Management Accounting Report: Analysis of Business Performance

This report provides a comprehensive overview of management accounting and its application to business performance, using Unicorn Grocery as a case study. The report delves into the core concepts of management accounting, including its role in strategic decision-making, risk management, and performance evaluation. It explores various management accounting systems, such as operational, cash flow, and financial budgets, and their essential requirements. Furthermore, the report examines different methods used in management accounting, including budget reports, accounts receivables, job cost reports, and inventory management, highlighting their significance in analyzing financial data and improving business efficiency. The report also discusses cost calculation, the advantages and disadvantages of budgetary control, and the adaptation of management accounting systems during financial problems. Overall, the report aims to illustrate the importance of management accounting in achieving organizational goals, increasing efficiency, and making informed business decisions.

MANAGEMENT ACCOUNTING

Table of Contents
Introduction...........................................................................................................................................3
Task 1.....................................................................................................................................................3
P1 Management accounting and different types of management accounting system..........................3
P2 Different methods used in management accounting........................................................................5
Task 2.....................................................................................................................................................8
P3 Calculation of cost ............................................................................................................................8
Task 3.....................................................................................................................................................9
P4 Advantage and disadvantage of planning methods of Budgetary control........................................9
Task 4...................................................................................................................................................10
P5 Adaption of Management Accounting System during financial problem..................................10
Conclusion...........................................................................................................................................11
REFERENCES.........................................................................................................................................12

Introduction
Management accounting plays a prominent role in the success for each and every business
organization. It is the combination of finance, accounting and management with using of
various aspects and tools in order to manage accounting in a business unit. It is systematic
process of preparing financial data and information which can be managed by the managers.
There are various tools and methods that can be used by the manager of the company in order
to attain their long term goal and goods (Angelakis, Theriou and Floropoulos, 2010).
Management accounting also helps to make various strategic decision making such as
expansion of business, increase debt, diversification in the business etc. The present report is
based on the Unicorn grocery which is one of the leading food outlets in the United
Kingdom. The cited business company is providing a wide range of products and services
with the organic quality food. The main aim of this report is to understand the significance of
management accounting and its role in the business performance.
Task 1
P1 Management accounting and different types of management accounting
system
Management accounting is a process which can help to analyses, measuring and interpreting
financial data and information and communicate this information to its various stakeholder
such as customers, employees, suppliers, financial institutions, shareholders, government etc.
This information also helps to make various decisions which can be strategic level,
operational level and tactical level (Baldvinsdottir, Mitchell and Nørreklit, 2010). The role of
management accounting in the strategic role:
Risk management: This is one of the major role of management accounting in which
calculating the risk is associated with the project and analyses these in an effective manner so
that they can attain its long term goals and objectives.
Performance management: This is another role where manager of the cited business unit is to
determine those risk and improve business performance in an effective manner.
There are various types of features

Effective decision making: This is one of the crucial role in an organization where company
required to use management accounting as a tool in order to get relevant information which
can leads to increase the effectiveness of decision making.
To provide relevant data: There are various data which is related with income and
expenditure of the company. With the help to this financial information the cited business
unit can make control techniques which can help to increase the profitability of the company
apart from that there are various financial information which is relevant for the potential
investors of the company. It can help to attract those investors which can support in
expanding its business performance in the near future.
Attaining organizational goals: With the help to management accounting the cited business
can achieve their short and long term goals and objectives in an effective manner. For
example, there are various cost control approaches which can be used by the employees of
the company which can lead to increase revenue (Bodie, Z., 2013). It is common goals for
each and every business organization.
To increase efficiency: Management accounting provide different tool such as budgeting, cost
accounting, etc. can help to increase the operational and management efficiency in an
effective manner.
Different types of management accounting
There are different types of management accounting tools which are given below:
Operational budget: This budget is a systematic process where the manager of the company is
make budget for all operational activities for a specific period of time (Burritt and et. al.,
2011). The time period of the budget is depending on the requirements like monthly,
quarterly, yearly. For example, in the context of a cited budget unit such budget is made by
the line manager of company who can make various budget such as production budget, finish
goods budget, sales budget, labour budget, direct and indirect expanses budget,
administration overhead budget etc.
Cash flow budget: This is another types of management accounting budget which is related
with the income and expenditure plan for the operational activities of the company. In this
budget the manager of the cited business unit get cash for their proposed expenses with in a
period of time.

