ASSIGNMENT 1 FRONT SHEET

Qualification BTEC Level 4 HND Diploma in Business

Unit number and title Unit 5: Management Accounting (489)

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Re-submission date Date received (2nd submission)

Student name Vo Thuy My Tran Student ID GBS190005

Class GBS0705_NX Assessor name

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I certify that the assignment submission is entirely my own work and I fully understand the consequences of plagiarism. I
understand that making a false declaration is a form of malpractice.
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Assignment Brief 1 (RQF)

Higher National Certificate/Diploma in Business

Student Name/ID Number:

Unit Number and Title: Unit 5: Management accounting

Academic Year: 2019

Unit Assessor:

Assignment Title: ASSIGNMENT 1

Issue Date:

Submission Date:

Internal Verifier Name:

Date:

Submission Format:

Format:

 This assignment is an Individual report and specifically.

 You must use font Calibri size 12, set number of the pages and use multiple line spacing at
1.5. Margins must be: left: 1.25 cm; right: 1 cm; top: 1 cm and bottom: 1 cm.
 You should use in text references and a list of all cited sources at the end of the essay by
applying Harvard referencing style.
 The recommended word limit is 1500-2000 words (+/-10%), excluding the tables, graphs,
diagrams, appendixes and references. You will not be penalized for exceeding the total
word limit.
 The cover page of the report has to be the Assignment front sheet 1 (to be attached with
this assignment brief).

Submission

 Students are compulsory to submit the assignment in due date (slot 38) and in a way
requested by the Tutor.
 The form of submission will be a soft copy posted on http://cms.greenwich.edu.vn/.
  Remember to convert the word file into PDF file before the submission on CMS.

Note:

 The individual Assignment must be your own work, and not copied by or from another
student.
 If you use ideas, quotes or data (such as diagrams) from books, journals or other sources,
you must reference your sources, using the Harvard style.
 Make sure that you understand and follow the guidelines to avoid plagiarism. Failure to
comply this requirement will result in a failed assignment.

Unit Learning Outcomes:

LO1 Demonstrate an understanding of management accounting system.

LO4 Compare ways in which organizations could use management accounting to respond to
financial problems.

Assignment Brief and Guidance:

*This assignment guidance is for reference only and can be customized by the tutor to meet specific
needs

In this scenario, you are a member of the Financial Governance committee of [ an organization of
your choice.] Your committee has to prepare an annual report for the shareholders’ meeting and
you are in charge of writing this time. Currently, the shareholders take a special interest in
expanding the operation, improving efficiency and ethical financial governance. US/UK based
corporations are highly recommended for this assignment due to the availability of the
information.

In the beginning you should write a short introduction for the corporation, summarizing the most
recent financial performance of the company.

To address the shareholder’s concerns, you need to do the following:

1. Describe to the shareholders the main objectives of internal accounting activities in

general. The report will have to clarify the responsibilities of management accountants in
the specific context of your organization. You will provide the company’s accounting
reports as evidences for identified responsibilities.
2. Discuss the importance of ethical and responsible financial governance to business in
general. To further enhance the argument, you should identify real life example of
company failing in the market due to poor financial governance. Next, propose some
recommendation to improve the company’s financial governance policy by applying
 planning tools.
3. Due to the recent expansion plan, the Board of directors want to hire more management
accountants. You will need to identify the required traits and skills of the position to the
Human resource department.
4. Lastly, write a short conclusion by summarizing all the key points above.

Learning Outcomes and Assessment Criteria (Assignment 1):

Learning Outcome Pass Merit Distinction
LO1 Demonstrate an P1 Explain M1 Evaluate the D1 Critically
understanding of management benefits of evaluate how
management accounting and give management
management
accounting system the essential accounting system
and their application accounting system
requirements of
within an and management
different types of
organisational accounting reporting
Management
context is integrated within
accounting
systems. organisational
process
P2 Explain different
methods used for
management
accounting reporting

LO4 Compare ways P5 Compare how M4 Analyze how, in D3 Evaluate how

in which organisations are responding to planning tools for
organisations could adapting financial problems, accounting
use management management management respond
accounting to accounting accounting can lead appropriately to
respond to financial systems to respond organisations to solving financial
problems to financial sustainable success. problems to lead
problems. organisations to
sustainable success.
Introduction

In addition to giving you the financial information you need to pay your taxes and
apply for financing, accounting can give you the data you need to understand your
operations and make your business more profitable. These functions fall under the
scope of management accounting because they are valuable for managers when
making decisions and improvements.

