Management Accounting System Analysis Report for Taj Stores

This report provides a comprehensive analysis of management accounting, focusing on its application within a retail business, Taj Stores. It covers essential requirements of different management accounting systems, various reporting methods like inventory control and accounts receivable, and the advantages of such systems. The report delves into cost analysis techniques, comparing marginal and absorption costing for income statement preparation. It also examines budgetary control, exploring the advantages and disadvantages of different planning tools. Furthermore, it discusses how organizations are adopting management accounting systems to solve financial problems and improve decision-making, with a conclusion summarizing key findings and referencing relevant sources.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting and essential requirements of its different types..........................1
P2 Various methods used for management accounting reporting...............................................3
M1 Advantages of management accounting systems and their application................................5
D1 Management accounting systems and management accounting reporting...........................5
TASK 2............................................................................................................................................5
P3 Techniques of cost analysis to prepare an income statement using marginal and absorption
costs.............................................................................................................................................5
M2 Management accounting techniques and financial reporting documents.............................9
D2 Financial reports that accurately apply and interpret data.....................................................9
TASK 3 .........................................................................................................................................10
P4 Advantages and disadvantages of different types of planning tools for budgetary control.10
M3 Use of various planning tools and their application...........................................................11
D3 Planning tools for accounting respond to solving financial problems................................11
TASK 4 .........................................................................................................................................12
P5 Organisation are adopting management accounting system................................................12
M4 Evaluation of financial problems.......................................................................................13
CONCLUSION.............................................................................................................................13
REFERANCES..............................................................................................................................14

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
TAJ STORES
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management accounting refers to a process of making the management reports as well as
accounts which gives timely and accurate statistical data or information needed by managers on
daily basis or to take the short term decisions. It provides accounting information and data to the
managers in a business firm and with the help of this, managers can take the good financial
decisions in a better and effective way. It is a procedure of determining, analysing, examining,
interpreting and also, communicating information and data in order to achieve common goals
and objectives of firm (Arroyo, 2012). Taj Stores is small retail business firm which deals in
household materials. It provides various different household products to consumers. In the
present business report, management accounting and necessary requirements of various kinds of
management accounting systems are described. Under this given report mentions about the
various methods which organisation uses. It is necessary that management should prepare
accounting reports in an effective and proper manner. There are some advantages and
disadvantages of various types of planning tools and techniques are also discussed which firm
uses for budgetary control in this report.
TASK 1
P1. Management accounting and essential requirements of its different types
Management accounting helps in developing the managing reports which provide
accurate data and information to managers. If data will be proper then employer can perform
business related activities in an effective manner. It is beneficial in taking the short as well as
long term decisions. Employer uses this accounting provision of accounting data or information
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to take better decisions in favour of company (Baldvinsdottir, Mitchell and Nørreklit, 2010).
With the help of this, performance of company or business will get improved. Management
accounting helps in measuring and recording all the operations related to business for internal
business in order to increase development and profitability of Taj Stores in United Kingdom. The
accounts manager of this company uses many accounting provisions to perform in a better way.
Management accounting is helpful in formulating different financial accounts as well as
reports which give relevant and exact financial data in a specific time period. Managers use that
data in taking their daily decisions. It will be helpful for manager in taking their long as well as
the short term goals and targets of an organisation. With the help of this, managers can take data
or information in a proper manner and also, perform its business operations properly.
Management accounting helps in providing relevant data to an organisation which is concerned
with the financial position of firm. It included information regarding ledgers, entries and also
budgets. It is concerned as a primary aspect of an accounting system which leads managers
regarding the information of accounts in order to determine total sales volume of an organisation,
accounts payable and receivable (Bodie, 2013). It is necessary for the financial manager to
collect all necessary information and data and use during examining the performance level of
company and it will be helpful in taking the better decisions in favour of an organisation. For
investors, this type of accounting information is necessary in order to take idea regarding
financial services of company and take better or effective decisions in order to invest the capital
of firm.
