Asda Background Of The Company Accounting Essay

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ASDA is a British superstore chain which includes foodstuffs, outfits, general merchandise, grocery, toys, flowers, mobile phones, opticians, pharmacy, Travel, local gifts and photo etc. ASDA headquarters is situated in Leeds, Yorkshire. ASDA came into existence in the year 1965 by a group of farmers and mainly operated in the north of Britain. It stretched to south in seventies and eighties by purchasing the competitors chain gateway. ASDA key plan is to create superior quality of products at lesser price. ASDA is selling their own brand products.

In the year 1999 ASDA has been completely owned by Wal-Mart which is the one of the biggest company in terms of value. Because of the takeover by Wal-Mart ASDA has become the second largest supermarket in the Britain with a market share value of 17%.

The working process of ASDA is Senior engineer will be there who will be accountable for manufacture and performance of quality of the product. Senior engineer will suggest what are the changes to be needed for the product to be improved by taking the feedback from the customers.


The main competitors for ASDA are TESCO and Sainsbury which are well established retail stores in the UK. As the recent result shows that Sainsbury has taken second position in retail stores as it has improved its sales during the Christmas period by pushing the ASDA company to third place and TESCO remains top retail sector in the Britain. ASDA must also have to encounter small retail stores shops which will be there in every town places in UK so customers will go to that shop to buy products which will be nearer to their home.

Policies of ASDA:

The main policies of the company will be to encounter the inflation rate which will be a main concern. If the inflation rate is too high then the products will be increased as it has to tackle the government VAT, Transportation cost and the production cost. The government should also help the company by reducing the Vat rates so that the company will not increase the products. The company will provide the best quality products for a moderate rate so that the customers will be affordable to purchase the products.

Management accounting

Management accounting may be defined as the procedure of preparing the organization accounts that will be correct and well-timed key monetary and statistical data essential by handlers to make every day and short-range decisions.

Fulfillment of Management accounting:

The management accounting plays two vital roles like reducing the cost of the product and facilitates supervisory.

Management accounting data acting major role in supervising the performance not only connecting the directors and CEO's of the company but also connecting the CEO's and other important executives. (Robie et al., 1997; Sapienza et al., 1994). So that there will be a good understanding while taking the decisions.

To accomplish the decision building roles the managers have to obtain the information through qualitative, fiscal and non financial terms. These are the applicable basis for administrative information. (Galbraith, 1973; Tushman et al., 1978)

The management accounting system information will not be provided by the company to the public. The management committee will build up multi technique plan based on qualitative and quantitative process.

Multi technique plan developed will be helpful for the assessment based facts about the make use of management accounting systems (Jick, 1979). The company will collect the information from the public. The information collected from the public will clearly show the current position of the product in the market. The data obtained from the survey will be provided to the board directors, CEO's and Marketing manager. They will assess the situation based on the report and what are the changes required during the meeting.

The key techniques for management accounting will be Break even analysis, Cost Volume Price (CVP) and Cost accounting.

The ASDA Company can implement these three techniques which will be very helpful for the company so that they can improve their sales and generate huge profit from the sales and can become the market leader in the UK retail stores.

1. Break even analysis: Break even analysis is a method which will be extensively used in manufacture organization and administration accountants. It is founded on categorize construction costs between those which may include both the fixed and variable cost.

The fixed cost of the company is not straightforwardly connected to the level of production. Long term fixed cost may change as an outcome of asset in the production capability.

For example: The company may add new factory outlet in some other places to increase their stores of ASDA across the Britain.

Variable cost is openly involved in level of production. It includes the raw material of the company, direct labor, fuel and income associated cost such as payments are all the factors included in variable cost.

2. Cost volume analysis (CVP): The cost volume analysis will help the company by obtaining the information from break even analysis. The decisive element of CVP analysis will be the point somewhere total income equals total cost. The break even analysis will not provide the company to understand the loss or gain.

BEP will be helpful for the company during an early examination but more detailed analysis can be possible through cost even analysis. The CVP helps the company to exactly differentiate which are the fixed costs and variable costs. The CVP helps the company to keep away from losses and helps to accomplish the target set. It will make a decision on spreading out or narrowing strategy which should benefit the company. It will also keep an eye on secretarial performance and examine operational danger. The company will select the suitable cost arrangement to assist in the decision making process to carry on the firm which will be very crucial for the company.

Using Cost volume analysis the ASDA Company will get the complete information whether to change the products if the sales are down or to improve some quality so that the product will be in market and can compete with other retail stores in UK.

3. Cost Accounting: The cost accounting will provide the wealth making and fiscal in order for the judgment makers within the company. The thought will be having provided the data to the company is that it will make a distinction between costs bookkeeping from other segments of accountancy.

The cost accounting is restricted primarily to make use of the company to support organization in the course of making choice that will help the stockholders by increasing company profit that convert into maximizing stakeholder income. Since the information is used internally which will be helping the managers to take appropriate decisions which intern will benefit the company.

The crucial step in cost accounting for ASDA Company is decision making to estimate the cost for the particular product. To be able to do this management should have an excellent plan as to how costs perform at different levels of operations. Will the cost increase if production increases or will the cost remain the equal.

The general make use of cost accounting performance in order to make an effort by management to forecast the overall production costs for units to be manufactured in the forthcoming month.

Strengths and Weakness of Analysis

The main strength of the analysis is the trade name of ASDA retail stores which is well know across the UK. The ASDA stores provide the low prices of product with high quality. The stores provide all types of products from toys to grocery and food merchandise. As the result shows ASDA stores are in good position in the market. The analysis shows that how the company is operating. It also tells how the decisions will be taken like based on the information obtained from the survey the management will take appropriate decision to retain the products in the market or to change the products depending on the data obtained from the consumers.

In this analysis it will show the management accounting and the techniques used in the management. The techniques will help the management for estimation of the products and also show whether the company is in profit or loss. The management accounting techniques will help the managers to come up with innovative ideas to establish new products which will be very unique from their competitors.

Based on the ideas given by the manager the management will take the decisions to improve the sales. As the sales raises the company will increase the production by understanding the rivals business properly.

The weakness of the analysis is that the techniques used in management will not provide the calculation part just gives the assumption part. Since the ASDA retail stores sells their own brand products the customers may choose for the options available. The consumer trustworthiness is based only on the price of the product. If the ASDA retail stores increases the price of the product then the consumers may choose other rival retail stores like Sainsbury or Tesco.