Financial Governance and Management Accounting

This assignment explores the importance of effective management accounting systems in addressing business challenges. It highlights how SMART objectives can improve employee clarity and performance. The analysis includes various financial ratios for two companies (UCK Furnitures and UCK Woodworks), demonstrating their application. Furthermore, the document discusses the benefits of management accounting in strategy development, decision-making, and overcoming financial issues. Tools used in planning are also examined, emphasizing their role in identifying future problems and formulating effective business strategies.

Management Accounting

Table of Contents
PROJECT 1......................................................................................................................................1
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
1.1Management accounting and essential requirement of different types of management
accounting systems.................................................................................................................1
1.2 Different methods which are used for management accounting reporting.......................3
1.3 Benefits of management accounting systems ..................................................................4
1.4 Integration of management accounting systems and reporting with organisational process 5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
...............................................................................................................................................8
PROJECT 2......................................................................................................................................9
INTRODUCTION...........................................................................................................................9
TASK 1............................................................................................................................................9
1.1 Calculation of cost using right technique of cost analysis...............................................9
1.2 Range of management accounting techniques for produce a financial report................10
1.3 Advantages and disadvantages of absorption and marginal costing methods................10
TASK 2..........................................................................................................................................11
2.1 Advantages and disadvantages of various planning tools..............................................11
2.2 Estimate the expenses.....................................................................................................13
2.3 Purpose of a budget........................................................................................................13
TASK 3..........................................................................................................................................14
3.1 Adaptation of management accounting system to respond financial problems.............14
3.2 Management accounting system improve financial performance of firms....................15
3.3 Planning tools used in management accounting.............................................................16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17
.......................................................................................................................................................17

PROJECT 1
INTRODUCTION
Management accounting is broad concept which includes both financial and cost
accounting. It includes the process of collection, evaluation and interpretation of the accounting
information which enhance decision making power of manager. Through preparation of
different financial and cost accounts ascertain both financial and non financial information which
provides opportunity regarding improving the existing performance of employees through proper
guidance. It helps the manager regarding formulation of the policies and strategies which helps
in effective operation of day to day to activities. UCK Furniture provides their products and
services in UK. They planning to provide training course to interns to provide information
regarding management accounting principles (Christ and Burritt, 2013).
In the present report explain about, essential requirement of different types of
management accounting systems, different methods which are used for management accounting
reporting, benefits which are attained by the manager of UCK Furniture through adoption of
management accounting systems and integration of management accounting systems and
reporting with organisational process.
TASK
1.1Management accounting and essential requirement of different types of management
accounting systems
In today's business environment, management accounting is known as an important tool
for business organisations as this help provide an opportunity to identify, collect, analyse and
communicate the data that is important for firms to achieve set goals. Number of management
accounting methods are there which are used by firms to collect information relevant for
business such as cost accounting, inventory control, job costing and various methods of
managerial accounting. All these methods help firm in collect both financial and non financial
data which guide managers in control business activities and increase effectiveness of decision
making process (Macintosh and Quattrone, 2010). Collected information support management
in monitor business operations and at the same time help in forecast future sales and risk involve
in business operations. Collected information support managers in formulate financial reports
and budgets which support in achieve set objectives.
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Under concept of financial accounting managers prepare income and financial statement on the
basis of past information available. One of the main reason behind preparation of these accounts
is that it provide direction to all staff members to perform their job roles in an effective manner.
Various type of management accounting systems
Concept of management accounting is very important for enterprise as this help managers
in take informed decision which help firm in achieve its set goals and objectives. Various type of
management accounting systems art there which support the business activities. One of the main
benefit of this is that it bring coordination among various business functions. Different type of
management accounting systems is give under following points:
Job costing: This is one of the most popular and effective system of management
accounting. Basically this is used by firms to record the cost of a job. This can be use by UCK
furniture to remain inform about the cost related with each job. Both indirect and direct cost is
consider by this system. One of the main benefit of this method is that it help in ascertain the
profits generated form a specific job at workplace.
Inventory accounting: This system is tool by firms to value the inventory available.
Mainly inventory of enterprise is divided into three main categories known as raw material, work
in progress and finished goods. This system help firm in maintain a record of inventory which
help in reduce the cost related with storage of inventory. Further, it help in utilise all resources to
an optimum level (Nandan, 2010).
Price optimisation system: This tool of management accounting is used by firm to
maintain the prices of its products. One of the main benefit of this is that it help firm in generate
large number of profits and at the same time help in offer quality products to its customers. With
help of this company can collect information about the fluctuations take place in prices.
