Management Accounting Report: NISA Co. Ltd. Case Study Analysis

This report comprehensively examines management accounting principles and their practical application within the context of NISA Co. Ltd., a UK-based retail enterprise. The report begins with an introduction to management accounting, its techniques, and essential requirements, highlighting its ...Read More

Management
Accounting
1

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1) Management accounting and its techniques' essential requirements....................................3
P2) Management accounting methods.........................................................................................5
TASK 2............................................................................................................................................8
P3) Different costing methods and differences between marginal and absorption costing.........8
TASK 3..........................................................................................................................................12
P4) Budgetary Control system for NISA Co. Ltd......................................................................12
P5) Different management accounting systems to reduce financial problem for Nisa Ltd.......17
CONCLUSION..............................................................................................................................19
REFERENCE.................................................................................................................................20
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INTRODUCTION
Management accounting is multidisciplinary approach to expand business entity and
managing its overall operations. It is useful approach for forecasting and decision making related
to further business operations. The present report is based on understanding different
management accounting tools and systems of Nisa ltd. It is small scale retail sector enterprise of
UK that provides groceries and food items. Different management accounting tools and methods
can be described to signify its importance. In addition to this, several costing methods to prepare
income statement that present financial position of organization is able to understand through
this assignment. Moreover, positive and negative aspects of budgeting can be expressed which is
considered as key component for preparing strategies and monitoring excess of production.
Along with this, several management accounting systems for reducing economic problems of
entity is to be expressed effectively. Hence, through this study, learners are able to understand
significance of management accounting tools for decision making regarding operating further
business activities.
TASK 1
P1) Management accounting and its techniques' essential requirements
Management Accounting:- Process of preparing management reports and accounts that
provie timely and accurate Financial and statistics information that requires by managers to run
business in day to day and short term decisions (Bellah and et. al., 2013). Unlikely Financial
reports that are published for external share or stake holders in yearly basis by organization
management accounting provide monthly or weakly reports to run business for internal
departments like purchase manager, sales manager or Chief executive officer. These reports
generally shows amount of cash in hand, purchase order, Sales revenue generated, Accounts
payable and receivable, Outstanding debts, raw material, inventory purchase and may also
include trends chart, variance analysis and other statistics
Different Type of Management Accounting: Tools & Technique used in management
accounting.
 Financial Planning: The main objective of any business is to achieve objective.
Objective can be of any kind but for NISA Company which is retail sector company 505 -
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 Type of paper : Assignment definitely would be to maximize profit by maximize sales.
So financial planning can help to achieve it (Brigham and Houston, 2011). Financial Statement Analysis: Profit and loss & balance sheet are important report of
company. These report are analyses at different period. These reports help manager to
analyses growth of business concern. These reports are made through various competitive
financial statements, common size statements and ratio analysis. Ratio Analysis: It is used to analyses company profitability, efficiency variability, and
liquidity (Chandra, 2011). They are current ratio, Quick ratio, return on equity ratio,
Equity and Debts ratio, Dividend payout ratio and earning per share ratios. Cost Accounting system: Cost accounting represents cost data in product wise, process
wise, department and branch wise. These cost data are compared with determined one.
This consist of two cost gives management a reason between differences of cost and
optimal best solution is taken to fill the gap. So retail company like NISA can use this
accounting to control cost of production and transportation cost so that goods can be sold
at reasonable rate (Chapman, Hopwood and Shields, 2011). Fund Flow Analysis: This analysis find out the movement of fund from one period to
another. Moreover, this analysis is very useful to know whether the fund is properly used
or not in a year when compared to the previous year. The Working capital changes and
funds from operation are also find out through this analysis. Standard Costing: It is predetermined cost. It provide yardstick for measuring actual
performance. It is used to find reasons in deviation if any in cost accounting (Gesimba,
Alvar and Mante, 2014). Marginal Costing: It is used to fixed the selling price, Selection of best sales mix, best
use of scarce raw material and resources, to take a decision whether to buy or to make a
product. Purchase or reject bulk order. This is based on fixed, variable and contribution in
business (Hult, Craighead and Ketchen Jr, 2010). Budgetary Control: Future financial needs are determined under this tools. It is used to
control financial performance of business. Business operations are directed in desired
direction.
