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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.
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.
There are some significant advantages of implementing “management accounting systems” in the organization. The benefits are discussed below:
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.
The principles of “management accounting” are:
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:
“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.
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.
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.
The advantages of “budgetary planning tools” are mentioned below:
In spite of having several advantages, there are also some disadvantages of “budgetary planning tools”. The disadvantages of the tools are:
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”.
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:
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 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.
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.
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