With the help of using proper accounting system, issues related with developing and
implementation of new and effective plans and policies will be resolved in an easy and effective
manner. The manager of TAJ stores can be resolved all the issues in a quick way so that it will
not develop the impact on growth and profitability of an organisation. In context to this, it is
noticed that the burden of managing finance on TAJ Stores increased because this firm do its
business related operations at large scale (Burritt, Schaltegger and Zvezdov, 2011). It is
necessary for the small firms to utilize management accounting system from many advantages.
Generally on the small firms has small resources along will the finance so these cannot do its
business operations on large scale. The small companies cannot deal with high risk. In order to
identify the mistakes and defaults, it is necessary for manager to utilize the proper utilisation of
resources and management accounting system so that firm can perform its business operations in
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a proper manner. It will be helpful in minimizing the confusion among different units so that
organisation can perform its operation in a given period of time. In order to minimize
unnecessary cost, it is essential for the manager to allocate effective resources in a proper
manner.
Significance of management accounting
Helps in achieving group goals- With the help of using effective accounting system, it is
essential for managers to arrange and use resources in a proper manner so that firm can achieve
its organisational objectives in a proper manner.
Proper resource utilisation- It is necessary that firm should utilise its resources in a
proper manner at the time of manufacturing process. With the help of this, results will be
achieved in a given period of time at minimum price.
Kinds of accounting systems
Job Costing System- It refers to a method of recording the production cost. It is a
procedure of assigning prices or costs which are involved in business. In this context, the
overhead costs can be incurred during production process of particular products (Chenhall and
Smith, 2011). There is a need for company to increase the jobs and also give many advantages
for earning more profit.
Cost accounting system- It is an important management accounting system. With the help
of this, firm can reduce its wastage in production process. Taj stores is a small company and it
needs to increase its revenue and profit level.
Price optimisation- The cost of any goods and services are based on its demand. With the
help of this firm can identify the exact value of goods. It is necessary that company should
provide the good quality of services and products to consumers at reasonable cost.
Inventory management system- It refers to a supervision of stock items and also non-
capitalised inventory. It is very essential completion which determines the supply chain along it
an impact on financial balance sheet. It is a management of stock as well as inventory.
P2 Various methods used for management accounting reporting
Every type of business firm has to develop different types of report so it is necessary for
company to evaluate its work and complete each task in an effective manner (Contrafatto and
Burns, 2013). The reporting system is a systematic procedure of providing data or informative to
the decided management stages so that firm can measuring the potentially of company. In
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regards to thus, there are different kinds of methodologies which are necessary in utilization
through an affiliation given below as above:
Inventory control reporting- With the help of this a report investigation can be if firm
can manage an inventory in an effective or proper manner and also evaluate those areas which
are necessary for improvement in the future context. Manager can search the real issues and
problems which are concerned with the merchandise.
For an example- Firm can settle the Under along with the over stock without any kind of
postponed.
This management report us helpful in determining the more goods which are necessary
for firm in order to enhancing the sale sin particular period of time. This kind of techniques used
through the TAJ stored in a proper manner and with the help of this this company minimise its
carrying expenses. In addition to this, it can be evaluated that the how much cost will be require
in order to show in different outlets (Elbashir, Collier and Sutton, 2011). There are different
kinds of selling cost used by company in order to doing the business operations in a proper
manner. The full work of firm will be finished with the help of evaluating the past faults and
mistakes.
Account receivable report- The TAJ Stores conducting its business in London city from
many years. So, this company has large number of customers which buy the goods and services
from them on Credit. In regards to this, manager develop a report under which it keep the record
regarding all the credit amount which given to people by this company. With the help of this
employer can know about the invest amount. Manager can make or record this kind of account
on the weekly, quarterly and monthly basis.