P1. Explain management accounting and give the essential requirements of

different types of management accounting systems.
What is management accounting and application of management accounting?

Management accounting, also called managerial accounting is the process of analyzing

business costs and operations to prepare an internal financial report, records, and account
to aid managers’ decision-making process in achieving business goals. In other words, it
is the act of making sense of financial and costing data and translating that data into
useful information for management and officers within an organization.

Application of management accounting:

Management accounting is the combination between the accounting section and operation
management, help for business giving out short term and long term decisions aimed at
achieving the general objectives of the business.

Productivity: To explain the use of management accounts and management information

systems in performance management.

Sale trends: By using management accounting, you can evaluate in detail which products
and accounts are earning you the most money. Sales figures can help you to pin down
whether your products are attracting a particular demographic and whether it's
advantageous to market particular products at specific times and at targeted places.

Financial Planning: Management accounting helps you to pay your bills and keep your
business afloat. By understanding how much money you have available and how much
cash you can expect to have during upcoming periods.
Communication: the report of information appropriate for administrators (Board of
Directors and the leadership) and others in the organization.

Role and principles of management accounting?

Management accounting is one of the effective tools and has a huge influence to the
decision of the administrator. Management accounting guide administrators to manage
costs to establish the cost center analysis decisions, the tools to inventory management,
how to categorize costs under multiple angles, how to allocate costs to the audience so
that exactly.
Planning process: Budgeting in management accounting is a tool for accounting
managers to plan. Planning is the setting up and reporting of what needs to be done, the
resources to be mobilized, the coordinated people, the implementation time, the economic
and technical indicators to be achieved for the organization. Targeted on the target. Based
on the records, calculations, and analysis of costs, turnover, results of each activity,
management accounting to make revenue, cost, profit, and budget estimates.
Control process: The organization's goals are defined to know whether the plan was
made feasible or not, it should be compared with reality. Accountants will provide
managers with information on the difference between the plan and the reality, and based
on the fact that there are forecasts for the administrator to adjust in time to ensure the
schedule.
Organization process: provide information for the function of managing the operations
of the executives, the management accountant will provide information for the different
scenarios with different options for the manager to consider. The right way in the process
of organizing production and business operations in accordance with the objectives
outlined. Information on selling prices, information on profits from production-business
plans. The accountant must collect this information on a daily or periodic basis
Decision-making process: Accounting information is often a major factor in decision-
making. This is evident in the nature of accounting information. It is the most accurate,
timely, and useful source of information from other specialized fields. The administrator
must have a reasonable choice in many different ways to make decisions. Decisions
within an organization can have short-term effects on the organization or maybe strategic
decisions that affect the organization over time. All decisions are based on the
information and much of the information provided by management accounting. This
information can also be expressed in the form of mathematical models, graphs, charts ...
so that the administrator can handle quickly.

Differences between management accounting and financial accounting?

Management Accounting: management accounting aims at providing both qualitative
and quantitative information to the managers, so as to assist them in decision making and
thus maximizing the profit. Managerial accounting almost always reports at a more
detailed level, such as profits by product, product line, customer, and geographic region.
It’s reporting on specifically what is causing problems and how to fix them. Managerial
accounting frequently deals with estimates, rather than proven and verifiable facts.
Example: In which case can the business sell the product at a price below the break-even
point? In which case should the company make homemade or buy some parts of the
product? In what case should the company sell the finished product instead of continuing
to finalize it?
Financial Accounting: Financial Accounting is an accounting system which is
concerned with the preparation of financial statement for the outside parties like
creditors, shareholders, investors, suppliers, lenders, customers, etc. It is the purest form
of accounting in which proper record keeping and reporting of financial data are done, to
provide relevant and material information to its users.
Financial Accounting Management Accounting
Objective To provide financial To assist the management in
information to outsiders. planning and decision-
making process by
providing detailed
information on various
matters.
User External person who make Managers who plan and
financial decision control the organization
Time focus Historical perspective Future emphasis
Information Monetary information only Monetary and non-
monetary information
Publishing and auditing Required to be published Neither published nor
and audited by statutory audited by statutory
auditors auditors.
Subject The primary focus is on the Focus on segments of an
whole organization organization
GAAP Must follow GAAP and No need to follow GAAP
prescribed formats

Different types of management accounting systems:

