Accounting In A Business Context Assignment Sample

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Introduction

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In this report, the overall function of “management accounting technique” will be discussed. A detailed analysis of the “accounting principles” will be done in this aspect. Based on the financial information, the “income statement” of Synergy Manufacturing Co. Ltd. will be prepared to evaluate the financial condition of the company.

Evaluation of management accounting system

The “management accounting system” helps the authority to improve the financial performance and operational performance of the organization. As a junior management accountant, it is a huge responsibility to evaluate the management accounting practices for making effective decisions. The system is integrated with the organizational process of Synergy Manufacturing Co. Ltd. The financial management of the company can take proper internal control in this process. “Cost management” and “quality management” can be initiated in this aspect. The management and employees of the organization can also make proper decisions regarding sustainability of the business in this process.

In this scenario, the “management accounting reporting” can be used for “planning”, “decision making”, “regulating” and evaluating the performance of the firm (EDMONDS and OLDS, 2013). The role of “management accounts department” is crucial in this aspect. Based on the analysis, it has been detected that an authentic “management accounting report” can assess the overall performance of the people associated with the business. It can also focus on the “production cost” and “selling price” of the products. The financial management can also evaluate the “variable costs” to determine the profitability of the firm. It can provide all the crucial information to the stakeholders of the organization.

Benefits of management accounting systems

There are some significant advantages of implementing “management accounting systems” in the organization. The benefits are discussed below:

• This system can save the overall costs and time for initiating the financial operations of the company. The authority can also enhance efficiency in recording the transactions in this process. In this aspect, the financial management of Synergy Manufacturing Co. Ltd. does not need to recruit additional accountants to initiate the financial transactions.
• It can minimize the errors in the accounting operations of the organization. A high level of risks associated with determining the profitability of an organization. However, the “management accounting technique” can play a significant role in mitigating the risks (HORNGREN et al. 2013).
• An effective “inventory management” can be implemented in this process. For the manufacturing company, it can be beneficial to assess the “inventories” to determine the overall business performance. Thus, it is a crucial initiation of the organizational management to implement the technique.
• This technique plays a crucial role in making relevant decisions regarding financial sustainability of the business. It provides flexibility in the financial operation of the organization.

The “management accounting systems” can be applied in the organization to ensure monetary sustainability in Synergy Manufacturing Co. A detailed evaluation of the “financial statements” of the company is necessary in this aspect. This technique can help the organizational management to make “short-term decisions” and “long-term decisions” (Latan et al. 2018). In the present scenario, the authority can develop “integration of cost management” to reduce the costs for ensuring effectiveness and profitability of the business.

Principles of management accounting

The principles of “management accounting” are:

• Designing and compiling of evidences
• Control at source accounting
• Financial accounting for inflation
• Evaluation of “return on investment”
• Integration
• Overhead cost absorption
• Controllable costs
• Appropriate approach by the management

It is important to integrate “management accounting systems” within an organization to take proper internal control. It makes a crucial impact on the financial sustainability of the business (SEAL et al. 2014). It is necessary for the financial management to evaluate the “inflation” for determining profitability of the business. A detailed analysis of the “market trend” is effective in this process.

There are different techniques used for “management accounting reporting”. Crucial management accounting techniques are discussed below:

• Margin analysis: This technique can be used to determine the “additional benefits” of the business activities compared to the “additional costs”. It is helpful to determine the effectiveness of business activities.
• Constraint analysis: Main focus of the “constraint analysis” is to evaluate the actual profitability of the business. It is necessary to identify the business constraints in this aspect. Impact of the constraints on the profitability of the business is also determined in this process (Oyewo, 2021).
• Trend analysis: It is identified as a “technical analysis” in which the financial management can predict future profitability of the business. They can also forecast the “future stock prices” by “trend analysis”.
• Capital budgeting: It is a crucial technique to evaluate the effectiveness of investment for a project. It can help the company to identify required capital for a business.

