Detailed Management Accounting Report: Systems, Techniques, Analysis

This report analyzes management accounting practices within the context of Unicorn Grocery, a company specializing in organic food and goods. It delves into various types of management accounting systems, including job-order costing and inventory management, and contrasts them with financial accounting. The report outlines essential management accounting techniques such as budget reports, accounts receivable aging, and job cost reports. Furthermore, it explores cost analysis methodologies and evaluates the advantages and disadvantages of different planning tools used in budgetary control. The assignment concludes by assessing how companies adapt different management accounting systems to enhance decision-making and achieve organizational goals. This report provides a comprehensive overview of management accounting principles and their practical application within a real-world business setting.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1 ..........................................................................................................................................1
P1 Management accounting & different types of accounting system.........................................1
P2 Different techniques used for management accounting reporting........................................4
TASK 2............................................................................................................................................6
P3 Different techniques of cost analysis.....................................................................................6
TASK 3............................................................................................................................................8
P4 Advantages and disadvantages of different types of planning tool ......................................8
TASK 4..........................................................................................................................................11
P5 Evaluate how companies are adapting different management account system ..................11
CONCLUSION..............................................................................................................................13
REFERENCES .............................................................................................................................14

INTRODUCTION
Management Accounting refers to the process of examining business operations and costs
in order to make financial account, report and records to support the process of decision making
by managers of the firm so that goals of the business can attained. It is a process of determining,
measuring, examining, interpreting & communicating data and information in order to pursuit
objective of an organisation (Bennett and James, 2010). These accounting reports help managers
in making short term decisions by providing them accurate and timely information related to
finance and statistics. It is also known as managerial accounting. In the present assignment,
chosen company is Unicorn Grocery which is located in Chorlton, England. The firm sells
processed, fresh and dried organic food & drink with emphasize on fair trade and local sourcing.
Along with this, it also sells body care, household and general grocery goods. The report covers
various types of management accounting system and their essential requirements. It also includes
different methods used in management accounting reporting. By the use of suitable techniques of
cost analysis, various costs are calculated. Apart from this, merits and demerits of various
planning tools used in budgetary control are defined in the project.
TASK 1
P1 Management accounting & different types of accounting system
From: Management Accounting Officer Date: 21t February, 2018
To: General Manager of Unicorn Grocery
Subject: Management Accounting and Its Types
Management Accounting can be defined as an accounting activities which play an important
role in providing information to managers which helps in conducting company's operations. It
provides more detailed information as compare to financial accounting, for example if there is
any difference in revenue and expenditure in company products, then department will provide
comparative data that helps in analysing all the profitable and unprofitable activities.
This accounting provides faster information as compare to financial accounting in regards to
performance of company. It is a most important medium in providing future cost and revenue
rather than simply presenting past revenue expenditure. Further, it gives information more
quickly than financial accounting irrespective of giving annual report which is done financial
accounts it provides monthly, weekly or daily basis report that enable managers to consider all
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the feedback and shift it's concern towards management inefficiencies (Chenhall, 2012). It
enable in providing valuable management information for accurate estimates and tenders that
helps in negotiating prices.
Benefits of Management accounting:-
 It helps in forecasting future trends of business.
 Through management accounting insights must be developed that helps in decision
making both at operational and strategic levels.
 It helps in analysing the difference between what was predicted and what is actually
achieved.
 The cost control devices is management accounting enables the reduction in prices of
the product and good are supplied with quality at reasonable prices.
 Management accounting selects only those information which are relevant and useful
for organisations.
 It emphasis on those factors which helps in estimating future revenue and expenditure
like standard costing, budgetary control (Christ and Burritt, 2013).
 Management takes the proper decisions and better planning on basis of financial
accounting information.
 It select appropriate alternative from the available alternates which are normally more
attractive and profitable.
Types of management accounting -
 Job-Order Costing Method: This method uses material cost flow document, overhead
cost flow document, labour cost flow document and job cost sheet so to track the
manufacturing expenses related with producing job lot. Manufactures produce various
products and each of them is produced with different production process. Each job lot is
having its own specific budget according to which activities related to it takes place.
For example: Account manager of Unicorn Grocery will first track raw material cost,
then they will track their labour cost and lastly they will figure out overhead expenses.
Further all of these three cost combine together on a job cost sheet. If the entire
production plan went as per the defined plan, then the total cost of job lot will be on
budget & comparatively less than selling price.
 Inventory Management System: This type of management accounting system provides
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beneficial information to manager of Unicorn Grocery concerned with inventory or
stock. It provides information related with raw material, finished goods, inventory
turnover. Usually companies manage their stock on daily basis. It is considered as an
essential aspect of doing business. In simple words, it refers to the remaining stock after
company has produced goods as per the customer demand and also after completing its
day to day operation. It covers each and every aspect starting from production, to
retailing to warehousing to shipping. It is component of operation management that
supervise the flow of stock from production department to warehouse in an effective and
efficient manner so to avoid overstock and stock-out.