Account payable reporting- With the help of using the document, employer of TAJ
stores, can identify the cost which firm pay to its suppliers (Granlund, 2011). It is basic for the
manager of an organisation to pay the credits on timely basis and with the help of this company
can maintain the good relations with the suppliers and consumers. Under this report, there is no
specific time in the manufacturing and firm prepare the report on the basis of policy of an
organisation. In context to thus, it will be helpful in finding out the finance which has to the
company and require in future time period.
Performance reporting- With the help of this, employer of TAJ Stores can determine or
measure the performance level of different departments. In this company many departments are
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working and they work together in context accomplishing the common goals of an organisation.
But along with this it is necessary for firm to prepare a financial report in an effective or proper
manner.
Budget reporting- It is essential for the business firm to prepare an effective or proper
budget for the company. With the help of this company can do its business operations in a proper
manner and also compare between the actual budget with the performance level. The proper
budget is helpful in know about the current performance of over all organisation.
M1 Advantages of management accounting systems and their application
Concept of management accounting use by many enterprises as this ensure management
of various business operation which help in increase profits of enterprise. TAJ stores also use this
as this help them to record daily transactions of business in an appropriate manner (Koh and Tan,
2011). This enhance effectiveness of business operations and also increase efficiency of various
activities. Further, it make the process of decision making more easy which provide various
advantages to enterprise and contribute more in growth of company.
D1 Management accounting systems and management accounting reporting
In TAJ stores, different employees and department perform their roles and
responsibilities differ from each other but towards a common objective. Effective use of
reporting system help firm to increase output and profits. Success and growth of an enter[prose
largely depend on reporting system as consists relevant information related with financial
position of firm. One of the main aim of reporting is to analyse the business performance and of
employees also and make efforts to enhance the same. Stakeholders make decision of
investment after analyse the financial reports of company.
TASK 2
P3 Techniques of cost analysis to prepare an income statement using marginal and absorption
costs
An income statement of any business firm is helpful in determining their income level
and also expenses. It is a single method which helps in develop or formulate the profit and loss
account. There is a discussion about the absorption as well as the marginal costing given below
as above:
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Marginal costing- In this the fixed expenses are taken according to the periodic. It
decrease and also enhance in a total cost of manufacturing in developing the one extra unit. It is
an effective costing technique where the variable cost as well as the fixed cost is charged for a
specific time period (Kotas, 2014). If in case this cited business firm is going to introduce any
new services or products for satisfying the needs and wants of consumers then in this case it is
necessary for firm to spend more money on the process of manufacturing. In addition to thus
there are many different things which firm has to be included like for an instance labour, raw
materials, overhead etc.
Absorption cost- It is different from marginal costing. It is necessary that firm should
allocate the selling units by using the fixed as well as the variable cost. Along with this, there are
some other expenses which firm can never involved at the time of developing the income
statement such as administration cost (Liao, Chu and Hsiao, 2012). This kind of tool is regarded
as the conventional method related to the accounting. In context to this, it is an obsolete tool
which is adopted through many business firms.
Difference between absorption and marginal costing mentions below as above:
Basis Marginal Costing Absorption Costing
Use The use of this kind of
methodology in taking the
better decisions in favour of
company in an effective or
proper manner.
This type of costing is used in
an extrinsic report.
Accounting standards When an employer so the
valuation of the stock of
company then in this case
manager can not apply thus
method on the basis of rules
and regulation of an
organisation.
It is an indication of the
international accounting so
from this the company can use
this tool and techniques during
the merchandise valuation.
Fixed cost On the basis of this kind of This cost will be occur in case
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attribute, it is necessary to
reduce the fixed expenses from
the total contribution. It will be
done only on case when the
goods of company sold at
same year.
if the products are sold at the
same year.
Inventory valuation It is necessary to include the
variable cost if the stock is
valuable to manager or
company.
On the basis of this kind of
tool, manager should be
include complete cost for this
objective.
Calculation as per Absorption costing.
