Unit 2 Management Accounting R/508/0486 Regent College

SECTION 1

P1: Information about management accounting and their significances

Nowadays, it has been determine that management is always trying to make use of appropriate accounting software that would be effective enough to record and analyse financial transactions that are being done in an accounting period of time. All collected information from various sources are taken into consideration while making preparation of various important data into their respective set format. The primary motive of account managers of the cited company is taking certain responsibility to keep material accounting data in regards to investors, customers as well as other outside stakeholders. They are helpful for parties to take necessary decision in respect to get more optimistic outcome in coming time. By the helpful of accounting systems which enable managers to targets on an significant aspects that can assist an organization to bring maximum growth opportunities to the company (Chen and et. al., 2011). There are few benefits in case manager’s uses to adopt management accounting systems are discussed underneath:

Enhance their overall efficiency: This seems to be utmost important chance of increasing wide range of business activities in regards to attain desire aims and objective within a set period of time.

Evaluate performance: It assist managers to analyse the overall performance and growth potential for employees by making comparison with actual results through taking standard outcomes.

Valuable management control: In case company make use of appropriate management accounting system, the managers can assist and control their overall expenses those are incurred during the time of production process so that their overall performances can be management in more effective manner (Soin and Collier, 2013).

Types of accounting system

Price optimisation: According to this particular accounting system which would be useful for a managers to determine an effective prices for increase interest and value to their stakeholders and customers at the same point of time. The overall perception of customers can easily be determined that what they think about different prices of products that are being set by an organisation.

Cost accounting system: As per this system, management would be able to collect all necessary information about cost and expenses that are incur during the time of production process. Its main objective of adopting these kind of systems is to overcome the costs and all resources those are use on maximum level. These are directly related with the production process of an organisation.

Inventory management system: This seems to be more useful system which is use to track appropriate movement of product those are being used in their operation management of production of products and services. By the help of this particular accounting Systems Company would be able to determine level of inventory present in warehouse in order to avoid situation of wastage in manufacturing of products and services during the time (Vakalfotis, Ballantine and Wall, 2013).

Job costing system: It refers to be utmost important accounting tools under which the total cost allocated for the objective of finishing particular project activities are taken into account. This will assist in deciding the cost to a customer’s which is required to execute a particular project or goods.

P2: Various method of accounting reporting use in an organisation

In every business organisation, whether related with retail and production industry they are able to attain their future aims and objectives in more effective manner. For the purpose of getting proper analysis of their financial position they need to prepare reports on the basis of collected information. Reporting is utmost important collection of financial data during an accounting period of time. Every organisation those are operating is small or large sectors are needed to adopt effective reporting system. By the help of using these reporting systems is having wide range of benefits that are obtained by an organisation such as planning for future decision, disbursement of important data and responsibility by the managers in order to improve financial decision. This seems to provide more valuable opportunities to management of NERO Ltd to attain their sustainability and financial growth for the company (Lukka and Vinnari, 2014).

There are large number of organisation which is held responsible for analysing their performance through using job cost, budget performance and inventory management reporting. Various kind of reports are having their certain crucial benefits to the company in near future time. It also assist in maintain valuable communication and coordination between other department that are responsibility for increase goodwill for the company. Reports are more essential aspect for the company. Most of the investors and stakeholders make use of data in order to take crucial decision regarding capital investments into their upcoming projects. There are various types of reporting method is needed to be analysed. Some of them are discussed underneath:

Performance report: According to this particular report which is being prepared by the company by taking certain information about past data and make comparison with using present data. Such kind of reports is prepared on regular basis from collecting regular feedbacks from employees. Such information is ascertainment of all problems that are present at the workplace. This seems to be primary main role of managers is to apply various method and plan to attain future aims and objectives in coming time.

Job cost report: It is known as one of the major reports that are associated with controlling costs which a company need to deal with at the time of execution of any new projects. Such kind of reports are useful for determining total cost a company is bearing to produce a group of products during the period of one year (Zang, 2011).

