Report on Management Accounting Systems and Financial Analysis

This report provides a comprehensive overview of management accounting, focusing on its importance in various organizations, including Unicorn Grocery Ltd. It delves into different types of accounting systems, such as cost accounting, price optimization, and inventory management, and their applications in financial reporting. The report further analyzes the advantages of using management accounting systems, emphasizing their role in planning, organizing, and decision-making. It also evaluates various costing methods, including absorption and marginal costing, used to analyze an organization's net profit. The report explores planning tools in budgetary control, discussing their advantages and disadvantages, and addresses different financial issues and their effective measures. The content covers key aspects of financial reporting, cost analysis, and budgetary control, offering insights into optimizing financial performance and decision-making within organizations.

Management Accounting

Table of Contents
INTRODUCTION.................................................................................................................................3
SECTION 1...........................................................................................................................................3
P1: Important and types of management accounting systems............................................................3
P2: Different types of accounting systems which is used in reporting...............................................5
M1: Advantage of using management accounting system.................................................................6
D1: Critical evaluation of accounting system reporting.....................................................................7
P3: Various costing methods those are helpful in analysing net profit of an organisation.................7
M2: Evaluation of accounting techniques..........................................................................................9
D2: Analysis of income statements..................................................................................................10
SECTION 2.........................................................................................................................................10
PART A...............................................................................................................................................10
P4: Advantage and disadvantage of using planning tools in budgetary control...............................10
M3: Analysis of using planning tools..............................................................................................11
D3: Critical evaluation of financial issues.......................................................................................12
PART B...............................................................................................................................................12
P5: Different financial issues and their effective measure...............................................................12
M4: Evaluation of financial problems.............................................................................................13
CONCLUSION...................................................................................................................................13
REFERENCES....................................................................................................................................14

INTRODUCTION
Management accounting is an essential aspect of every organisation whether
operating as small or large scale. They need to make use of perfect accounting systems that
can assists in managing financial transaction of the company. The primary motive of
managers is to make use of role and function of management accounting department. The
short and long term objectives can only be attain by using appropriate tools and techniques
those are helpful in control operations of an organisation (Hilton and Platt, 2013).
This project assignment is explaining various parts of accounting systems and
reporting those are helpful in attainment of future aims of the departments. Various costing
methods which will be useful in achieving net profit of an organisation. Merits and demerits
of using planning tools in budgetary control process are discussed clearly. Different financial
issues and effective measures those are helpful in remove this problem which is arises in the
department.
SECTION 1
P1: Important and types of management accounting systems
In every business organisation, it has been seen that management always tried to use
best alternatives or systems that can provide better results in more quick time. They can also
plan to control their costs and expenses those are been incurred during the production of
products and services. For this purpose, department use to appoint well experience and
capable accounts managers that can help them to control these issues. Managers always
made its best efforts to bring better outcomes by allocating resources in effective manner.
Long terms aims and objectives can only be attained if appropriate accounting systems is
been used by Unicorn grocery ltd for recording of their various transactions. It will be easier
to save their extra time as well as manpower (Van der Stede, 2011). The primary motive of
every business is to make planning for maintaining their performance and growth through
proper utilisation of resources. It would be necessary for them to take maximum advantage
available possibilities those are been helpful in fulfilment of organisation demands. In order
to generate better results it is important to follow accounting functions in appropriate manner.
Such as:

