Accounting Clerk's Report: Management Accounting Overview

This report, prepared by an accounting clerk at Hawthorn International, provides a comprehensive overview of management accounting. It delves into the core functions, principles, and distinctions between management and financial accounting. The report explores various management accounting systems, including cost accounting and inventory management, and highlights the importance of effective reporting through budget and performance reports. It also examines techniques like variable costing and its application to income statement analysis. Furthermore, the report discusses the integration of management accounting within Hawthorn's operations, emphasizing its benefits for strategic decision-making, resource management, and overall organizational efficiency. The conclusion underscores the critical role of management accounting in supporting Hawthorn's financial health and recommends the implementation of advanced techniques for enhanced cost control and profitability.

Part 1
Introduction
This report was created by an accounting clerk at Hawthorn in order to obtain a knowledge of
the company's many divisions and their interrelationships. In order to get a fundamental
understanding of management accounting, this study examines its functions, duties, and
principles. It also explores the management accounting system and various reporting
techniques utilised in this area.
Management Accounting
"Management accounting" may be described as the process by which accountants use their
professional abilities and expertise to effectively prepare accounting information that aids in
formulating policy and decision-making for an organization's operations and planning
control. To put it another way, Professor J.B. batty says management accounting is a phrase
used to describe the systems and processes that are used to aid management in maximizing
benefits and avoiding losses in their operations. Business owners and managers may use the
notion of management accounting to help them make better choices, formulate rules, and
organise and monitor activities in order to increase their company's productivity (Duska et al.,
2018).
Functions of Management Accounting
Management accounting's primary responsibilities include these:
1. Planning and forecasting: It refers to giving the essential data and information to produce
short- and long-term projections and plans for corporate operations (Weetman, 2019).
Analyzing data and creating business strategies requires the application of a wide range of
approaches, including statistics, probability theory, correlation, budgeting, and cash flow
analysis.
2. Organizing: To put it another way, it's the process of determining what resources are
available and how to allocate them in accordance with established plans.
3. Coordinating: It refers to ensuring that policies and procedures are developed and
implemented at all levels of management and departments of the organisation.
4. Controlling performance: Methods like budgetary management, standard costs, costing
ratios, cash flow statements and the assessment of the capital expenditure and return on
investment are all included in this category.
5. Analysis and evaluation: It has to do with how data is interpreted and analysed in order to
arrive at sound conclusions. Managerial accountants examine the company's structure and
operations to verify that the objectives are being met (Weetman, 2019).
6. Reporting: Managerial accountants are expected to generate a variety of reports to convey
the issue's core cause and monitor the progress of changes and operations.
Difference Between Management Accounting and Financial Accounting

Generally, the terms "management accounting" and "financial accounting" are used
interchangeably. Both terminologies, on the other hand, have a substantial distinction.
Basis Management Accounting Financial Accounting
Aim It aims at helping managers
to make informed business
decisions.
It aims at providing financial
information to the business
and external parties.
Standard It can be modifying
according to the needs of the
business (Lal, 2017)
It needs to comply with
specific business and
accounting standards set by
the governing body
Purpose Its purpose is internal
business management
Its purpose is to inform
external party on business
financial status as well as
internal financial decisions.
Compulsion It is not compulsory It is compulsory
Type It involves the use of both
monetary and non-monetary
data.
It involves the use of
monetary data (Lal, 2017)
Focus Its focus is to develop
policies, decisions and
budget for business
operations.
It focuses on preparing
financial statements and
communicating financial
information.
Principles of Management Accounting
Management accounting is based on the idea that better management information may lead to
better business decisions. Management accounting is governed by four universal principles :
1. Influence: This is based on the idea that information may be conveyed more effectively
via conversation. Its goal is to guarantee better strategic choices and their implementation at
all levels of management. This idea is propelled by a combination of perception, data, and
integration (Abednazari et al., 2018). Clearer strategy, better decision-making, and targeted
communication are the main advantages of this philosophy for Hawthorn international.
2. Relevance: This idea has something to do with the usefulness of data. Its goal is to assist
the organisation in formulating tactics and strategy for execution by preparing and locating
the information required. It is based on the analysis of data to produce a long-term business
plan. Effective decision-making is made possible because of this principle's emphasis on
high-quality data.
3. Analyse: The third principle focuses on assessing the value of a product or service. Its goal
is to demonstrate the link between the inputs and the results by simulating various situations
(Abednazari et al., 2018). To help Hawthorn international prioritise efforts and make
educated choices, it may use this tool.
4. Trust: Trust is established via stewardship, according to this idea. Its primary goal is to
safeguard the organization's assets, worth, and reputation by active management of the

