Management Accounting and Reporting Techniques

This document provides an overview of management accounting, including its definition, essential requirements, and different methods of reporting. It also discusses the benefits of management accounting systems and their application to an organization. Additionally, it covers the calculation of costs using cost analysis techniques and the preparation of income statements. The document further explains the purpose of budgeting and provides examples of different types of budgets.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
SECTION 1......................................................................................................................................3
1.1 Explain management accounting and give the essential requirements of different types of
management accounting systems...........................................................................................3
1.2 Explain different methods used for management accounting reporting...........................5
1.3 Benefits of management accounting system and their application to an organisation.....6
1.4 Management accounting system and management accounting integration and importance
of different methods of reporting for the success of the organisation....................................6
SECTION 2......................................................................................................................................7
2.1 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs......................................................................7
2.2 Range of MA techniques..................................................................................................9
2.3 Interpret Data..................................................................................................................11
2.4 Calculation of BEP.........................................................................................................16
PART 2..........................................................................................................................................17
3.1 Define and explain purpose of budget and prepare different types of budget................17
4.1 Compare how organizations are adapting management accounting systems to respond to
financial problems................................................................................................................24
4.2 Management Accountants solving these financial grievances.......................................27
4.3 Planning tools used in management accounting.............................................................27
4.4 Importance of variance analysis along with definition of material, labour and overhead
variance.................................................................................................................................28
CONCLUSION..............................................................................................................................28
REFERENCES..............................................................................................................................29

INTRODUCTION
Management accounting is an accounting which identifies, measure, evaluate, interprets
and then communicate the financial information of company and helps manager to check their
financial position and help in achieving the organisation goals. It helps in controlling the
activities of management and take suitable decision regarding and use resources alternatively and
efficiently. In this report, it is shown that how the accounting manager uses various techniques,
tools and adopt different accounting system so that they can maintain, track their financial
position and can also improve ,resolve the grievances and faced by the organisation which
disturbs their financial status.
The report is about a UK based UCK furniture is trading its two division and drawer
division. They provide woodwork sells the components to UCK Furniture and rest of the world.
In this report, topic like different accounting system, calculation, usage and benefits of budgetary
tools and approaches of management accounting is been discussed.
SECTION 1
1.1 Explain management accounting and give the essential requirements of different types of
management accounting systems.
As discussed above, management accounting is an accounting system which helps
company to measure their financial position, control their business activities by identifying,
evaluating, controlling and communicating the financial information to the managers. This type
of accounting generally needs to prepare reports including the expenditure and revenue
(Masschelein,Moers,2020) cash, current account, trade receivable and paybles etc. Such reports
are need to be shown to the internal investors of the company so that they are also aware of the
financial performance and position of the company so as to take decision related to further
investment effectively.
Management Accounting is a part of financial accounting only but there is a big
difference among the two. A difference table can be helpful to see the difference which is
discussed below:

Basis Financial Accounting Managerial Accounting
Usage This type of accounting is used
by the external stakeholders so
so to see the information and
make decision regarding
investment.
This accounting is used by
internal stakeholders of the
company(Guinea,2016) to
analyse and take investment
decision as per the status or
financial performance.
Laws Management accountants work
by abiding themselves through
various laws and follow the
guidelines while analysing and
making these finance accounts.
As this type of accounting is
basically used by the internal
management of the company
and that why they don't have
any regulations to be followed
by preparing such accounts.
Content Financial Accounting carries
information related to finance
only.
It is a part of financial
accounting and contains the
financial as well as non
financial information.
Management Accounting has different accounting systems which is used by the managers
wh(Nuhu,Baird,Appuhamilage,2017ich are discussed below:
 Cost Accounting System: This system is also referred as costing system or product
costing system. It helps organization to record, evaluate and report the various cost like
fixed cost, variable and semi- variable cost. This system (Guffey,Harp,2017)helps to
identify the loopholes and focus on the improvement for that, they need to take
corrective measures to make it perfect.
 Inventory Management System: It is a sequential way of placing and storing the
inventory of raw material, leftover stock, finished goods so as to use them in future. It
helps to maintain continuous flow of supply chain of goods in the organization so that