Account receivable report: Such kind of report is useful for an organisation to analyse total lists of unpaid invoice details of customers and credit memos. It is used to determine total time duration which is needed to debtors to return their overdue amounts. By the help of this, management of an organisation need to take crucial decision in relation to change in their credit terms and condition and boost their collection duration process.

Inventory management report: As per this particular accounting report which is being prepared by an organisation to manage and control overall flow of stock from the company. All essential detail about opening and closing entries of inventory that are being kept by an organisation are discussed under this report. There are some effective techniques that are essential for the mangers to taken into account such as LIFO, FIFO, EOQ and Inventory turnover ratios.

M1: Benefits of using management accounting system

According to the attainment of better outcomes for the company, it is essential for them to make use of appropriate accounting systems that are able to attain more desirable outcomes in near future times. All the above discussed accounting systems are having their own benefits and limitation. Such as in case of using price optimisation system a company would be able to determine customer perception that about various price they wants to be paid for their products. Whereas in case of inventory management system which is used to record and analysis various data about stock position of the company are mentioned effectively under the reports.

D1: Critical analysis of accounting and reporting system

In accordance to increase profitability for Nero Ltd they need to make use of appropriate methods and techniques that can have the ability to make company more better in coming period of time. All those mentioned reports are having advantages that can help managers to increase their overall growth and stability in coming future time. However, performance report is one of the important reports which use by an organisation to analyse actual and standard outcomes that is being followed during an accounting time. While account receivable is another important report that is prepared to analyse total time duration debtors are taking to make payment of their outstanding amounts (Moser, 2012).

P3: Various costing method used to calculate net profit for the company

Cost is an essential aspect for an organisation which is direct related with the production process. It is the value of amount that is being charged by the company in accordance with the getting something in return. This can attain in increasing overall growth and efficiency of the company in more effective manner. There are various types of costing that can be used by an organisation in order to attain more desirable outcomes in coming time. Some of them are mentioned underneath:

Absorption costing: It is known as one of the most effective costing which is helpful to increase the profitability position of the company (Absorption costing. 2012). These are related with all manufacturing costs. Both variable and fixed costs are taken into account in order to produce a product. Because of this it is known as full costing method. It does not taken into account as more effective costing method for future decision making.

Marginal costing: It is said to be that particular cost which is applicable in the time of production of one additional unit of products during the time. It is used to taken into account only variable cost and fixed costs are not considered. It is more reliable and accurate costing techniques which would provide more effective results for the company.

These two above costing is helpful in calculating net profit for the Nero Ltd through preparing income statement of the company (Quattrone, 2016).

(b): Evaluate variation in the gains:

It is an essential aspects for an organisation to evaluate net profit for the company, it has been seen that both costing methods are delivering individual differences for an organisation. These will be increase fixed costs adjusted accordingly (Wickramasinghe and Alawattage, 2012).

M2: Analysis about various types of accounting techniques

In accordance with making proper analysis of the company’s performance, it is necessary to make use of appropriate accounting techniques. There are various types of tools and techniques which are liable for the company to attain future aims and objectives in more quick time. Such as financial planning tools, budget analysis, standard cost and historical costing. These tools are more reliable and effectively helpful to attain more valuable growth for the company in coming time.

D2: Reconciliation and interpretation of income statements

From the above reconciliation, it has been found that the total absorption profit they are able to earn is about 4300 and 3100 on their total sales amount.

SECTION 2

PART A

P4: Advantage and disadvantage of using planning tools use in budgetary control

Planning is an essential aspect for an organisation, it is used to make analysis of budgets that are profitable for the company during the period of time. Some of them are discussed underneath:

Forecasting tools: It is known as utmost important tools which is useful to estimate total costs and expenses incurred during the period of time. They tends to required to be compare it with previous performance in more reliable manner.

Advantages: This will be assist in maximising value to stakeholders and wealth maximisation for the company.

Disadvantage: It would be hard to estimate future results. In some situations, it is not so effective (Hansen, 2011).