Cost accounting system: This system can be used by UCK furniture for control the extra
expenses which take place during perform various functions at workplace. It support manager in
identify the production cost and help in determine the profits of company.
Managerial accounting: This tool is use by firm for make informed decisions. It help
manager in control and monitor day to day activities of business.
Requirements of management accounting system
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Basically requirement of management accounting is significant for three major areas
known as risk, strategic and performance management. Use of this system under these areas is
given below:
Strategic management: Under this manager collect information about activities of
various department as this help manager in formulate better and effective strategies to achieve set
goal. Further, this help management in guide workers to work effectively at workplace.
Risk management: In this, relevant data related with various reports is collected by managers of
UCK furniture. This help in plan future decisions ion basis of available information. Further this
help in formulate contingency plans (Burritt and et. al., 2011).
Performance management: With such kind of data various budgets related with
management of company's activities is prepared. These budgets are used as a standard and actual
performance of employees is evaluated with standard one.
Difference between management and financial accounting
Basis Management
accounting
Financial accounting
Purpose One of the main
purpose of use
management
accounting is to
improve
decision making
process of firm.
Concept of financial accounting
consists preparation of financial
accounts that indicate financial
performance of firm to its
stakeholders and various
external parties.
Users This system is
used by the
parties which
work within the
firm.
This is use by third parties for
make investment decision.
1.2 Different methods which are used for management accounting reporting
Report: This is known as written document that contain data related with various
activities of business. One of the main benefit of this is that in enhance understanding among
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various business functions. It is very essential to prepare various reports such as performance
management, account receivable report, job cost report and many more.
These type of report contain financial and non financial data related with business activities.
These reports used by parties to bring and maintain coordination among various business
activities. With effective use of reports enterprise can manage risk and achieve its set targets in
adequate manner. Various type of reports are as follows:
Accounts receivable report: This report of enterprise contain data about the unpaid
invoices of customers and unused credit memos. One of the main benefit of this is that it support
firm in manage all its debtors in an effective manner. This can be use by UCK furniture. This
report help management in identify the time given to debtors to pay to back their outstanding
amount. Further, this help firm in formulate better policies related with collection of debts in
specific time. Effective use of this approach provide large number of benefits to firm.
Budget report: These type of reports are prepared on basis of future transaction of firm.
One of the main feature of this report is that it guide employees in complete the assign work in
an effective manner. Further actual performance of employees is compared with the standard
one. This guide manager in remove extra expenses and increase efficiency of business activities.
Inventory report: As the name implies, this type of report is formulate by manager to
keep a control over the inventory. Further this help in identify the variation take place in
inventory and suggest firm in maintain a optimum level of stock. Main advantage of this is that it
help in allocate raw material to production department for effective production of product to
satisfy the needs of customers. Further this help in reduce wastage of raw material (Chen and et.
al., 2011).
Job cost report: This report make the management inform about the cost related with a
specific job at workplace. Further that expenses is compared with the revenue generated by that
job at workplace. Major feature of this is that it help firm in identify the profitable and non profit
jobs of company. It also assist in reduce unnecessary cost related with job.
1.3 Benefits of management accounting systems
There are large number of benefits are achieved by the management of UCK Furniture
through implementation of the different management accounting systems which are mentioned
below:
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Job costing system:
 This tool of management accounting help firm in estimate different type of cost take
place during manufacture process.
 This help in avoid duplication of work and enhance efficiency of production process.
 Further this help in maintain the quality of work and action taken by employees at
workplace.
Price optimising system:
 This system, provide opportunity to manager to identify the perception and attitude of
customers towards the final price of company's product.
 It help in generate large amount of profit and offer quality products to customers.
 Segmentation of customers can be carry out by which with help of this (Goyal, 2014).
Inventory management system:
 This system help management in enhance the accuracy of inventory management and
improve inventory orders.
 It save both time and cost of company.
Cost accounting system:
 This system assist manager in analyse the efficiency of process and methods use by
company to improve the performance of employees.
 It help in reduce the fixed prices.
 This help manager in collect relevant data related with future decisions of enterprise.
1.4 Integration of management accounting systems and reporting with organisational process
Today, every enterprise do number of efforts to enhance productivity of company and
enhance performance of employees. Implementation of management accounting system and
reports help firm in achieve the same. These provides provides useful information to manager
which enhance effectiveness of decision making process
Types of reporting Integration of system with process of
enterprise
Accounts receivable report Integration between preparation of account
receivable report and different enterprise
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functions can be achieve with help of amounts
due to debtors in a specific period of time and
by formulate strategies related with collection
of amount in order to make it more effective.