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 Revaluation Accounting: Fixed assets are revalued as per revaluation accounting so that
capital is fairly represented with assets value. It helps in finding out fair value of capital
employed. Historical Cost Accounting: It means cost are recorded after being incurred it can be
used for predetermined cost to evaluate performance (Łukaszewski and Wilk, 2016).
 Statistical Tools: To solve management problems various tools of statistics are used like
method of least square, regression, quality control etc.
P2) Management accounting methods
There are several methods applied for effective management accounting including cost
analysis, budgeting, performance measurement, project decision making and so on. Therefore,
some of the management accounting tools and techniques can be described as below:- Cost analysis:- Management accounting of Nisa Ltd determines costing to prepare
income statement. On the basis of which, financial position of organization is presented
therefore several ideas are created for enhancing its profit earning capacity same as
creating balance between incurred expenses and gained income (Malhotra and Temponi,
2010). In this regard, different costing methods are used such as; marginal, absorption,
demand based, competition basis etc. Therefore, analysis of cost is interrelated with
balance of production and distribution of goods. Moreover, fluctuations in market
demand affects pricing strategies in increasing in demand effects on productivity
positively. On the other hand, decreasing in demand reflects production and supplement
of goods negatively. Thus, cost analysis is effective for fund allocation and creating
balance between expenses and income of the organization. Performance measurement:- As management accounting is multidisciplinary approach
in which employees performance analyzed that creates several ideas for enhancing their
working efficiencies. However, it is useful for improving their skills such as
communication, problem solving, listening and working in group. It influences personal
and professional development of entity. In addition to this, performance of employees
and organization get managed effectively. Hence, performance evaluation is great
technique of management accounting that is interrelated with organization's effectiveness.
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In this process, performance management is obtained through using this tool (Malhotra
and Temponi, 2010). Project decision making:- Under this system, management accountant of Nisa Ltd
accomplishes tasks through decision making for projecting. It includes estimation for cost
incurred and forecasting time to be spend on projection. In accordance to this, decision
making process is implemented for effective project planning and scheduling to reach out
set target. It is useful for best use of resources and fund that impacts on productivity and
profitability of entity (Shelby, 2013). Therefore, projecting relating to effectiveness of
organization and increasing its quality services is possible through using management
accounting tools adequately. In this regard, management accounting is helpful to succeed
any project through effective forecasting and decision making process. It involves entire
elements that project accomplishment such as cost, time and quality used for projecting. Planning and budgeting:- Management accountant of Nisa Ltd analyzes entire business
operations and further prepares strategic plans for effectiveness of organization. In this
regard, according to critical evaluation of overall activities, decisions are made for
enhancing quality services and valuable market position that affects long term
sustainability. However, planning is prepared for short term as well long term periodicity.
Including this, it is considered that several ideas are created for optimum utilization of
resources and fund. It affects productivity and profitability of organization for making
decisions regarding business operations. Therefore, adequate production and distribution
of goods can be gained through budget process system. Along with this, management
accountant of entity recognizes all factors such as finance, production, risk management,
marketing and sales. Thus, attractive organizational structure is created through this tool.
In this process, planning including forecasting and decision making is implemented by
preparing budget (Swayne, Duncan and Ginter, 2012). Financial management analysis:- There are various financial tools such as income
statement, balance sheet, profit and loss account, cash flow and fund flow statement.