Financial budget: This is another type of budget where the income and expenditure for a
given period of time is to be calculated. The manager of the company anticipate the income
and expenditure of their budget and measure the performance.
Essential requirements of different types of management accounting
Management accounting having a large significance in order to fulfil various requirements
which are given below:
Traditional accounting techniques: This is one of the approach where small and medium
business enterprises can be used due to its limitation of financial resources (Davies and
Crawford, 2011). This is one of the common technique where the owner of the business
organization can measure its profits and other aspects on the basis of simple predictions.
Lean accounting:It means cost is not exist to be calculated it exist to reduce it. Lean accounting is a
very common term which was used by the authority to make reforms in their financial process. If
there is any reforms in control measurement and procedures of management then lean accounting
must be applicable.
P2 Different methods used in management accounting
There are various methods in the management accounting which can be used by business
organization (Weißenberger and Angelkort, 2011). With the help of these approaches
financial data from day to day operations which can include sales, purchasing, inventory
management, changes in the cost of material can be used in an effective manner. These
methods can help to converting financial information to analyses in an appropriate manner.
The manager of the cited business unit can use these report which can be related with the
income and expenditure, incentives, employee wages etc. There are various types of budget
which categorises into following criteria:
Budget report: In this report complete performance of a company is analysed, in big
organisations it helps in evaluating performance of different departments by their managers.
This report is made from all the real expenses that occur in last year of business operation.

Organisation compare their past and present work by taking assistance from this report as it
helps in finding where a company miss their target or where they achieve more than their
planned target. This report help in cost reduction in long run and it also assist manager in
determining various incentives and performance of their subordinates. It is an internal report
so it help organisation in ascertaining future targets by using actual data. It has many purpose
but main purpose can be getting an overview of overall performance by executives so they
can find which department is not using allotted money and which department is doing
excessive expenditure. Budget report differ in structure because companies are not of same
type they differ in size and structure so their reports also differ. It provide various data to
executives but at the same time it also help in finding problems in preparation of budget
because if these problems get solve than organisation can generate more sale and revenue and
cost cutting can be done (Herzig and et. al., 2012). A budget report contain date and time and
if report is long than they can also have features like introduction and title page.
Accounts receivables: : It is related to credit given to customers in market and managing cash
flow of organisation. In order to run a business an organisation has to provide credit to their
customers but when company is operating on a large scale than it is difficult to manage cash
flow so account receivable report help in managing cash available to company efficiently. In
this report a data can be obtained according to the time period for which a customer has
owned to company which can be a week or may be half a year which depend on company
policies and their scale of business (Ward, K., 2012). Through this report an organisation's
techniques of collecting money is evaluated as well as the method they use in collection of
outstanding money. It helps in determining information about customer's payment system as
well as it also evaluate companies collection process. This report assist in finding outstanding
account receivable so the amount that company is going to receive from debtors can be
ascertained and a clear picture of the amount company will have in short period can be
determined. Name of every debtor is mentioned in report and the time since it is due.
Generally accounts are classified by name instead of time period but this is fixed as it depend
on company's policy and their scale of business. Normally the data on accounts receivable is
costumers name, time period since account is due and the amount that is due but sometimes
companies add other things like invoice number, past details of customers, any note on
customer etc.
Job cost reports: This report is made to find job profitably so it can analysed that which job is
higher-earning and providing good return and which job is has low profit margin. This will

