Management Accounting Report: Financial Analysis of Tesco Ltd.

This report provides a detailed analysis of management accounting principles and their application within Tesco Ltd. It covers key concepts such as the principles of management accounting, the role of management accounting, and various management accounting systems including cost accounting and inventory management. The report further explores presenting techniques and methods used, including income statements, balance sheets, and ratio analysis. It also discusses the integration of management accounting systems and reporting within an organization, highlighting the importance of managerial reports. Finally, the report examines the benefits of an effective management accounting function to the organization, providing a comprehensive overview of the subject matter.

Management Accounting
LO1 & LO2

1. The principles of management
accounting.
Management accounting is an essential tool for the management in
order to make effective decisions for the company's operations. It
helps the manager to analyse and control the various activity of the
Tesco Ltd.
Management accounting can be defined as the process of gathering,
analysing and presenting the financial as well as the non-financial
information from various department to the management of the
company in a way so that the management of the Tesco Ltd can
formulate various decisions and strategies for the future business
operations in order to achieve the business objectives in more
effective manner.

CONTD....
Principles
Designing and Compiling
Management by Exception
Control at source accounting

2. The role of management accounting and
management accounting system
 Management accounting is the process of presenting of the
accounting information to the management in order to stimulate
their decision making process.
 It is mandatory for each type of business entity as it comprises
non profit organizations, sole proprietorship and government as
well.
 It has presence of important role in business as it is widely used
through management for accomplishing quality decision making
and better control.
 There are various management accounting system that are
essentially required in the Tesco Ltd in order to increase its
business efficiency.

CONTD…
Type of management accounting system
Cost accounting system:
It can be termed as an accounting system which assist to determine
the manufacturing and production cost of particular product. Cost
accounting assist in evaluating the manufacturing cost from each input
through various stages of manufacturing of the product.
This is an essential system which assist the manager in order to track
and record the manufacturing expenses as compared top the finished
product.
Cost accounting will assist the manager in analysing the profitability,
inventory valuation and cost control if each product by evaluating their
manufacturing cost.

CONTD…
 Job order costing: this method assist the manager top assign the
cost to a particular product or specific unit. Each job would be
allotted with cost which needs to be used.
 Process Costing: it can be termed as accumulation of cost
through each operations, processes and department. The work
performance on every unit is standardised and uniform for the
mass production along with the assembly operation.

CONTD…
Inventory management system:
Inventory management system assist the manager of Tesco in taking
decision regarding the effective supply chain and logistic of the
company. this system is vital as the asset are considered to be the
core asset of the company. There are different method used for the
inventory valuation in Tesco Ltd. These are:
LIFO
FIFO

CONTD…
Price optimization system:
it is an accounting method which assist the manager in order to
control the price of the available resources. It is an mathematical
model which assist in calculating the fluctuation of demand in
market that are varies at different price levels.
Thus system helps in combining the data with the information
related to the cost and inventory level in order to ascertain prices so
as to improve the profit of the organisation. Price optimization
serves as an essential tool to the management in order to analyse the
customers responds to the price changes in the market in data driven
scenarios.
This system helps the management of Tesco Limited to make the
effective pricing strategies in order to maintain the stable demand
off their product and to enhances the customer base in more
profitable manner.

3. Presenting techniques and methods
which are used in management accounting
Income statement of Tesco

CONTD…

Balance sheet of Tesco

CONTD…