Thus, by identifying these sources, several tools and techniques are presented that is
useful for fund allocation as well resource management. Hence, management accounting
as financial statement analysis is one of the great component for economic stability and
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increasing profit earning capacity of organization. It is key element for financial
management and operating further business activities. Including this, it is useful for
economic stability and creating balance between incurred expenses and gained revenue
that affects productivity and profitability of small scale enterprise. In accordance to this,
management accounting is useful to present monetary structure and systematic evaluation
of entity at high level (Talke, Salomo and Rost, 2010). Therefore, various tools and
techniques are obtained for enhancing financial position that is interrelated with other
departments' performance including production of goods, efficient fund and resources for
business operations and so on. However, financial statement analysis is one of the great
tool for enlargement of Nisa Ltd and increasing its quality services for organization's
effectiveness. Statistical techniques:- Management accounting tool as statistical techniques including
mean, mode and median that is valuable to reduce problem occur at workplace. In this
process, actual performance of business organization is obtained that presents
quantitative methods for determining problems and solving out issues. Thus, forecasting
and taking decisions for further business operations. It is useful for effectiveness of small
business unit and enhancing its quality services for long term sustainability in market.
Under this system, different techniques are applied that is affected with production and
supplement of goods. However, statistical techniques are bases for estimation and
forecasting regarding business operations. Including this, mathematics and specific
calculation for further implementation (Angelakis, Theriou and Floropoulos, 2010).
Under this system, linear programming, regression method and data analysis is obtained
for recognizing actual business performance as well making decisions for enlargement of
small business unit. In this process, applying statistical tools and techniques is useful to
allocate resources and fund efficiently. Therefore, mathematical calculation and critical
analysis on organization's structure is created as per which varieties of ideas are
generated regarding market efficiency and increasing in demand for goods. Hence,
management accounting tool as statistical technique is useful to present current business
performance and managing systematic business operations at large scale.
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 Management reporting:- Accounting and management reports are prepared to present
actual business performance and further making decisions on the basis of recognition of
recorded data. In this process, different reports are recorded including financial
statements such as balance sheet, income statement, profit and loss account and so on.
Therefore, management reporting is element to determine actual organization
performance and enhancing quality services for effectiveness of firm. However,
accounting reports including purchase and sales account as well income expenditure
statement that affects market position of entity. In this regard, reporting for accounting in
the form of finance, production and distribution of goods are obtained (Bowen, Call and
Rajgopal, 2010). It is interrelated with expansion of entity and increasing its efficiencies
at high level. Auditing of financial statements affects financial performance and
production system of firm. Thus, management reporting is useful to keeping records of
business operations as well creating innovations for their enhancement. It is interrelated
with developing interest of customers towards goods and services of small business
entity.
Hence, above mentioned management accounting methods are interlinked with
management of overall business operations. Including this, expansion of Nisa Ltd and its quality
services can be enhanced at high level for making place to sustain company's good reputation for
long term period. It is related to forecasting and decision making for further business operations.
For example; production and distribution of groceries and performance of entity including
planning to operate business activities is created by which several tools are used for decision-
making and enhancing quality services of entity. Therefore, management accounting components
are related to enlargement of small business enterprise and increasing its profit earning to
carrying out business entity efficiently. In this process, entire activities of business organization
get managed for utilizing raw material used in production system same as enhancing its
efficiency for long term sustainability (Cadez and Guilding, 2012).