relationship and resources. Good habits and morals play a crucial role in this process. Its
advantages When it comes to satisfying responsibility, credibility, and ethics, Hawthorn
International leads the pack.
Role of Management Accounting and Management Accounting Systems
Hawthorn's executives may benefit from improved decision-making via the use of
management accounting. As a key tool for reaching the company's stated objectives, it aids
managers at all levels in locating, analysing, interpreting, and conveying information
(Stockenstrand and Nilsson, 2017). All aspects of accounting, including trends, product costs,
budgeting reports, sales forecasts, constraint analyses, and other aspects of corporate
operations, are included.
Internal control, data analysis, and product introduction are just a few of the functions that
management accounting performs in a variety of businesses. As a result of this, there are a
variety of management accounting systems in use.
1. Cost Accounting System
The cost accounting system includes the procedures used to evaluate the cost of the goods,
projects, and processes, in order to present the exact costs on the financial statements and
assist management in making better business decisions (Dierkes, and Siepelmeyer 2019).
2. Inventory Management System
It's the ways in which the company's products are manufactured, stored, and consumed that it
sells, not the products themselves.
3. Job Costing System
The work costing system is a method for determining the cost of an order. Useful in a
corporation where each project is unique and tailored to the needs of the client (Bottomley
and Bosman, 2018).
4. Price Optimization System
Statistical methods are used in order for the organisations to understand how customers
respond to varied pricing for their goods via different distribution channels.
Methods Used in Management Accounting Reporting
Management accounting relies heavily on reporting. Reports are an important part of how we
do business at Hawthorn because they help us share information and make better decisions.
Based on the facts and information offered in the report, the choices are made (Muller, 2019).
As a result, the following positive traits should be included in the document:
 Reliable: so that decision-makers may put their trust in it.
 Relevant: a report's content should be tailored to the reader's specific needs.
 Updated: The reports should be updated on a frequent basis to avoid erroneous
conclusions based on partial or out-of-date information.
 Accurate: The data and information supplied in the report should be reliable and
error-free in order to prevent any potential dangers. (Muller, 2019).

Hawthorn's reports may be more effective if they emphasized the attributes listed above.
There should be some of these qualities in all reports. Various sorts of reports are used to
provide access to a wide range of information and data. Management accounting at Hawthorn
International makes use of a number of essential reports, including:
a) Budget report:
A company's financial management is documented in these reports. Executives and managers
scrutinise the budget report to verify that activities are properly managed (Lynch, 2017). The
budget report at Hawthorn is used to examine how the firm spends its money and how much
money is left over for new initiatives and goods.
The following is an example and an outline of a budget report:
Have to shown
b) Performance report
The goal of a performance report is to compare the actual results of an activity or project to
the budget or goal that was originally set. It aids managers in keeping tabs on the
performance of their staff and taking the necessary steps to encourage them to perform better
(Lynch, 2017).
Below is a sample of an activity performance report, including its content:
c) Accounts receivable ageing report:
These outstanding invoice amounts and the time period for which they have been unpaid are
recorded in the report that is created. Customers that are notoriously late on their payments
may be tracked down using this system (Lynch, 2017). There is a sample of the contents of
an ageing report below:
Have to shown
Techniques of management accounting and calculation for an income
statement using variable costing
Financial planning, standard costing, marginal costing, variable costing and absorption
costing are some of the methods used in management accounting, as well as cash flow
analysis, income statement analysis, budgetary control, statistics, and graphical tools. In this
section, a financial statement analysis approach, i.e., the income statement, is briefly
explained. Hawthorn international's revenue statement is examined using the variable costing
method. This is a cost notion in which the product's production cost does not include the
fixed cost of manufacturing. Fixed costs are left out of the equation, and only the variable
costs associated with the manufacturing process are taken into account. As a consequence,
the contribution margin income statement may be used to do an effective cost-volume-profit
analysis.
Here is an example of how Hawthorn international's income statement may be calculated
using variable costing:

