Management Accounting Report: Ikea Inventory and Financial Data

This management accounting report provides a comprehensive overview of the subject, beginning with a definition of management accounting and its functions within an organization. It differentiates between financial and management accounting, highlighting their distinct purposes and requirements. The report delves into various management accounting systems, including cost accounting, inventory management, and job costing systems, along with their applications and benefits. It includes an analysis of financial data, comparing absorption and marginal costing methods, and presents different types of management accounting reports, such as inventory and accounts receivable aging reports, along with budgeting techniques. The report also examines the integration of different management accounting systems and explores various budgeting methods like zero-based budgeting. Furthermore, it provides insights into measuring tools and the characteristics of effective management accountants, including a case study on Ikea's inventory management system. The report concludes by summarizing key findings and offering recommendations for effective management accounting practices.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
MA Definition........................................................................................................................1
Function of MA......................................................................................................................1
Difference between Financial and MA...................................................................................2
Requirement of MA................................................................................................................2
MA System, application and benefits.....................................................................................3
Financial Data of Company....................................................................................................5
Different type of MA report...................................................................................................8
Different type of Budgeting..................................................................................................10
Different type of measuring tool..........................................................................................12
Characteristic of effective management Accountant............................................................13
Difference between adoption of MA system in organization...............................................13
Ikea inventory management system.....................................................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is the process in which organization uses different report in the
organization to improve the performance of the business. Katie walker Furniture, is the
organization who has to consider dealt in the retail sector of the nation. This report explain the
critical evaluation of MA and system in the firm. After that the report explain the various type of
Management accounting report and budgetary tool. In the end the report explain the different
measuring tool in real and how different organization has to consider adopt MA system in an
organization. Report also explain the calculation of different financial data.
MAIN BODY
MA Definition
As per Institute of MA (IMA), MA is define as a profession which has to consider provide their
support in management decision making of an organization. This eventually prove crucial for
organization in planning different operation in an organization and provides a good hand of
support to financial reporting and implementing various policy in an organization (Otley, 2016).
Institute of cost and management accounting, defines management accounting as application of
different professional skill in the preparation of report in the various which provides good
support in formulation policy and considering different alternative.
Function of MA
Function of MA are as follows:
Planing: MA has to consider provide the contrastive information about the situation of
the business and on the consideration of same different policy and strategy are being planned in
an organization (Cooper, Ezzamel and Qu, 2017).
Organising: MA help manager in organizing different activity, as this helps Management
accounting manager is able to regulate, adjust and coordinate various activity at workplace.
Controlling: MA provides the organization in controlling various activity in the
organization. As MA help organization in understanding variance between actual and expected
performance.
Margin Analysis: management accounting is has to consider determine the different
amount of profit or flow of cash which is generated in the firm, due to product, customer and
region.
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Cost setting: MA also provide very crucial support the company in ascertaining different
cost which will be require by a company in manufacturing process.
Inventory valuation: MA provides good hand of support to company in determining
variety of different direct and indirect cost and inventory item in an organization (Maas,
Schaltegger and Crutzen, 2016).
Difference between Financial and MA
Basis MA Financial Accounting
Aggregation MA in the firm looks at
detailed level to enhance the
performance. Such as profit by
product, product line, customer
and geographic region
Financial Accounting at the
same time has to consider look
at enhancing the result of
entire business.
Standard Management accounting did
not need to compile with any
of the standard to present the
result (Hopper and Bui, 2016).
Financial accounting has to
compile the out come of the
report with variety of different
standard.
Time Period This is generally prepare on
the frequent basis in the
organization.
Financial accounting is
generally drawn once or twice
the year only.
Requirement of MA
Forecasting cash flow: MA is require in the firm to forecast different cash flow of the
organization. As MA has to consider make various forecasting decision on the basis of budget
and different financial report.
Analyzing ROI: management accounting is require in the organization to analyze ROI of
the business. As with MA is required in the firm to select the best opportunity available at market
place (Bromwich and Scapens, 2016).
Strategic management: MA is also required at the workplace for the purpose of
Strategic management. As MA help organization in forming different strategy.
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Decision making: MA is also required in the firm to make or take various type of
decision in the firm. As this framework provide a good basis of information to make different
decision in an organization.
MA System, application and benefits
Cost Accounting System: Cost accounting system is the system which is used in the MA
to estimate different sort of cost of the product to determine cost of the product, inventory
valuation and control.
Requirement and Benefit
 Cost Accounting system is required in the organization to determine the variety of fixed
and variable cost incurred in the company. This help the firm in optimizing the budget
and resource allocation in the organization.
 It provides company in offering product at reasonable price, as it eliminates unnecessary
item in production (Quattrone, 2016).
Inventory management system: It is the accounting system in the firm which prove
crucial for organization in tracking the different level of inventory in the firm.
Requirement and Benefit
 Inventory management system is required to forecasting the different need of company
product at market place. This help in planning the different manufacturing activity in a
way that it help company in achieving the goal efficiently.
 provides organization in keeping the warehouse of the company well organized.
Job costing System: This is the system which looks at determining the contrastive cost
which has been incurred for a specific production or service in an organization.
Requirement and Benefit
 Job costing system is generally required to estimate similar or different type of job which
can be undertaken.
 provides organization in understanding the variety of pros and cons of job in an
organization (Ax and Greve, 2017).
Price-optimizing System: This is the system which has to consider consider the change
in demand due to change in the pricing structure in an organization.