there is no shortage when there is requirement and does no affect the operations of the
business.
 Job Costing System:This system is also called as job order costing and it helps manager
to collect the information related to cost of production. This
(Nuhu,Baird,Appuhamilage,2017)type of cost includes all the expenses which is occurred
while producing and manufacturing a product. By calculating this cost manager can
analyze how much profit and losses are there while manufacturing any product.
 Price Optimizing System: It is a mathematical system which helps company to decide
the price for their product. This system help managers to make assumptions to set the
price of product. That is affordable enough and customer is (Cokins,2016)also ready to
pay the settled amount to buy it. This system helps company to increase their profit
amount.
1.2 Explain different methods used for management accounting reporting.
Accounting report showcase the financial status of a company in a period of time by
recording all the business transaction so as to find out the revenue generated by company. The
report helps to s them(Quattrone,2016) to take flexible and strategic decision for so as to achieve
the organisation goals efficiently.
There are different methods used by accountants for management accounting reporting are
detailed below:
Job Cost Report:This report depicts the total cost incurred in completing assigned work.
Connect catering services are preparing this report so that they can avoid any type wastage while
completing their task or projects and focus more towards the more revenue generating zone and
also towards less revenue generating zone,so as to improve them more and can increase their
profits and attain their organisation motive.
Order information Report: This report is prepared with a motive of analysing and judging the
on going trends of business so that they can work by following an applying the trends to
maintain effectiveness and efficiency in the organisation. This report contain the information of
the orders which is received by the company. In context to UCK Furniture the management

prepares a order information report so that they can keep a record of it and check the order
history if required in near future.
Performance Report: In this report, the performance of each ad every employee is been stated
to check their activities, task they are performing and monitor their performance. It helps to
improve it if they are lacking behind in some cases and take some steps to solve it and increase
the employee working efficiency to boost the overall (Phornlaphatrachakorn, 2019)performance
of organisation. UCK Furniture prepare this report to track the performance of tier workers and
check their working efficiency.
Budget Report: This report helps the company entities to know, measure and control the cost of
an organisation. The budget helps in identifying the approximate income and expenses which
could be there in the organisation so that they can predict their profits for that period of time.
UCK Furniture uses this report so as to predict their approx income and expense and then use the
resources accordingly (Clarke,2019).
1.3 Benefits of management accounting system and their application to an organisation
There are many benefits like high productivity, better flow of inventory, effective pricing
decision and better internal management. All these are important in respect to an organisation for
the purpose of success. Updated level of information through management accounting help in
effective decision making and bring coordination in departments.
1.4 Management accounting system and management accounting integration and importance of
different methods of reporting for the success of the organisation
There is direct level of integration between management accounting system and
management accounting concept. Not possible to apply anyone without the help of each other.
Systems are effective in direction of getting data and results while accounting concept is
important for implementation of systems. So, it is clear from the point that effective
implementation of system is possible when able to following accounting principles.
There are many importance’s of reporting that aid success of an organisation like
effective decision making, better planning, better inventory control, better cost control, better
internal management. All these aid in success through improvement of productivity and
profitability.

SECTION 2
2.1 Calculate costs using appropriate techniques of cost analysis to prepare an income statement
using marginal and absorption costs.
1. Preparing income statements:

2.2 Range of MA techniques

2.3 Interpret Data
Interpretation: As per the calculation it is analyzed that there are preparing income statement
with the application of marginal costing method and absorption costing. Along with produce cost
card and get profit 75000 & 64500 January and February by marginal method. Moreover, 77000
and 63500 in Jan and Feb respectively. There are calculated profitability in case of absorption
and fixed cost.

(b)
Date Purchases Purchase Cost
Cost per
unit
Opening 50
15-May 100 1000 10
18-Aug 200 2200 11
19-Sep 130 1800 13.84615
FIFO

Opening 50
Purchases
15-May 100
150 10 1500
18-Aug 200
350 150*10 + 200*11 3700
19-Sep 130
480 3700 + 130 *13.84615 5500
Cost of Goods Sold
1
0
7
0
0
LIFO
Opening 50
Purchases
19-Sep 130
180 13.84615 2492.308
18-Aug 200
380 2492.308 +200*11 4692.308
15-May 100
480 4692.308 + 100*10 5692.308
Cost of Goods Sold 1
2
8
7

