Financial Issues and Management Accounting

This assignment requires students to identify financial issues related to a company and compare them with other organisations. The student must then analyse the problems and suggest solutions based on research from various books and journals. References include 'Management Accounting Change' by Wickramasinghe and Alawattage, 'Management Accounting Research in the Wake of the Crisis' by Van der Stede, and others.

ACCOUNTING
SYSTEM

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Management accounting and their types.....................................................................................1
Methods of management accounting reporting...........................................................................2
Benefits of management accounting system...............................................................................3
Evaluation of accounting system integration and reporting method...........................................4
TASK 2............................................................................................................................................5
Marginal costing..........................................................................................................................5
Absorption costing......................................................................................................................5
TASK 3............................................................................................................................................6
Advantages and disadvantages of planning tools........................................................................7
Analysis of various planning tools and their application............................................................8
Evaluation of planning tools for responding to financial issues.................................................8
TASK 4............................................................................................................................................8
Comparison with other organisation financial issues..................................................................8
Management accounting leads organizations to achieve sustainable success...........................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Accounting system is the system that are using for the revenues, expenses and also for
other financial activities of a business. It is helping to track the business financial transactions
such as purchases, liabilities, sales etc. it is capable for generating comprehensive statistical
reports are providing to management and also to interesting parties to support decision making
process (Wickramasinghe, and Alawattage, 2012). In this report taking company Jupiter PLC, it
is a medium sized manufacturing company.
In this report covers different tasks and in task first explain of management accounting
system and their types. In task 2, calculate of budget with the help of marginal and absorption
costing. In task 3, using planning tools regarding to management accounting and in task 4,
Jupiter PLC compared to other organisations to solve financial issues.
TASK 1
Management accounting and their types
Management accounting is a tool used to prepare and provide statistical and financial
data on time. It also present accounting information which helps management to formulate
adopted policies and also to make short term and long term decisions. It is internal system used
by junior management accountant of Jupiter PLC so that they measure and evaluate their
management process effectively. The various management accounting system which is used by
them are mentioned below:
Job Costing System:
Job costing system is process of collecting data related to costs of manufacture and job
service. It also record the job cost of all products that are manufacture in company. This system
is used by Junior management accountant of Jupiter PLC so that they determine quality of
estimating system from accumulated information (Van der Stede, 2011). And also help to quote
cost of product which is acceptable to gain profit by collecting information about direct material,
direct labor and overheads.
Price Optimisation:
Price optimisation is process of discovering the structures of price which optimise goals
like revenues or acquiring customer targets. Junior management accountant of Jupiter PLC use
this system so that their products will sale rapidly in market with a sufficient profit. This system
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is used by company which is based on their competition level, manufacturing cost of products
and demand of each product. This helps them to balance the amount and profit of all product.
Inventory Management System:
Inventory management system is accumulation of technology with methods and
operations which manage and handle the maintenance of furnished stocks such as finished
products or raw materials and supplies. Junior management accountant of Jupiter PLC using this
system so that they monitor stocks regularly and optimise the management process by investing
in cloud based software. This will helps them to increase productivity, sales and get higher
return on investments (Lavia López, and Hiebl, 2014). It also helps accountant of company to
compute the raw materials closing value, progress of work and total expenses which is incurred
during business operation so that they prepare accurate financial statements.
Cost System System:
Cost accounting system is the method used by firm to record product cost activities
through different production process. It is important accounting system applied by Junior
management accountant of Jupiter PLC to ascertain their product cost so that they analyse the
profit, control the cost and examine the inventory. By adopting this system company gain some
benefits that are valuation of inventory, decisions related to acquisitions and so on.
Methods of management accounting reporting
Management accounting is also known as managerial and cost accounting, which shows
internal data obtain from financial accounting. This accounting make the internal reports which
are used by Junior management accountant of Jupiter PLC to plan, regulate and measure the
performance (Haustein, Luther, and Schuster, 2014). Accountant analyse the management
accounting reports to highlights definite activity and convert them into useful data which helps in
organisational growth. The different types of management accounting report used by the
company are explained below:
Performance Report:
Performance report is maintained to analyse the whole company performance including
employees. By using this report Junior management accountant of Jupiter PLC appraise the
performance and work of their employees also make strategical decisions for company growth.