TASK 2
P3) Different costing methods and differences between marginal and absorption costing
Costing also terms as pricing is considered as key tool for determining cost of goods and
services to be produced. Further, by analyzing price of product, income statement is prepared
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that presents financial performance of Nisa Ltd. In this regard, various methods are used for
price determination and also to increase economic profile of entity. It is obtained as base for fund
allocation and manner for financial management of small business enterprise. In this regard,
several tools and techniques are applied for costing methods and making decisions for short term
as well long time periodicity. In addition to this, applying costing methods are benefited for
setting price of products according to cost incurred manufacturing and production of goods
including advertising for grocery items (Englund and Gerdin, 2011). However, costing is a
technique for preparing income statements that generates ideas related to creating balance
between expenditure and revenue. Thus, through costing method, market position, earning
capacity and estimations are obtained for making decisions regarding financial position and other
sectors' performance. Therefore, costing methods as marginal and absorption can be expressed as
follows that affects production and return on this process. However, management accountant of
Nisa Ltd analyses marginal and absorption as following to prepare income statement for
presenting entity's actual business performance such as:-
Marginal costing:- Under this costing method, decisions take on the basis of cost of
goods. In this process, different techniques are used for determining price and income statement
preparation. However, profit earning tools are presented for decision making regarding further
business operations. Including this, it is determined that if sales price is greater than marginal
cost then process system is profitable. While, on the other hand, if sales price is lower than
marginal cost then it will not be in favor of organization's effectiveness. Marginal cost is
evaluated through following formula as;-
Marginal Cost (MC) = change is cost (C)\change is quantity (Q)
In this process, cost incurred in production process is divided by changes in quantity
used therefore cost per unit is determined. It creates several ideas for further production and
distribution of goods and services. However, decisions are made on the basis of marginal costing
for investment related to business operations. In this process, fixed expenses are not added to
variable for deducting with gross profit. In accordance to this, cost incurred in production system
including purchasing raw material and prices incurred in production of goods are analyzed. On
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the basis of these factors, marginal costing is obtained for decision-making regarding further
business operations. In this way, management accountant of Nisa Ltd determines cost through
marginal process can be described as:-
Interpretation:- It is analyzed that Nisa Limited incurred 6600 for production of goods
and gains 21000 as return on production calls as sales prices. Therefore, gross profit earned by
organization is 14400. As per this evaluation, it is recognized that company's profitability is quite
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well and in future time, it can be enhanced at high level. However, for measuring net profit gross
profit is deducted with cost incurred in spending for production of goods. In this process, total
cost expenses is obtained as 1800. Thus, net profit incurred by company is 12600. According to
this profitability, it can be foretasted that in further years, Nisa Ltd can invent fund at high level
for adequate production and distribution of groceries. However, profit earning capacity of
organization can be enhanced that impacts on productivity and profitability of firm.
Absorption costing:- Through this costing method, decisions are made for further investment on
business operations. In this process, this tool is valuable for long term planning strategies.
However, under this system, costing for further implementation regarding long term periodicity
is obtained for enhancing its profitability at high level. In addition to this, for absorption costing,
direct and indirect expenditures. It is valuable for long term decision making that is helpful for
long term sustainability of organization effectively (Cadez and Guilding, 2012). In this regard,g
into account indirect expenses (overheads) as well as direct costs. management accountant of
Nisa Ltd evaluates following data interpretation regarding decision making for further business
operations as:-
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Interpretation:- Determining net profit through absorption costing method is related to
deducting gross profit with total cost of goods involving expenses on direct and indirect
operations. Therefore, under this data interpretation, it is evaluated that gross profit of
organization is 14400 and further total cost of expenditure is 5100. In accordance to this, total
cost is composition of variable and fixed expenses in which variable cost expense is 1800 as well
into account indirect expenses (overheads) as well as direct costs. fixed expenses cost is 3300.
Thus, net profit evaluated as 9300. As per this evaluation, it can be estimated that in future time,
Nisa Ltd can invest high amount for further production and distribution. Including this, funding
can be obtained for long time period that affects on sustainability of firm to facing competition
and making place. However, by applying marginal costing, management accountant of entity can
make decisions related to expansion of small business unit as well investing for high level of
production. Moreover, it can also purchase innovative machinery equipment for increasing
quality in production and distribution system. Thus, absorption costing is related to decision
making process for business enlargement as well enhancing its profitability for long term
sustainability efficiently.
