Analysis of wal mart managerial accounting process

Organization Description


For the final project of handling finance Wal-Mart Stores Inc is picked as the topic target. Belonging to the grocery price tag shop frontrunners in the world, Wal-Mart (WM) operates business with 10, 500 retail models in 28 countries with about USD444 million of sales this year (Wal-Mart homepage 2012). Powered by the corporate strategies, WM growth rapidly around the world. To compliment the growth, bureaucratic effectiveness inside the operations is very important. Since price range is the first step which set manager’s plan into procedure, let’s take a close look at WM’s cash strategy process.

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Budgeting Process

Budget shows a company’s plan, the two long and short term, to perform business goals. The focus with the WM’s cash strategy system is upon providingbetter quality and solutions to the buyers. WM uses needed concerns in its spending budget process and procedures. That they implements flexible budget in its business that identifies overhead cost individuals and allocates capital to prospects over brain costs correctly. Through that way, WM has the capacity to make price range for different degrees of activity.

WM create goals and targets and determine their mission and perspective clearly within their budgeting process. They policy for the share requirement to be able to achieve the forecasted amount of sales. Cash strategy process is likewise helpful to measure the performance of various departments in WM. It enables them to handle costs of various levels of action by evaluating the actual costs against the budgeted cost (Plunkett, Attner & Allen, 2011, p. 558-560).

WM requires corrective actions to control those costs to make this nearer the flexible budget well prepared in advance. WM communicate desired goals and targets of each employee through price range and constant report back in the corporate upon operation, expense and economical activities depending on budget info. Its budgeting procedures support WM to get competitive in cost and also to economically utilize resources that made better revenue for the company. Contrary to this, from this procedure, prediction is hard for the manager since they believe on a range of estimations of what to expect financially. In addition , this process as well depends on different variables that affects to one another. It is very difficult to prepare and hard to understand to get other staff of the firm (Axson, 2010, p. 132-140).

Management Accounting System

Administration accounting program (MAS) in WM perform a crucial position to improve their very own business activities effectiveness. Managing accounting information are accumulated, stored and prepared through make use of well designed accounting information system. It makes simple getting info to people beyond the organization when necessary. Through make use of MAS, WM determines their initial price of raw material which includes subsequent operating and routine service costs. NO ENTANTO help to evaluate the pricing structure’s effectiveness by simply showing expense, sales and revenue info. It gives thought to the company to decide the price tag on the product to become competitive available in the market. WM disseminates this information to its several parties through conductingformal and informal meetings, conferencing, global network and employees’ review techniques (Needles, Powers & Crosson, 2010, p. 720-722).

Moreover, WM mainly uses its accounting reports depending on principles of GAAP to make inform the stakeholders regarding its financial position. WM uses the strategic management accounting system which helps to enhance the effectiveness of decision making within the company. WM use CONTUDO for from entering in new market to vendors/products selection and new costs process, promotion strategies and distribution (Needles, Powers & Crosson, 2007).

The accounting information coming from MAS of WM helps in planning, controlling and other bureaucratic activities. Their particular system as well able to arise all kind of alternatives with integrated accounting information which in turn assist management to find out the best strategy for organizational effectiveness improvement (Wal-Mart home page 2012). WM disseminate bureaucratic accounting data through finances for all departments which help most departments to facilitate proper integration in every kind of activities within the firm.

WM at the moment uses Perspective Suite accounting software that features different aspects of finance just like AR/AP, general ledger, verify writing and external accounting integration. This kind of software is faster and comparatively cheaper and generates accounting documents automatically. Through this, many types of useful reports may be generated pertaining to management making decisions. On the other side, it could be susceptible to get computer viruses and cyber-terrorist. In a shortage of proper control and protection, it can make problems for the privacy of the organization (Gilbertson & Lehman, 08, p. six, 437 ).

Costing System

In term of being process, WM is concentrate on inventory control since this provides the most important part with their business to ascertain its success. To determine the cost of inventory, WM uses a lot of costing approach. In order to reduce inventory price as well as determining accurate expense of products, WM uses equally LIFO and FIFO. By using the retail technique of accounting, inventories are at inexpensive or at least by market level. This will help to increase the effectiveness of procedure since WM is retailbusiness and this will facilitates competitive advantage more than competitors. Relating to WM’s 2012 twelve-monthly report, they use LIFO to ascertain weighting normal cost intended for products in US and then for inventories to get international functions are using the FIFO method (Wal-Mart annual report 2012, page 31). These dissimilarities way of charging will improve effectiveness in the company in managing expense. WM complete their approach, “everyday low cost approach (EDLC) through these costing method (Wal-Mart total annual report 2012, page 18).

So as to spend cost to be able to products, WM uses the activity based charging (ABC) system. ABC system enables the WM to higher understand the cost structure and cost individuals. On the basis of this kind of, WM requires effective decisions regarding cost structure. The ABC procedure can show the actual work relating with production better in order to be within management accounting. The HURUF system is employed by management to gather a full price view. VM can reduce the overhead price by minimizing the number of price drivers (Leitner, 2007, l. 5).

In contrast to this, there is certainly possibility that as per this technique, costs may be more than revenue. Apart from this, additionally, it requires data input via multiple departments that can produce greater likelihood of failure of information inputs. The price of managing the system is also large due to having more price pool volume level. For instance, Wal-Mart is a large organization, as cost accounting information is definitely difficult to distinct, due to the presence of multiple product lines and lots of machine setups in complex production surroundings (Drury, 2006, p. 350-362).