Income statement

“Marginal costing” is a crucial technique in which the “variable costs” have been charged to the overall units of cost. In the present scenario, the “income statement” has been prepared for Synergy Manufacturing Co. Ltd. based on the financial data of Product A and Product B. The “selling prices” for the 2 products are £828000 and £480000 respectively. The “cost of sales” include “direct materials”, “direct labor” and “variable production overhead”. The overall “variable costs” for Product A and Product B are £460000 and £231000 respectively. Total “fixed costs” are also identified as £155298.12 and £108705.88 for the two products. Based on the analysis, the amounts of “net profit” from the products manufactured by the company are £212705.88 and £140294.12 respectively.

The junior management accountant of the company also prepared an “income statement” based on “absorption costing technique”. In this aspect, the amount of “sales” and COGS of the first product are £828000 and £243529.41 respectively. The “gross profit” of the company from Product A and Product B are £584470.59 and £337529.41 respectively. The “net profits” are also calculated as £212705.88 and £140294.12 respectively from the two products.

Conclusion

This report sheds light on the effectiveness of “management accounting technique” for Synergy Manufacturing Co. Ltd. A brief analysis of the role of “management accounting reporting” for determining the organizational sustainability has been done in this aspect. Main focus of this report is to provide recommendations to the management accounts department of the company regarding profitability of the business. Proper decision-making can be done in this process. Different techniques used for “management accounting reporting” and “income statement” using two different methods have been discussed in this report. 

Activity 2: Article for a Newsletter

Introduction

A detailed analysis of the “planning tools” used in accounting will be done in this article. This context focuses on the merits and demerits of “budgetary planning tools”. Evaluation of the financial problems will be done in this aspect. Comparison of “management systems” of Asda Stores Ltd. and Morrisons will be done in this article.

Merits and demerits of budgetary planning tools

The advantages of “budgetary planning tools” are mentioned below:

• The planning tools play a significant role to promote “cost consciousness” among the organizational management and the employees. It can provide proper “budgetary control” for enhancing efficiency of an organization (Qian, Hörisch and Schaltegger, 2018).
• It can provide “centralized control” of the business to initiate the financial activities more efficiently. The “budgetary planning tool” like “variance analysis” can help the organizational management to run the monetary operation smoothly.
• It can also detect the financial problems of the business by proper forecasting. It is necessary to mitigate the business threats by executing relevant action.

In spite of having several advantages, there are also some disadvantages of “budgetary planning tools”. The disadvantages of the tools are:

• It is not easy to prepare financial budgets based on the tools. It can provide inaccurate results that result in inappropriate financial assumptions.
• Whether there is a huge “expenditure” incurred by the organization the “budgetary planning tools” are not appropriate to take internal control over the business. It is a huge cause of concern for organizational management.
• The financial management can prepare a budget by estimating financial aspects of the future period. However, the monetary condition of the business is uncertain (Wall and Leitner, 2021). It can minimize the effectiveness of the planning tools.

The “budgetary planning tools” are applied for preparing a financial budget based on a proper monetary forecast. The planning tools used in “management accounting” are “variance analysis”, “responsibility accounting” and “adjustment of funds”. The financial management can also use “Personal Capital” as a relevant tool for budget planning. The “variance analysis” can be applied by evaluating the deviation in “actual behavior” and “forecasted behavior”. The “responsibility accounting” is also used in the budgetary control. It is also necessary to adjust the funds for proper forecasting for the “financial budget”.

