Detailed Report on Management Accounting for Nisa Ltd (Business)

This report provides a comprehensive analysis of management accounting principles and their application within Nisa Ltd, a UK-based retail entity. It begins with an introduction to management accounting, highlighting its importance in decision-making and planning, and then delves into various management accounting systems, including traditional cost accounting, lean accounting, throughput accounting, and transfer pricing. The report then examines different types of management accounting reports such as job order costing, sales forecasting, budget analysis, inventory management, and performance management reports. Furthermore, the report explores cost calculation techniques, specifically marginal costing and absorption costing, and provides income statements for each method. Finally, it evaluates planning tools used for budgetary control and discusses the significance of management accounting systems in addressing financial problems. The report concludes by emphasizing the value of management accounting in improving service quality and making informed business decisions.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1) Management accounting and essential requirements of different types of systems.............1
P2) Management accounting reports...........................................................................................2
TASK 2............................................................................................................................................4
P3) Cost calculation using different techniques..........................................................................4
TASK 3............................................................................................................................................8
P4) Critical evaluation on different types of planning tools used for budgetary control............8
P5) Significance of management accounting systems for responding to financial problems...11
CONCLUSION..............................................................................................................................13
REFERENCE.................................................................................................................................14

Illustration Index
Illustration 1: Income statement through marginal costing method................................................5
Illustration 2: Income statement through absorption costing method..............................................6

