HND Business Module 7: Management Accounting Report for Lets Grow Ltd

This management accounting report analyzes the financial performance of Lets Grow Ltd, focusing on the application of management accounting systems to improve operational effectiveness. The report delves into the essential requirements and benefits of various systems, including cost accounting, price optimization, and inventory management. It evaluates how these systems and related reports aid in decision-making. A cash budget for the next six months is prepared and evaluated, along with an assessment of how the company implements management accounting to address financial issues and critically evaluate its financial position. The report covers different techniques used in management accounting, such as budget reports, performance reports, and cost accounting reports, with the goal of improving overall efficiency and achieving business objectives. The report also provides an overview of the essential requirements and benefits of management accounting systems and their impact on the financial health of the company.

Management Accounting Report for Lets Grow Ltd

INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
(a). Explain the essential requirements and benefits of management accounting systems which
are used by the organizations to run their operations effectively................................................1
(b). Evaluate that how management accounting systems and its report help the Lets Grow Ltd
at while making important decisions...........................................................................................5
(c). Prepare Cash budget for the next six months........................................................................5
(d). Evaluate the use of cash budget and it application at the time of preparing or forecasting
the financial position of Lets Grow Ltd.......................................................................................6
(e). Evaluate that how Lets Grow Ltd implement management accounting system to resolve
the financial issues which they face.............................................................................................8
(f). Critically evaluation the financial position of the company which is based on the
forecasted cash budget prepared by them..................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management Accounting is the collection of financial documents in order to determine the
organization's strategies to also be followed and to support its everyday operations (Al-Mawali
and et. al, 2018). In other words, it is a communication path that fulfills all their tasks like
planning, organizing, hiring, handling and governing. It is the combination of financial reports
that have been used to provide adequate and accurate numerical information to make profit. The
owner of the company defines, collects, and records the business transaction by handling the
payment information and holding revenue. Management responsibility is the general term, which
helps to make innovative strategic decisions by controlling suitable financial reporting and
details. This assessment is focused on the Lets Grow Ltd Company that is related to
manufacturing sector. This study consists of many different structures and analyses that aid in
the process of decision taking. Usage of the cash allocation for predicting market operations to
using accounting control programs to address financial difficulties. This assessment helps the
students to gain knowledge and improve their understanding regarding management accounting
concepts.
MAIN BODY
(a). Explain the essential requirements and benefits of management accounting systems which
are used by the organizations to run their operations effectively
Management information system is essential in all type of industries because it enables
the businesses to work effectively by providing necessary financial data for operational activities
(Galinova, 2017). Detailed information on specified function is necessary for monitoring the cost
and making reasonable decisions in intended to notify the overall progress. With the help of
several management accounting systems, managers of Lets Grow Ltd takes advantage of it and
make the correct investment decisions. Additionally, by implementing management accounting
structure that increases productivity, it manages accounting successfully. The basic
characteristics of the management accounting system are discussed below:
Cost accounting system: It is one of the most effective systems of management
accounting which are used to calculate correct and accurate expenses throughout the production
period of goods in the manufacturing unit (Horvat and Mojzer, 2019). It includes the process of
reporting, assessing, defining, summarizing and transmitting needless costs to track. In fact, it
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will be used to think about the real value of the various products and services. This approach
followed by the Lets Grow Ltd in order to calculate the expense of growing manufacturing
operation as well as assess that, it will beneficial for the company to provide success or not. By
applying the cost accounting system organizations will cover the costs of its
operational activities and create a profitable margin for organization.
Essential requirement:
This system essentially required for the Lets Grow Ltd where managers use to calculate
the cost of each unit at the time of manufacturing goods. The obligation of such program is to set
cost for each commodity in order to maximize the profitability and it is also used to build
strategies for future potential operations.
Price optimization system: Pricing structure within manufacturing is the main
component which required addressing that determines which equipment can be used to assess the
quality of the products and services. Because of the use of quantitative data that specified how a
business can obey the pricing structure to enhance efficiency as well as profit margin. This
approach also serves to provide guidance in determining the tariffs that would be appropriate to
both company and customers for their products which meet the company's objective as well as
customer's willing power to purchase. Managers of Lets Grow Ltd also evaluate the rates while
paying wages and price of raw material because these factors affect the price structure of
company. Price optimization system helps the managers to set suitable or affordable price
structure for customers who help in maximizing productivity as well as profitability.