 Financial accounting – It presents the information in form of the financial statements
which is very crucial to the external parties such as stakeholders,creditors,lenders,banks
and other financial positions. These statements are based on the
rules,regulations,guidelines and directions of GAAP(generally accepted accounting
principles) which shows the past and current position. It includes the standards for the
financial information. Principles also contain the accounting
conventions,rules,regulations and other policies and accountant has to consider it before
creating balance sheet,operating statement. Reports are also created upon standards by
government bodies (Contrafatto and Burns, 2013). Company can also compare reports
and other information as they know their benchmarks. Through which they can also
improve their performance. Outside parties by evaluating these information take
decision to invest in the company.
 Management accounting – It gives information regarding the management which is
important to internal users. Users include managers,CEO owners,employees and
internal stakeholders who evaluates information. Through this they can check past and
present performance of the company. They can check their progress and take corrective
actions if any deviations are there (Dillard and Roslender, 2011). Managers can make
short,long term plans , policies and other objectives. It also helps them in sales
forecasting,making budgets. Executives can create their reports and can take decisions
related to future. Owners can also do the cost comparison of present with that of past
year and try to reduce the cost. So it is beneficial to the company.
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 Tax accounting – GAAP includes the different guidelines ,directions through which
reports and other accounting statements can be prepared to modify provisions of
taxes .Concepts,principles and other rules are based on GAAP. Through this company
can make tax planning,implementation of tax rules and they can pay taxes timely .Firm
can create tax reports ,returns and give advice regarding it to other areas of business.
They can calculate profits through deducting the profits. Organization will not face any
problem as they pay taxes timely .Through it government can also make their reports
and take short and long term decisions.
 Government accounting – It is referred to public accounting and this type of
accounting is used in public sector. Separate rules,regulations,concepts,principles are
there of this sector as compared to private sector. It checks past, present financial
performance of this sector and if deviations they take remedial actions to improve them.
They can make their reports,rules,policies, plans and objectives related to the budgets
and that of any other problems. Separate policies are created for their events and other
transactions.
 Forensic Accounting – It means the techniques ,auditing and use of other tools in
solving the conflicts in the management. Accountants are witnesses of the criminal and
civil disputes. They helps in detecting the fraud. It includes different cases such as
insurance,personal injury and other different frauds and claims (DRURY, 2013).
 Project accounting – It helps in checking the financial progress of the project. So they
are the standards. Managers can evaluate their performance and can take corrective
actions to improve them. It is beneficial for success of completing the project. It is used
as a competitive weapon for many companies.
 Social accounting – It includes policies,rules which evaluates different activities related
to protection of social environment. Company can make different environmental reports
which helps in making yearly reports. It helps in public awareness and thus helps in
development of society (Dumitru and et. al. 2011).
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P2 Different techniques used for management accounting reporting
From: Management Accounting Officer Date: 21t February, 2018
To: General Manager of Unicorn Grocery
Subject: Management Accounting Reporting
Management Accounting Reporting: Management accounts and reports are the sources by the
help of which goals and targets of the firm can be achieved. Managerial accounting emphasize
on information received by financial accounting and is used for decision making, planning and
controlling. Data and information are collected from various departments of the organisation
such as administration, production and operations, human resource, finance & accounts, sales
and marketing etc. Below described are some techniques used for management accounting
reporting which are as follows:
Budget Report: Under this method, future needs related to finance is forecasted and
arranged it on orderly basis accordingly. Budgetary control technique is used to monitor and
control financial performances of the firm. Through this, the operations of business are directed
in desirable direction. This technique is very useful for managers in order to control all the
operations and costs in given period of accounting.
Accounts Receivable Aging: It is a critical tool mainly used for handling cash flow for
business entities that extent credit to their consumers. This Aging report divides the balance of
customer by the amount they have owned. Most of the report maintains separate columns for
invoices that are usually 60 days late or 90 days late or 30 days late. Accounts manager use
these report so to figure out problem related with firm's collection process. However, if
significant number of customers fails to pay their balances then company are require to tighten
their credit policies. In addition to that, if account manager of Unicorn Grocery periodically
examine account receivable aging then they are ultimately reducing the chances of overlooking
old debts.
Job Cost Report: These reports are mainly prepare for specific project that shows all
the expenses related to that particular project. Thy are matched with estimated revenue which
enables firm to figure to out whether they earned significant profitability in this job or not.
Along with this, it aid in determining high-earning areas of the company so that they can laid
stress on those areas instead of wasting money and time on low profit margin jobs. Unicorn
Grocery is using these report so as to examine expenses during on-going project so that
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managers can deal with wastage area in an effective manner and develop corrective action
before final costs increases or escalate.
Management Information System: For proper and effective functioning of business,
free flow communication is necessary within the organisation. Thus, management needs to
build the system by which every individual of the firm can assess information & data and used
it for discharging their responsibilities and taking decisions. Proper and clear communication of
information ensures attainment of set objectives and targets of the company in effective and
efficient manner.