Planning: It is formulating short and long term plan or actions which are done by an
organisation in order to attain a specific objective. A budget can be financial planning which
indicate how company resources can be utilised (Boyns and Edwards, 2013).
Organising: It is known as a systematic process of establishing an organisational framework
and allotting roles and responsibility to an individual those are operating in various
departments.
Controlling: A plan or system needs to be monitor in well organised manner by collecting
crucial feedbacks and make necessary solution to their issues. This will assists in better
understanding of individual roles while doing a task.
Decision making: It is known a system of selecting between competing alternatives. It is
inherent in every functions of management department (Bennett, Schaltegger and Zvezdov,
2013).
Importance of management accounting:
Forecasting cash flows: The primary significance of accounting is to estimate cash
flows and their impacts on the business before any crucial decision is been taken by the
company. It consist of designing of budgets and trend line graphs which is been used for the
purpose of allocating costs and resources.
Understanding performance variances: It is mostly commonly used in making
valuation among actual and budgeted outcomes. By the help of accounting tools assists in
determining positive and negative aspects of an organisation.
Types of accounting systems:
Cost accounting system: It is known as one of the appropriate system which is used by the
company’s in order to control their costs and expenses those are been incurred over the
production of products. These are directly or indirectly related with the production. Such as
direct labour, material and overhead.
Price optimisation system: This particular system is more effectively utilise by managers in
order to determine customer perception regarding price of their products. The outcomes of
their review would be taken into consideration for further evaluation of company’s
performance.

Inventory management system: There are various stock controlling systems is been used by
managers to manage and control their inventories. This system assists in systematic recoding
of every stock item according to their day of occurrence.
Job costing system: It is a perfect system which is been helpful in assigning production costs
to a single products or groups. Basically, the job order costing is effectively useful in
determine every produced products must be separate from each other.
P2: Different types of accounting systems which is used in reporting
In order to get better results in near future every company used to analyse or record
their financial transaction by using effective reporting system. A report is a detail information
documents which consists of financial condition of Unicorn grocery that is done during an
accounting year. To make report more reliable an accurate various accounting systems is
been used. The role of managers is to gathered information from various departments so that
a perfect report can be prepared. There sources of data collection would be taken from
internal as well as external department such as finance, HR and other stakeholders. The base
of reports would be directly associated with the financial statements such as profit and loss,
balance sheet and cash flow statements.
The data collected for the reports are been presented in front of various investors
those are sole partners of the company. After overlooking every aspect of the company health
and financial position they make their valuable decision to make capital investments. Their
decision would be crucial for the future attainment of aims and objectives. in this context
there are various accounting systems reporting is been used the primary motive of every
manger is increase profitability and growth of an organisation for this purpose they use
implement latest and effective techniques those are providing better outcomes in very fast. In
accordance to deal with the tough competitive market, company uses their latest and reliable
sources those are helpful in creating better opportunities in coming time. This will help
increasing goodwill in front of other competitors those are dealing in same business
operations. There are various reporting systems which will be helpful in solving various
accounts related issues. Some of them are discuss underneath:
Performance report: This particular report is effectively helpful in determining organisation
productivity and efficiency over past time. It is essential to analyse current performance with
the past to examine stability of the company in the market. This will assists the investors to
make their valuable contribution in the success of organisation. It is essential for every

company to make maintain their financial as well as organisational performance in effective
manner so that it would draws the attention of outside stakeholders.
Account receivable report: According to this reporting system, managers and company both
use to determine total lists of customers those are unpaid and credit memo. This will help to
analyse total amount to be recover within an accounting period. It specifies total duration of
time it will take to recovery the amount from various customers.
Job cost report: It is crucial for the production managers to identify total cost they are
bearing for the production of one units or group of products. This will help the company to
control extra costs so that maximum advantages can be attained in effective manner. It is vital
for the company to make regular analyse of their daily production detail that are been done
over the manufacturing time period.
Operational budget report: There reports are directly related with the production process. It
is mainly sales, raw material and other overhead costs those are needed during the time of
manufacturing process. Total expenses and costs can be primary target of the managers to
control by record every day operation details. This budget helps the management to make
estimation about total expenses they are going to be investing for gaining maximum
production. It can be control by regular monitoring of their production activities.
Inventory management report: With the help of this accounting reporting system,
management can control and manage their stock level. This will be crucial for accounts
department to make use of effective tools and techniques that can be useful in recording
opening and closing stock of an organization. There are various inventory management tools
such as ABC costing, inventory turnover ratio and EOQ. These are more effectively helpful
in analyse current billing and store keeping information about of Unicorn grocery.
M1: Advantage of using management accounting system
It has been seen that accounting systems are more effective tools of accounts
department. They use this as primary sources to record their financial transaction which were
done by the company during the period of time. The major benefits of using this are to make
planning for increasing the efficiency of an organisation. To make appropriate decision
regarding use of resources so that maximum productivity can be attain. Every information of
transaction would be recorded in their respective statements as per their mention date of