Normal costing is not used in the income statement computations since variable costing is.
Variable costing income, on the other hand, shows the contribution margin. There are no
fixed selling or administrative costs in this model, thus the contribution margin is determined
by adding all the variables to the variable production costs. It sheds light on the impact of
fixed expenses on net profit (Cunningham et al., 2020). For effective CVP analysis and cash
flow management, Hawthorn utilises this data.
Integration of Management Accounting Within Hawthorn international
Hawthorn's management accounting may be applied to a wide variety of activities and tasks
inside the company.
 Customer service system: Hawthorn can effectively analyse and track demand for
products and make effective decisions such as launching new products, increasing
production etc. to meet customers' needs and increase organisational profit by
integrating management accounting with customer service system (Kaplan and
Atkinson, 2015).
 Departmental budget: Financial and non-financial information on internal corporate
activities is provided by management accounting, allowing managers to establish an
appropriate departmental budget by analysing reports.
 Strategic decisions: By integrating management accounting with strategic decision
making, a firm may secure its long-term growth and development (Kaplan and
Atkinson, 2015).
 Resource Management: Keeping track of inventories and making sure there is a
balance between resources and output is an important part of resource management.
Benefit of Management Accounting to the Hawthorn international
Management accounting provides the following advantages to the company:
 Hawthorn's SMART goals and objectives are derived from the precision and
dependability of data provided by an effective management accounting system and
reports.
 Overall operational expenses of a firm may be reduced by good management of
business operations, which in turn reduces the need of additional resources and
expenditures (Kaplan and Atkinson, 2015).
 Errors in company processes and tasks may be reduced, which leads to greater
efficiency.
 It was possible to earn larger profits and income due to improvements in efficiency
and cost reduction.
 Through the use of data and information that are reliable, management accounting
may help individuals and organisations achieve their full potential. (Kaplan and
Atkinson, 2015).
Conclusion and Recommendations
Management accounting, as discussed in the preceding paragraphs, plays a critical part in the
successful management and development of a corporation. The manufacturing processes of

hawthorn International need to be improved by using new methods and techniques of
management accounting. Cost and inventory management systems should be used by the
organisation to decrease expenses and waste while increasing profitability.
Part 2
Introduction
This study, written by an assistant financial accountant at Hawthorn International, analyses
the various planning tools and their usage in order to assure the financial performance and
stability of the organisation. Here, we cover many methods for dealing with financial
difficulties. As a follow-up, two organisations are examined in terms of their use of
management accounting.
Three Planning Tools Used in Management
Accounting planning is critical to the day-to-day functioning of a company, and the use of
good planning techniques aids in the efficient use of resources and the achievement of
organisational goals. The following is a concise overview of management accounting
planning tools (Egbunike and Unamma., 2017).
Budgetary Control
To prepare a company's budget, a budget comprises a full summary of financial expenditures
for the next year, as well as the company's anticipated income (Egbunike and Unamma.,
2017). An organization's budget is prepared for the future and compared to its actual
performance in order to figure out where there is room for improvement. The discrepancies
between the predetermined budget and actual performance will aid in determining the various
and remedial measures that need to be implemented to enhance it.. There are a variety of
budgeting techniques that may be utilised by any firm to keep costs under control and
maximise resources (Egbunike and Unamma., 2017). In this section, zero-based budgeting is
briefly covered.
Zero-based budgeting
The budget for the next year is treated as if it were zero, with the assumption that income
would be equal to costs and the difference between the two will be zero. This method aids in
the management of every dollar spent during the course of the year.(Miller, 2018).
Advantages
 It aids in the computation and comparison of all expenditures, and it compensates for
any overages.
 With zero-based budgeting, you can keep spending under control by using the same
procedure year after year.
Disadvantages
 Inconsistencies in budget management and the absence of a thorough budget
preparation procedure are to blame.