Cost accounting system: A cost accounting system is a framework used by firms to
estimate the cost of their products for profitability analysis, inventory valuation, and cost
control. Estimating the accurate cost of products is critical for profitable operations. A
firm must know which products are profitable and which ones are not, and this can be
ascertained only when it has estimated the correct cost of the product. Further, a product
costing system helps in estimating the closing value of materials inventory, work-in-
progress and finished goods inventory for the purpose of financial statement preparation.
Inventory management system: An inventory management system is the combination
of technology (hardware and software) and processes and procedures that oversee the
monitoring and maintenance of stocked products, whether those products are company
assets, raw materials, and supplies, or finished products ready to be sent to vendors or end
consumers. At its core, inventory control works by tracking two main functions of your
stock room or warehouse – receiving (incoming) and shipping (outgoing). The goal of
inventory control is to accurately know current inventory levels and overstock situations.
By efficiently tracking quantities across stocking locations you’ll have insight and be able
to make smarter inventory decisions. Benefits of an Inventory Management System:
Improves a company’s bottom line, improves inventory accuracy and Improves company
workflow.
Job-costing system: A method of calculation of costs when the work is performed
according to the special requirements of customers and each order has a relatively short
time. The information is also useful for determining the accuracy of a company's
estimating system, which should be able to quote prices that allow for a reasonable profit.
The information can also be used to assign inventorial costs to manufactured goods.
When an enterprise uses the method of calculation of costs according to the orders, the
cost of materials for each item is determined from the requirement to buy raw materials,
some labor costs, such as overtime charges and costs to fix substandard products, can be
calculated directly for an order or general expenses, depending on the event costs.
Price-Optimization System: Price optimization is the process of finding that pricing
sweet spot or maximizing price against the customer's willingness to pay. It can be used
to adjust the price to the customer segment by simulating how the targeted clients will
react with price change with situations in the direction of the data. With the complexity of
the pricing of thousands of items in dynamic market conditions, help the demand
forecasting, pricing strategy development and advertising, stock level control and
improve customer satisfaction.

P2. . Explain different methods used for management accounting

reporting.
Budget report: A budget report is an internal report used by management to compare the
estimated, budgeted projections with the actual performance number achieved during a
period. In other words, a budget report is designed to compare how close the budgeted
performance was to the actual performance during an accounting period.
 Account receivables aging report: is a critical tool for managing your business. A
report that lists unpaid customer invoices and unused credit memos by date ranges. The
report may be configured to also contain contact information for each customer.
Management, to determine the effectiveness of the credit and collection function, also
uses the report
Job cost report: is the accounting report of a uniform nature, compulsory. This
accounting statement is of high legal value. These are the reports which must be prepared
by the enterprise in accordance with the accounting reporting regime and formulated in
accordance with the prescribed form and filed at the address and within the prescribed
time limit in order to provide information for the management of the macro- for statistical
and economic information, as well as for analyzing economic and financial activities in
units.
Inventory and manufacturing report: A report providing the values of trade and
business sales and of product inventories for manufacturers, retailers, and wholesalers,
along with the inventories: sales ratio which is a guide to how long existing inventories
will last if the current rate of sales continues. Rates of change within the report are
indications regarding economic growth or contraction.
Performance evaluation report: Performance reports are calculated every year.
However, some companies create them monthly or quarterly. Managerial accountants use
budgets to compare actual expenditures and revenues to budgeted amounts. The
differences calculated are analyzed when determining new budgets and all information
regarding these amounts is listed on a performance report.
Order information report: The Orders Report can be accessed through Reports>Sales>
Orders. Order information is displayed in daily, weekly, monthly, or yearly increments
depending on which option you select. Order information reports are used and prepared
by managerial accountants. These reports indicate backlog information and if the orders
placed were enough needed. These reports also summarize if too many orders of specific
products were ordered, therefore forcing the company to sit on unused products not
needed at the time.
Business situation or opportunity reports: are also created, which help managers make
decisions regarding current and future business situations.

P5. Compare how organizations are adapting management accounting

systems to respond to financial problems
Considering the overall situation is to consider the change in total assets and capital over
business cycles - usually one year. This change reflects the change in the size of the
business. What is the value of total assets increased? (Fixed assets / current assets) and
formed from which sources (increased in debt or equity)? About the structure of assets to
consider Investment rate:
Investment rate = (Fixed asset + Long term investment) / Total assets
This rate reflects the different characteristics of the business lines. Business policies of
organization. This rate increases, reflecting companies are trying to invest in a longer
strategy to seek long-term stable profit in the future.

