Management Accounting Techniques and Applications in Tesco

Desklib provides past papers and solved assignments. This report analyzes Tesco's use of management accounting to solve financial problems.

Management Accounting
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Table of Contents
Introduction......................................................................................................................................3
LO1: Demonstrate an understanding of management accounting systems.....................................4
LO2: Apply a range of management accounting techniques...........................................................7
LO3: Explain the use of planning tools used in management accounting.....................................11
LO4: Compare the ways in which organisations could use management accounting to respond to
financial problems.........................................................................................................................14
Conclusion.....................................................................................................................................17
References......................................................................................................................................18
Appendix........................................................................................................................................19
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Introduction
In this report, it discusses the management accounting is using to solve the financial problems to
achieve the organisational goals. Management accounting is having the different types of the
management accounting system and reports to build an effective control on the organisation
departments. Management accounting is having many benefits all over the organisation. In this
report, it will discuss the income statement of the organisation. Planning tools are playing a
Vitter role in the organisation to get the proper use of management. In the different organisation
are using management accounting and many of the organisation is not using management
accounting, they get the major difference in the work. A method of management accounting is
used to overcome the financial problems such as benchmarking, balanced scorecard and activity-
based costing (ABC). The management accounting is chosen by the Tesco; they make different
budgets for planning and control the cost of financial problems in the organisation. The planning
tools are analysed and they will use to minimise the cost, which is not necessary for the
organisation. Management accounting is mainly used to lead an organisation to get a sustainable
success in the competitive market.
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LO1: Demonstrate an understanding of management accounting systems
Management accounting
Management accounting is the method to use for the financial problem with the help of
identification, analysing, interrupting, formulation and reviewing the problem to get sustainable
success in the competitive market.
Roles of management accounting
Budgeting
Management accounting is the main works to create a budget for the individual department with
the help of market research. For making the budgeting, it creates the proper Performa of the work
to get the minimum cost and it can be used for the efficient use of resources (All Business
Schools, 2019).
Aiding in strategic planning
The management accounting is adding into the strategic planning to make the creative planning
for the involvement of market standard and get the effective result for the specific task or project.
Managing assets to helping determine compensation and benefits packages
In the Tesco, there are many assets, which are not earning sustain profit as compare to the value
of the assets, and then they will use management accounting to determine or study the value of
the assets (All Business Schools, 2019). The management accounting is minimising that type of
assets to make another investment.
Management accounting systems
Cost-accounting systems
The cost accounting system is the type of management accounting, this means it provides the
framework used in the very project and task is used in the Tesco to get the products for the
profitability that will be analysis and gives the proper system to the organisation.
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Job-costing systems
Job costing system is determining the accruing manufacturing costs of the different unit of
output. The jobs costing systems is an important system for analysing the cost and maintain the
cost of using different department.
Price optimising systems
Price optimising system is the analysis of the price with the Tesco and customer needs and
customers will respond to the different prices of the product. The prices should be satisfied with
the company and customers.
Inventory management systems
The inventory management systems are the software system for the product tracking inventory
level and manage the inventory level, sales, deliveries, and orders. The inventory management
system is used to check on time to time for the circulations (Surrum, 2019).
Methods used in management accounting reporting
Cost reports
Cost reports are determining the price of items with the whole renewed price of the labour, raw
material, overhead, and other prices are taken to make the item this will be a consideration.
Budgets reports
Budget reports are the analysing or compare the pre-budget set for the department or item as to
the actual price for the department or item. The budgets reports give the changes in the prices
whether it increases or decreases.
Execution reports
An execution report is determined by the management accountants to exploit the plans to
contrast uses and incomes with the planes sums. The execution reports will helps to the external
part of the organisation.
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Benefits of management accounting systems
Increases efficiency of the company
In the Tesco industries, management accounting is used to increases the efficiency of all the
thing like work and time limit. In the Tesco industries is a valuable thing to do work in the
proper time and management accounting is doing the work in time with the effects.
Simplifies the decision making in Financial Statements
The management accounting is solving the financial problems with the effective decisions and
the decision will take from the customer analysis and market research and it will create the
financial statement strong and that will help to the investors.
Increases the bar of Profitability
The management accounting includes the budgetary control and capital budgeting to get the
minimum cost and this will increases the profitability ratio and make an effective or creative in
the market.
Enables the fluctuation of business monetary fund
The management accounting is styling the monetary funds in detailed and it controls over the
changes in the monetary funds. The management accounting is maintaining the emergency funds
that can be used in uncertain things this helps most in the organisation.