INTRODUCTION
Management accounting is a multidisciplinary approach that is essential for decision
making process regarding business operations. It includes different tools for analysing
organization's performance and further preparing plans for proper management of all activities.
The present report is based on understanding different aspects of management accounting for
improving service qualities of Nisa Ltd. It is retail scale entity of UK that provides services of
groceries, food items and clothes to customers. However, concept of management accounting
including planning tools are to be described for decision making process. Including this, various
methods for management accounting report and costing is to be understood through this
assignment. Moreover, planning tools used for budgetary control can be presented that involves
its positive and negative both aspects. However, several management accounting systems to
reduce financial problem is to be introduced that affects effectiveness of entity. Thus, learners
are able to acquire knowledge about management accounting and its aspects for preparing
planning and decision making through this project.
TASK 1
P1) Management accounting and essential requirements of different types of systems
Management accounting can be defined as procedure that helps in preparing the reports
and accounts of company. This document contains facts and figures about financial and
statistical information of business operations. That helps management in making sound business
decisions for the development of the corporation. It is an essential business function that helps in
keeping the detail about product and services so that managers can allocate funds to each activity
effective and can gain high return over its investments (Otley and Emmanuel, 2013). Report of
management accounting shows amount of cash availability in the firm, raw material,
outstanding, debt, sales revenues etc. By this way managers can forecast the returns and can
make sound decision so that it can meet with the objectives.
Different types of management accounting system
There are many management accounting systems that can be used by Nisa for making
sound business decisions. These are described as below: Traditional cost accounting: It is the traditional approach that is used by most of the
firms. It involves direct cost, labour cost and overhead expenditures of the company in
order to identify the cash flow in the workplace. Nisa can take support of this system
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because by this way cited firm will be able to shed hight on the overall expenditure of the
entity and manager can allocate resources accordingly (Fullerton, Kennedy and Widener,
2013). It is highly required in the organization because by this way margin of profit can
be estimated by the company. Lean accounting: It is another management accounting system in which management
includes accounting, controlling and measuring of performance of the entity. It is an
effective tool that needs to be used by Nisa in making necessary changes in its controlling
and measuring process (Kaplan and Atkinson, 2015). That can help the cited firm in
making sound pricing decisions that can help in enhancing the overall business
performance significantly. It is less complex and cost effective method that can support
the organization in accomplishing its goal soon. It is the system which focuses more on
lean manufacturing and lean thinking so that entity can sustain in the complex situation
well and can improve its performance continuously. Throughput accounting: This is regarded as the type of accounting that includes the
examination of the constraints within the system that is related with the production within
the firm. This is on the basis of the principal as well as approach attached with simplified
management. In relation with increasing the profitability Nisa is being assisted towards
the procedure of decision making (Nørreklit and et.al., 2016).
 Transfer pricing: Such is considered as the price wherein the products and service
movement is being carried out. With the cost calculation the transfer expenses attached
with the goods and services are being included to a greater extent.
P2) Management accounting reports
Management accountant of Nisa Ltd prepares and maintains different reports that
presents organization's financial and non-economic performance (Macinati and Anessi, 2014).
For example; job order costing, inventory management report, ratio analysis, budgeting and
performance management reports and so on. However, these management accounting reports can
be described as below:-
 Job order costing report:- Through this reporting system, cost incurred on
manufacturing of products including purchasing raw material, labour cost and overhead
expenses are analysed. On the basis of this, price is determined on product services
produced by entity. However, various tools and expenses incurred on production and
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marketing of goods and identified through this report (Christ, 2014). In accordance to
this, financial records related to costing on expenses and revenue are prepared by which
further decisions are made. Besides this, economic position of entity is recognized that
leads to prepare plans for further implementations.
 Sales forecasting reports:- This report is prepared for recording financial data related to
marketing of goods and services provided by Nisa Ltd. It involves expenditures and
revenue on production and distribution of product services. On behalf of analysing these
reports, further decisions are made related to planning including forecasting and decision
making in future time. Moreover, market position of entity and its products is recognized
through maintaining this report (Tucker and Schaltegger, 2016). Therefore, selling of
groceries and items are managed by identifying last year's performance. Including this, it
is able for optimum allocation of resources and fund therefore proper management of all
goods can achieve systematically.
 Budget analysis report:- Budget is a management accounting technique that is useful for
preparing plan involving forecasting and decision making for further years. In this regard,
actual performance of entity is identified also provides several ideas for better quality
services and managing all resources. By preparing and maintaining records, adequate
allocation of goods and fund can be managed efficiently (Van, 2015). However, it is
suitable for preparing systematic planning schedule to be followed on to achieve set
target. Thus, budget is one of the main management accounting tool useful for optimum
allocation of goods and making decisions to improve efficiencies and quality services of
entity in a systematic manner.
 Inventory management report:- It affects liquidity position of Nisa Ltd which plays
crucial role in management of business operations. In this process, inventory and goods
provided organization is recorded. Overall transaction of goods and financial information
obtained by this method that proceed to making decisions for further years; business
operations. However, reporting for inventory management is useful for adequate
production and supplement of goods. It is also valuable to improve quality services of
products as well enhancing efficiencies of entity efficiently (Kaming and Marliansyah,
2016). Thus, reporting for inventory management is appropriate for following on
particular strategies and plans of organization for improving liquidity position as well
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making decisions for future production of product services. Along with this, excess of
wastage material get reduced through this process thereby proper management of
material is gained for manufacturing process.
 Performance management report:- As management accounting is multidisciplinary
approach, it focuses on all activities involving performance of worker performs their job
for entity's effectiveness. In this process, critical evaluation their performances is created
by which different ideas are generated for improving working efficiencies. Along with
this, it is helpful for encouraging them regarding better contribution in team work
(Wodchis and et.al., 2013). On the basis of this performance evaluation, report is
prepared related to their work performance by which segmentation of work can be done
according to workers' abilities. However, report is prepared and maintained related to
making decisions for better work performance that affects effectiveness of entity.
TASK 2
P3) Cost calculation using different techniques
Costing is a process of price determination by which adequate cost of product and
services is set. It is set on the basis of expenditures incurred on manufacturing and production of
goods. However, cost is calculated on the basis of different factors as purchasing materials,
labour cost, expenditures on production and advertisement of goods, market demand,
competition and so on (Ninan and Inoue, 2013). Further, price is determined through costing
method that leads to prepare income statement to present financial position of Nisa Ltd. In this
regard, income statement through absorption and marginal costing can be expressed as follows:-
Marginal costing:- It is a method for calculating cost of product on the basis of direct
and indirect expenses incurred for business operations. For preparing income income through
this costing method, net profit is evaluated by deducting gross profit with variable expenses only.
Therefore, it is suitable for short term decision making process and preparing strategies for
solving out any problem occur at workplace (Nazifi, 2016). Including this, preparing income
statement through this method is suitable for making decisions regarding business operations for
normal investments. In this regard, management accountant of Nisa Ltd prepares following
income statement through marginal costing as:-
Interpretation:- It is determined that amount on expenditures of groceries and food items
is 6600 on which organization gains revenue of 21000. It is quite effective for further
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implementation. However, gross profit on this operation is 14400 which is good for improving
profitability in future time period. As per this analysis, it can be forecast that in further years'
organization can improve its efficiency and earn income adequately. Further more, under
marginal costing method, for evaluating net profit gross profit is deducted with expenditure
incurred on variable overhead. However, total amount spent on variable expenses is 1800 that is
normal for investments on operations. Further, net profit on production and distribution of goods
is 12600 which is effective for further operations and improving efficiencies at high level.
Absorption costing:- For calculating net profit through marginal costing method, gross
profit is deducted with sum of expenses incurred on variable and fixed overhead. Thus, it is
suitable for long term decision making process as well investment on purchasing heavy
machinery equipment. However, it is appropriate for long term sustainability of organization as
well increasing quality services of entity efficiently (Frimpong and et.al., 2016). In addition to
this, marginal costing is valuable for setting price of products and investing on heavy
expenditures. However, income statement through this costing method is evaluated as below by
which decisions can be made for further years to achieve long term sustainability effectively as:-
Interpretation:- For evaluating income statement through absorption costing, net profit is
determined by deducting gross profit with overall cost incurred on variable and fixed
expenditures. However, gross profit on production and distribution of groceries and food items
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Illustration 1: Income statement through marginal costing method

