A Management Accounting Report On NEXT Essay

This study is meant to explicate the importance of direction accounting and its relevancy to a concern. It takes a expression at the public presentation of s at the public presentation of the company of pick is Following and this study would help in the direction of the company in accomplishing long term and short term aims.


Following is one of UK ‘s taking retail merchants based in Enderby, Leicester that offers voguish and high quality vesture and accoutrements for work forces, adult females and kids and, besides offers a really broad scope of place merchandises runing from kitchen contraptions, furniture to place amusement electronics.

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The company has been in being since 1981 and opened 70 NEXT shops for adult females ‘s vesture in the UK. I983, 52 NEXT shops were opened for work forces ‘s dress. The parent company was called J. Hepworth & A ; Son, and in 1986 changed its name to Next.Next has since grown into a planetary trade name with more 55,000 strong work force of over 35,000 in full clip employment worldwide. Next is listed on the London Stock Exchange under the parent company, Next Group PLC. The company recorded gross of ?3.4 billion for the fiscal twelvemonth stoping 2010 and a pre-tax net income of ? 0.

5 billion. ( next.com, 2011 ) Next has besides been appointed as the Official Clothing and Home Appliances Supplier to the London 2012 Olympic Games.


Following retails apparels, places and accoutrements for work forces, adult females and kids. It besides sells branded electronics and place wares.


Next has three major distribution channels for its merchandises which include ;Following Retail: which comprises of more than 500 shops in the UK,Following Directory which is its on-line offering and,Following International which comprises of more than 180 shops in Europe, Asia and North America.Besides retailing, Next is into other concerns that include ;Following Sourcing: this beginnings for Following merchandises,Lipsy which designs and sells younger adult females ‘s vesture wholesale and retailVentura: a conveyance and logistics company supplying client services to clients for outsourcing intents


Following is in a really competitory concern and therefore has a really big base of rivals worldwide. These include, Debenhams plc, Esprit Holdings Limited, Gap, Inc.

, The H & A ; M Hennes & A ; Mauritz AB, House of Fraser Group Plc. , John Lewis Partnership Plc. , Marks and Spencer Group Plc and Zara France



“ Management accounting is the application of the rules of accounting and fiscal direction to make, protect, preserve and increase value for the stake- holders of for – net income and non – for – net income endeavors in the public and private sectors ” , ( CIMA, 2005 )


Used for doing determinationTo guarantee that an entity ‘s plus is secured.

Increasing resources useCommunicating internally with stockholders and employerControling and planning activitiesScheme forming.Management Accounting is fundamentally related to assemblage of informations both from external beginnings and internal beginnings processing, analyzing, pass oning, and construing the consequence of the information for utilizing within the company in other to let the direction program, control operation and in doing determinations.Management Account Key TechniquesCost – volume – net income analysisPaybackDiscounted paybackNet Present ValueProfit/Service profitablenessActivity based costingActivity-based-managementLinear schedulingBudgetingInternal rate of returnBalanced ScorecardDiscrepancy analysisJust-in-time

The cardinal techniques of direction accounting

The direction accounting techniques recommended for following are:Cost-Volume-AnalysisActivity-based-costing/managementBudgetingBalanced scorecardJust-in-time


Cost-volume-analysis which is besides known as Break-Even analysis is an application of managerial costing which shows the relationship between net income, cost and volume for determination devising and short term planning ( Lucey, 1996 ) .

The premises of cost-volume-analysis are:There is no stock degree.Cost can be decided on into fixed and variable elements.In other words, it is the classification of production cost into fixed and variable in other to find the degree of gross revenues volume at whether a house makes net income or loss.


Activity-based-costing ( ABC ) measures the cost and public presentations of the activities involved in fabricating a merchandise, the merchandise, the resources and the consumers of the merchandise for determination devising within the administration. Activity-based-management ( ABM ) uses the information taken from ABC to guarantee attempt betterment and determination devising for an efficient operation in an entity.However, relevant cost direction must supply relevant cost information, irrelevant activities that do non lend to the value of clients and the administration, accurate cost information of merchandises and services in metameric market and cost driver information.