occurrence. The overall productivity of an organisation can enhance with proper utilisation of
information through effective accounting system.
D1: Critical evaluation of accounting system reporting
In every manufacturing business, it is crucial to determine effective accounting system
reporting those are helpful in generating positive outcomes in near future. Adopting such as
system as well as reporting can assists in providing proper direction to employees so that they
can accomplish their objectives in more quick time. Performance and job cost report are more
reliable and accurate reporting systems that can help in delivering better outcomes to the
company.
P3: Various costing methods those are helpful in analysing net profit of an organisation
To get better results with their limited resources the company need to make control
over their cost and expenses that can increase their cost of production. Cost is simply means
that among of value which is given for the purpose of receiving something. It can increase
extra burden over the company that would make huge impacts in near future. To deal with
such kind of situation every organisation use to make contingency planning to deal in these
kind of condition. Without having proper control over the cost company would also go into
heavy losses. Every products produced by the company carries some sort of costs that would
be help them to generate maximum earning from the sales of those goods. These are costs are
mostly associated either directly or indirectly with the products such as direct material, labor
or other overhead costs (DRURY, 2013). The management always eying to make effective
planning to control their cash flows by using appropriate tools and techniques. These costs
methods assist in overall growth and net profitability of the company during the period of
time. Some of them are mentioned underneath:
Absorption costing: These are said to be those costs which is imposed overall manufacturing
products and services. It would consider both variable and fixed costs. Such kind of costing
methods of computing the total cost of a product by taking indirect or direct expense. It used
to absorb every costs of producing a good. Because they use to considered every costs and
expenses so these are also known as full costing method (Richardson, 2012).
Marginal costing: It is refers as those costing methods which are related with the costs of
additional units produced by the company with the same sort of resources. It is also known as
variable costs because it does not consider fixed while calculating net profit of the company.

This costing is also known as period costs. With the increase or decrease in the total cost of a
production running for making an items.
Comparison:
Absorption costing Marginal costing
Apportionment of final cost to the cost centre
in relation to analyse cost of production is
said to be absorption.
It is known as well know decision making
tool for ascertaining total cost of production.
It used to take into accounts both variable
and fixed cost as production cost.
The variable cost taken into consideration
while calculating net profit.
Because of inclusion of fixed cost most of the
time profitability gets affected.
By the help of profit volume ratio company
used to measure profitability.
It is not considered best for future decision
making by the investors.
For plenty of stakeholder, marginal costs are
taken as primary base for future decision
making.
Statement of profit and loss using absorption
costing
Quarter 1
No. Of
units ￡/unit ￡ ￡
Sales value 66000 1 66000
Less: Cost of sales
Less: Opening inventory 0 0.85 0
Add: Production 78000 0.85 66300
Less: closing inventory -12000 0.85
-
10200 -56100
Gross profit 9900
Expenses
Selling &Administration costs -5200
Profit 4700
Less: Under absorption -2800
Profit reconciled 1900
Quarter2
No. Of
units ￡/unit ￡ ￡
Sales value 74000 1 74000
Cost of sales

Opening inventory 12000 0.85 10200
Add: Production 66000 0.85 56100
66300
Less: closing inventory -4000 0.85 -3400 -62900
Gross profit 11100
Expenses
Selling &Administration costs -5200
Profit 5900
Statement of profit and loss using marginal costing
Quarter 1
No. Of units ￡/unit ￡ ￡
Sales value 66000 1 66000
Cost of sales
Opening inventory 0 0.65 0
Add: Production 78000 0.65 50700
50700
Less: closing inventory 12000 0.65 -7800 -42900
Contribution 23100
Less: fixed costs -16000
Less: selling &administration -5200
Profit 1900
Quarter 2
No. Of units ￡/unit ￡ ￡
Sales 74000 1 74000
Cost of sales
Opening inventory 12000 0.65 7800
Add: Production 66000 0.65 42900
50700
Less: closing inventory 4000 0.65 2600 -48100
Contribution 25900
Less: Fixed costs -1600
Less: selling &administration -5200
Profit 4700
M2: Evaluation of accounting techniques
It is essential for an organisation to make use of accounting techniques in managing
their business operations in more effective manner. Company always looks for generating
positive results by make use of their organisation resources. This can lead to attain their
overall aims and objectives which will take them to reach at their valuable set destination.
Accounting techniques are more effectively helpful in managing operational effectiveness.
There are some specific techniques such as marginal costing and historical cost data which is