And also by using it organisation to set criteria to improve performance level, to demonstrate
compliances and so on.
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Inventory Management Report:
Inventory Management report is created to maintain inventory and make production
process more effective. Junior management accountant of Jupiter PLC prepare this report to get
all information about materials and stocks. This report also give the accurate data of company
opening and closing stock. Some techniques which used by organisation is turnover ratio and
EOQ. It is pertain to foe appropriate methods for the analysing and evaluating financial
transaction of the company. For prepare of this report using methods are LIFO ( Last in first out )
, FIFO ( First in first out ) and weighted average cost method for proper analysation.
Account Receivable Report:
The account receivable report using as a important tool for managing cash flow when
customer credit to customers. It is prepare to find out the number of unpaid invoices that are
collecting to during to specific period and also find out to total numbers of debtors of the
company in the case of Jupiter PLC. These reports are prepare on periodic basis to find out of
non-paying invoices or debtors of the company (Lavia López, and Hiebl, 2014). With the help
of this report prepare financial statement that are helping to know actual financial position of the
company. In financial statement including balance sheet, profit and loss account. In this also
including cash flow statement, changes in equity.
Budget report
This report mostly prepared by the small business to analysis of business performance as
well as also manager analysis of their department's performance and control costs. Budgets
reports are prepared on the basis of last years expenses and incomes because it helps to
understand where to business spend and where earn. It is related to actual revenues and losses on
the behalf of prior years. If the small businesses was considerably in the budget in last years and
methods can not find to clean-cut costs. So it will help to estimate of future budgets may need to
raise to a more faithful level. But in the report can not mention incentives provides to companies.
It is including bonus fund that are giving to achieve selected financial goals (Accounting
management reports. 2018).
Benefits of management accounting system
When company applying management system so accomplish many benefits. Every things
have two sides so as well as management accounting system have merits and demerits. It
important to proper recording, smooth functioning and analysing of data and overall critical for
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business growth. The Jupiter PLC are UK based are adopted to management accounting system
and related techniques in order to present business report in systematic way to ascertain it
properly. There are several benefits related to accounting system and their types -
Types of accounting system Benefits of accounting system
Cost accounting system This system using by companies to maintain proper record of the
company because it helps to measurable to cost that are incurred
related to specific items and helpful for determine and find out
the profit of the company.
Inventory management
system
This system helping to maintain proper inventories or stock in
accurate way. With the help of this know opening and closing
stock. These are basis of the company because on the basis this
know inventories.
Job costing system With the help of this system know that particular cost and
generate income are related to specific job. That helping to
determinant the profit from the job or operation. In this system
mainly identify direct material, direct labour and overhead of the
company.
Price optimization It helps to determinant the actual price of each product of the
company. By the particular job also determine the profit as well
as operations also.
Evaluation of accounting system integration and reporting method
It is true that in the organisation to conduct business activities applied management
accounting systems and management reports. These are useful for recording and transferring the
operational information of the business (Banerjee, 2012). The company of Jupiter PLC used two
tasks relating to management accounting that are help to fill gap between the formulation,
combination and movement of performance information of the business. In the business are
presents operational information are that are showing by the methods and these are reports of the
management according to their nature. One of the type of reporting system is that performance
report are based on the overall performance of the company. In this including business
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operations and performance of employees are working in the organization in a direction of
achieving objectives and goals. Accounting receivable report is also useful for the company
because mostly information are provide by this report. In this report showing information related
to unpaid invoices, debtors and creditors. For showing overall performance related to this
prepare financial accounts of the company that are financial situation. For preparing this
including balance sheet, profit and loss account.
TASK 2
Marginal costing
It is a costing technique that is using for charged to cost units on related to variable cost
and fixed cost. It is written off to related period for the against of contribution. It is applied on
the relationship of the volume and profit output to clearly brought out (Bouten, and Hoozée,
2013).
Absorption costing
It is a method that are apply to all of the manufacturing costs are en-wrapped by the units
produced. In different words, cost of finished goods including inventory and in this involve
direct materials, direct labour and both are divided in variable and fixed. As a output, absorption
costing is also mention as full costing.
