Management Accounting: Tesco's Financial Reporting and Analysis

This report delves into the core principles and practical applications of management accounting, using Tesco as a case study. It begins by defining management accounting, outlining its essential requirements for various systems, and highlighting its importance in decision-making, profit maximization, and efficiency enhancement. The report then explores different methods of management accounting reporting, including budget, cost, and performance reports. A significant portion of the report is dedicated to cost calculation methods, specifically marginal and absorption costing, and their application in income statement preparation. Furthermore, the report examines the advantages and disadvantages of various planning tools used for budgetary control. Finally, it investigates how organizations adapt management accounting systems to address financial problems, providing valuable insights into Tesco's financial strategies and overall management accounting practices. The report aims to provide a comprehensive understanding of management accounting and its practical applications.

Management
accounting

Table of Contents
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
P1 Management accounting and its essential requirements of different types of
management accounting systems...........................................................................................3
P2 Methods used for management accounting reporting.......................................................6
TASK2.......................................................................................................................................7
P3 Calculating costs using suitable methods of cost examination to make an income
statement using marginal and absorption costs......................................................................7
TASK3 ....................................................................................................................................10
P4 Discuss advantages and disadvantages of different types of planning tools used for
budgetary control .................................................................................................................10
TASK4 ....................................................................................................................................13
P5 Differentiate how enterprises are adapting management accounting system to respond
to financial problem..............................................................................................................13
CONCLUSION .......................................................................................................................14
REFERENCES ........................................................................................................................15

INTRODUCTION
Management accounting can be defined as a process of management which is directly
associated with providing information regarding different financial resources of the
organisation and the accounts for identifying the costs as well as money implemented by the
firm for achieving profitability and given market (Alsharari and Youssef, 2017). There are
various functions which are included in the management accounting and directly related to
the communication of information related to different financial accounts of the organisation
to various stakeholders and interested party. In this present report the chosen organisation is
Tesco, discussion about various aspects related to management accounting with its national
valuation of its financial account. The British retail multinational giants which are selling
retail products with the market of UK as well as some global countries. In the beginning of
this report there is discussion about the management accounting and its essential requirement
for different types of management accounting systems (Christ, Burritt and Varsei, 2016).
There is also a discussion about different method used in management accounting reporting
system so that organisation can achieve its goals and objectives in an effective manner. In
middle of this report discussion about various cost is suitable method for exam in the cost
implemented by the organisation to generate income by the use of various financial accounts.
There is also discussion about different advantages and disadvantages of the organisation
while using the planning tool for budgetary control. in the end of this report discussion about
how different enterprises adopting management accounting system for responding different
financial problems and providing solution to these financial problems.
MAIN BODY
P1 Management accounting and its essential requirements of different types of management
accounting systems
Management accounting can be defined as that process within the organization which
is helpful to the organization in identification of various accounts and getting the financial
information related to these accounts. management accounting and also be defined as a tool
which is used by the manager of the firm to identify the current performance of the
organization or comparing it with the predetermined standards that whether the performance
of the organization is going towards the goals and objectives of the firm or not. Management
accounting is also essential for the organization in various decision-making processes where
it helped the firm in identification of the cost and taking the decision on the price and other

aspects of the product by considering the cause found in management accounting system
(Fleischman and McLean, 2020).
According to institute of management accounting "Management accounting can be
defined as that profession which is related to partnering in managing decision and making
device planning for increasing the performance of the organization by comparing the current
financial position stated in different financial accounts of the organization to per-determined
standards on the performance standard which are meant by the organization to compare the
performance of current. it can also be stated as a system of control their organization monitor
the cost in care by the firm and different activities by the use of different formula and
implementation of organization strategy to achieve its goals and objective in a particular
direction"
There is various kind of function in management accounting which have different benefits to
the organization some of these are mentioned below in relation to Tesco.
Profit maximization: management accounting is directly related to the maximization
of profit because it helps organization in identification of the various which are in the current
performance of the organization in relation to the predetermined standard performance. By
this test you can identify current affair for means and take effective decisions related to
profitability of the organization and will become more effective in the direction of profit.
Efficiency booster: one more advantage of management accounting to the Tesco is
that it helps organization in increasing the efficiency of different investor within the firm this
is because continuous evaluation of account help form in identification of various aspects
related to the performance of different individuals. Identification of this organization can
manage effective control on the cost as well as performance of different individual which
ultimately help in increasing the efficiency and managing the work of different individuals by
the help of proper evaluation.
Essentials requirements in management accounting
History: It is basis requirements in this function , this is because before formulation of
any accounting and management information. The basic requirements is about the history of
that information in relation to respective accounts.
Management Accounting Reports: Reports are also essentials content in relation to
management accounting. This is because, formulation reports is linked to organisation where