Essential requirement:
In order to set optimum price level for buyers, organizations use this system
which involves an appropriate company pricing structure and ultimately selling out on the
market. It is essentially required to satisfy the consumer's expectation regarding price and
company's objective regarding profit margin.
Inventory management system: This accounting system is very important for the
companies because it helps in managing and track acceptable stock records. It has been used
mainly for the manufacturing companies where they need to manage their inventory level to
facilities the goods for the effective supply chain (Kostyukova and et. al, 2018) (Nartey, 2018).
In context of the Lets Grow Ltd's manager, they adapt this system to evaluate inventory level for
the manufacturing of goods. It has been used to offset the additional requirement of stock
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which further prevent the situations like shortage or wastage of raw material. This
system includes the process of material handling, processing to shipment, manufacture goods,
ordering material etc.
Essential requirement:
It is another management accounting system which essentially required by the Lets Grow
Ltd's managers to track their inventory level for effective production process. This system is
function to gather all the details on inventory control and monitoring with the aid of tools.
Benefits of different management accounting systems:
At the time of implementation several accounting systems in the business operations,
managers of Lets Grow Ltd get the several advantages which are discussed below:
Cost accounting system: It is beneficial for business to allow the classification of
profitable and unprofitable activities. It also recommended for potential development strategies
or requirements to maximize the outputs and controls the sale of goods and materials. Through
implementing this system in Lets Grow Ltd, managers can gather information on effective and
unproductive market and uncover all the specific reason for unsuccessful transactions. Therefore
it uses this approach to understand the future development and profits. Main purpose of this
system is to control over cost through the production period and try to minimise the cost in order
to maximise the profit margin.
Price optimization system: This management accounting system has numerous benefits as
it promotes making the customer more competitive in the industry, setting fair retail values and
identifying the hazard in a business (Quilty, Cosentino and Bagby, 2018). Price optimization
system helps in identifying the buying patter of customers on the basis of price structure. So,
company will provide the buying preference with different price range.
Inventory management system: It is an effective system which helps in achieving
operating productivity of different departments that achieves optimum performance by reducing
costs and maximizing sales and earnings. Implementation of inventory management system helps
the managers of Lets Grow Ltd to track their inventory level and order the quantity accordingly.
With the help of it, managers able to prevent the situations like shortage due to low level of stock
in the production process and the other side, raw material waste due to over order of stock which
is waste of material.
Different techniques of management accounting reporting:
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There are types of reports which are used by the organization for reporting purpose which
cover the several information and it will used by the managers at the time of formulating
business strategies. These reports are followed by the lets grow Ltd which is discussed below:
Budget report: Budget report: It is a critical instrument that used to determine the firm
profitability and generate revenue for small to large organizations (Robalo and Gago, 2017).
Thus, each organization has developed a spending report that include the estimated revenue as
well as expenses which can occur in the future through implementing business strategies. It is
built on the basis of prior experience and expertise enabling revenue and expense to be produced.
In context of Lets grow Ltd, managers produce this budget which provide better employment
protection and anticipate revenues and expenditure correctly.
Performance report: In this report, organizations evaluate the company's overall
performance as well as individual employee’s performance. Management of the organizations,
use such information to make effective business decisions to maintain long term efficiency as
well as target the company's goals & objectives. With the help of this, companies have praised
their employees with their hard work that helps the staff to be motivated, and they're making
more efforts. Performance measurements report is critical because managers prepare by
recording success at work and behaviour. Company owners of Lets grow Ltd will use this report
to provide bonuses and other benefits making them feel great. By implementing laws and
legislation they function more effectively as a practice.
Cost accounting report: In this report, all the necessary information included such
as costs of products and services which produces by the organizations. Cost analysis of the
business define the each element along with the descriptions each costs which incurred (Schmidt,
2017). It determines the quantities of the items manufacture and the cost which they used to
produce and with the help of it, manager set the product price. This report help the managers
of Lets Grow Ltd to handle administrative accounting records in order to consider the expense
levels for growing company. Profit margins is calculated and the results as if by these tests, after
providing a good image of all costs. Therefore, it aims to minimize inventory waste, work hour
cost and payroll costs by managing all investments across various organizations.