help in finding useless work so time and money can be saved. Stock and revenue are
compared to find to job profitability so organisation can focus on high earning areas and
sectors. It is mainly used in a business where product and service are offered on special order
like in motion picture, construction etc. In these kind businesses it is difficult to find how
much to charge for services given or product sold as there is no fixed rate. Customer have
different demands so it is difficult to determine cost of product or service or price that seller
should charge, this report help in determining the areas which do not generate high revenue
so company can utilise their resources in right direction and process and optimum utilisation
of available resources can be done (Noreen, Brewer and McGowan, 2010). First it help in
determining the cost of product or services so appropriate amount can be charged from
customer and high profit can be earned (N.B and Quattrone 2010). After that it assist in
finding the job and work that is not contributing in revenue of companies as well as they have
high cost. This method is not used in every organisation because many of them has fixed
production process and they cannot make good or provide service according to specification
of customers.
Inventory and manufacturing: It helps in finding shortcoming of production process so an
efficient method can be created to get something extra compare to other players in industry.
Production is not the only area where it focuses other is inventory management which is
equally important to production process as proper demand and supply chain can be
maintained through inventory management. This budget helps in determining the area where
scope of improvement is present as well as provide a path to reach that improvement. This
report include inventory cost as well as per unit overhead cost. This report can be made on
weekly basis, monthly basis or yearly bases as it depend on policy of company and their scale
of operation. This report assist in identifying cost of production and other expenses done in
order to produce goods as it analyse whole production and inventory process so lacuna in
both them can be found (Herzig and et. al., 2012). For future operations this report can play a
huge role, by using this report executives can make new plan according to it, so in future
mistakes cannot be repeated and avoided. This report can help in determining right amount of
stock that should be kept at various level like in warehouse or wholesale stores etc. which is
necessary to find correct amount of goods that should be kept at different places. Overloading
or under utilisation of space can be found in this reports so future plans can be made
according to it and optimum utilisation of available space can be done.

Task 2
P3 Calculation of cost
Income statement as per Marginal costing
Particulars Amount
Sales (35*600)
Less:
Cost of Production (6+5+2)
Variable overhead (600*1)
Closing stock (100*13)
Variable cost
Contribution
Less:
Fixed expenses
Admin & selling cost (700+600)
Total
21000
-9100
-600
-1300
-8400
12600
-2000
-1300
-3300
9300
Absorption costing: This is one of the methods which can help to calculate the associated cost
of the production process for the product and services.
Income statement according to Absorption costing
Particulars Amount
Sales (35*600)
less:
Cost of Production (16.33*700)
Closing stock (100*16.33)
Total Net cost
Gross Profit
Less:
Fixed and variable cost:
21000
11433.33
-1633
9800
11200
600

variable sales overheads (600*1)
Admin & selling cost (700+600)
Less- Over absorption
Net profit
1300
-300
9600
Difference between marginal costing and absorption costing
Marginal costing Absorption costing
This method is related with the variable
aspects of cost will be considered.
In this approach only total cost will be
considered and divided in to all units.
In this approach profit volume tool is to be
used in order to measure profitability.
On the other hand, in this approach fixed cost
is to be considered at the time of profit
calculation.
In this tool only two types of expenses are to
be categorized one is fixed and another one
variable.
Whereas, there are various types of cost like
administration, selling and distribution,
production are the major expenses.
The cost per unit not affects by any variance
between closing and opening stock.
It affects cost per unit due to variance
between opening and closing stock.
Task 3
P4 Advantage and disadvantage of planning methods of Budgetary control
There are various tools and techniques in the budgetary control which can be used by the
company. it can provide different advantages and disadvantages these are given below:
Increase profit: Each and every business organization's main aim is to gain profit by using
planning tools in an effective manner (Hope and Fraser,2013). For this, they require proper
management in planning and use various cost controlling tool in order to maximise the profit
which is the common goals and objectives of the business organization.
Coordination: This is another advantage where the cited business unit required that to
coordinate their budget with the various functional department such as marketing, finance,