of Nisa Ltd is 14400 which is good. Further, net profit is evaluated for which variable expenses
amount is 1800 includes cost incurred on flexible transactions which are changes time to time. In
this regard, cost incurred on fixed expenses is 3300 that evolves office fixed expenditures, cost
of sales, non-static production overhead and so on. Therefore, total cost incurred on entire
expenses is 5100 that is deducted with gained gross profit of the organization. Thus, net profit of
the entity is 9300 that is impressive and effective for further operations and making decisions for
further planning effectively. On the basis of this interpretation, it can be forecast that in future
time, organization can enhance its quality services as well invest at large scale for long term
sustainability.
Absorption vs marginal costing method:- There are some differences between marginal
and absorption costing can be expressed as:-
Bases Marginal costing Absorption costing
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Illustration 2: Income statement through absorption costing method

Profit variation For evaluating net profit, gross
profit is deducted with
expenditures incurred on
variable overhead only.
Net profit is determined
through deducting gross profit
with overall cost incurred on
variable and fixed overhead.
Time periodicity Suitable for short term
operations.
Appropriate for long time
periodicity.
Decision making process Decisions are made on normal
investments.
Decisions are made related to
long term sustainability and
competitiveness including
heavy expenses.
It is evaluated that preparing income statement through marginal costing is suitable for
making decisions for short time period investments. While, on the other side, absorption costing
is appropriate for making decisions on heavy investments for improvement in quality services.
However, decisions can be made through costing methods regarding business operations and
further implementations. It shows financial position of organization and different aspects for
better quality services and effectiveness of entity at high level (Frimpong and et.al., 2016). Apart
form this, it is gained that on the basis of preparing and analysing income statements through this
method, further decisions are made for improvements and effectiveness of entity. Thus, marginal
and absorption both kinds of costing methods are suitable for decision making related to
organization's growth and proper effectiveness in systematic manner.
TASK 3
P4) Critical evaluation on different types of planning tools used for budgetary control
The concept of budgetary control is considered as one with which management of Nisa
would make construction of future period's budget by the means of projection. Further it is
comprised of making comparison with the actual performance in order to make determination of
the flaws so that corrective measures can be taken without making any type of delay (Otley and
Emmanuel, 2013). There is presence of several tools and techniques that can assist in
development of budget for the years to comes. These are enumerated in the manner stated as
below:
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Incremental budgeting
It is regarded as the tool that depends on development of smaller alteration in the
prevailing budget for the sake making development of the new budget for the year to come. This
is considered simple manner as each year incremental amount is being added to the budget of
past year as well as makes sure requirement for regular funding (Tucker and Schaltegger, 2016).
On the other hand it makes promotion of the expenses and does not offer managers with any kind
of incentives for cost curtailment.
Advantages Disadvantages
 Easier in budget creation
 Makes sure small or less differences
 Ensure maintenance of equality in all
the departments that exists within Nisa
 Make promotion of unimportant
spending
 In order to control cost no incentive
 System of permanent resource
allocation
Zero based budgeting
The manager of Nisa can make development of the budget by the means of considering
zero as base as well as make analysis of the need and cost associated of each function with
suitable justification by the means carrying out investigation in market (Nisa Ltd, 2016). It offer
real figures regarding the potential operations as managers make analysis of the conditions
existing in the external market as well as forecast the future. Thus elimination of unnecessary
actions is done that encourages saving.
Advantages Disadvantages
 Real figures along with judgement
 Assist is suitable planning
 Lays emphasis on cost curtailment
 Consumes time
 Require huge amount of funds
 Manager has to be highly experienced
and talented for the sake of assessing
trends within the market along with the
challenges related with preparation of
budget
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Fixed budgeting
This is regarded as the financial plan which do not differ in accordance with the actual
production volume of Nisa. In addition to this it offers budgeted targets for activity level that is
fixed.
Advantages Disadvantages
 It assist in measurement and
examination of the performance
 Act as an aid in strategic decision
making and plan for growth
 Maintains the level of cost at minimum
for greater return
 It does not offer any kind of assistance
towards making comparison of the
outcomes in case standard and actual
results varies
 It cannot alter in accordance with the
actual level of activity
Flexible budgeting
As compared with the fixed this budgeting plan pays greater focus towards more than one
output related with production (Kaplan and Atkinson, 2015). Further it can be effectively
adjusted as per the real output of Nisa.
Advantages Disadvantages
 It act as an aid in adjusting the target in
accordance with the actual volume of
production related with Nisa
 It offers assistance in making optimum
allocation of resources in accordance
with the need
 It makes important adjustment with
respect to volatility within the market
that is inflation and others.
 It needs monitoring on continuous basis
in order to track the alterations within
the external market environment that is
time consuming procedure
 There is difficulty in making
determination of accurate data that
results in increasing the complexities
within the construction of budget
Activity based budgeting
In the present time the use of activity based budgeting is being done by the organizations
for the sake of making development of their budgets. In accordance with such tool Nisa can
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