Assist in goal completion (Objectives)
The management accounting is following accountants study on the long term goal. The
accountant makes the achieving standard on the long term goal of the organisation. The goal
completion will assist the remaining levels of long term goal and this will focus and they are
trying to achieve the remaining goal.
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Critically evaluating how management accounting systems and management reporting is
integrated into an organization
The management accounting is using by the Tesco industries and they will make the individual
system to use in the management and gets an effective result. After making the systems then it
makes the reports to analyse and it will make the changes according to the plan then it gives the
proper decisions on the task or project and gets the sustainable success. The management
accounting is having the essential requirement in all the level and it gives the different work
order in the Tesco. In Tesco industry, it has to use all the systems in the company to get an
efficient result and make them unique (Jan, 2019). The reports give the changes and department
has to make the change on which the investors or external part will understand about the Tesco
industries and they will invest in the company.
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LO2: Apply a range of management accounting techniques
The Tesco industries are having the income statement using the marginal costing and absorption
costing, and it creates a difference in the market position.
All values in £
Income statement as per marginal Costing
Particular Amount ( In
Unit )
Units Total
Sales 60 20,00
0
1,200,00
0
Variable Cost
Direct material 7.5 20,00
0
150,00
0
Direct labour 2.5 20,00
0
50,00
0
Selling and distribution expenses 7.5 20,00
0
150,00
0
Production Overhead 10 20,00
0
200,00
0
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Contribution 32.5 20,00
0
650,00
0
Fixed Cost - Production 20 20,00
0
400,00
0
Administrative Expenses 5 20,00
0
100,00
0
Total Cost of production / Cost of
Sales
52.5 20,00
0
1,050,00
0
Net Profit Under Marginal Costing 7.5 20,00
0
150,00
0
Income statement as per Absorption Costing
Particular Amount ( In Unit ) Units Amount (£)
Sales 60.00 20,0
00
1,200,0
00
Cost of Goods sold
Direct material 7.50 20,000 150,000
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Direct Labour 2.
50
20,0
00
50,0
00
Production overhead
Fixed Cost 20.
00
20,0
00
400,0
00
Variable Cost 10.
00
20,0
00
200,0
00
Under and Over Absorption of
Inventory
2.
00
20,0
00
40,0
00
Gross Profit 18.
00
20,0
00
360,0
00
Administrative Expenses 5.00 20,0
00
100,0
00
Selling and Distribution Expenses 7.50 20,0
00
150,0
00
Net Profit Under Absorption Costing 5.50 20,0
00
110,0
00
Reconciliation Statement
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Particulars Amount (£)
Marginal Costing 150,000
Less - Over absorptions at the cost centre 40,000
Absorption costing Profit 110,000
Techniques of management accounting
 Historical cost accounting
The Tesco industry is using historical cost accounting to make effective strategies. The
management accounting is studying the previous accounting methods that have been using in the
industry and they achieved success.
 Financial planning
Financial planning is the plans, which has been used with the requirement of the different
department. Financial planning will only decide the whole thing of the organisation and makes
the creative use of funds in the different plans of the market (Accounting Coach, 2019). The
financial planning got the success then all over the organisation will get success and this can be
helpful from the market research.
 Decision-making techniques
In Tesco industry, the decision-making technique is an essential technique for the use of in every
department and it will make the long term decision with the investment. The best decision helps
in the success of the organisation.
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 Financial statement analysis
The main technique of management accounting is analysing the financial statement of the Tesco.
The financial statement is concise information of the organisation and it is showing the result of
the organisation to the external part of the organisation. The financial statement is good then it
will attract the investors.
 Graphical techniques
The Tesco industry is using the graphical technique to understand an easy method. In the Tesco's
annual report, it is showing the graphical presentation as on the last five years data. As to attract
the investors or stakeholder's that has to show in the graphical view they will need to understand
and it is in a simple method.
Different business activities
 The business is making marketing plans and brand recognition with large numbers of
strength in the market.
 It makes the individual budget for the different department of the organisation.
 It is growing the sales among the different area of the market and building the
relationships among the customers to earn more profit.
 Hiring qualifying employees is one of the business activities to make effective or smart
work in the process of work to get different work of doing (Chron, 2019).
 Customer service is the business activity to make a loyal customer and they get effective
satisfaction. The organisation has to give the after sales services to feel familiar with the
customer and company.
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