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 role in financial planning and decision-making. It then delves into various management accounting methods, including cost analysis, performance measurement, project decision-making, planning, budgeting, and financial statement analysis. The report further explores different costing methods, contrasting marginal and absorption costing, and analyzes the budgetary control system tailored for NISA Co. Ltd. Additionally, it discusses various management accounting systems aimed at mitigating financial challenges faced by NISA Ltd. The report emphasizes the importance of these tools for effective business operations, forecasting, and strategic decision-making, providing insights into how NISA Co. Ltd. can optimize its financial strategies and enhance its overall performance.

Management
Accounting
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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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