the organization to identify their shortcomings and understand in which ways they are
lagging behind the rivals. These facts help the organization to bring an overall
revolution in its way of performing in the market (Parker, 2011). This organization can
thus revise all of its plans and strategies and design new and different plans and
strategies in order to earn more amount of returns.
Conclusion
on the basis of above discussion it can be concluded that, there are different types of
management accounting system which is very important for the organizations. It helps to reduce
the cost of the company and give best possible solution.
P2 Explanation of different methods used for management accounting reporting that can also be
used for the chosen scenario:
From: Management accounting officer
To: General Manager
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Subject: System of management accounting
Date: 6th December 2018
Introduction:
Sir,
Different methods of management accounting can be elaborated as follows:
 Job Cost reports : this is the kinds of reports which has been made on the basis of job
or performance made during the period as well as the utilization of cost for such
operational activities. This report is very much useful for the companies to keep all the
records and transactions of the company. This process helps to keep the secure data and
company efficiency.
 Inventory management reports : this is the another process or report prepared by the
company which is important for the inventory system tool. This report helps to identify
the actual demand and requirement of the company.
 Debtors/accounts receivable again g reports: there are various debtors of the
organization which are increasing the debts in the company accounts. This report helps
company to measuring the long term and short term debts. This very much required to
know about the debtors position to maintained the proper management accounting.
 Performance reports: this is the another report under which actual position of the
company has been concludes in order to get the best performance and also helps to take
the best possible action plan. Operating budget reports: it is the another process or reporting the actual target
market conditions to evaluate the better performance level. Apart from that, it will be the
more challenging and better opportunity growth to make then better performance level.
This is the operational budget cost report to fulfill the better objective. Besides, it will be
the great impact on the company nature to secure the operating cost reporting. Marginal Costing- For the purpose of taking different kind of decision and to analyze
the overall scenario of the business, the business organization perform different kind of
things such as marginal costing which includes acts such as break even analysis and
differential costing (Cinquini and Tenucci, 2010). Cash flow statement- The business organization, especially the Palmer and Harvey
analyzes the cash flow statement in order to know about the availability of liquidity in
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the hands of the company and the availability of working capital. From this, various
kind of decision can be easily taken up by the organization. Decision making- It also helps the business organizations especially the Palmer and
Harvey to make different kind of decision. Different aspects of the company can be
easily looked upon and so the right kind of decision can be made. Communication of information- The act of management accounting also helps in activity
of communication different kind of information and data in the organization. Different
kind of necessary data re been communicated using management accounting (Nixon and
Burns, 2012).
 Statistical and graphical representation- Management accounting helps in the formation
of various statistical representations and interpretation of the data that are available art
their hands. This helps out the organization to understand any important data and take
different kind of steps in response to such kind of information.
Illustration 1: Kinds of various accounting reports
Conclusion:
This part of the study has been done based upon the terms of explanation of management
accounting and giving the essential requirements of different types of management accounting
system. Further, this part has also dealt with the importance of management Accounting and
explanation of different methods used for management accounting reporting. Different concepts
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related to the aspect of management accounting has been recognized and explained in this
study. Further, the significance and different kind of used of management accounting in
different kind of business organization have also been identified and explained in various parts
of this study.
Task 2
P3 Preparing income statement by taking base of two techniques of management accounting and
calculate marginal and absorption costing
In this part of the study, different kind of calculation shall be done. The calculations shall, be
related to the finding out of the different things such as the net profit. In this part, the net profit
shall be calculated with the help of two methods, that is marginal costing method and absorption
costing method. Then the overall deviations between two of the costing results shall be identified
and different kind of concepts shall be related to the deviations and the deviations shall be
explained. This part of the study shall be ended with the help of a concluding statement which
shall help to draw the final line over the whole of analysis that shall be done in this part of the
whole assignment.
Absorption Costing: These techniques help the individual in computing the adequate
costs incurred for such operation. All the analysis will be based on overall computing method
with full production cost which helps to identify the direct cost.
Calculation of the net profit using absorption costing method:
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