Cost Accounting: Cost data is presented by this method of accounting in product,
process, department and branch wise. This method focuses to capture cost of manufacturing of
the company by assessing the cost of raw material at every production step and fixed cost. Data
is compared with predetermined cost data. This comparison enables the management to find out
the reasons that are responsible for variance among these costs. Various costs are considered in
this method of accounting.
Fund Flow Analysis: This is used to determine all inflows and outflows of cash in and
out of financial assets. It is useful for the management to ensure proper utilization of funds. The
data of present year is compared with previous one in order to know that whether capital is
properly utilized or not. By the assistance of fund flow analysis, funds from operations and
changes in working capital are also examined.
Marginal Costing: This method is use to set fix selling price, pick out best sales mix,
optimum utilization of scarce resources or raw materials, make decisions, rejection and
acceptance of bulk and foreign order etc. It is rely on fixed & variable cost as well as
contribution (Fullerton, Kennedy and Widener, 2013).
Decision Making Accounting: It is the method by which management choose most
profitable and best alternative to solve the issues related to business. Comparison of relevant
cost is done in order to select such alternative. Hence, accounting information and data are used
to resolve issues which arises due to increasing nature of complexity of business. This method
helps the managers of the company in making effective decisions which leads the firm towards
attainment of objectives on specific period of time.
Management Reporting: A report is prepared by management accountant on the basis
of balance sheet, profit & loss account content and submit them to top management (Granlund,
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2011). These reports reveal strengths and weaknesses in various areas of financial and operating
activities. These determination are very useful to manager in decision making and exercising
control.
Ratio Analysis: This method is useful to management in release of its general functions
of anticipating, planning, coordination, communicating and control. It coat the way of effective
control of firm's operations by undertaking appraisal of both monetary and physical targets. It is
used to analyse different aspects of financial and operating performance of the company such as
liquidity, profitability, efficiency and solvency of firm.
Financial Statement Analysis: Balance sheet and profit & loss account are crucial
financial statements. These are examined for different period. This analysis assist the
administration to know the growth rate of business entity. Financial statement analysis is done
by ratio analysis, comparative and common financial statements.
Revaluation Accounting: According to this technique, fixed assets are revalued so that
capital is clearly represented with the value of asset (Hopwood, Unerman and Fries, 2010). It
assists to determine fair return on the capital employed.
Cash Flow Analysis: Cash movement from one period to other can be determined by
this analysis. It is use to evaluate quality of firm's income. Positive cash flow shows increase in
liquid assets of company and negative indicates decrease in liquid assets.
Financial Planning: The main purpose of every business organisation is profit
maximization. This objective is attained by formulating appropriate and sound financial
planning. Thus, financial planning tool is considered as a best method for accomplishing
objectives and targets of business concern (Kotas, 2014).
Standard costing: It is defined as a predetermined cost. It acts as a yard stick to measure
actual performance. This method is used to find out the reasons for deviations. Standard
costing is used by the firms to determine the variances between actual cost of products that were
manufactured and the cost that must have incurred for those goods. It includes the cost of direct
labour & material and manufacturing overhead.
Above mentioned are the different techniques used for management accounting
reporting . The financial manager of Unicorn Grocery use some of these methods in order to
attain objectives of the organisation. These methods are assistive in making financial decisions
and monitoring and control of performance of the organisation.
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TASK 2
P3 Different techniques of cost analysis
Computation of Net profit by using absorption costing
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
Less:
Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
Calculation through marginal costing using
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2 - 7800
Closing stock: 100*13 - 1300 -6500
Contribution 11000
Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
Total Profit / Loss 7500
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In above practical question, cost has been analysed via two techniques one is absorption and
other is marginal. In absorption costing, fixed cost and overheads are not taken into
consideration. Profit under marginal cost technique is £7500 and under absorption is £9500.
Difference between financial statement and financial planning:
Financial Statement Financial Planning
 This statement is generally prepare on
the basis of financial statement or
records such as income statement,
balance sheet, profit and loss statement.
 It shows the actual position of the
company in terms of numerical figures.
 This technique also determine the
capacity of Unicorn Grocery in context
of paying all debt and liabilities on
time.
 It anticipates financial needs, managing
different department and division and
identifies the needs in order to achieve
specific task.
 It assist in creating financial
procedures which further help in
achieving goals and objectives of the
company.
 With the help of financial planning,
Unicorn Grocery can identify the need
to capital requirement.
TASK 3
P4 Advantages and disadvantages of different types of planning tool
Budgetary Control refers to the process through which various business
enterprises prepare budget for future time period and match with actual performance in order to
detect any variances (Leitner, 2013). In simple words, budgeting means preparation of plans in
numerical figures for the specified future time-frame. Companies may develop the budget for
different divisions, departments, units or the entire organisation. The time period of budget is
usually for one year depending upon the firm whether they prefer accounting or financial year.
Organisations compare budgeted figures with the actual ones which is ultimately beneficial for
company as via this they can easily determine variances & take corrective measures without any
further delay. Budgets are the basis of control systems. They measure the performance of the
company in terms of financial figures and alleviate comparison among different levels or
divisions of Unicorn Grocery.
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