Comparison between marginal and absorption costing methods:- The main variance
between marginal and absorption costing is profit variation (Haiza Muhammad Zawawi and
Hoque, 2010). In which, differences occur for evaluating net profit. It affects on further business
operations as well profitability to maintain its reputation. Therefore, in tabular form, comparison
between both costing methods can be presented as below:-
Bases Marginal costing Absorption costing
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Meaning It is technique of price
determination that affects
production and supplement of
goods for short time period.
Decision-making process for
business operations regarding
long term periodicity is
obtained through absorption
costing.
Fixed cost consideration Fixed cost considers as period
cost
It is essential to add fixed cost
for evaluating net profit of the
organization
Time periodicity decision-
making
Suitable for short term
decision-making process
Appropriate for decision-
making process for long time
periodicity
Technique to determine net
profit
Net profit is determined in
simple form. In the process of
deducting gross profit to cost
incurred for variable expense.
For calculating net profit, gross
profit is deducted with total
cost incurred including fixed
and variable expenses.
TASK 3
P4) Budgetary Control system for NISA Co. Ltd.
Budgetary control is a process by which budgets are prepared for future period and
compared with actual performance for finding out variance, if any. The comparison of budgeted
figure with actual figure will help the management to find out variance and take corrective
actions without any delay.
A Per “Chartered Institute of Management Accountants” defined a budget as: A plan quantified
in monetary terms prepared and approved prior to a defined a perio d of time usually showing
planned income to be generated and/or expenditure to be incurred during that period and capital
to be employed to attain a given objective (Lee, 2011).
Planning tools used in Budgeting:
 Fixed Budget
 Flexible Budget
 Zero Based Budgeting
Fixed Budgeting: A fixed budget is budgets that does not changes or flex when sales or
some other activity increase or decrease. Fixed budget is also refers to static budget. Fixed
budget allows us to prepare for expenses in advance. It works well for those who are having
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limited budget. Fixed budget means our expenses categories and income will not change every
month. Many people on fixed budget gets same amount every month as they work for salary or
draw set of amount from retirement account (Li and et.al., 2012).
Advantages of Fixed Budgeting:
 No need to Adjust budget every month: A fixed budget will not change from month
to month or year to year. When planning our fixed budget we need to plan for annual
expenses and solid emergency fund. This budget looks much more solid and care full
planning will make it easier to deal in emergencies and stressful situation. Since our
budget will not change, it is easier to follow your spending limits as we become adjusted
to our budget. After NISA have set up budget they will no longer need to adjust their
budget each month, which can save our money.

 Measurement profit: Fixed budget allows a business to measure both short term and
long term budget. The fixed budget allocates a set amount of money towards essentials
such as overhead costs. Any money left over at the end of the month (or any other period
you review your budget) is your profit (Pitkänen and Lukka 2011). This may seems
simple and forth ward but bears mentioning since NISA Co. cannot measure profit
without budgeting. Since fixed budget makes easier to measures profit as same amount
is allocated toward necessities each time. Profit measurement gets difficult to measures
if budget gets fluctuate every month.
 Measurement Performance: Since Fixed budget allotted each time same month for
necessities it can be easily measured by performance. NISA co. can also measure yearly
budget to measure long term performance. They can compare on which month have
better cash flow and analyse a reason for that. One month increase in expenditure then
another give better idea of smooth running of business. So this change give better idea to
businessman and strong and from this change it can get strong financial results
(Taipaleenmäki and Ikäheimo, 2013).
 Keeping Cost Down: Through financial tracking and budgeting any business can be
kept at optimum utilization of its resources with limited resources and budgeting even in
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long run. It forces financial discipline at every level of business. This forces NISA Co.
to not spend in costlier and risky projects if no capital expenditure exist.
Disadvantages of fixed Budgeting:
 Useless In Unpredictable events: It is not good way to predict unpredictable events and
unfortunate things, like inflation, rise in price of goods and services, transportation etc.