An organization's future budget and income may be estimated, and the variances between
those estimates and actual can be examined, with the aid of good budget planning. It's up to
the business to adjust in order to eliminate or reduce the wide range of results. After a year of
analysis, the budgeting method may be inaccurate for the next year. The zero-based
budgeting approach may be used by the corporation to anticipate and evaluate all of the costs
for that year by assuming it is zero. By making the appropriate modifications to the sales,
production, capital, and operational budget for that year, cost control may be achieved
(Kaplan and Atkinson 2015).
Cost Volume Profit
Analysis It is a part of management accounting planning that examines the impact of sales
volume and expense volume on an organization's operational profit. It also takes into account
the impact of fixed costs, selling prices, and variable costs on an organization's profit. Cost,
sales, and profit are all taken into account in this planning tool. This tool determines the
breakdown level in order to ascertain the profit and loss scenario, and it displays the
breakdown situation as a graph (Abdullahi et al., 2017).
Advantages
 Profits are easily calculated and the collection of factors is rapidly determined to alter.
 The breakdown scenario will aid in determining future expenditures and how the
organization's goals will be affected by the breakdown situation.
 Using this tool, you may alter the product's pricing from one point to another
(Abdullahi et al., 2017)
Disadvantages
 If all expenses are fixed in the tool, then the only variable costs would be those
associated with manufacturing.
 The product's sales will not fluctuate regardless of how much demand there is for it.
 Only one budget may be prepared for a certain length of time at a time (Abdullahi et
al., 2017).
When a firm has reached a point of no loss and no profit, it may use the cost-profit analysis to
make decisions about pricing, budgeting, and cost planning for the next year, allowing the
company to create a profit. Estimated sales volume and standard formulae will aid in keeping
the budget under control (Abdullahi et al., 2017).
Pricing Strategy
The product's price is influenced by a variety of variables, including risk-taking, market
knowledge, and research. Pricing is determined by considering the intended audience as well
as the market's other players. It's possible to use a variety of approaches, including skimming
and penetration. Taking into account the cost, demand, competition, and market, the company
decides on price (Srinivasan et al., 2017).
Advantages
 Sales improve when customers are prepared to pay the perfect price for a product.
 A cost-based pricing strategy may be used to examine gross margin and cost.

 The price of a product may be optimised by taking into account demand pricing.
Disadvantages
 The firm will suffer a loss when price is set by the organisation rather than by the
desire of customers to purchase.
 Customers may cease purchasing if the price is raised via penetration pricing.
 When client demand changes, demand pricing may be adjusted.
When deciding on a product's price, the organization's pricing strategy is an important
consideration. The company can use any pricing strategy that best suits its objectives in order
to do so. Whichever pricing strategy the organisation chooses, it will aid in budget
management because it will allow the company to make more money than it spends
(Srinivasan et al., 2017).
Comparing ways in which organizations could use management accounting
to respond to financial problems
Management accounting technologies are now being used by all organisations to deal with
their businesses' financial issues. Management accounting skills are lacking, which has a
negative influence on the effectiveness of the business because of the negative social and
environmental impact. Identifying financial concerns such key goal indicators, budgeting
objectives, and benchmarks may help a company better understand its deviations and
challenges (Maas et al., 2016).
Key Target Indicators
Setting a sensible aim will make it easier to meet the goal. Non-financial indicators such as
particular sales, specific pricing, etc., may be used as key goal indicators. The key
performance indicators aid in determining the company's long-term expenses and results
(Maas et al., 2016).
Budgeting Controls
Operational and capital budgeting strategies may be used to handle financial issues, such as
understanding the predefined cost and analysing projected income; if the costs exceed sales,
remedial action can be performed to lower the cost (Maas et al., 2016).
Benchmarks
In order for a company to achieve its stated goals, it is important to establish a benchmark.
Benchmarking aids a firm in accomplishing its objectives and meeting its targets.(Maas et
al., 2016).
Financial Governance
An effective operational strategy is needed to address the problem of financial governance,
which is part of an organization's financial planning.(Maas et al., 2016).
Case Studies on application and adoption of management accounting in two different
organisations
ASDA

