Question

QUESTION

Read the article below and answer the questions

JOHNSON BOOKS $116 MILLION LOSS

Johnson West Africa  has registered an after-tax loss of $116.4 million for the full-year ended September 2018, down from a profit of $267 million even as chief executive Jackson Atinga quit the firm.

Mr Atinga told Business Daily on phone that on Thursday was his last day in office, with the company having already settled on former head of corporate services Margaret Ombolo as his replacement.

“I need to take a break. It has been extremely demanding and tiresome. It is like a General to war,” Mr Atinga said of his exit that came at almost same time as that of ex-chairperson Catherine Mulele.

Johnson's loss came on the back of sales revenue shrinking by 26 percent to $251.7 million and in the absence of the $452.4 million one-off gain booked in the previous financial year from the sale of its prime property in Nakuru.

The firm’s outgoing CEO said the performance was further weighed down by an extended electioneering period, a tight credit market and increased competition.

“Our revenues declined by 26 percent driven largely by our inability to access key markets in Quarter One as a result of trade uncertainties associated with protracted electioneering period,” said Mr Jackson.

During the financial period, Johnson West Africa undertook various cost control measures, leading to a decline in overhead costs by 38 percent or $123 million to $217.5 million.

Chairperson Lucy Magiwa says the board will still implement more programmes to further shed off costs.

“Our focus in the coming year (ending September 2019) will be achieving the right balance between revenue generation, margin enhancement and cost minimisation,” said Ms Magiwa.

Johnson West Africa has restructured the business model from the manufacture of third party brands and now focuses on the Turbo brand to grow revenue.

The firm has been pushing to grow sales for its Turbo brands launched in 2016 after fallout with Energizer. The American firm had given Johnson West Africa exclusive rights to distribute its products. This was a major risk for the company since the arrangement with Energizer creating control over product distribution and company margins, Mr Jackson said.

REQUIRED:

a) From the above article,

i) Identify 4 items in this article that are associated with financial accounting information

ii) Identify 4 items in this article that are associated with management accounting information

b) Explain the difference between managerial accounting and financial accounting with reference to;

(i) Time orientation, (ii) Emphasis, and (iii) Frequency of reports

c) “Non-profit organizations such as Central and County Government agencies and non-profit hospitals, do not need managerial accounting because they do not have to earn a profit.”

Do you agree with this statement? Why or why not

Answer 1

Answer to a) i)

Followings are the 4 items in this article that are associated with financial accounting information.

1)After Tax Loss of $ 116.4 million

2)  overhead costs $217.5 million

3)sales revenue $251.7 million

4) JOHNSON BOOKS $116 MILLION LOSS

Answer to a) ii)

1)After Tax Loss of $ 116.4 million for the full-year ended September 2018, down from a profit of $267 million

2)Johnson West Africa undertook various cost control measures, leading to a decline in overhead costs by 38 percent or $123 million to $217.5 million

3)sales revenue shrinking by 26 percent to $251.7 million and in the absence of the $452.4 million one-off gain booked in the previous financial year from the sale of its prime property in Nakuru.

4)Our focus in the coming year (ending September 2019) will be achieving the right balance between revenue generation, margin enhancement and cost minimisation,” said Ms Magiwa. Johnson West Africa has restructured the business model from the manufacture of third party brands and now focuses on the Turbo brand to grow revenue.

Answer b)

i) Time Orientation

Managerial accounting provided top management with reports that are future oriented, while financial accounting provides reports based on historical information. There is no time span for producing managerial accounting statement but financial accounting statements are generally required to be produced for the 12 previous months.

ii) Emphasis

Financial Accounting mainly emphasis on financial aspect of the each department and entire entity wise reporting for the Stakeholders, managements, General Public related to the business, Government Authorities

Where as managerial Accounting Emphasis on preparing reports on the financial and other business aspects of the organisation for the Management of the organization, which helps them in decision making process to grow their businesses.

iii) Frequency of Reports

Financial Reports usually issues quarterly of yearly basis

Where as Managerial Reports usually done on monthly or more frequently depending upon the necessity of the management.

C) Disagree with the statement, as every organisation whether having profit motive or non- profit motive needs Managerial accounting as it provided the management with variety of information that needs for taking decisions which is relevant and important in non-profit making organisation as well. Decision making is the process which do not have any relation of profit and non-profit directly in the particular situation.