Ryder Architecture: A Report on Management Accounting Practices

This report delves into the application of management accounting within Ryder Architecture, a UK-based small-scale enterprise. It examines various management accounting techniques, including lean accounting, throughput accounting, traditional accounting, and transfer pricing, highlighting their benefits and requirements in the context of Ryder Architecture's business operations. The report further analyzes the advantages and disadvantages of budgetary control planning tools and explores methods to tackle financial issues, such as benchmarking and key performance indicators. Practical applications, like marginal and absorption costing, are calculated and compared, providing a comprehensive understanding of how management accounting can aid Ryder Architecture in future planning, decision-making, cash flow prediction, and cost reduction.

MANAGEMENT ACCOUNTING

Executive summary
This report is based on the implementation of management accounting in the conduction of
business for Ryder Architecture. The various aspects of management accounting and the
importance of management accounting will be discussed in this report in detail. Furthermore,
two tables have been created for the purpose of calculations which are used to identify the
differences between marginal and absorption costing techniques of management accounting.
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Table of contents
Introduction......................................................................................................................................4
Task 1...............................................................................................................................................4
Introduction......................................................................................................................................4
Description of management accounting and highlighting the necessary requirements of various
types of management accounting systems to the chosen scenario..................................................5
Lean accounting...........................................................................................................................6
Throughput accounting................................................................................................................6
Traditional accounting.................................................................................................................7
Transfer pricing............................................................................................................................7
Inventory management system.....................................................................................................7
Benefits of Management Accounting..............................................................................................7
Plan for the future........................................................................................................................8
Decision making for the future....................................................................................................8
Predict cash flow..........................................................................................................................8
Reducing cost of production and increasing rate of return..........................................................8
Description of the various methods used for management accounting that can also be beneficial
for the chosen scenario....................................................................................................................9
Financial Planning........................................................................................................................9
Evaluation of the financial statements.........................................................................................9
Controlling budget.......................................................................................................................9
Marginal costing..........................................................................................................................9
Making decision.........................................................................................................................10
Statements of cash flow.............................................................................................................10
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Representation of graphs and statistics......................................................................................10
Conclusion.....................................................................................................................................10
Task 2.............................................................................................................................................11
Introduction....................................................................................................................................11
Computation of the net profit percentage using Absorption Costing method...............................11
Computation of the net profit percentage using Marginal method................................................13
Differences between the Marginal and Absorption management accounting techniques.............15
Conclusion.....................................................................................................................................16
Task 3.............................................................................................................................................17
Introduction....................................................................................................................................17
Evaluation of the application of planning tools of budgetary control and understanding their
advantages and disadvantages.......................................................................................................17
Budget........................................................................................................................................17
Master budget.............................................................................................................................17
Operating budget........................................................................................................................18
Cash flow budget.......................................................................................................................18
Financial budget.........................................................................................................................18
Behavioural implications of budgeting..........................................................................................18
Pricing strategy..........................................................................................................................19
Supply and demand....................................................................................................................19
Applications of the various methods of Management accounting that can be used by
organisations to tackle financial issues..........................................................................................19
Benchmark.................................................................................................................................20
Key Performance Indicator (KPI)..............................................................................................20
Budgetary targets.......................................................................................................................20
Financial governance.................................................................................................................20
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Management accounting skills and their usefulness..................................................................20
Conclusion.....................................................................................................................................21
Conclusion.....................................................................................................................................21
Reference List................................................................................................................................22
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Introduction
Management accounting is a technique used by the organisations to retrieve the correct data
regarding the amount of sales in a financial year, stock in hand or left in the inventory, raw
materials bought by the company, salary and wages of the staffs and so on. Therefore, it can be
said that applications and contributions of management accounting is huge in a business
organisation. In this report, the benefits of the applications of management accounting will be
discussed along with the advantages and disadvantages of the various tools of management
accounting.