Application of management accounting in ASDA
In terms of worldwide scope, ASDA is the biggest retail corporation and is considered a
subsidiary of Walmart. A variety of financial management methods are being used by the
corporation in an effort to increase sales while lowering costs. In order to plan and control
costs and profits, ASDA has implemented management accounting methods. A separate
department receives the entire budget report, which enables them to better plan and manage
their resources. The answers to financial issues like budgeting and variance discrepancies are
found in management accounting procedures. In the long run, the company may utilise a
financial governance management plan. To avoid the difficulty, ASDA's accountant manager
employs management accounting talents (Malmi, 2016).
Adoption of cost accounting system within ASDA
ASDA's management accounting tools may be used to address the company's financial and
non-financial issues, as well as generate more income and sales. The company's potential to
grow in the long run will be affected by trends in social and environmental issues. KPIs
should be tailored to the organization's objectives. Investment evaluation, budgeting, pricing,
and other sustainability considerations should be included in the report. Management
accounting methods such as inventory management, the balanced scorecard and cost
accounting are used by the ASDA (Malmi, 2016). These techniques are used to address
financial issues and get an advantage over the competition. Organizations that adopt good
management accounting strategies are more likely to succeed (McWatters and Zimmerman,
2015).
TESCO
Application of management accounting in Tesco
Tesco's management accounting system aids in the resolution of various financial issues.
Management accounting skills are put to good use in resolving issues of process
misappropriation, and the company benefits as a result. In order to ensure timely and accurate
reporting, it is critical that the company implement effective methods and mechanisms. Tesco
oversees the disclosure of all financial data at all levels. Cost-profit analysis, variance
analysis, and the budget cost are all used by Tesco to improve and enhance the company's
financial operations. Effective management accounting in day-to-day practise may help the
firm overcome difficulties including key target indicators, pricing, and financial governance
(Malmi, 2016).
Adoption of cost accounting system within Tesco
As a way to boost revenue and profits, Tesco has used management accounting methods.
Tesco's management accounting abilities need to be improved, and this may be done by
providing training and development for existing employees. The choice on capital budgeting
may be made by evaluating the alternatives. Customers will be more likely to put their faith
in Tesco if it develops a plan for transparency around sustainability issues, including financial
and non-financial data. Budgeting, lifecycle planning, carbon footprint analysis, and costing
are just a few of the management accounting tools and processes in use at the organisation.
lowering the product's price has been demonstrated to increase sales for the firm, hence this is

where the price reduction strategy should be used by the organisation (McWatters and
Zimmerman, 2015).
Balanced scorecard
Many companies utilise a balanced scorecard as a financial management tool in order to
tackle financial difficulties. Using this strategy, a company's resources are strategically
managed, and it aids in resource allocation and personnel development, which may assist in
addressing bad cash flow and improving sales (Madsen and Stenheim, 2015).
Conclusion and Recommendation
One may argue that good management accounting processes are critical to the success of any
business. There are both benefits and downsides to the various budgeting control systems, so
they must be carefully chosen and linked with the company's overall business goals.
Increased income may be generated via the adoption and usage of budgetary management
measures. Management account practises are used by various organisations depending on
their operational needs, and these practises assist to resolve financial difficulties and give a
corrective route for the firm to succeed over its rivals.