Management Accounting Reporting Assignment Sample

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Introduction

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Section One

1: Introduction to management accounting

The concept of management accounting deals with evaluating and analysing the informative data of an organisation. The application of management accounting is necessary to manage the financial data of an organisation. The implementation of management accounting further helps in the decision-making process of an organisation. The aspects of management accounting help in interpreting the accounting information of an organisation effectively. The application of management accounting would help to manage the various aspects of the operational activities of an organisation. This report sheds light on evaluating the different accounting aspects of Argos Company in the UK (Argos.co.uk, 2022). Argos is a retail company and a unit of Sainsbury in Home Group in the UK. 

Principles and benefits 

There are two principles of management accounting which are named Principle of Causality and Principle of Analogy (Abdusalomova, 2019). The application of the two principles of management accounting would help in analysing the accounting information of an organisation and would help to manage the customer community. The implementation of management accounting would be beneficial for Argos Company as it would help in conducting operating decisions effectively and efficiently. The aspect of management accounting would further help in conducting investment decisions within the organization which would be beneficial for the expansion of the organization.

2: Explain different methods used for management accounting reporting

The different types of management accounting systems are cost accounting system, inventory management systems, job costing systems and price optimising systems (Abdusalomova, 2019). The explanation of the different systems is stated below. 

Cost accounting system-This system helps in estimating the cost of a project within the organisation. The implementation of this technique would help Argos company to analyse the production activities and design the cost accordingly.

Inventory management system-This accounting system would help to monitor and track the record of the inventory of the organisation (Rikhardsson and Yigitbasioglu, 2018). The application of this technique would help Argos company to manage its inventory and to establish an effective supply chain. 

Job costing system-This accounting system would help identify the cost structure of individual projects (Abdusalomova, 2019). The application of this system would help the Argos Company to identify the direct cost and the indirect costs of any project.

Price optimising system-This system would help to analyse and identify the aspect of variation in the demand structure in alignment with the cost structure (Rikhardsson and Yigitbasioglu, 2018). This technique would help the Argos Company to evaluate the change in demand and design the cost accordingly in order to reach profitability.

3: Calculate costs using appropriate techniques of cost analysis to prepare an income statement using marginal and absorption costs 

Income Statement (Absorption Costing)
Particulars	Amount	Amount
Sales	4201625
less: Variable cost (overhead cost)	3237848
cost of goods manufactured	963777
less: inventory	709613
Gross Margin	254164
less: Operating expense	89133
other expense	41845
Total expenses	123186
Net Income under absorption costing	840591

Table 1: Income statement under absorption costing

(Source: self-made)

The aspect of absorption costing helps to identify different types of cost within the organisational structure. The aspect of absorption costing helps to identify the cost structure related to the manufacturing of the products. The aspect of absorption costing would help to analyse the different costs related to the production of the product (Nan, 2019). The calculation of absorption costing would be beneficial to analyse the financial activities of an organisation. The implementation of absorption costing would help to identify the cost structure related to the manufacturing process of the product. This technique would further help to identify the profitability aspect of the organisation effectively. This accounting tool would be used for calculating the various aspects of the financial data more accurately. The accurate informative data would help to identify the profitability aspect of an organisation. The net income of Argos Company by using the Absorption costing technique is nearly about £840591.

Income Statement (Marginal Costing)
Particulars	Amount	Amount
Sales	4201625
Less: Variable cost
Cost of goods sold	3237848
Selling and administrative cost	12248
Total variable cost	3250096
Contribution Margin	951529
Less: Fixed Cost
fixed expense	38541
other fixed expenses	8000
Total expenses	46541
Net Income under marginal costing	904988

Table 2: Income statement under marginal Costing

(Source: self-made)

The aspect of marginal costing would help to increase the profitability of an organisation. The calculative structure of marginal costing would help the organisation to improve its profitability structure. The aspect of marginal costing would help to increase the marginal customers of the company which would help the company to increase its market share (Christian, 2018). The different aspects of the calculative structure of the organisation would get developed with the help of marginal costing. The net income of the company as per the calculation of the marginal costing is nearly about 904988. The aspect of fixed expenses and the variable expenses of the company have been evaluated while processing with the calculation of marginal costing. 

4: Reflection of management accounting on Argos

The application of management accounting would help the organisation to analyse various financial aspects. This would further help the organisation to expand its territory effectively. The implementation of management accounting would help Argos company to improve its financial position in the market. This would further help the organisation to increase its market share by targeting its customer base (Ndemewah and Hiebl, 2021). The implementation of management accounting would help to develop the aspect of the informed decision-making structure of an organisation. The application of management accounting would help to improve the management structure of the Argos Company. The analysis of financial performance and the analysis of the operational performance of the organisation could be done with the help of management accounting. Argos Company would be able to increase its sales margin with the help of management accounting (Argos.co.uk, 2022). Argos Company could develop its organisational structure with the help of management accounting. The sales of the company have increased to a level of 11% with the implementation of management accounting (Nan, 2019). This has further helped the company to maximize its profitability structure effectively and efficiently. The operational efficiency of Argos Company could be enhanced with the help of management accounting.

Section Two

Advantages and disadvantages of different types of planning tools used for budgetary control

The three different planning tools in management accounting that could be used by Argos Company effectively are Budgetary Control, Marginal Costing and Standard Costing (Argos.co.uk, 2022). 