Above discussed reports followed by the managers of Lets Grow Ltd in order to
maximise the overall efficiency as well as effectiveness. By using above report help the
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organization to improve their operational performance and with the help of it, managers can
formulate the strategies which help in archiving business goals & objectives.
(b). Evaluate that how management accounting systems and its report help the Lets Grow Ltd at
while making important decisions
It has been critically evaluated that accounting system and reporting, both are related with
each other when anyone talk about the organizational process. Both are used to audits the
company's accounts and evaluate the overall performance. After that, managers evaluate that,
company required improvement or not and what steps they can take to improve performance.
Everything comes from system of management accounting that guarantees that the operational
activity is efficient or not. Manager of Lets Grow Ltd, use above discussed system or reporting
techniques to evaluate company's expenses and revenue in the production period and further
build strategies accordingly. By using performance report, company address the area
of improvement which helps in enhancing organizational process. Using these reports and
processes a manager gathers all the relevant knowledge that assists in the process of decision
taking (Singh and Verma, 2018). The inventory program helps to understand how much product
is needed to minimize wastage for the further order and encourages reporting. It also assists in an
acceptable manner in the appropriate use of capital. Lets Grow Ltd could obtain cost data that is
relevant by following the cost accounting system and plan it through cost reports. Throughout
reality, price optimization system is often used to set product price after identifying the cost of
each product by using cost accounting system. As such, all the reports and systems used by the
managers of Lets Grow Ltd which help them to improve their decision making process and make
sure that it will improve the overall organizational process which maximize the productivity as
well as profitability.
(c). Prepare Cash budget for the next six months
Particulars March April May June July August
Bank balance £ 20,000 £ 20,000 £ 49,000 £ 47,000 £ 13,000 -£ 9,000
(A) Receipts
Credit sales £ 30,000 £ 156,000 £ 168,000 £ 124,000 £ 144,000 £ 162,000
Amount received
from customers £ 96,000 - - - - -
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Total (A) £ 146,000 £ 176,000 £ 217,000 £ 171,000 £ 157,000 £ 153,000
(B) Payments
Credit purchases - £ 50,000 £ 70,000 £ 80,000 £ 90,000 £ 100,000
Loan - - 20,000 - - -
Wages £ 30,000 £ 30,000 £ 30,000 £ 30,000 £ 30,000 £ 30,000
Rent £ 4,000 - - £ 4,000 - -
Depreciation on
fixed assets £ 2,000 £ 2,000 £ 2,000 £ 2,000 £ 2,000 £ 2,000
Variable overhead £ 10,000 £ 15,000 £ 18,000 £ 12,000 £ 14,000 £ 16,000
Fixed overhead £ 30,000 £ 30,000 £ 30,000 £ 30,000 £ 30,000 £ 30,000
Suppliers for
purchase £ 50,000 - - - - -
Total (b) £ 126,000 £ 127,000 £ 170,000 £ 158,000 £ 166,000 £ 178,000
Total (a) - (b) £ 20,000 £ 49,000 £ 47,000 £ 13,000 -£ 9,000 -£ 25,000
(d). Evaluate the use of cash budget and it application at the time of preparing or forecasting the
financial position of Lets Grow Ltd
Budget: It is intended to offer an estimation of future sales and expenses for the future
activities. By making a calculation, the budget is helpful in assessing the goals and objectives of
an organization. The management of Lets Grow Ltd prepares multiple types of budgets which
help in providing proper path which employees have to follow at the time of performing their
task. It is one of the essential tools which are used by the every organization for effective
performance as well as provide better directions for their spending.
Cash budget: It is a document which includes the calculation of expenditure wherein the
place of cash is assessed by an organization. Cash budget is being prepared by an entity to
forecast any potential cash receipts operation from different sources (Suljović and Meta, 2017).
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It offers weekly, monthly and yearly cash positions. Correspondingly, a structured introduction
in respect of a corporate organization with planned money supply. By preparing a cash budget, in
which a Lets Grow Ltd offers a summary of projected revenue, running expenses, selling and
purchasing properties, and settlement of approval or responsibility, it is necessary to determine
how more capital is required, and then if there is a surplus of capital. Like, Lets Grow Ltd start
preparing cash budget where only credit payable and receivable information is collected. The
cumulative expenses and sales of the company take out within a defined time span.