Activity-based-management is necessary for direction betterment determination devising.


ADVANTAGES OF JUST-IN-TIMELower investing because of execution of zero or no stock list.Elimination of work flow issues and constrictions improves an entity public presentation.Due to decrease in stock aid in the satisfaction of market niches.Savingss are acquired from the decrease in stock list.

DISADVANTAGES OF JUST-IN-TIMEJust-in-time additions complexness within work cellsThe tool requires no defect at all in the production of a merchandise the first clip.A alteration of mill layout is required.Requires engagement of full workers.



This is a direction tool used for strategic planning and direction. It is used to supervise a company ‘s public presentation with regard to long term ends and besides enhances both internal and external communicating in the company. Following direction needs to supervise the public presentation of its subordinates, shops and on-line offerings. They besides need to be cognizant of the public presentation of new scope of merchandises and old merchandises excessively. Knowing which merchandise lines to stop since the company has a big selling mix.


This is the drumhead and appraisal of future outgo and a mechanism of ways this outgo. For case, since Following trades with vesture, the monetary value of cotton can so impact the concern. It is necessary to do proviso for the discrepancy in the monetary value of this trade good.

PAYBACK Time period

This length of clip required to retrieve an investing by a company. Understanding and ciphering the payback period of an investing is important to an administration. It assists direction in doing determinations in footings of budgeting and long term programs which could salvage the company money, clip and attempt.Since there would be an expected growing in the figure of Following shops in the UK, Next would hold to see puting in new trucks for transit of goods to warehouses and forth transportation to shops countrywide.

Cost of new truck: ?5,000,000Life: 8 old agesBenefit: better the transit of merchandises across parts in the UK alternatively of constructing new warehouses which may be clip devouring and affect engaging new manus and increased recurrent disbursals and increase net income by ?1,500,000? per twelvemonthCost of capital is 5 %The new trucks would be sold for ?1,000,000 at the terminal of eight old ages

PAYBACK Time period

?1,000,000 is expected to be recovered in the 4th twelvemonth and so the payback period for this 4 old ages.Accounting rate of returnThe increased one-year income related to the new trucks will be ?500,000( ?5,000,000 – ?500,000 of depreciation ) .Depreciation = ( ?5,000,000- ?1,000,000 ) /8= ?4,000,000/8 = ?500,000The mean income will be the one-year income since the one-year income is equal each twelvemonth.The mean investing is ?2,000,000 = ( ?5,000,000 – ?1,000,000 ) /2The accounting rate of return for the investing in the new trucks is computed as:?2,000,000 / ?5,000,000 = 40 %Net nowadays valueThe administration ‘s cost of capital is 5 %The incremental hard currency flows in each period of the undertaking ‘s life.

?5,000,000 outflow instantly?1,500,000 influx at the terminal of each twelvemonth for eight old ages?1,000,000 influx from salvage at the terminal of eight old agesFor a eight-year rente of ?1,500,000, PV = ?For the ?1,500,000 salvage in five old ages, PV = ?The PV of the hard currency influxs is ?Because the investing of ? takes topographic point at clip zero, the PV of the entire escapes is ? ( )The NPV of this investing undertaking is ?

Internal rate of return

By test and mistake, or the usage of a fiscal reckoner or spreadsheet package, we find that the IRR in our illustration is 16.14 % & gt ; 10 % cost of capital,

Profitability index

The present value of the hard currency influxs was ? and the present value of the hard currency escapes was ? .Therefore, the profitableness index for that undertaking was


The techniques used in this study are really much relevant to Next Plc as a concern and can besides be used in other countries and subordinates of the company. It is can be rather helpful in analyzing and measuring both long term and short term aims. For case, Its on-line offering, Following Retail and it ‘s logistics subordinate, Ventura can be examined utilizing this studyOne failing is that it does non foretell future province of the company giving the current economic clime and the consequence of the addition in VAT by the authorities or the consequence the UK economic system would hold on it since bulk of the company ‘s income comes the United Kingdom. That can non be presently determined.

It besides can non foretell the impact Next ‘s major rivals would hold against Next, financially.


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