6
.
9
2
FIFO
Opening 50
Purchases
15-May 100
150 10 1500
18-Aug 200
350 350*[(10+11)/2] 3675
19-Sep 130
480 (3675/350 + 13.84615)* 480 11686.15
Cost of Goods Sold
1
1
6
8
6
.
1
5

2.4 Calculation of BEP

PART 2
3.1 Define and explain purpose of budget and prepare different types of budget

Budget: It is an microeconomics concept which refers to an approximation of income and sales
for a period of time. It is a financial planning which is planned so as to measure how much an
organization has incurred profit and losses in an year. It is been systematize and evaluated on
regular basis.
Budget are prepared on duration basis:
1. Short term: In this the budget is prepared usually for 2 to 6 months or maximum for an
year.
2. Long term: Budget is prepared for longer duration for more than an year. UCK Furniture
also prepare long term budget for their company.
Budget majorly has two categories:

 Operating Budget: This budget estimates the approximation of all a business expenses
and income like maintenance repairs, bills etc. which occur from the daily activities on
the routine business activity.
 Capital Budget: This budget estimates the money which is required in the maintenance
of fixed assets of a business like plant, machinery etc.
Except these, there are various budgets which is used by UCK Furniture for estimating their
income and expenses so as to(Alyousef,Mickan,2016) measure their profitability which are
discussed as below:
 Cash Budget: It is the approximation of the cash inflows and outflows of a business
organisation for a period of time. This helps the company to identify that company has
efficient, required money to carry on their day to day operations to maintain the
productivity.
 Sales Budget: It is a financial design which help to company to allocate their resources in
such a manner that they can be able to achieve the desired sales target. The main motive
of preparing this budget is to make best use of resources in alternatively so that they can
gain more income by using less resources ad generating more sales this can lesser their
expenditure and maximize their income.
Advantages and Disadvantages of these budgets.
Budget Advantages Disadvantages
Cash budget  It helps organisation to
prevent from
overspending of money
this make money more
resourceful
 It does not involve any
additional cost and they
are accepted almost
everywhere in an part
of the world.
 This budget requires
several documents
because is necessary to
keep record of every
transaction and this can
create danger of theft.
 It limits the raise of
debt amount and this
unable to build a credit
profile of business.
Sales budget  It helps management to  It requires a lot of time

plan the overall budge
of the company.
 It helps in using the
resources in
alternatively, and
allocate the resources
for all the departments
by determining the
sales.
and effort to know the
actual sales as it
includes
editing,modifying, and
then re work to know
the actual sales.
 Sometimes the budget
prepared by the
management can be
unrealistic which is not
accepted by the top
level or executives.

4.1 Compare how organizations are adapting management accounting systems to respond to
financial problems.

Financial problems of organization arises when a company don't have sufficient fund to meet
their with their expenditures for day to day activities. This situation arises when there is no
proper budgeting takes place,they have high operating cost, due to economic crisis,or even ehen
the company is facing high debt.
Some of the financial issues are discussed below:
 Unnecessary High Cost: There are several cost which occurred unwanted and this
increases the overall cost of the organization and it creates disturbance in the financial
estimations. (Al-Sayed,Dugdale,2016). This reasons creates increment in the cost and this
decrease the profits of management. UCK Furniture will lead to certain problems as it
leads to issues in the management due to high cost.
 Decreasing sales earnings: There are various reasons which decreases the sales of an
organization they are high competitive market,improper pricing of product and

services,shaky market strategies etc. This tend to decline the growth of business and
company need to face losses or break even situation will occur.
In corespondent to that, there are various techniques which can be used by managers to resolve
these financial problems which are illustrated as:
 Financial Governance:There are various policy, rules and procedure followed in the
accounting. It describe the track of collecting, managing, monitoring and lastly
monitoring the financial status and required information of company. It tracks the
operations, financial statements, manages the performance of firm.
 Key Performance Indicators:These are the indicators which presents the company
objective which is to be achieved in a point or period of time. These are the critical point
which helps to move towards the path of success. It helps in strategic decision making, so
that the mangers and employees both complete their task in well manner and increase the
revenue.
 Benchmarking:It refers to analyse and measure of the product and services of a
company with the standard so as to find out the difference among them and fulfil it by
improving the areas which are lacking so that they can meet with the standard set. UCK
Furniture set standards of quality, cost to measure the benchmarks so that they can meet
the expectation with the actual.
Here is a tabular differentiation chart between two companies which shows how these company
to overcome from the financial issues:
Basis Ginger Jar Food UCK Furniture
Issue Identification
Techniques
The company use
benchmarking technique so
that they can evaluate and
monitor their actual
performance with the standard
one and helps to improve it
and increase their profits.
The company use budgetary
control technique so as to
decrease their unnecessary cost
and increase their profits by
reducing these cost.
Management Accounting The company used The company used costing