So for that flexible budgetary is used. Some natural calamities like flood, drought
earthquake can affect our business too (Batch cost, 2016).
 It is not an accurate way to track expenses as it always fluctuates. So because if we fixed
budget we can be in problem if budget is limited. Flexible expenses are not easy to
predict.
 Costlier: For small business fixed budgeting is costlier as it was made in every quarterly
or half yearly. So every month it may be costlier.
 Competition: In competition it is not good for business to fix budget because if it made so
competitor can know weaknesses of our business.
Flexible Budget: Flexible budget is budget that flex for change according to change in
volume of activity. It is more sophisticated and useful then fixed budget which remains one
amount regardless of the volume of activity.
Advantages of Flexible Budgeting: Importance of a flexible budget depends very much
on the accuracy of the classification of expenses into fixed, Semi-Fixed and Variable ones (Haiza
Muhammad Zawawi and Hoque, 2010). The important advantages of flexible budget are as
follows:
 Flexible budget enables management to give ideas about deviation in expected output and
actual output.
 Management can compare at actual cost at actual volume vs budgeted cost vs budget
volume.
 Flexible budget provides correct basis of comparison between actual cost and expected
cost.
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 Flexible budget helps to achieve objectives of control cost where it compares with planed
cost and planned objective.
 Flexible budget gives more accurate assessment of managerial and organization
performance.
Disadvantages of Flexible Budgeting: Flexible budgets are drawn just on basis of fixed
expenses and rest are predictive. So flexed budget is only accurate when cost behave in predicted
manner. All too often assumptions are made about cost behavior are so simplistic and hence do
not reflect what actually happens (Lee, 2011). In sense it appears perfectly but it have some
drawbacks which are explained here. Formulation: Though flexible budget have great techniques of calculating but putting all
variable cost in formula is not possible, therefore fixed cost can be considered and
calculated along with budget formula. Also, great deal of time can be consumed in
implementing formula which is more time than typical budget staff available in mildest
of budget process. Consequently, flexible budget include only small number of variable
cost formulas. Closing Delay: NISA can't reload flexible budget in computer software for compare to
financial statement instead they have to wait for financial reporting period to be
completed then input revenue and other activity measures included in budgeted model,
then extract the model and put this model in computer software then only financial results
will be issued which contains budget vs actual performance with variance between two.
This process consume lot of time in issuance of financial statement (Cadez and Guilding,
2012). Revenue Comparison: There is no way to compare actual vs budgeted revenues in
flexible budget. The models are designed to compare actual vs expected expenses but no
way to calculate or predict budget and actual revenue.
 Applicability: Some companies have very little variable cost that there is little chance of
preparing flexible budget. In sense flexible budget is not implicated to every business.
Instead these companies have very huge amount of fixed cost. For ex, web stores and
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credit cards they have fixed cost more then variable cost (Bowen, Call and Rajgopal,
2010).
Zero Based Budgeting: As per “Investopedia” It is method of budgeting in which all
expenses must be justified for each new period. It is started with zero based and each and every
function in an organisation is analysed for its need and cost. Budgets are then built around what
is needed for upcoming period regardless of whether the budget is higher or lesser than previous
year.
It was popular in 1970s as started by few companies in USA to take advantage of proper
allocation of resources along with ranking and evaluating the package for benefits and cost.
Advantages of Zero Budgeting: Accuracy: These types of budgeting requires companies to take over every department
to make sure they are getting correct amount of money. Efficiency: It helps judge need by actual need by focusing on current number instead of
past number. Reduction in wasteful spending: It can control spending by re examining potentially
unnecessary expenditure
 Co Ordination and communication: It allows better communication within department
by evolving employees decision making and budget optimization.
Disadvantages of Zero Budgeting:
 Bureaucracy: Taking ZBB in NISA can take enormous time, effort, analysis that would
require extra staff. This would cost counter productive in cutting cost.
 Sometimes ZBB sounds too radical and so consensus difficult to obtain.