Planning tools	Advantages	Disadvantages
Budgetary control	It helps to increase the profit margins. It helps to reduce the cost structure.	It majorly depends on the top-level management. It could create conflict within the organisation.
Marginal Costing	It helps to control the cost of the organisation. It does not include any absorption cost.	It does not include the aspect of fixed cost. It does not consider the time value factor.
Standard Costing	It helps in designing the product costing. It helps to control excess costs.	It is a time-consuming process. It is not suitable for small scale organisations.

Table 1: advantages and disadvantages of different tools

(Source: self-made)

For example the technique of standard costing would help Argos company in controlling its operational costs in identical units. For example, the technique of budgetary control would help to estimate and forecast the budgeted cost of any project which would save the organisation to bear any extra costs. The technique of marginal costing would help the company to limit its manufacturing cost-effectively and efficiently (Christian, 2018). The implementation of different planning tools would help the organisation to control its cost structure and would also help to increase its profitability aspect. The implementation of different planning tools would help the organisation to manage its accounting data in an effective manner. This would further help the organisation establish b financial stability (Thinkhdi.com, 2022). The establishment of b financial stability is important to expand the territory of the organisation by making further investments. The production cost, the operational cost and the manufacturing cost of the organisation could be measured and monitored with the help of planning tools. The application of these tools would help identify the risks and uncertainties associated with the business organisation (Rizza and Ruggeri, 2018). The estimation and the forecasting of various budgeted cost could be identified with the help of different techniques and tool. The application of management accounting would help the organisation to attain sustainable success.

Compare how organizations are adapting management accounting systems to respond to financial problems 

The aspect of management accounting is used by different organisations in a different manner which would prevent the organisations to suffer from financial problems (Thinkhdi.com, 2022). The different techniques of management accounting would help the organisations to identify the root cause of the financial problems which would help the organisations to develop different structures of plans. For example, Williams Performance Tenders operates as a boat manufacturing company in the UK that uses accounting management to overcome its financial problems. The company has improved its performance efficiency with the help of management accounting. Previously the company was suffering from cash flow inconsistency which created disruptions in the cash related activities of the organisation. Williams Performance Tenders was able to overcome this financial issue with the implementation of management accounting (Sohrabi, 2017). For example, AgmetCompany was suffering from debt issues due to which the company was unable to generate enough profitability margins. The implementation of budgetary control has helped the company to resolve the debt-related issue effectively and efficiently. The company was able to resolve its debt issues with the application of management accounting. Argos Company also used management accounting to overcome its bills payable issue which resolved the disruptions. 

Support of planning tools in solving financial problems

The support of the different planning tools of management accounting helps in mitigating financial problems. The implementation of effective planning tools would help the organisation to overcome the barriers effectively and efficiently (Cooper et al. 2017). The aspect of different financial tools helps in resolving different types of financial problems of Argos Company. Argos Company was able to overcome its cost-related issue with the help of accounting tools. The company was able to mitigate its risk associated problems with the help of management accounting. The decision-making process of the company has improved with the help of management accounting tools which helped it to reach its goals and objectives (Thinkhdi.com, 2022). The company would be able to enhance its operational activities with the help of management accounting tools which would help the company to attain sustainable success. The mitigation of the financial problems with different accounting tools would help the organisation to attain sustainable success effectively and efficiently (Rizza and Ruggeri, 2018). The usage of different planning tools like budgetary control, and marginal costing tools would help to overcome different financial problems such as debt-related problems, cost-related problems etc. This would help the Argos Company to achieve sustainable success with the help of management accounting.

References

Journals

Abdusalomova, N., 2019. PROBLEMS OF MANAGEMENT ACCOUNTING AND WAYS TO SOLVE THEM. International Finance and Accounting, 2019(3), p.2.

Christian, D., 2018. Building Cost Management: Case Study Using Costing Methods. International Journal of Advances in Agriculture Sciences.

Cooper, D.J., Ezzamel, M. and Qu, S.Q., 2017. Popularizing a management accounting idea: The case of the balanced scorecard. Contemporary Accounting Research, 34(2), pp.991-1025.

Nan, N., 2019. Comparative Analysis of Marginal Costing Method and Absorption Costing Method.

Ndemewah, S.R. and Hiebl, M.R., 2021. Management accounting research on Africa. European Accounting Review, pp.1-29.

Rikhardsson, P. and Yigitbasioglu, O., 2018. Business intelligence & analytics in management accounting research: Status and future focus. International Journal of Accounting Information Systems, 29, pp.37-58.

Rizza, C. and Ruggeri, D., 2018. The institutionalization of management accounting tools in family firms: the relevance of multiple logics. Journal of Management Control, 28(4), pp.503-528.

Sohrabi, M., 2017. The Relationship between Non-Financial Innovative Management Accounting Tools and Risk and Return of Iranian Stock Market Listed Companies. Dutch Journal of Finance and Management, 1(2), p.40.

Websites

Argos.co.uk, (2022),  Official Website, Available at: https://www.argos.co.uk/ [Accesed on 7/4/22]

Thinkhdi.com, (2022), Financial Tools, Available athttps://www.thinkhdi.com/library/supportworld/2016/three-must-know-financial-tools-effective-decision-making.aspx [Accesed on 7/4/22]