Case Study On Management Accounting - Oakwood Guest House UK

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
Table of Contents.............................................................................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Explaining management accounting and analyse about the essential requirements of
various systems in the Oakwood guest house..............................................................................1
P2Explain various types of management accounting reporting..................................................4
TASK 2............................................................................................................................................5
P3 Income statement preparing using marginal and absorption costing.....................................5
Differentiate among marginal or variable as well as absorption costing approaches..................7
P4Explaination on advantages and disadvantages of various types of planning tools of
budgetary control.........................................................................................................................8
TASK 4..........................................................................................................................................10
P5 Different kinds of tools and systems of management accounting for reducing financial
problems within Oakwood guest house.....................................................................................10
CONCLUSIONS...........................................................................................................................11
REFERENCS.................................................................................................................................12

INTRODUCTION
Management accounting is the key aspect of each business entity which helps to the
entrepreneur for make the firm more successful and fulfils several objectives which are framed
while existing in the industry. It is a system or process at where the management department can
prepare several kinds of the reports, make interpretation, analyse as well as conclude. By this
different types of appropriate decisions are to be adopted along with framing effectual plans. The
current case study is explained about the management accounting by taking base to a small
business firm which operates in the hospitality sector of the UK. The small firm chosen is
Oakwood guest house which provides food and accommodation both the services to its
consumers. The study helps to the reader to understand concept of management accounting and
its different tools and systems. Moreover, different reports are to be analysed in the current study
which are used by the selected business in order to management accounting reporting. In
addition to this all, marginal and absorption costing techniques are to be explained through the
reports which are adopted to prepare profit and loss statements. In the third task different
techniques of tools of budgetary control are to be shown in this report. At the ending part of it,
those kinds of systems are analysed which are most supportive for the Oakwood firm in order to
reduce financial constraints from the workplace.
TASK 1
P1 Explaining management accounting and analyse about the essential requirements of various
systems in the Oakwood guest house
In the financing and accounting area, there are many types of concepts are available
which are used by the company for run the overall business in smooth way. In this there are key
concepts of the accounting which are mostly used by companies are like as management and
financial. These both are used by the Oakwood firm to analyse business performance but for the
internal and external purposes (Cheng, 2012). Management accounting is the key concept which
is the mostly used for the internal purposes and objectives. At the workplace of the firm different
types decisions has to made by the management which are taken with the help of respective
aspect of the accounting process. It is the most significant for the selected entity to take decisions
that within the manufacturing and operating process there are what is necessary to buy or which
kinds of materials has to make. Moreover, higher the use of management accounting aspects the
business entity can forecast those types of data as well as informations which are the highly
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necessary for the future FY. Each and every firm whether it is of the hospitality industry or any
other make always investment in any project or avenue. In this concept when the company such
as Oakwood guest house make the investment then able to assess rate of return of the sum of
money which is put at the initial level with the help of management accounting systems
(Richardson, 2012).
In the management accounting concept many types of systems are there which supports
to the Oakwood company for run and operate the overall entity in effectual manner . According
to the current study the chosen business entity uses some management accounting systems which
are described such as follows:
Inventory management system- The method and system in which the Oakwood entity uses the
stock level in highly effectual manner for improving sales and revenue level. It is the system and
process of moving and converting the raw materials into the finished products and services
(Cohen and Karatzimas, 2013). It is highly compulsory for every organisation to manage as well
as control over the inventory to make the business profitable. When there are higher the stock
level is available then it leads to reduce total stock turnover ratio which is negative and adverse
situation for it. There are various kinds of methods which are available in the stock management
criteria which are like as just in time, total quality management, six sigma, lean management etc.
On the basis of just in time method the Oakwood entity can produce the services of
accommodation and food products at the right time and before deadline. In continuous to this,
along with right time production it can manage stock level and deliver the services as well as
products at the right time in the appropriate quantity.
Apart from this all it is necessary to calculate value of the stock which it has in the firm
currently for which there are some methods and ways are available in the management
accounting. The methods which are implemented by the Oakwood guest house for evaluating
stock value are such as weighted average technique, last in first out (LIFO) and first in first out
(FIFO). By using such kinds of all the techniques actual value of the inventory is identified and
further decisions are taken for utilising it (Kastberg and Siverbo, 2013). Optimum as well as
higher the utilisation and uses level of the inventory supports the Oakwood to make more sum of
profit. When there are higher the stock level is available then it leads to reduce total stock
turnover ratio which is negative and adverse situation for it. There are various kinds of methods
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