Monitor the process and policy on continuous
level is very essential for attain accuracy and
flexibility.
Performance report Integration of performance report with
business activities of UCK furniture support
manager in decide future actions of firms to
achieve set goals and objectives. All this not
only increase efficiency of business activities
but at the same time increase profits of firm.
Job cost report Integration of business activities of UCK
furniture with job cost report help firm in reach
its objectives with a specific job. Further,
formulation of cost report assist enterprise in
set right price for the product and better satisfy
the needs of its customers (Van der Stede,
2011).
Inventory reports With help of integration of these report with
business activities help firm in maintain an
optimum level of stock which reduce the cost
related with inventory management. Further
this increase effectiveness of inventory level.
For this EOQ is a model which support firm in
do management of stock. All these are the
major types management accounting system,
integration of all system with business
activities help firm in achieve set objectives.
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CONCLUSION
It has been concluded from the above report that, concept of management accounting
system enhance effectiveness of decision making process of firm. It help manager in collect and
analyse relevant information related with various function of business. This provide guidance to
employees so they can perform their job roles at workplace in an effective manner.Further
various report and system support enterprise in manage an optimum amount of stock and this
decrease the cost related with inventory management. Further, it remove all the unnecessary
obstacles and issues arise in production process and help firm in offer quality products to its
customers at affordable prices. With effective integration of management accounting system with
business activities help management in reduce unnecessary obstacles.
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REFERENCES
Books and Journals
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PROJECT 2
INTRODUCTION
Management accounting is the process of examine business activities and cost to
formulate internal financial report, accounts and records and all this aid effectiveness in decision
making process in achieve final goals (Stadler, 2013). Further, it is known as the act of making
sense of costing data and after that translate that information into useful data for management
and higher authority at workplace. Various type of cost are there which take place in business
process such as absorption costing and marginal costing. Collection of data through various tools
of management accounting help manager in take informed decision and formulate better policies
for business activities. Effective strategies help firm in handle various issues and contribute in
success of enterprise. UCK furniture, a firm which offer different type of furniture and various
other services to its customers is taken under this report for study. Concept of marginal and
absorption costing with its merits and demerits is all given in this report.
TASK 1
1.1 Calculation of cost using right technique of cost analysis
Cost is known as the amount which take place in an enterprise during carry out business
activities. Determine the final cost include examination of materials, risks, resources, time and
resources consumed during production process.
Marginal costing: This is one of the cost effective method and this is used by firms in
allocate variable cost to various cost units and the fixed cost which occurred during production
are write off and not involved in the final cost (Stair and Reynolds, 2013). Mainly this method is
used by firms to determine the impact of profitability due to variation in production level.
Absorption costing: This is another method of cost and this consider both fixed and
variable cost take place in enterprise during production process. Various costs are consider by
firm under this for monetary evaluation of products such as direct labour, direct material, fixed
and variable overhead cost.
Marginal costing Absorption costing
Under this costing method only variable cost is
consider by managers and fixed cost is
In this method of costing both fixed and
variable cost is consider by management.
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neglected by management.
In this inventory is valued at variable
production cost.
Inventory is valued at full production cost.
PARTICULARS January February
Sales (35 per unit) 315000 402500
less:
Cost of Production (12+8+5) 275000 237500
variable selling overheads (1 per unit) 11000 9500
variable cost 286000 247000
Contribution 29000 155500
less:
fixed manufacturing overheads 20000 20000
Fixed Admin & selling cost 2000 2000
total fixed costs 22000 22000
NET INCOME AS PER MARGINAL COST 7000 133500
NET INCOME AS PER ABSORPTION COSTING:
Sales (35per units) 315000 402500
less:
Cost of Production (12+8+5+1.82) 295020 254790
Gross Profit 19980 147710
LESS:
Fixed and variable cost:
variable sales overheads (1 per unit) 9000 11500
Fixed selling cost 2000 2000
Total costs 11000 13500
NET INCOME AS PER ABSORPTION COSTING: 8980 134210
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1.2 Range of management accounting techniques for produce a financial report
It is ascertained that marginal and absorption, both costing methods help enterprise in
analyse the cost of the product (Onyon and et. al., 2014). At one side marginal costing method
help firm in identify the cost of product on basis of variable cost take place. On the other hand,
absorption costing assist in examine the cost of product on basis of both fixed and variable
elements. All these methods assists firm in increase efficiency and profits.