Contingencies tools: It refers to as one of the most effective planning tools which is more reliable to detect all kind of risks that are present with the company. This is done in accurate manner to determine risk that are affecting overall productivity of an organisation.

Advantages: This happens to remain more similar in any sort of problems that are arises at the time of making effective planning process.

Disadvantage: It is too costly and more difficult and time consuming activities for an organisation.

M3: Analysis of planning tools

In accordance to enhance efficiency of an organisation, it is the most effective tools to make use of resources in effective manner. The company Nero Ltd can use the financial tools to make valuation of costs and expenses that are incurred during manufacturing of products and services.

D3: Critical analysis of financial problems

In every business organisation, it has been seen that financial issues are making huge impacts on the performance of Nero Ltd. The responsibility of managers need to make use for effective tools that can assist in resolving financial issues for an organisation.

PART B

P5: Different types of financial problems and measure to overcome them

In every business enterprises, it has been found that there are various financial issues that are affecting overall growth and performance during the time. The major issues are:

Profit level: In case the company is not able to sell sufficient amount of products into the market. Then it is hard to lead in order to make analysis of impacts on the profitability for an organisation (Sisaye and Birnberg, 2012).

Product and quality services: It is mostly associated with overall reputation of Nero Ltd. If they are not being able to manage their funds in well effective manner. This can create more influences over the company.

These above mentioned issues can easily overcomes by using appropriate financial tools and techniques. Some of them are discussed underneath:

Key performance indicators: It is consider as well organise valuation techniques that is used by manager to analyse previous performance with to that in current time. This will assist the company to analyse various aspects in order increase the company wealth.

Financial governance: It is stringent set of various rules and regulations those are issued by local government to make ensure that financial processes can be manage in effective manner. This will help an organisation to regulate their operations in more effective ways (Nitzl, 2016).

M4: Evaluation of financial problem

There are various financial issues that are affecting the productivity for an organisation. Some of them can be resolve by using budgetary techniques, financial governance and benchmarking tools. All these can be manage through using balance scorecard methods.

Conclusion

From the above project report, it has been concluded that management is always in search of using most effective accounting system and reporting that are helpful in increase profitability for an organisation. Various costing method can be used to calculate total net profit incur during the time. With the help of merits and demerits of using planning tools company would be able to control their future impacts.

References

• Burritt, R.L., and et. al., 2011. Environmental MA and supply chain management (Vol. 27). Springer Science & Business Media.
• Chen, H., and et. al., 2011. Effects of audit quality on earnings management and cost of equity capital: Evidence from China. Contemporary Accounting Research. 28(3). pp.892-925.
• Soin, and Collier, 2013. Risk and risk management in management accounting and control.
• Vakalfotis, N., Ballantine, J. and Wall, A. P., 2013. A literature review on the impact of Enterprise Systems on management accounting.
• Lukka, K. and Vinnari, E., 2014. Domain theory and method theory in management accounting research. Accounting, Auditing & Accountability Journal. 27(8). pp.1308-1338.
• Zang, A.Y., 2011. Evidence on the trade-off between real activities manipulation and accrual-based earnings management. The Accounting Review. 87(2). pp.675-703.
• Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser?. Management Accounting Research. 31. pp.118-122.
• Hansen, A., 2011. Relating performative and ostensive management accounting research: reflections on case study methodology. Qualitative Research in Accounting & Management. 8(2). pp.108-138.
• Sisaye, S. and Birnberg, J. G. Eds., 2012. An organizational learning approach to process innovations: the extent and scope of diffusion and adoption in management accounting systems. Emerald Group Publishing Limited.
• Nitzl, C., 2016. The use of partial least squares structural equation modelling (PLS-SEM) in management accounting research: Directions for future theory development.Journal of Accounting Literature.37.pp.19-35.
• Wickramasinghe, D. and Alawattage, C., 2012.Management accounting change: approaches and perspectives. Routledge.
• Moser, D. V., 2012. Is accounting research stagnant?.Accounting Horizons. 26(4). pp.845-850.

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