This is distinct from the income statement which shows the money flow in the statement.
Profit and loss statement includes the revenue and essentially categorizes of spending. It shows
the income of the company which generated effectively within a given financial year.
Cash budget covers all associated revenue inflows such as profits and forms of non-income, such
receipts through product purchases and receipts from fixed asset transactions.
Importance of budget:
Preparation of budget is essential for the organizations where they determine the amount to
support the business operations. A budgetary budget helps avoid a revenue deficit in periods
when a company faces a large amount of spending. When the organization is struggling to pay
operating costs due to a huge cash deficit, this problem has to be resolved immediately by going
into further profits, delaying or eliminating all of the payments, or obtaining approval from the
bank for a larger loan.
Application of Cash budget:
In context of Lets Grow Ltd, cash budget is used for short term or long-term money
criteria which required to be recognised and enable the stability of administration to take
appropriate measures to avoid such operational issues (Weetman, 2019). This determines the
possible willingness of the business to quickly exchange payments and other liabilities to enjoy
the lease purchase advantages. It provide the origin of cash position such as cash refunds and it
also include the several elements such as deferred revenue money transfers, and stock buybacks.
Managers of Lets Grow Ltd prepare cash budget which include the expected revenue as well as
expenses and management make sure that, their staff will surely follow this budget to achieve
their business goals & objectives. Some of the advantages and disadvantages are as follow:
Advantages: This budget allows the determination about whether cash reserves are
appropriate to fulfil regular obligations, or whether the minimum reliability and cash status
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requirements defined by the internal regulations of businesses or organizations are retained.
That also helps a Lets Grow Ltd to determine whether it retains too much cash that could be
spent in successful operations. Organizations who borrowed from borrowers would like to
control their cash risk proportion and schedule impact on the global economy would be the first
attempt to calculate the percentage.
Disadvantages: Due to lack of flexibility, managers of the company unable to changes
their budget figures. Cash estimation provides the specifics or expected investment
related commitments (Welsh, 2018). When the department updates the cash budget, company
should make recommendations that are based on expected funding requirements. If the actual
budgetary needs are higher than the forecast than the estimation of the department has already
helped to support. Manager who makes decisions that impact the cash budget will exceed their
expenses. Such records developed relatively low extra payments in currency. The management is
greeted with appreciation for their efforts on the program. Nonetheless, if the actual expenses
occur and do not suit the goal amounts, cash over-payments may experience a gap. At this time
manager could be in a different position and may not feel the implications for the acts.
(e). Evaluate that how Lets Grow Ltd implement management accounting system to resolve the
financial issues which they face
Financial problem
It is one of most general problems which are suffered by every size organisation small,
medium and large while executing their day to day practices and these are connected with the
monetary and financial resource issues (Jones and et. al., 2018). These problems are basically
occur due to different components such as fiscal pressure, external force, change of consumer
execution, business cycle, internal component and many more. In order to get over and resolve
these complexities, financial administrator plays an important role. There are some major fiscal
issues, which can be suffered by Let Grow Ltd, they are defined as under:
Poor cash management- For organising business operations and purpose in efficient way, it
is essential to administrate cash of organisation effectively. In respect of Let Grow Ltd, their
financial administrator not capable to administrate their cash in efficient form as there is not
proper data of inventory, change in extrinsic atmosphere and maximisation in competition. Cause
of this, the administrator of respective venture suffer problem that directs to deprive cash
management.
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Late payment by clients-Each organisation has some target audiences because without
contribution of customer no business can be run and operate. The consumer buys products and
services on the credit basis and most of the time, they do not conduct payment that instantly
affect organisation budget. In context of Let Grow Ltd, they also have numerous customers who
buy their commodities on credit basis and not make payment in upcoming time.