The report is conducted as the General Manager of a company and the discussion on
management accounting of the company will be identified and evaluated in details. For better
understanding of the project the company that has been chosen is Ryder Architecture, which is a
small-scaled enterprise of the United Kingdom and the impact of the applications of management
accounting on the business conduction process and managing other records will be discussed.
Ryder Architecture is a company which is aiming at improving the internal and the external
architectural designs of properties of their clients and currently they are focusing on enhancing
their skills to serve their clients better.
Task 1
Introduction
This portion of the report will focus on the management accounting system of Ryder
Architecture and will also emphasise on the various types of management accounting that can be
incorporated by the company to be more effective in maintaining their books of accounts and
also planning on monitoring their allocated budget. Furthermore, the benefits of management
accounting used by Ryder Architecture that can help the company grow in the market will also
be discussed in this portion.
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Description of management accounting and highlighting the necessary
requirements of various types of management accounting systems to the
chosen scenario
Management accounting is a very effective tool that can be used by the companies in order to
maintain their books of accounts and also helps the management of the company to take
important tactical decisions that can benefit the company in the market in the long run. In this
report the company in focus is Ryder Architecture and the management accounting methods that
can be used will be discussed. Furthermore, this tool has also been very effective in monitoring
the records for the company and also monitors the use of the allocated budget efficiently
(Herbert and Seal, 2012).
There are four different types of management accounting, they are as follows:
Figure 1: Different types of Management Accounting
(Source: As developed by researcher)
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Lean accounting
The concept of Lean accounting highlights the fact that when changes are necessary within an
organisation, the management of the organisation adopts the principles of Lean accounting
methods. In the scenario regarding Ryder Architecture, the management of the company and
other organisational heads of the company can implement the concept of Lean accounting to
bring the necessary organisational changes. In addition to this, the concept of Lean accounting
does not focus the traditional methods wherein the focus was on mass production. Furthermore,
the concept of Lean accounting principle will help the management of Ryder Architecture in
maximising the profit margin by reducing the cost of production.
Figure 2: Principles of Lean accounting method
(Source: (Herbert and Seal, 2012).)
Throughput accounting
It is a simplified accounting system which is based on the Theory of Constraints. Throughput
accounting can be very effective and can also help the management of Ryder Architecture to take
better decisions for achieving growth in the market. The operations of throughput accounting
will help the management of Ryder Architecture to understand the basic concept of accounting.
Furthermore, this accounting method will also help the management of Ryder Architecture to
understand the market situation and take decisions related to investment and taking decisions for
making strategic changes (Hilmola and Gupta 2015).
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Traditional accounting
The traditional accounting method is the oldest form of accounting method. The calculations
which are done in traditional accounting is based on the primitive method of calculations. Many
people consider the traditional accounting method to be advantageous and more flexible as
compared to other accounting methods. In scenarios, wherein Ryder Architecture is facing issues
with their business conduction process, then the management of the company can opt for
switching to the traditional accounting for better maintaining their books of accounts (Elsukova,
2015).
Transfer pricing
Transfer pricing is another type of management accounting wherein companies can control and
stabilise the prices for their manufactured products in all of their branches across the world (Tice
et al. 2015). For a company like Ryder Architecture, which has stock inventories in various
destinations across the borders, so the management of Ryder Architecture has to incorporate the
strategy of transfer pricing to reduce the cost of cross border control, taxation rules and other
issues which are associated with the transfer of the products across the borders like issues with
the custom clearance and so on.
Inventory management system
The management of Ryder Architecture can monitor the purchases and the sales made by the
company and can also manage the stock that is present in their inventory. Since, Ryder
Architecture business is spread across borders, so the management of the company needs to
monitor the stock that they have and also needs to monitor the amount of sales the company has
made along with the revenue earned by the company from sales. Therefore, this would allow the
management of Ryder Architecture to reduce the loss of stock and make use of the available
resources (Müller et al. 2015).
Benefits of Management Accounting
A company which adopts the management techniques of accounting reaps a number of benefits
which ranges from monitoring the stock in hand to making important decisions for the business.