firm can use impact full system. Reports are use in managing accounts and getting
information about various cost and overheads.
Certification: This is also an important fucntion which is require by organtion to
achive its business objectives. Under this system, it incudes rules and requlation prescribed
by institution of management accounting. These has to be full fill foir fuanctioning of
management accounting practices.
Various systems that are used in management accounting
Price optimization system: it is that system which is used by the organization as a
calculation instrument which helps the manager in performing different accounting systems
for identification of the response related to the customer behavior and managing the prices of
product according to it. It is a best suitable method which is used by the organization to
determine the price of the product by identification of cost and other expenditure on
development of product and giving it a final shape. In the system the main objective is to
maximize the profit of the organization and decide a price in a appropriate structure so that
organization can retain its customer by higher profitability as well as covering all its cost to
run its operation for a longer period of time as well as identification of various future growth
aspects (Kastberg and Siverbo, 2016).
Inventory management system: it is also part of management accounting system
where organization focus on managing inventory within the firm which is presented in form
of finished goods and finished good and processing goods. This system helps organization in
management of inventory by the use of various software and hardware which have
predetermined combinations of different processes for managing the inventory according to
the need and requirement of firm. This system enable Tesco to maintain the stock of raw
material as well as finished good in an appropriate quantity so that firm can get advantage of
inflation and deflation related to product prices. This system also helped organization in
utilizing the information related to market research where it can retain the stock of various
commodities which are highly reactive with price.
Cost accounting system: under this system organization always focus on the cost
implemented by the firm on development and finalizing the product for identification of
actual prices as well as profitability of the firm related to selling of the product. this is an
important system which is used by the organization because it enable form in manufacturing
and developing a product which is highly price sensitive and organization can cover its cost
easily by identification of all aspects related to cost. this system include evaluation of caused

by the help of various diagrams in charts some of these are revenue charts sale charts
marginal cost charge and other which help in identification of the cost as well as determining
various variables which impact on the performance of the organization related to the cost.
Job costing system: this system includes identification of the cost as well as expenses
incurred by the organization on some particular task for stage in development of the product
and services. This is directly associated to the management accounting of processes within
the manufacturing industry where organization has to identify the actual expenses and
revenues in relation to the process is performed to acquire the product by the firm. Under this
method all the expenses are identified and the cost in performance of the job will discuss and
used in the pricing of the product for paying the compensation of labor and other factors who
are involved in production process. This method is helpful to the Tesco as it help company in
identification of actual profit after decreasing all the revenues and expenses then under the
product development and facilitate growth opportunities in front of organization (Shields and
Shelleman, 2016).
It can be evaluated from the above that there are various functions which has to be
performed by the firm and management accounting and has great impact on performance of
test because it help in identification of different laws related to the production and other
processes within the firm.
P2 Methods used for management accounting reporting
Management accounting reporting
Accounting is also called management cost accounting which is directly faces on the
different information which are received through financial accounting by the manager of the
organisation. it is a system which is used by the organisation where different reports related
to planning regulating decision-making and measuring the performance of the organisation
will be formulated so that firm can measure its performance as well as compared different
financial factors for its future goals and objectives as well as current goals and objective to
achieve them in an appropriate manner (Yigitbasioglu, 2016).
Budget reports: These are essential part of the organisation where it help in
managerial accounting of the budget where it is critical in measuring the company's
performance as well as generate the fool action plan for the business according to the
department within the firm. it is important for each company to create a budget report which

will help in understanding different schemes related to the business as well as adopting a
proper mechanism within the firm so that but it can be used. these kind of reports asali based
on different sources of earnings and expenditures where a company try to achieve its goals
and mission while staying with budgeting amount.
Cost managerial accounting report: these report which are directly related to
computation of the cost of different articles which are manufactured as sales by the
organisation. these reports include all the raw material cost overhead labour costs as well as
any other added cost which is the library taken into the action. These kinds of report help
identifying the total amount which has to be divided within the manufactured product so that
company can easily identify its cost implemented and can decide the price of the product
according to the cost. This kind of reports is also important for inventory management as well
as reducing the working labour arts as well as overhead cost (Nair, 2017).
Performance report: Performance reports are those reports which are created by the
organisation to identify the performance of different employees as well as department within
the organisation so that it can generate a proper review as well as identify the flow of work.
This will also help in increasing the motivation within the individuals as proper identification
of performance will help organisation in providing adequate rewards to the employees which
will directly effect on their behaviour and will improve motivation within the employees.
Cost accounting report: Cost accounting reports are also important part of the
organisation where did directly deal with the cost implemented by the organisation on
different products for manufacturing the products. This kind of report help company in
identification of different cost which are associated with the products and taking the decision
according to these costs to that form can reduce the chances of failure of the forms operation
by properly identification of the cross and deciding the price of the product according to the
cost implemented on this product (Quinn and Hiebl, 2018).
Therefore, it can be concluded from the above mentioned information that who is the
leading organisation where it is important for the form to use different kind of managing
accounting reports show that it can formulate a proper structure as well as used a proper
system where an object is can be achieved. Different kind of reports like inventory
management report account receivable aging reports performance reports and cost accounting
reports will help organisation in gaining maximum advantage.