Working notes:
Absorption costing
Working 1: Calculate full production cost
Direct material £6
Direct labour £5
Variable cost £2
Fixed cost £3
Total £16
Working 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*19 = £13300 100*16 = £1600
Working 3: under/ over absorbed fixed production overhead
Actual fixed production: £2100
Fixed overhead: £2000
Total £100(over absorbed)
Administration Cost: In this budgeted cost is £800 and Actual cost is £700
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Production Cost: £700
Selling cost: In this budgeted cost is £400 and Actual cost is £600
Net profit using absorption costing £ £
Sales
(-) Cost of Sales:
Opening stock
Manufacturing
Closing stock
(Under)/ Over absorbed fixed prod.
O/h
Gross Profit
Less Expenses
Variable sales expenditure
Fixed administration expenses
Fixed selling expenditure
Over absorption
Net Profit
0
11200
(1600)
600
700
600
(100)
21000
(9600)
11400
(1800)
9600
Working 1: Calculate variable production cost £
Direct material 6
Direct labour 5
Variable production O/h 3
Variable production cost 14
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*14 = 9800 100*14 = 1400
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Net profit using marginal costing £ £
Sales value
Less: Variable costs
Opening stock
Manufacturing
Closing stock
Contribution
Less Fixed costs
Variable Production expenses
Administration cost expenditure
Selling cost
Net Profit
0
9100
(1300)
2000
1300
600
21000
(7800)
13200
3900
9300
From the above given data it has been concluded that it is necessary that there is a need to
company to use the abortion costing. With the help of developing the income statement firm
analyse its position (Lukka and Modell, 2010). With the help of this, firm get the more revenue
and that is £9600. In this the firm applied the marginal costing in its business so from this the
revenue of company reduced by £300. the reason of this difference is handling fixed value or
cost. When a business firm uses this marginal costing then the fixed expenses of firm reduced
from the total contribution in orde4r to calculate the profit.
M2 Management accounting techniques and financial reporting documents
Planning of future business operations provide variety of benefits to an enterprise. With
this, TAJ stores can increase the number of its profits. For effective planning, it is very important
for firm to use effective techniques and tools so managers can predict about future profits of
company. One of the main benefit of planning is that it help in remove obstacles and barriers
from business process.
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D2 Financial reports that accurately apply and interpret data
From above calculation, it can be summarised that there are two methods of costing
which can be used by TAJ stores in order to achieve reliable results. Both methods are showing
different results. Use of absorption costing is showing a profits of 7800 however amount of
profits is 7500 after use of marginal costing (Parker, 2012). Variation of 300 arise because of
fixed cost which is not consider in marginal costing. In order to get reliable results it is essential
for firm to choose a right costing method.
TASK 3
P4 Advantages and disadvantages of different types of planning tools for budgetary control
Budget- Budget is related to the future activities and also expenses. This is called as a
planned and also relevant information for specific period of time related to business activities
and operations. It is helpful in evaluating all the expenses and also costs in which TAJ Stores
expand in manufacturing of goods as well as services (Qian, Burritt and Monroe, 2011). It is
regarded as the comprehensive design of accounting planning and the operation for a particular
gap. Basically it is developed for more than the 1 year but this can only be applied in case the
results of company are not in company favour.
Budgetary control- It is also an important or essential tool related to the budgeting
which can influence a management in order to carried out the business operations such as
planning, directing, controlling and also determining. It is concerned with all the activities of an
organisation which is segmented in to two different parts and it is called as budget centre.
Budgetary Control Process
Discuss with the concern employers- It is necessary for an employer to do the proper
evaluation with the help of taking information as well as data with each other. There is a need to
manager to developing a proper budget and manage all the expenses an also cost.
Do better assumption- After gathering the feedback or review from the employer, top
management should prepare an assumption in context to overcome from all the losses. The main
purpose of budget planning is to control and manage all the activities, additional costs and
operations in future,
Fixed data of company for budget to achieving goals of company- In this step of process,
an accurate list of relevant data is formulated through collecting from all functions of an
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