Responses to financial problems

It is a huge responsibility of the managers of a business to mitigate the financial problems at the initial stage. Some crucial initiatives for the managers to respond to the “financial problems” are mentioned below:

• The managers have to determine the cause of the “financial crisis” of the business. The monetary problems can be caused by some internal or external factors. In recent times, the “global pandemic” is a major factor of financial problems in most of the organizations (Ameen, Ahmed and Abd Hafez, 2018). It is necessary to manage the business finances more effectively to mitigate the problem.
• It is necessary to reduce the “non-essential costs” to ensure financial sustainability of an organization. It can also improve profitability of the business. The managers have to make the purchasing decisions effectively to enhance profitability.
• The business managers can prepare a financial budget based on proper monetary assumption to allocate the resources into the departments. It can also mitigate the monetary crisis of an organization. The financial budget can also play a significant role in developing financial stability in each department of the organization.
• Proper monitoring over the “cash flows” of the business is necessary to evaluate the organizational performance. A detailed analysis of the “income” and “expenses” of the business is necessary in this process. The managers can also evaluate the “financial statements” of the organization to make proper response to the “financial problems”.
• It is a crucial approach of the managers to change the “sales strategies” to enhance “revenue” of the organization (Azudin and Mansor, 2018). The monetary crisis can be mitigated in this process. It can be beneficial for the business to implement effective technology to get rid of the monetary problems.

Role of management accounting to achieve sustainable success

Good management accounting can assist the organization to manage all the resources of the business. Thus, “sustainable success” can be achieved in this process. It also evaluates the “tangible assets” and “intangible assets” of the business for sustainable development. In the present scenario, the organizational management can determine the role of “internal factors” and “external factors” of the organization to improve organizational sustainability. The management and employees of the organization can also make proper decisions regarding profitability of the business in this process (Ogungbade and Oyerogba, 2020). This accounting technique can provide all the information about the sustainability impacts of the business to make the pricing decisions. A detailed evaluation of “investment appraisal” and “strategic planning” is also detected in this process.

Financial budgeting is a crucial “management accounting technique” that can be implemented by the organizational management. It can help the business managers to determine the “operational effectiveness” of the organization. The authority can also enhance efficiency in recording the transactions in this process. This technique can also improve the monetary standings of the business. The “management accounting” provides relevant reports to the stakeholders regarding financial profitability. It can also develop “social and environmental reporting” and “sustainability reporting” to achieve success. It can develop communication between the management and the employees to enhance effectiveness in the business. Collaboration of the senior management with the financial management can be ensured in this process to achieve sustainable success.

Comparison between organizations

Comparison between the management systems of Asda Stores Ltd and Morrisons has been done in this aspect to respond to the “financial problems”. Asda is a reputed “british supermarket chain” that executes its business by providing fresh groceries, foods and beverages (asda.com, 2022). This company adopts the “management system” to mitigate the financial crisis in recent times. This system is used in the company for proper “inventory control”. There are some issues regarding “supplier connectivity” and “reverse logistics” of the company. It can lead the business to face a monetary crisis. Thus, the “management accounting technique” has been implemented in the company to get rid of the financial problems. The company also improves connectivity with the suppliers in this aspect. The company has also implemented “cost-leadership” to improve decision-making for organizational management. It also minimizes the financial crisis of the business.

The “management systems” of Morrisons can be evaluated in this aspect to mitigate the financial problems of the organization which initiates its business as the “fourth-largest supermarket chain” in the UK (groceries.morrisons.com, 2022). This company encourages its stakeholders to review the “shareholder information” for evaluating the profitability of the business. Based on the analysis, it has been detected that the prices of the products have increased in recent times due to lack of profitability. The “revenue” has decreased significantly in recent times. Thus, the company has implemented “financial risk management” for responding to the “sub-prime crisis”. Problems regarding “lack of liquidity” of Morrisons have been mitigated by adapting “management systems”. However, comparison between Asda Stores Ltd and Morrisons signifies that Asda gets more benefits from adapting “management systems” to mitigate its financial crisis.

Conclusion

This article focuses on relevant analysis of effectiveness of “planning tools” used in accounting purposes. A detailed evaluation of the budgetary plans has been done in this aspect. The “variance analysis” is applied by evaluating the deviation in “actual behavior” and “forecasted behavior”. It also sheds light on “social and environmental reporting” and “sustainability reporting” to determine the sustainable development of the organization. Evaluation of financial crisis and role of “management systems” to mitigate the financial problems of Asda Stores Ltd and Morrisons has been discussed in this context.