Capital Making decisions Process

Analysis of expenditure appraisal methods is useful in capital decision making process simply by bringing together financial and ideal aspects of the project. The administrative centre investment decisions of WM are mainly driven by it is financial focus such as expansion, leverage and returns upon investment. The main concern of WM is foreign expansion as well as profitability (Wal-Mart annual survey 2012, site 28). WM select and manage jobs through the below steps:

1 ) Project information collection ” collect information such as earlier performance, costs, benefits and associated risks. 2 . Analyzing the project ” Work with cost advantage analysis, net present benefit, IRR etc to evaluate the project. WM uses reduced cash flow (DCF) investment appraisal technique in capital decision making process. They will only invest its capital in tasks that satisfy stringent payback periods and yield for least a required rate of come back in a DCF analysis (Brigham & Daves, 2012, p. 544-549). a few. Selecting task ” WM uses NPV and IRR method to assess projects’ substitute. For selecting projects, they will depending on different conditions of the assignments, but as well taking into account the incremental income, time, business reputation and so forth.

The above help WM to ensure optimal using their capital resources. For example , WM’s new solar project in Washington dc, they dedicated to DCF approach to decide that this should make investments its capital in this task or not. After employing this technique, WM determined the typical payback period for its energy saving projects that was 6. 3 months. Additionally, it provided a return on investment of 190 percent on these types of projects that was successful for the corporation. Therefore , WM wants to to understand discount movement values due to its new solar power project help to make profits as future prospective (Ailworth, 2012).

Capital Structure

In term of capital acquisition decision, the main requirements are the permanent sustainability and stability in performance. The money flow is the main source of capital that ensures the long term success. WM considers market placement, market trend, credit policy, financial position and stakeholders’ interests prior to deciding the best sources of acquiring financial capital. Sometimes, it also considers the financing cost to arrange the administrative centre for jogging its procedures. Credit rating with the company influences the WM’s decision upon capital structure because its good rating helps this to take the credit through the financial institutions (Kronwald, 2010, s. 5-16).

Instead of issuing prevalent equity, WM is counting more about funds credit from industry. Additionally , capital structure of WM is risky as their financingrely heavily about debt or perhaps loans that may impact revenue. WM continues to be operating at 1 . 71 debt equity ratio (Yahoo Finance, 2012). Funding decisions of WM is connected with capital growing through debts more because of taking benefits associated with tax deduction and reduce financing expense. “It has its own implications such as funds technology; positive impact on financial effect or firm performance and meeting requires on operation and investment (Seidman, 2005, p. 77-80). This is important to keep up low capital cost when achieving the firm goals inside the capital framework of the organization (Wal-Mart Annual report 2012 page 28).


In order for the company to create effective bureaucratic decision, several types of processes and approaches in budgeting and costing are necessary. WM applied a well top quality budgeting process which improves their success in achieving their objectives. Their cash strategy process helps to motivate and improve effectiveness of staff and also aid to create permanent objective to get the organization. Each uses MAS to complete have the most cost effective distributors and products selection and also to manage all of the accounting details to improve the effectiveness of the managerial decision. In order to reduce the total cost of products and maintain competitive position available in the market, WM selected the appropriated costing method and process. Given their effective technique of capital assets and powerful capital framework for obtaining capital which helps WM to be productivity in a large amount of capital decision making as well as targets accomplishment. In summary, the overall bureaucratic accounting techniques with WM is quite successful.

Information Sources and Strategy

Most of the details of this debate was collecting from the twelve-monthly report of WM this january. In addition , financing text catalogs, journals and web sites are being used as well. To get the annual report, three years has been evaluated in order to have an even more clear photo of their progress as well as if there were virtually any managerial practices or method been transformed. A lot of information about WM’s monetary and bureaucratic accounting devices such as budgeting/costing process, capital structure etc are available in individuals

methods. Observation method is used to assess information.


Ailworth, Electronic. (2012). “Walmart to install solar panels on 27 stores in Mass.  Retrieved by: Reached on: April 25, 2012

Brigham & Daves, P. R. (2012). “Intermediate Economic Management. USA: Cengage Learning.

Drury, C. (2006). “Cost and Supervision Accounting: A great Introduction. USA: Cengage Learning EMEA.

Gilbertson, C. M. & Lehman, M. T. (2008). “Fundamentals of Accounting: Course 1. USA: Cengage Learning.

Kronwald, C. (2010). “Credit Ranking and the Impact on Capital Structure. Germany: SMILE Verlag.

Leitner, A. (2007). “Activity Primarily based Costing. Germany: GRIN Verlag.

Needles, N. E., Powers, M. & Crosson, H. V. (2010). “Financial and Managerial Accounting. USA: Cengage Learning.

Plunkett, W. Ur., Attner, R. F. & Allen, G. S. (2011). “Management. USA: Cengage Learning.

Axson, G. J. (2010). “Best Practices in Planning and Performance Management: Radically Rethinking Management for any Volatile World. USA: Ruben Wiley & Sons.

Seidman, K. Farrenheit. (2004). “Economic Development Finance. UK: SAGE.

Yahoo Finance (2012). Gathered from: Accessed upon: Oct 25, 2012

Walmart Homepage 2012. Retrieved via: Reached on: March 25, 2012

Walmart Total annual report 2010 to 2012. Retrieved by: Utilized on: April 25, 2012


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