helpful in operating their business operations in more sufficient manner. The overall growth
and sustainability can be attaining by proper utilisation of company resources.
D2: Analysis of income statements
According to the above mentioned calculation, it has been found that managers are
mainly using two methods such as absorption and marginal costing to determine net profit for
the company. The results are relatively different form one another. The maximum chance of
getting more reliable outcomes is by using marginal costing because it only considered
variable cost.
SECTION 2
PART A
P4: Advantage and disadvantage of using planning tools in budgetary control
In order to control extra cost and expenses so that to increase productivity of Nero
Ltd. For this purpose, company need to make a well organise budget prior making any vital
decision. It needs to be revaluing on regular basis to make effective provision and standards
to increase moral of employees. It is effectively related with internal techniques that are
helpful in order to control risk factors. There are various important factors that consist of
various resource quantities, cost and other expenses as well as cash flows (Albelda, 2011).
Budgets are known as an estimation of future estimation those are helpful for the
company to manage their costs and resources of an organisation. It is a financial plan which
is used to define period of time. It consists of planned sales volume and revenues, cost and
expenses. it is known as perfect measure to estimate income and expenditure for a set period
of time. To control all these things, they need to use make use of planning tools. Those are
mentioned underneath:
Forecasting tools: These tools are more useful in making vital prediction of upcoming
activities on regular basis of their past and current information in more simple trends as
persists in the market. It mostly starts with certain assumption those are being related with
management assumption, skills and judgment.
Advantage: The main advantage of using these tools is that to provide the business with
more effective decision regarding the future of an organisation. This method is helpful to

assess possible results for Nero Ltd. In plenty of cases forecasting uses as qualitative
information that depends upon the judgement of experts.
Disadvantage: It is sometime not possible to forecast accurately the future. Because
of qualitative nature of forecasting a business cannot able to come up with latest and
innovative difference those are helpful in getting better results in coming time.
Scenario tools: It is said to be more thinking analysis. Such planning methods help an
organization to make use of flexible long term plans. In wide business firms they mainly use
to adopt to control their team actions (Advantages and Disadvantages of Scenario, 2011).
Advantage: This planning tool establishes proper thinking regarding various best
alternatives. It will helpful in analysing better understanding and purpose of employees and
managers. Scenario tools lead to deal with any critical situation according to determine their
final outcomes (Herzig and et. al., 2012).
Disadvantage: Sometimes, these seem to be harder to get according to the situation.
The early planning cannot have right scenario to deal difficult aspects of an organisation.
Contingency tools: It is known as an effective plan which devise for a solid outcomes
which often helpful in usual plan. It is mainly useful in analysing total risk factors those are
present in an organisation. These are mostly devised by local government as well as
businesses.
Advantage: This planning tools recognising company’s total limitation and preparing
perfect deal with other things. A company does not have occasion to make use of contingency
plan.
Disadvantage: It is very difficult to face in some critical situation because risks are
more ascertain (Lavia López and Hiebl, 2014).
M3: Analysis of using planning tools
In order to get more effective results in the future the company need to make use of
planning tools which can assists in better understanding of budgetary control of an
organisation. There are various planning tools which will be helpful in estimating positive
outcomes in more quick time. Some of them are forecasting tool which is used to make