 Too many decision package will be needed for very large organisation.
 Need commitment and professional attitude to ensure proper implementation.
 Justifying every expenses may not be feasible or practical.
 Department like Research and Development can become crash crunch.
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P5) Different management accounting systems to reduce financial problem for Nisa Ltd
There are several kinds of management accounting systems obtained that impacts on
business operations. However, it is considered as decision making component for expnasion of
small scale business as well enhancing its quality services. Including this, it includes various
management approaches. For example; finance, inventory, costing, ratio analysis, inventory and
several kinds of tools that is useful to present actual business performance and further
implementing strategies for effectiveness of entity (Burritt and Csutora, 2011). In this regard,
different management accounting systems can be described as:- Financial accounting system:- In this process, management accountant of Nisa Ltd
analyzes all financial accounting components such as balance sheet, income statement,
profit and loss account, cash flow, fund flow statement analysis. Therefore, on behalf of
its critical evaluation, several ideas are created to increase profit earning capacity of firm.
It affects other business operations for example production and distribution of goods,
market value, customer interest towards product and so on (Li and et.al., 2012). In this
regard, strength to face competition related to business operations and competitive
advantages. Thus, management accounting system as financial accounting is key
component for increasing economic profile of entity. Including this efficiency of firm can
be enhanced at high level for facing competition and carrying on business efficiently.
However, proper financial management and fund allocation is created through this system
for effective quality services at high level. Inventory accounting system:- Financial problems occur at workplace can be reduced
through effectiveness of inventories. It creates idea for production and distribution system
as well goods are keep safe in different stores such as; warehouses, stores, business entity
and factories for manufacturing and producing products. However, inventory
management is related to creating balance between incurred expenses and gained
revenue. In addition to this, accounting is managed for further implementation in
productivity of goods. Hence, this management accounting system is able to present
actual performance of small scale enterprise that impacts entire business operations.
Moreover, management accounting system in respect of inventories are get managed
therefore expansion of enterprise and increasing quality services are improved
19

(Taipaleenmäki and Ikäheimo, 2013). It emerges high level of demand that is valuable
for production and supplement of goods at large scale. Ratio analysis:- It is great management accounting tool that presents actual business
performance. In this regard, several kinds of ratios are determined such as; liquidity,
financial, solvency and debt equity. However, overall business operations' performance is
created through this process that leads to increasing profitability and productivity of
organization. Moreover, several innovative techniques are applied for fund allocation. In
accordance to this, ratio analyses presents organizational structure and different
operations for effective management and creating balance between income and
expenditure (Cadez and Guilding, 2012). Hence, ratio as management accounting tool is
essential for enhancing quality services of organization including expansion of small
business unit at high level.
 Price optimization:- Management accountant of Nisa Ltd uses this tool for optimizing
price and deciding cost of products. Therefore, costing is obtained for preparing income
statement as well presenting financial performance of small scale enterprise. In
accordance to this, price optimization is considered as strategies related to balancing
incurred expenditure and gained revenue (Bowen, Call and Rajgopal, 2010). It is
interrelated with market value and attracting customers towards goods and services of
organization. Thus, price optimization is useful for reducing financial issues and creating
balance between income and expenditure.
Thus, above mentioned management accounting systems are beneficial to decrease
economic issue occur at Nisa Ltd. Therefore, by using financial accounting and inventory
management accounting tools, various business operations can be managed. Including this, these
are interlinked with management of small business unit.
CONCLUSION
The report is concluded that management accounting is composition of all accounting
systems that affects production and distribution of goods. Including this, different management
accounting tools including costing and budgetary control system. In addition to this, various
costing methods and differences between marginal and absorption costing is considered through
this assignment. Including this, critical evaluation on budgetary control is presented for
20

forecasting and decision-making process is described. Thus, through this report, importance of
management accounting and it various components are determined through this study.
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