TASK2
P3 Calculating costs using suitable methods of cost examination to make an income statement
using marginal and absorption costs
Income statement: Income statement can be defined as that financial accounts which
are related to the statement of profit and loss revenue statement of financial performance
earning statements as well as other important statements which show the financial position of
the organization in the current time as well as indicate how the revenues are transformed in
the net income of the organization. Important part of the organization functioning as they
provide different kind of information related to the different operations performed by the
organization in terms of money. Income statement of the organization is based on the period
of time where these the main contract is balance sheet which represents a single moment of
time.
Absorption cost: Adoption process that part of managerial accounting method which are
directly related to the variable and fixed overhead cost of producing a particular product by
the organization in a given period of time. This method is used to know the full cost of the
production of each unit which enables a manufacturing organization to identify the price of
the product after cleaning different cost. Absorption cost also known as the cost which of the
manufacturing cost per unit produced by the manufacturer. This includes overheads in
additional materials factory and labor cost as well as other various cost related to the single
brand (Samuel, 2018).

TASK3
P4 Discuss advantages and disadvantages of different types of planning tools used for
budgetary control
There are various kind of planning tools which can be used by the organisation, these
planning tools will help company in budgetary control as well as making effective plans
which can be executed in future for achieving various business objectives. Relation to Tesco
also follows different budgetary control and planning tools and some of these are mentioned
below with their advantages and disadvantages:
Capital budgeting: It is that tool in budgetary control which is used by the organisation and
includes a planning process which is used to determine whether the organisation must need a
long term investment in different kind of products like the placement of machinery
purchasing a new machinery purchase in a plant or developing a current plan. this help the
organisation in managing the capital structure where is cash flow can be maintained as well
as a process of allocating the resources will be established in an appropriate manner for
proper capital management (Saukkonen, Laine and Suomala, 2018).
Advantages-
 It is a system which has major advantage to the organisation where it provide
assistance to the firm in understanding various risk involved in different investment
opportunities and how these risk can be helpful for maximizing the returns to the
company.
 It also help organisation in identification of estimate related to different investment
options so that it can heal the best possible returns.
Disadvantages

 Capital budgeting decisions are directly related to the long-term plants where there are
chances of irrelevance related to different nature of investment.
 The technique used in capital budgeting are based on different assumptions which is
not necessary that they are correct for every time.
Cash budget: It is also a technique which is used by organisation in the form of budgetary
control where it prepares the record of different transactions related to the flow of cash within
the organisation. In relation to Tesco, cash budget statement play important role in
identification of various activities related to the organisation performance as well as cash
flow within the firm so that effective decisions can be taken for further cash transactions as
well as improving the organisation liquidity (Procházka, 2017).
Advantages
 It is helpful to the organisation in avoiding the depths this is because regular
identification of cash flow within the organisation help form in knowing its debt.
 One more advantage of cash budget is that it will help organisation in becoming more
resourceful because it directly initiate a regular flow within the organisation which are
helpful to the firm in managing different resources.
Limitation
 The major limitation of cash budget as a tool of budgetary control within the
organisation is that there are chances of theft because recording of transaction can be
misused by the organisation for saving the interest and taxes.
Zero based budgeting: Zero based budgeting is a popular approach which is used in
budgetary control within the organisation which is directly related to the technique where the
next year budget is based on the nil bases. This is a helpful approach to the organisation
because it helped organisation in estimating the income which will be equal to the extremely
expensive where the difference between the estimated income and expenses will be zero
(Sugahara, Daidj and Ushio, 2017).
Advantage
 The major benefit of using zero based budgeting in the organisation is that it and sure
that the manager of the organisation will allow every amount in a budgeting period