(a) Marginal costing
Calculation of net profit by using marginal costing method
Particulars Amount
Sales revenue = ( No. of goods sold * selling price = 50 * 16000) 800000
Marginal Cost of goods sold: 560000
Production = ( Marginal cost per unit * Produced units= 35*18000) 630000
closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 2000) 70000
Contribution 240000
Fixed cost 100000
Net profit 140000
Absorption costing
Computation of net income by using absorption costing method
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Particulars Amount
Sales = (Price of selling * no. of units sold = 16000 * 50) 800000
Cost of goods sold- 560000
Production = ( Marginal cost per unit * Produced units= 35*18000) 630000
closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 2000) 70000
Gross profit 240000
Less – under absorb fixed production cost 10000
Net profit/ operating income 230000
(b) In the end of September actual production unit – 19000
Closing stock - 3000
Calculation of net profit by using marginal costing method
Particulars Amount
Sales revenue = ( No. of goods sold * selling price = 50 * 16000) 800000
Marginal Cost of goods sold: 560000
Production = ( Marginal cost per unit * Produced units= 35*19000) 665000
closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 3000) 105000
Contribution 240000
Fixed cost 100000
Net profit 140000
Computation of net income by using absorption costing method
Particulars Amount
Sales = (Price of selling * no. of units sold = 16000 * 50) 800000
Cost of goods sold- 560000
Production = ( Marginal cost per unit * Produced units= 35*19000) 665000
closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 3000) 105000
Gross profit 240000
Less – under absorb fixed production cost 5000
Net profit/ operating income 235000
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After the calculation of budgeted and actual Profit and loss accounts profit are same by using
marginal and absorption costing method. In marginal costing Profit are same but in absorption
costing coming change of 500.
TASK 3
Budget
It is a estimation of the company that basis of prepare budget to forecasting of revenues,
expense, resources and cost of the company. It is prepare for the particular time to on the behalf
of future conditions (Maas, Schaltegger, and Crutzen, 2016).
Budgetary control
It is the process to controlling of management system because according to this when
company conduct business activities. So these activities are compare to related budget because in
this process compare to standard output with actual output for the future period.
Advantages and disadvantages of planning tools
Planning tools are important part of the organisation that are using to for future period
and they are as follows -
Contingency tool –
It is the tool are used for assessing to those market changes that are suddenly changes or
business delay might on a situations. These tools are describe to those factors are helping to
timely ans accurately areas are effective for humanistic. It is planned to help Jupiter PLC to
related different types of risks to moving from performance (Cuganesan, Dunford, and Palmer,
2012).
Advantages – It is designed in effective way to reduce all types issues that are suddenly origin in
the market. So this planning tool help to create strategies according to risks and also for that
difficulties are happen in future.
Disadvantages – This approach of contingency is good in practical but it is very complex related
to some situations. It is avoid the dangers of simplistic or liner thinking.
Scenario tool –
It is focuses of the Jupiter PLC according to future outlook. It is using as a method of the
organization that are using to predicate future possibilities in the future like as budgets that is
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effected to strategic objectives. It is not easy to predicate future possibilities of the organization
that's why create variety of future scenario would be possible.
Advantages – The scenario tool will have to work closely together to scenario of the business.
But in this tool found many strategies that are helping to make effective decision for up coming
period.
Disadvantages – It is critical to estimate accurate occasion related to any situation. Regarding to
future growth found several problems that are not implemented.
Forecasting tool –
In this planning tools are using internal and external factors that are for estimate of future
trends of Jupiter PLC (Chenhall, Kallunki, and Silvola, 2011). For growing of the business are
using strategies to analysis of existent data. Mostly this tool using regarding to budgetary control
that is helping to deciding allocation of budgets for up coming expenses in future. At the end of
in this tool actual outcomes are compare with estimate results.
Advantages – With the help of this tool estimated future financial information of the company. It
is helping to management for taking long term and effective decision on the basis of future
predication.
Disadvantages – In this tool apply only on qualitative approach that are any time change
according to situation. So easily no believe on that for future trends and not taken properly.
Analysis of various planning tools and their application
In Jupiter Plc using different methods of controlling of the budget using by manager are
using various types of planning tools. There are specific planning are using by company is first
one is contingency tool for controlling those risks are growing in business. It is identified that
total expenses and costs are receive by the company (Lachmann, Trapp, and Trapp, 2017). In
scenario tool predicate future risks that are rising when activities happen. In forecasting tool
prepare strategies for internal or external factors are changes according to future trends. For the
effective budget process using different type equipment that are already examined.