Management accounting approaches
It refers to those tools, techniques and methods that are used by a business venture to
administrate and manage the monetary value and financial issues of the company (Legaspi,
2018). The description of some approaches of management accounting is defined as under in
context of Let Grow Ltd:
Benchmarking- It is an accounting approach that helps organisations to measure business
performance by organising comparison with other business that are known as best in class in
whole business industry. It helps the management to identify diverse development opportunities
for further growth. By using and implementing this approach, management of respective
company can make comparison regarding their plans and plan of actions with other organisation
performing same operations in order to overcome from financial complexities of late payment by
customers.
Key performance indicators- This approach enable in setting parameters in respect to
measure components. It is considered as positive evaluation that helps in aiding financial areas in
form of resolving fiscal complexities (Thabet and Alaeddin, 2018). By utilising this approach,
the venture can evaluate development by attaining objectives by measuring executions towards
key standards. High KPI focuses on overall performance whereas low KPI concentrates
regarding departmental execution.
Financial governance- It is an accounting method and system that monitors on
acknowledging, collecting, analysing and controlling key monetary value data of the company. It
plays an important role in handling fiscal activity, information along with documents of the
business. It helps managers to apply accounting principles in effective manner. By using this
approach and tool, business venture can solve business issues and recording transactions in
accounting books.
Comparison among Let Grow Ltd and Creams Ltd
Let Grow Ltd Creams Ltd
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Problem: Finance manager of this company is
suffering the complexity of late payments by
consumers that influence business performance
and occur issues while executing daily business
operations and practices. Such problems can be
resolved and remove by implementing
benchmarking approach of management
accounting, with the assistance of this, the
manager can make comparison among actions
to recollect fund from target audiences by
utilising forms that implement by other
ventures.
Problem: The complexity that can be
evaluated by the company is that the
accountants the business enterprise are facing
poor cash management issue that affect the
position of the business in competitive market.
It also influences diverse operations by
misbalancing budgets. This type of fiscal
problem that will be minimised and resolved
by utilising KPI tool by which managers will
be able to evaluate the execution of inventory
transactions (Zandi and Lee, 2019).
System: In order to get over the respective
fiscal complexity, managers of the company
can use price optimisation system of
management accounting with the motive of
setting price structure along with prominence
on maintaining credit information and forcing
debtors to pay their monetary value in
suggested time duration.
System: To resolve this issue, finance manager
can utilise inventory management system in
order to track the inventory and record all
information on computer systems.
(f). Critically evaluation the financial position of the company which is based on the forecasted
cash budget prepared by them
Management accounting provides needed information to top level managers in respect to
remove and resolve complexities that are occurred in term of accomplishing and acheiving
development and success, it include effective accounting systems an tools that are adopted by all
companies to assess the problems (Alamri, 2018). One of the important methods is financial
domination that enables in finding out loop holes and improving acts and practices to overcome
such financial complexities. At the same time, both companies can use method of benchmarking
and key performance indicator to set position and remove problems with the motive of
contributing in the effective survival and sustainability of the company.
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Planning tools are evaluated as fiscal approach to get over the complexities and performing
effective plans to resolve financial issues. By carefully understanding existing circumstances,
such approaches and methods are effective for the company to deal with future situations. These
methods and approaches are effective as they help both the companies to analyse situations and
apply strategies and plans. The management of Let Grow Ltd can use planning tools, methods
and approaches like operating master and cash budget which is essential and beneficial to
understand the features of financial business and analysing monetary value issues by increasing
profit margin and market share as to lead towards sustainable accomplishment and development
(Dávila, 2019). Effective management accounting tools will assist in dealing with the financial
complexities and improving the fiscal position of the business venture in effective and efficient
manner.
CONCLUSION
From the above discussion it has been observed that management accounting systems
and techniques are essential for the business. The firm use the cash budget to analyze the
liquidity position of cash in their business and it encourages to know the real financial position
and to make sound decisions. There are several reports which are used to make
effective business decision. In addition, by using management accounting systems organization
resolve their financial issues.
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REFERENCES
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and organizational performance: evidence from the United Arab Emirates
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de Contabilidad-Spanish Accounting Review, 22(1), pp.1-5.
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Jones, C. and et. al., 2018. Financial Management for Nurse Managers and Executives-E-Book.
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Weetman, P., 2019. Financial and management accounting. Pearson UK.
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Zandi, G. and Lee, H., 2019. Factors affecting environmental management accounting and
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