HR, production. With the help to appropriate planning methods they can meet their long term
goals and objectives.
Certain aims: There are specific aims and target which having a period of time. It is essential
for Unicorn grocery is that to use various planning tools in order to meet their targets. For
example, the cited business wants to increase their sales by 10 percent in the next 5 years.
With the help of planning tools, they can easily attain their long term goals and targets in an
effective manner.
Identify weaknesses: It helps in determining weaknesses when there is deviation between the
attempts made and the budget. Unicorn Grocery can invest their money in order to
purchasing mangoes or any other products but without demand their investment will be
wastage (Kaplan and Atkinson, 2015). Therefore. With the help of budgeting and proper
planning the manager of the cited business unit can save their money.
Reducing cost: UK market is one of the competitive market where large number of business
organizations are operating their business. In order to increase sale of their product they need
to overcome cost of production. With the help of planning tools, they can use various
methods which can leads to reducing the product price and increase the revenue of the
company.
On the other hand, the planning tools also having various disadvantage which are given
below:
Coordination problem: This is one of the major issue which is related with the coordination
between various departments. This is the responsibility of the manager of the cited business
unit is to communicate and coordinate of their budget information so that they can implement
in an appropriate manner.
Dependence on budget control: This is another issue where the business is fully dependent on
the budget control for their business performance. but for a shorter period time it can provide
solution which is not good for the company.
Different types of Budget:
Zero based budgeting: In this methods of budget preparation, on the basis of past data and
information will be used. In this budget company examining each and every expenses in an

effective manner. Every business can be used such approach in order to attaining its financial
targets.
Master budget: This is another approach which contains all functional budget of a business
organization. The master budget is covers the overall plan and its estimated expenses for a
given period of time. Such type of budget is expressed the managerial and strategic policies
in order to attaining long periodic goals of the company.
Cash flow budget: Cash is too significant for each and every business unit in order to
running operational activity of the firm. There are two types of transaction inflow and
outflow considered and identify any shortage and excess of cash, make their decisions
accordingly for a limited period of time.
Task 4
P5 Adaption of Management Accounting System during financial problem.
Management accounting system is related with the financial information which is used by the
manager in order to make various decision in an effective manner. With the use of such
system a business unit can easily understand the current performance of their business. On
the basis of these data they can use it in the near future in order to improve organizational
performance. There are various types of risk which are associated with the business which
needs to be focused by the managers.
There is various management accounting have to identified various financial problems:
Benchmarks: This is one of the major problem where a company see other organization
about its process, application, quality of work and approaches of the company. It is a kind of
believe of accounting system which set by a firm before implementing of any type of
financial approach. With the help of such method a company can minimise its financial issues
and problems in an effective manner.
Key performance indicator(KPIs): These are standards to indicate a firm progress in
relating to a financial problem. The main aim of such standards is to monitor company’s
performance in order to attaining organizational goals and target.
This is the responsibilities of the cited business firm that they can use forecasting tools so that
they can overcome the potential risk on the business in the near future (Li and et. al., 2012).

Management accounting is a systematic process of arrange the financial data in a sequence
manner. There are various external and internal factors which having a large impact on the
business performance. with the help to planning tools they can overcome these factor as well
which can help to increase the profit and sales of the company in the near future. Each and
every business unit is use different tools which has given below:
Unicorn Grocery Vectair Holding
The cited business unit is using lean
accounting approach which is more modern
approach as compare to traditional methods.
It can help to provide various strategy which
can be used by the company and reducing
operational cost through eliminating
wastage.
On the other hand, Vectair Holding is
focused on the traditional management
accounting which is quite simple approach
as compare to modern methods.
With the help to lean management
accounting the manager of the company can
get the immediate information which can
help to increase the efficiency in the
decision making process.
Traditional accounting system is not
providing the updated information which
can delay in the decision making which is
not good for the company.
The system which are using by the Unicorn
grocery are quite expensive which can
increase the cost of the operation.
Whereas, the management system is not
expensive which can save their money
which can leads to increase the profitability
of the business.
M2 Management Accounting Techniques.
There are different accounting management tools which are used in the developing the
financial report. These techniques can be included cost control, financial control, budgetary
control, cash flow statement, forcasting tools etc (Lukka, K and Modell, S., 2010). which can
be used in the financial report. In the context of Unicorn grocery, they having long term goals
and objectives which can be attain by these tools. Apart from that, there are various rules and
guidelines which must be followed by the company in an effective manner.