This portion of the report focuses on discussing the benefits of management accounting that
Ryder Architecture can get if the management of the company implements the technique. In
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addition to these benefits, management accounting can help an organisation in numerous ways
which are as follows:
Plan for the future
The principles of Management accounting can help the management of Ryder Architecture to
take necessary decisions for the company which can be related to investment in business or
acquiring business or collaborating with other companies and so on. Furthermore, the
management accounting techniques can also help the management of Ryder Architecture to
understand the tastes and preferences of the customers and likewise the company can undertake
strategies and allocate budget to develop relevant products (Lavia López and Hiebl 2014).
Decision making for the future
As per the market data, most of the managers of the companies are more inclined to the
qualitative information in order to take important decisions for the future of the business. The
dependence on the qualitative data for the managers have proved to be not so efficient as the data
provided has numerous gaps. This is where management accounting comes into action as it can
fill the gaps and help the management of Ryder Architecture to take decisions to meet the future
demands (Crutzen et al. 2016).
Predict cash flow
Predicting the cash flow is one of the most important phases in a business organisation, the
management and the hierarchy of the managers of Ryder Architecture has to monitor the cash
flow to understand the use of allocated budget and predicting the amount of revenue that can be
generated and setting the price of the products per unit accordingly.
Reducing cost of production and increasing rate of return
The applications of Management accounting can also be understood wherein the management of
Ryder Architecture can optimise the available resources by reducing the cost of production and
increasing the margin of profit by stabilising the price at a certain range (Adenike and Michael
2016).
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Description of the various methods used for management accounting that can
also be beneficial for the chosen scenario
The other management accounting tool that can be used to benefit Ryder Architecture to perform
better in the market are as follows:
Financial Planning
This type of planning is associated with the planning related to the budget of Ryder Architecture.
The management of Ryder Architecture has to undertake the changes and make decisions based
on the financial situation of the company. Therefore, the management of Ryder Architecture has
to make decisions which would make the company achieve the organisational goals as well.
Evaluation of the financial statements
The phase that is associated with the analysis of the financial statements will help the
management of Ryder Architecture to understand the cost that the company has to incur and the
revenue that would be generated from the sales as per the prices set per unit. The analysis also
helps the company to analyse the opportunities and risks, evaluate and understand the cash flow,
income statements and balance sheet for the business in a financial year (Kansal et al. 2013).
Controlling budget
The management of Ryder Architecture has to identify the possible ways they can save money
and make use of the allocated budget for maximising production and profit. When the company
controls the budget, wastage of resources is minimised and the company can boost their
production in the entire process (Yao et al. 2014).
Marginal costing
This is a term associated with management accounting where the production for Ryder
Architecture can get affected if there is any increase or decrease in the production of the products
by Ryder Architecture. Therefore, the expense that has been incurred by the company due to
change in production of one unit of the product is referred to as marginal costing.
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Making decision
Based on the expenditures that Ryder Architecture has to incur during the production phase,
management accounting would help the management of the company to make strategic changes
to gain competitive advantage over the rivals (Venugopalan et al. 2014).
Statements of cash flow
A company should always analyse its cash in hand and the amount of credit the company has in
the market in terms of liquidity. Therefore, it is important for the company to maintain its
liquidity so that the management can pay when the necessity arises. The same goes for Ryder
Architecture, the management of the company should maintain the cash reserve to maintain a
balance between the various types of assets and cash in hand (Zhu et al. 2016).
Representation of graphs and statistics
The management of Ryder Architecture can use management accounting to develop different
types of statistical representations and data interpretation. This information proves to be relevant
and helps the company to understand the market situation and demands and take necessary steps
to respond to the changes in the market.
Conclusion
After completing the studies and the researches on the various aspects of management
accounting, the importance of management accounting and its various tools has been identified.
This portion of the report also focuses on the explanation of the various concepts associated with
the aspects of management accounting and the ways by which Ryder Architecture can make full
use of management accounting and benefit from it. In addition to this, the importance and
various types of management accounting implemented by the different organisations has also
been explained in the aforementioned points.
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