analysis of future growth and stability of Nero Ltd. Another one is a contingency planning
technique which is mostly helpful in controlling risk in a project.
D3: Critical evaluation of financial issues
It has been found that there are plenty of financial issues were arises in every business
organisation because of which they need suffer from continuous losses and other problems.
Some of the major issues are profit level and product and service a quality issue which is
more in manufacturing sector. To deal with this kind of issues management need to make
crucial decision by implementing key performance indicator, financial governance and
benchmarking techniques. These effective tools are more helpful in facing any problems
those are related with finance (Banerjee, 2012).
PART B
P5: Different financial issues and their effective measure
In every manufacturing business, the major problem faced by them is related with
financial department. It is the major aspects which need to be taken into account so that better
results can be generated by the company. These problems would be vital to remove as soon
as possible because they implication can be more over the profitability position of the
company. Some issues are mentioned underneath:
Profit level: It is an essential issue which is directly related with the productivity of the
company. If proper amount of finance is not available during the time of production process
there maximum impacts will be seen over the profitability of the company.
Productivity issue: Without having proper flow of cash during the time of production
process. This will directly make impact on the productivity of an organisation.
Product and service quality: Some other financial issues are affected because of inefficient
product and service delivery of goods and services. This will make huge impacts on the
performance of an organisation (Burritt, Schaltegger and Zvezdov, 2011).
To deal with above mention financial issues below tools are effectively helpful in the
Nero Ltd. Some of them are discussed underneath:
Key performance indicators: This is an effective tool which is used for the purpose of
making comparison of past data by using present. This will assists in analysing actual
performance with the standard one.

Financial governance: There are certain rules and regulations which is been set by a
government to operate financial operations of an organisation. This will be helpful firm to run
their business in more efficient manner (Parker, 2012).
Nero Ltd Unicorn grocery
This company is use to control their business
operations by well using their KPI in regular
basis.
As this company is working on small scale
they are using benchmarking and financial
governance to operate their business.
M4: Evaluation of financial problems
To overcome with various financial issues those are been arise in an organisation.
They need to make use of KPI, smart tools and financial governance in more effective
manner.
CONCLUSION
From the above project report, it has been concluded that management accounting is
an essential aspects for every business organisation. This will help in accurately recording of
financial transaction in various statements of the company. The overall projects is delivery
better understanding of accounting systems and tools those are crucial in better decision
making in near future.

REFERENCES
Books and Journals:
Hilton, R. W. and Platt, D. E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Parker, L. D., 2012. Qualitative management accounting research: Assessing deliverables and
relevance. Critical perspectives on accounting. 23(1), pp.54-70.
Burritt, R.L., Schaltegger, S. and Zvezdov, D., 2011. Carbon management accounting:
explaining practice in leading German companies. Australian Accounting Review, 21(1),
pp.80-98.
Van der Stede, W.A., 2011. Management accounting research in the wake of the crisis: some
reflections. European Accounting Review, 20(4), pp.605-623.
Banerjee, B., 2012. Financial policy and management accounting. PHI Learning Pvt. Ltd..
Lavia López, O. and Hiebl, M.R., 2014. Management accounting in small and medium-sized
enterprises: current knowledge and avenues for further research. Journal of Management
Accounting Research, 27(1), pp.81-119.
Albelda, E., 2011. The role of management accounting practices as facilitators of the
environmental management: Evidence from EMAS organisations. Sustainability Accounting,
Management and Policy Journal, 2(1), pp.76-100.
Herzig, C and et. al., 2012. Environmental management accounting: case studies of South-
East Asian companies. Routledge.
Richardson, A.J., 2012. Paradigms, theory and management accounting practice: A comment
on Parker (forthcoming)“Qualitative management accounting research: Assessing
deliverables and relevance”. Critical Perspectives on Accounting, 23(1), pp.83-88.
DRURY, C.M., 2013. Management and cost accounting. Springer.
Bennett, M.D., Schaltegger, S. and Zvezdov, D., 2013. Exploring corporate practices in
management accounting for sustainability (pp. 1-56). London: ICAEW.
Boyns, T. and Edwards, J.R., 2013. A history of management accounting: The British
experience (Vol. 12). Routledge.
Online
Advantages and Disadvantages of Scenario. 2011.[Online]Available through : <
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1736110>.