System used competitive advantage as their
management accounting
system so that they can
maximise their market share.
For this the company needs to
serve their product and
services at affordable cost and
give them price benefits to
attract more people an f
increase market share.
system of management
accounting so that they could
identify, evaluate, monitor the
cost and help management to
resolve the issues and
recognize the approximation of
the increased cost.
Financial Grievances They major issues faced by
this company is they are
continuously increasing their
explosion in various localities
without taking market
attraction and share n
consideration.
They faced decreasing sales
issue as their competitor has
set prices lower than them so
they have the power to attract
more people towards their
services.
4.2 Management Accountants solving these financial grievances
Management Accountants have more skills, knowledge and experienced in this field so they
know how to solve such financial problems which are arising in the organisation. The manages
has the quality of managers and leader also and they plan strategies according to their work so as
to perform their task smoothly. For this, they take help of these tools and techniques like
budgetary control, benchmarking, key performance indicators to improve their financial status of
the company.
4.3 Planning tools used in management accounting
Planning tools are another essential management accounting approach. Main profitability
metrics like as the current ratio, quick ratio and others are calculated and the results to assess a
corporate growth and, if necessary, to identify what steps should be done to correct weak ratios.

As a result, every management tool used in management accounting aids in increasing business
productivity and minimizing financial challenges in order to be successful.
4.4 Importance of variance analysis along with definition of material, labour and overhead
variance
Variance analysis is the technique of identifying gap in between actual and standard
performance. There are lots of benefits associated with the point of variance analysis such as
improved employee performance, better development of policies, identification of gap on time
and application of standards properly at workplace. Material variance is about identification of
gap in material aspects same it is determined in respect of labour and overhead charges. Here,
main purpose is to improve functioning and reducing gaps.
CONCLUSION
From this report,it is been evaluated and analysed that in company,management
accounting has big role in maximizing the efficiency and effectivenesses of the organisation. Its
tools and methods helps to increase the sales and improve their financial position, and thus this
has positive impact on its productivity and profitability. It helps organisation to focus towards
growth and able to achieve its prime objective. The company operates in a compound, lively and
cut throat environment so these tools are required the most to maintain the flexibility in
organisation operation and position in the competitive market.

REFERENCES
Books and Journals
Al-Sayed, M. and Dugdale, D., 2016. Activity-based innovations in the UK manufacturing
sector: Extent, adoption process patterns and contingency factors. The British Accounting
Review. 48(1). pp.38-58.
Alyousef, H.S. and Mickan, P., 2016. Literacy and numeracy practices in postgraduate
management accounting. In Multimodality in Higher Education (pp. 216-240). Brill.
Clarke, B., and et. al., 2019. Strategic management accounting: CPA program.
Cokins, G., 2016. The top seven trends in management accounting. Edpacs. 53(4). pp.1-7.
Guffey, D.M. and Harp, N.L., 2017. The journal of management accounting research: A content
and citation analysis of the first 25 years. Journal of Management Accounting Research.
29(3). pp.93-110.
Guinea, F.A., 2016. Study regarding the creative accounting techniques in management
accounting. The Audit Financiar journal. 14(142). pp.1136-1136.
Masschelein, S. and Moers, F., 2020. Testing for complementarities between accounting
practices. Accounting, Organizations and Society, 86, p.101127.
Nuhu, N.A., Baird, K. and Appuhamilage, A.B., 2017. The adoption and success of
contemporary management accounting practices in the public sector. Asian Review of
Accounting.
Phornlaphatrachakorn, K., 2019. Influences of strategic management accounting on firm
profitability of information and communication technology businesses in
Thailand. International Journal of Business Excellence. 17(2). pp.131-153.
Quattrone, P., 2016. Management accounting goes digital: Will the move make it
wiser?. Management Accounting Research. 31. pp.118-122.