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Introduction to Management Accounting

Management accounting’s role has increases with the increasing business complexities of an entity. Nisa retail store has been selected by an entity which is located in the United Kingdom which is small scale enterprise deals in grocery business in generating higher business outcome in the near future. This project is all about defining the concept of management accounting along with the management accounting reporting systems in conveying important relations related to the business enterprise. This report also stresses on preparing income statement using marginal or absorption costing.

P1 Explain management accounting and different types of management accounting

Nisa retail store is located in the United Kingdom which falls under the retail sector as it is one of small scale entity. This entity operates at narrow level as the initial investment is less their main motive is to capture the overall market share and various aims and the objectives of the business. Aims and targets of the external market are imposes on an entity to be completed within a given time frame as they held liable for achieving the goals to improve their performance. Small scale entity has more enthusiasm as they are new in the industry who aspires to accomplish all the tasks in fewer periods in order to get success. The study has revealed that small entrepreneur who started their business from zero have gained higher market share due to its current skills, talent and patience to stay for long time struggling in the market. The challenges of small scale entity will be managed by using various techniques and tools of the management accounting. Budgets used by an entity will help in predicting its future performance after considering the current financial resources held in the business for longer period.

Major concern of the management is to recognize ts current costs in the business as their major objectives are cut down its available costs. Cost cutting strategies are prepared in order to generate higher amount of sales and the revenue for an enterprise as this helps in improving overall performance of an entity. Management accounting is regarded as on one of the important process which includes several steps in improving the overall business performance with the passage of time. It includes sourcing, analysis, communicating. The certain areas of the business are identified which requires help in accomplishing the desired aim's and the objectives of an enterprise. The information is classified into two major categories such as financial as well as non-financial information analyses by the management accountants in an enterprise which will be conveyed to the management. Top management is highly concerned in knowing its financial condition along with the performance of all the employees working in an organization.

Alignment among financial performance and all the employees will be created that helps in reaching the final outcome in terms of reasons to rectify the current performance of an entity. Employees working in an enterprise will accomplish desired tasks of the firm which helps to generate higher sales and the revenue of an entity which indirectly increases the profit and stabilize the financial performance of Nisa retail store Ltd located in the United Kingdom.

Types of management accounting systems

Cost accounting systems

Every business wants to earn profit as their basic aim of establishing he business is profit element. Reducing cost in an enterprise in turn increases the income and profit of the business. Cost reduction strategies are prepared by an entity in order to improve the quality of the all the services delivered by an entity to end consumers. Cost can be ascertained by an individual by using various techniques like marginal and absorption costing systems which will consider all kinds of costs of an entity in improving the business practices. The focus of these statements lies on ascertaining costs in order to generate higher sales and the revenue of an enterprise. Marginal costing stat will emphasize on only variable cost in developing the price of product supplied by an entity to its variety of customers. Absorption costing sheets on the other hand used to determine the actual cost incurred by the business enterprise. This kind of costing considers both kinds of costs such as variable as well as fixed costs while developing all the products or services of an entity. Being a small scale enterprise, Nisa retail store is required to know its current level of costs in order to devise various strategies in improving the quality of services offered by them to its different customers. Initial investment made by an entity is less that shows its inability to handle the heavy pressure of all kinds of costs in an enterprise.

Inventory management systems

Inventories are important part of an organization that needs to be managed in order to achieve the desired aims and the objectives of an enterprise by utilizing all inventories I the business in generating higher sales and the revenue for an entity. Current inventories of Nisa retail stores needs to be tracked as it helps an entity owner in order to utilize their idle inventory without purchasing new one. Proper stock ledgers will be prepared which will keep record of each and every inventories Sold or purchase by an entity. Wastage of inventories will be avoided in order to increase the performance of an entity as customer satisfaction will be improves with the passage of time.

Inventory management software will be used by an entity in which inventories are prioritized according to their nature in an organization to help an individual to purchase the right products according to their own choice and tastes and preferences of all the customers of Nisa retail store Ltd. FIFO method will be uses which stands for first in first out method in which inventories purchased firstly in the firm are sold first in order to reduce the warehousing cost of saving all the inventories in the organization for long time till gets sold. Another method of evaluating the inventory's sis LIFO which stands for last in first out method in which lastly purchased materials sold first to sells of the stock without piling up in the firm for long term in order avoiding future consequences. Weighted average cost will be used as one of the inventory's management software in managing the current inventory in which the sales price will include the combination of all sale prices on the weighted average cost to be charged from the customers.

P2 Explain different methods used for management accounting reporting

Top management keep track on all its business practices included in its firms in order to achieve its desired aims and the objectives within a given time frame. Reports are supplied from lower management employees to the top management in order to convey important announcements or any kind of default occurred in the business. Managerial accounting reports will be helpful for small business owners like Nisa retail stores which are small based retail store located in the United Kingdom in order to fulfill desired needs of its regular as well as potential customers on an enterprise. Managerial reports are prepared in order to keep track on all the activities takes places in an entity as this is regarded as the monitoring and supervising tool in order to ensure higher productivity of the business organization.

Being a small scale entity Nisa retail store is required to give emphasize on all its business activities in order to generate higher outcome within a given deadline as time sensitivity will determine the success or failure of an entity which needs to be improved with the passage of time. The performance of an entity will be determined by an entity owner in various time frame such as monthly, quarterly and yearly in order to take advantage of its external market. There are various kinds of management accounting reports prepared by an entity owner in its overall tenure of a business:


Traditional systems of an enterprise is budgets which will includes all kinds of financial resources in these statements to predict the future performance of an enterprise. The performance of Nisa retail store will be analyzed using various parameters such as quality, services offered by an entity, customer satisfaction as all these parameters defined the nature of the business in relation to external market aims and targets that needs to be completed in a given time frame. The manager of Nisa retail state classify all heir store into various departments which helps in keeping track on the individual performance of singular departments such as product department, financial head, inventories ledger. All the components of an entity are assessed at the year end according to the external market aims and objectives as their desired motive is to accomplish all the tasks and duties in order to enhance the overall performance of an entity. There are various categories of budgets prepared in an entity like Nisa retail store in order to improve its overall performance by recognizing all its weaknesses in a given time period along with the application of various tools and techniques to rectify the weaknesses of an entity. Budgets play dual role in the business as it is act like a forecasting too as well as acting like a monitoring and controlling business function to keep track on all business activities in order to identify the deficiency lies in the system. The recognized deficiency is essential in order take corrective action in order to enhance the overall performance of an e

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