Evaluation of planning tools for responding to financial issues
It has been identified that Jupiter PLC faces many inner problems that are relating to
develop. In order to control several evince are connected to to the budgets of the company. For
solving to financial issues in the company using planning tools are contingency tool, scenario
tool and forecasting tool. Contingency tool is applied for the one of the reliable tool which are
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using to control to business risk for moving over all performance of the company. In forecasting
tool is using for predicate to future issues that are effected to performance and for this solution
using key performance indicator. Scenario tool predict to future trends that are suddenly changes
and creating problem to conduct business activities so for this using KPI.
TASK 4
Comparison with other organisation financial issues
In Jupiter PLC regarding to management accounting have many financial problems that
are simple found. When its rise up that time business face to critical situations, so has to manage
financial resources. In this system including several types of financial issues such as increase in
cost, customer satisfaction and decrease in income. These issues can resolved by using following
tool are as -
KPI ( Key Performance Indicator )
It is a technical tool that are using to measure the value that are establish to know how
effectively a company is achieving key business objectives. It is using by Jupiter PLC on the
various levels to evaluate their success to reaching targets (Baird, Jia Hu, and Reeve, 2011) . It
will be divides in to two parts, first one is high level that is related to the overall performance of
the company and second one is low level, that is focus on employees process related to different
departments. It is helping to Jupiter PLC for taking effective decision making. Because of in
organisation have complex nature of the structure that is helping to reduce it and cover over all
performance of the company.
Bench marking
It is the process of measuring performance of company's processes, services and products
compared with those industry are considered as best in the country. It is using to Jupiter Plc for
identifying the internal possibility for improvement (Wanderley, and Cullen, 2013). The
objective of bench marking are – (1) to determine where and what improvement are called (2)
Analysis of other leading organization to achieve higher performance level (3) after analysis
getting information are using in organization for improve performance.
Comparison between Jupiter PLC and
Jupiter PLC Cornmill limited
In this organisation based on medium sized This is a small sized manufacturing company
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manufacturing. It is adopted job costing system
to manufacturing process to evaluate direct
material, direct labour and overhead. It will
applied after that improve efficiency of the
company and calculate cost of each job and
project will be ascertained and allocated
properly. With the help of this system
identified profitable and non profitable areas in
the company.
that adopted management accounting system.
In this system taking inventory management
system that are using for the minimum
expected result. So solving problem relating to
this using benchmarking. It is help to company
to achieve set targets and achieve to best
practices. In this system using many
technologies for evaluate the objectives. In the
benchmarking taking leading company to
compare so Cornmill limited taking leading
company and compare with them. With this
compare bring effectiveness in working.
Jupiter Plc is using Key performance indicator
but it is divided in to two parts first one is
financial and second one non financial so they
are mostly prefer to financial indicator.
Because job costing system mainly related to
cost that are major by these indicators. It is
helping to solve financial problems.
Financial issues when origin in organisation
that time faces many inner problem. So for the
solution prepare budgets and according to this
follow business activities. This will helping to
keeping track record of revenues and expenses.
And after analysis compare standard and actual
outputs.
Management accounting leads organizations to achieve sustainable success
Even, if an organization is conducting all the business activities properly so financial
problems are origin due to uncertainties in the organisation. For solving these problems are using
management accounting system in the organisation for conducting properly business activities.
In management accounting, there are many systems are there along with reporting system which
helps in constant judgement of financial performance (Busco, and Scapens, 2011). Here,
sustainable success refers to total growth of all the departments in Jupiter PLC. This can be
achieved as management accounting is practical in every division whether finance or human
resource. In management accounting define Success that are directly related to proper decision
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making and reports are equipped to performance analyse. Decisions are taking on the basis
performance that are need to evaluate.
CONCLUSION
From the above report management accounting is important part of the organization that
are using in Jupiter PLC for improve to financial condition and also for effective management. It
is not necessary to acquire by all organisations but internal stakeholders want to proper
information of the company that are providing by the analysis of overall performance of the
company. It is using to prepare managing report that are shows activities of the business and with
the help of costing techniques prepare budget. For know financial issues that are related to the
company that are compare with other organisation and identify that other company how to solve
these problems.
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