Requirement and Benefit
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 This is required in the business to drive the focus of organization toward different value
added activities in an organization.
 Also it helps the organization in promoting automation of task in the company and helped
in making quick decision in an organization.
Information should be relevant, accurate and reliable
There is very much need of providing the contrastive information in a relevant and
accurate way to contrastive interested party. Reason behind the same is identified that it will help
the manager in making more relevant decision as manager will be having accurate data . It is also
very crucial for the organization to have reliable information, otherwise it may impact the
efficiency of the business in long run.
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Financial Data of Company
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Financial data of the company it has been find out that absorption costing system will be
great choice for the organization as profit derive from this costing is higher as equivalence to that
of a marginal costing. Profit from absorption costing system is 82335, 71500 and 87695 and
marginal costing as 60200, 85150 and 85300 respectively three year
 Marginal costing is a costing technique which has to consider charge the variable cost of
the company and has to consider write off fixed cost of company. Where as absorption
cost has to consider consider both direct and indirect cost of production.
 Marginal costing provide very crucial support organization in fixing the selling price of
the company, provides the organization in understanding the impact of the variable cost
which has to consider has on the operation of the business.
 difference in profit from both the costing is that absorption cost is that marginal cost has
to consider overwrite fixed cost but absorption cost has to consider not do it.
 This financial statement prove crucial for company in forecasting future of the
organization, this help company in making decision in the firm very efficiently.
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Different type of MA report
Inventory Report: Inventory report is the report which has to consider show the
summarized version of the various type of the inventory present in firm and the stage at through
which that inventory is going on (Granlund and Lukka, 2017). This shows the comprehensive
accounts related to the stock and supply of different item in an organization.
Benefit of inventory report
Inventory report help organization in making different management strategy in the
organization. As at the time of making contrastive strategy related to production of inventory,
inventory report provide the basis of current situation of inventory in the company. This helps
the organization in overcoming the issue of duplicate of work at the workplace. Also, saving the
cost of the production in an organization. Also inventory report help organization in preventing
the situation of product shortage and allowing you to keep good amount of product in the
organization.
Account Receivable aging report: Account Receivable aging report which has to
consider shows the list of the various sort of debtor of firm with the date on which they are liable
to pay debt. This report has to consider record the date of the occurrence of the debt as well.
Benefit of Account receivable aging report
This eventually prove crucial for company in managing the debt of the company in more
efficient way in the organization. As with the help of Accounts receivable aging report
organization is able to identify the customer which has to consider fall behind on their payment
and can memorized them on time to pay contrastive debt in an organization. This prove crucial
for organization in seeing the greater amount of financial availability in the company
(Soderstrom, Soderstrom and Stewart, 2017). This eventually prove crucial for company in
planning different activity very efficiently.
Budget Report: Budget Report has to consider show the actual result of the outcome of
the budget with the per-established budget of an organization. They generally has to consider
show the variance in the budget formation.
Benefit of Budget Report
Budget report generally help the management of the organization in knowing the
contrastive expenditure level in the organization is too high for the organization. Organization
can take different action to lower down the same in the organization. This report also has to
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consider show the different revenue option available in front of the organization. This help the
management of the organization in overcoming the issue related to the profit margin in the
organization.
Integration of Different MA system
MA system in the organization is linked with the variety of the various reports in the
firm. As it has seen that MA system in the firm shows the result qualitative form. Whereas MA
report in the firm has to consider show the different result in quantitative form. So manager in
the organization has to consider check out the result of both reporting as well as system and has
to consider make different managerial decision in the firm.
For Example: Inventory management system or job costing system has to consider
create the environment in company which prove crucial for company in analysis how
organization can manage the inventory in the firm or maintain good cost structure in an
organization (Dekker, 2016). At the same time MA report in the firm has to consider provide the
current situation of the cost in the organization or inventory in the company. On the basis of the
integrating the strategy to maintain the inventory or cost and actual position, manager in the firm
has to consider take various type of management action in an organization.
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Different type of Budgeting
Zero Based Budgeting: Zero Based Budgeting is budgeting which looks at justifying all
the different expenses for new period. This process of budgeting has to consider starts from the
scrap and has to consider take every budget as a zero and all the function in the organization are
also analyzed for the purpose of needs and cost (Nitzl, 2016).
Advantage of Zero based budgeting
 Zero based budgeting in the organization help the manager in justifying all type of the
expenses in cited firm. Not only that it provide the help to the organization in justifying
the various operating expenses in the organization as well.
 Zero based budgeting is also recognized as the efficient budgeting tool as this tool has to
consider focus on the current situation of the business as compare to the previous or past
budget of an organization.
 It provides the organization in removing the redundant spending of the company as it has
to consider re-assist unnecessary expenditure in cited firm.
Disadvantage
Zero based budgeting consume good amount of time and efforts in company, this
eventually has to consider impact efficiency of the business. As they have to start from scrap
from starting.
Also it has been Analyzed that ZBB is the technique which increases the chances of the
corruption in the organization as compare to the other budgeting tool.
Purchasing Budget: It is the type of the budget which has to consider determine the
amount of the resources or the inventory which will be require by the organization in coming
period to carry out the various operation. Also this budgetary tool has to consider define the
amount of the money which will be require to procure the same in the organization (Budgeting
Tool, 2016).
Advantage
 This budgetary tool in the organization provide very crucial support the organization in
optimum utilization of the resources. As there is good amount of the clarity, which
reduces the amount of wastage.
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