The History And Background Of Tesco Plc Accounting Essay

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Tesco Plc is a global grocery and all-purpose merchandising trader. The organization is having all-purpose stores in 14 countries including Europe, Asia and North America and the organization is leading in UK, Malaysia and Thailand in grocery. When the company was started its basic focus was in UK and expertise in food and drink. It has differed in both geographically and product, including clothing, financial services, internet services, health, electronics etc.

The Tesco Plc is having three types of stores. Appendix A gives the checklist for the below.

Tesco Superstores

Tesco Extra

Tesco Metro

The company's major competitors are ASDA, Sainsbury's, Morrisons, Amazon etc. The survey shows it as a major market share in UK. This is a very good sign for company's efficiency.

The role of the management accounting manager helps the business organization to take major decisions for business.

Business strategy formulation.

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Resource optimization.

Audits conducted for internal business.

Competitive landscape impact explanation.

Advising for financial propositions of projects.

According to the analysis of the Tesco Plc the problems faced by the organization are:-

Since the company is selling thousands of products, the organization needs to focus on costing of product.

In order to improve the hidden costs of inventory maintenance.

In order to improve the quality of processes and products.

Management Accounting

Management accounting can be defined as the practical science which creates the value within organisations which includes both private and public sectors. (CIMA, June 2009)

However, Management accounting is one of the way looking into accounting, which refers for the use of financial accounting data by the managers in order to make decisions for future business within the organisation.

Advantages

Disadvantages

Since it is based on making future judgments using the past financial figures, it is therefore forward looking and progressive in nature.

Dependant on the accuracy of data of financial and cost accounting.

It is basically used for internal management users like top management and does not have any strict guidelines as making financial accounting.

It is affected by the prejudice of top management which may tweak in benefiting themselves rather than shareholders.

Based on proper data and analysis of feasibility and profitability the business decisions can be made. It can be prepared for anytime (Weekly or Monthly) and it is flexible in nature.

Proper evaluation of management is not possible because it does not follow management principles.

Based on the most managerial accounting theorists and writers some of the techniques and methods of management accounting are:-

Decision-Making Methods

Techniques

CostVolumeProfit analysis            

Fixed and variable costs

Comprehensive budgeting                 

Escapable and inescapable costs

Flexible budgeting                             

Relevant costs

Incremental analysis                          

Incremental costs

Return on investment                        

Sunk costs

Direct costing                                    

Opportunity costs

Capital budgeting                             

Common costs

Inventory models                              

Direct and indirect cost

Cost analysis for marketing, production, and finance           

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Contribution margin

Segmental income statements         

Planning

Financial statement ratio analysis   

Control

Standards

Organizations

Techniques and Applicability of Management Accounting

There are some techniques of Management Accounting that helps to take business decisions. After the careful evaluation, the key techniques for the Tesco Plc to overcome the problems which will help the company to take decisions for improvement business strategies are given below:-

Cost-Volume-Profit (CVP)- Direct Costs and Indirect Costs

Opportunity Costs

Cost-Volume-Profit (CVP)- Direct Costs and Indirect Costs:

Cost-Volume-Profit analysis is an analytical process which helps in understanding the cost behaviour of products and provides data for management decision-making.

Total Costs= Direct Costs+ Indirect Costs.

With the help of this method the organization can precisely estimate the cost of various products and services so that the organization can identify which are unprofitable and also to reduce the products which are expensive.

The Cost-Volume-Profit method provides the organization's resource costs through various activities (offers) to the products and services provided for the customers. The basic purpose of this method is to understand the product, customer cost and profit. This method is carried out in making some strategic decisions such as pricing, identification and outsourcing.

Since the Tesco is dealing with various grocery products business the CVP method helps to understand the costing of their products and is very useful method. In case if the company is charging more or less for any of the specific product the CVP method will help company to take decision based on costing of the products in a situation. This is based on the direct and indirect costs of a particular product which accounts for total cost. This is one of the important method for the company. With the help of this technique in a company it helps to increase its profitability.