With regard to capital, the analysis focuses on the structure and stability of capital,
equity, bank loans, shareholder loans, etc. Equity accounts for as high as possible.
It is necessary to consider the situation of capital assurance for business activities through
the norm of circulation capital: Capital for working capital = (Current assets + Short-term
investments) - Short-term liabilities

Key performance indicators (KPIs): is a measurable value that demonstrates how

effectively a company is achieving key business objectives. Organizations use KPIs at
multiple levels to evaluate their success at reaching targets.
KPIs can be used to measure performance at various departments in the business from
Sales, Marketing, Human Resources to Finance and Accounting. Each room has certain
indicators that need to be measured and analyzed. Every business sector has specific
indicators that need to be monitored, measured and analyzed - the performance of the
marketing department measures the number of visitors coming from marketing channels,
marketing campaigns. The easiest way to do business is to rely on sales or the human
resources to control the rate of hiring.

Setting KPIs should follow the SMART principal SMART is a method that helps define
the KPIs for your business? S.M.A.R.T is an acronym, providing guidelines for
establishing accurate goals:
 S-Specific: Specific, easy to understand. The target must be specific as it is
intended for future activities.
 M-Measurable: Measurable. This indicator, which is not measurable, is not
known whether it is achieved or not.
  A-Attainable (or Achievable): just power. Targets must be challenging to try, but
do not set targets that are unattainable.
 R-Relevant: fact. This is a measure of the balance between the ability to perform
your resources (time, personnel, money, etc.).
 T-timed: deadline. All work must have a due date, otherwise it will be delayed.
Reasonable time helps you to achieve your goals and to support your goals.

The Balanced Scorecard (BSC) with four dimensions including Finance, Customer,
Process, Learning & Development helps to establish a financial & nonfinancial indicator
system. The measurement system is built at the company level and then distributed to
each department and to the individual (cascading), based on the key functions and tasks
of the department.
Depending on the strategic direction in each period, management will set different
weights for each aspect of BSC (total weight is 100%), resulting in the weight of each
indicator will be different components. For each indicator, the enterprise needs to
determine: the frequency of measurement, the unit of measurement information, the
measurement point scale and the measurement method.
Example of non-financial indicators:
 Satisfaction rate of target customers
 Share of VIP customers
 Percentage of VIP customers not using products or services in the last 6 months
 Brand awareness of target customers
 Frequency of customers using products or services in the last 6 months
Corporate Budget is a system of value-driven flows, movements, and transfers of funds in
the distribution process to create or use monetary funds to achieve business objectives of
a business in the framework of the law. Corporate budgets are a type of relationship that
creates the distribution of wealth in the form of value that arises in the course of business
operations. Budgeting is to determine the available capital, estimate the cost and expected
revenue of the business.
A general budget should provide an overview of financial activities including assets,
liabilities, capital, revenues and expenses over a specified period of time.
Look at your budget as a planning tool. And use it to reach your goals out by determining
how much money you need to spend on different items to keep your business going.
Financial Governance: Financial governance refers to the way a company collects,
manages, monitors and controls financial information. Financial governance includes
how companies track financial transactions; manage performance and control data,
compliance, operations, and disclosures.
How this can prevent financial problem? : Financial governance includes activities
related to investment, financing and asset management in line with the company's overall
goals. So the decisive function of financial management can be divided into three groups:
investment decision, fundraising and asset management, in which the investment decision
is the most important of the three basic decisions.
In the course of business operations, managers face many barriers by using only equity.
In order to optimize profits, managers need more flexibility to use more loans to
accelerate their business growth. However, managers need to make careful calculations
before making a loan decision to avoid this becoming a burden on the business. In
addition, during the operation, managers also need to limit the mixing of personal assets
into corporate assets, not to entrust the signing of important documents to others.
It can be seen that financial management is one of the basic functions but very important
for the development of business in the future.

Conclusion
It is necessary to distinguish between investment (expenditure of investment projects)
and expenses for regular business activities of new enterprises to evaluate the investment
efficiency as well as profits of enterprises.

Reference List:
 Merald.com. (2019). Management accounting in less developed countries: what is
known and needs knowing | Emerald Insight. Available at:
https://www.emerald.com/insight/content/doi/10.1108/09513570910945697/full/h
tml [Accessed 8 Oct. 2019].
 Accounting and Kaplan, R. (2019). Advanced Management Accounting.
Goodreads.com. Available at:
https://www.goodreads.com/book/show/1120717.Advanced_Management_Accou
nting [Accessed 8 Oct. 2019].
 Perrini, F. and Tencati, A. (2019). Sustainability and stakeholder management:
the need for new corporate performance evaluation and reporting systems.
 agetik.com. (2019). Financial Governance - Glossary | CCH Tageti. Available at:
https://www.tagetik.com/us/glossary/financial-governance#.XZw7ouczZbU
[Accessed 8 Oct. 2019].