Management Accounting: Importance and Use in Excite Entertainment Ltd.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................1
Scenario 1 ........................................................................................................................................1
Section A .....................................................................................................................................1
a) Difference between management and Financial accounting ........................................1
b) Cost Accounting System ..............................................................................................1
c) Inventory Management System ....................................................................................2
d) Job Costing System ......................................................................................................2
e) Benefits of management accounting systems................................................................2
Section B......................................................................................................................................3
a) Types of managerial accounting reports........................................................................3
b) Accuracy and reliability of information provided to the users......................................3
c) Integration of management accounting reporting and management accounting systems.. 4
Scenario 2 ........................................................................................................................................4
Financial report under marginal and absorption costing. ............................................................4
Scenario 3 ........................................................................................................................................5
Planning tools used in management accounting. ........................................................................5
Scenario 4 ........................................................................................................................................6
Use of management accounting techniques for solving the financial issues...............................6
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Management accounting helps in preparation of different financial reports that help in
analysing the operation and performance of the business. Present report is based on Excite
Entertainment ltd. operating in entertainment and leisure industry. Company has main operations
of promoting festivals and concerts. The objective of this report is to provide understanding
about importance and use of management accounting in Excite ltd. This report will identify the
use of management accounting reports for ascertaining the financial performance and the
different types of management accounting systems that can be used (Endrikat, Hartmann and
Schreck, 2017). The report will also evaluate different budgetary options and conclude how the
management accounting tools can be used in an organization.
Scenario 1
Section A
a) Difference between management and Financial accounting
Management Accounting Financial Accounting
 It is the accounting system that
provides information relevant for
management in making plans, policies
and strategies essential for running
business.
 Management accounting provides
information for internal use for
executives and managers.
 Management accounting has the focus
over present and on forecasts of future.
 This system of accounting focuses over
preparation of the financial statements
of corporations for providing financial
information to interested parties.
 Information provided by the financial
accounting is mainly for external users.
 It focuses over historical reports, that
belong to the events and transactions
already occurred (Granlund and Lukka,
2017).
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b) Cost Accounting System
Cost accounting is referred as an accounting form aiming to improve the profitability of
company by controlling, managing & eliminating the expenses. It is used by management for
determining cost of product, project and process that shows company where it is losing and
earning money. It is used as an integral part of budgeting process of the Excite ltd that hepls in
arriving at accurate costs.
Direct Costing – It is used in cost analysis where only variable costs are considered for making
decisions. Fixed costs are considered to be associated with time periods.
Standard Costing – It is method used for comparing standard cost and revenues from product
with actual results for arriving at variances and informing management about deviations to take
corrective measures.
c) Inventory Management System
Inventory management refers to the management of inventory within organisation. This
ensures the availability of inventory for the production and keeps track record of all the finished
goods inventory (Konopczak and Welfe, 2017). Inventory management systems are installed in
the warehouse and production units of Excite Ltd which ensures that all the inventory is
available at time without affecting its operations.
ABC Analysis
Under this method Excite ltd. classifies inventory under three categories. A reflects the
most valuable inventory, B represents less valuable but generate profits and C reflects the least
valuable but have high sales.
Just-in-time
This approach ensures that Excite ltd is available with the materials required in
production as and when required without any delay. This approach do not focus over storing
materials which helps in reducing its carrying costs.
d) Job Costing System
System involves process of collecting information about all costs associated to
manufacturing or to service job. The information helps the company available with the cost
information related to particular job which is also sometime used for reimbursements. Job
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