1.3 Advantages and disadvantages of absorption and marginal costing methods
Marginal costing: Merits and demerits of marginal costing is given under following points:
Merits:
 It highlights the relationship between price, volume and cost of product.
 Complex situation such as under or over absorption does not take place. This indicate the impact of sales and production policies of firm.
Demerits:
 Historical or past information is take by management for take future decisions. One of the main disadvantage of this costing method is that it does not consider fixed cost
during calculate the cost of production.
Absorption costing: Following are the main advantages and disadvantages of absorption costing
Advantage:
 All type of cost such as variable and fixed is consider under this for determine the final
cost of production. This provide more accurate picture of firm's profitability.
Disadvantages:
 This method is not an effective one for analysis of cost.
 Sometimes, it become difficult to identify the variations which take place in cost during
different level of production.
TASK 2
2.1 Advantages and disadvantages of various planning tools
Budget: This is a written financial plan that is used by organisation to determine income
and expenses of a financial year (Simkin, Norman and Rose, 2014). Mainly this is prepare by
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firm for distribute available funds in an effective manner to complete all business operations.
Basically, budget is prepared for five year by consider all activities of business.
Budgetary control: This aspect is related with effective use of various type of tools and
methods to control usage of funds in different areas of company. This help manager in allocate
funds to various functions of enterprise in an adequate manner which ensure completion of
business activities.
Process of budgetary control involve the following steps: Discuss with manager for formulate better strategy: This is the first step involve in the
process of budgetary control (Smith, 2017). Manager discuss with other members of
departments for implement strategies in an effective manner and to complete business
activities in time. Record the actual manager: In this manager compare the actual performance of
employees on basis of part data. Compare of actual with the planned: Comparison of various variable of cost and
budgeted cost of sales in done by manager in this. It help in examine the performance of
firm. Determine difference: This step is related with examine the variations between desired
and actual performance of company (Haimes, 2015). For examine performance in a
better way manager can appoint an employee who can ascertain the main reason behind
gap. Further, manager remain responsible to take right decision to solve issue so firm can
achieve its set objectives. Respond immediately: This is the last step involve in the process of budgetary control, in
this manager examine the performance of employees on basis of available information for
complete business operations (Holsapple, 2013). For complete this process of budget
various tools of planning are there which can be used by manager of UCK furniture
which are as follows:
Forecasting tools: Under this different approaches are used by managers to maintain
sustainable position of firm in market. Various elements such as customer's demand, wages of
labour and price of final products is all determine under this. Advantages: This support manager in identify the future challenges which a firm may
face during implementation of various strategies.
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 Disadvantages: It is not possible that assumptions always leads to profit in business.
Scenario analysis tools: This tool is used by enterprise for identify the uncertainties
which may affect the business operations (Hoye and et. al., 2015). Main benefit of this is that it
help firm in achieve its set goals and objectives in an effective manner. Advantages: Contingency plan is develop by manager which help enterprise in manage
the risk face by firm and contribute in its success.
 Disadvantages: Poor quality and relevant data does not provide expected outcomes to
firm.
Contingency planning tools: These type of tools help enterprise in face difficult
situations. Advantages: It help in minimise the cost of business activities.
 Disadvantages: In this manager face number of difficulties.
2.2 Estimate the expenses
Calculation of variable cost per unit using identified high and low activity level:
Total cost= (Expenses of high activity- expenses of low activity)/(Highest activity hours spent -
lowest hours spent)
Total expense per units = (9820-7410)/(795-505)=8.31
Total expenses for July:
650*8.31=5401.5
For August:
750*8.31= 6232.5
2.3 Purpose of a budget
Cash budget Amount
Particulars September
Opening balance 9000
Cash sales 39000
Sale on account 5648
Total Cash collected 53648
Purchase -16800
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Selling and administration
expenses -13000
Equipment cost -18000
Dividend paid -4000
1848
Add: minimum cash balance 5000
Expected cash in the end of
September month 6848
TASK 3
3.1 Adaptation of management accounting system to respond financial problems
UCK Operate on a large level and provide its services to various customers in United
Kingdom. In all this firm face different type of financial issues. Major issues arise in areas of
operating, financial and investing operations (Kanellou and Spathis, 2013). One of the min
reason why management face all these issues is due to ineffective implementation of various
system of management accounting. All this create issues before enterprise in recording relevant
information related with various business functions. Due to these situation, management is not
able to take informed decision (Kouvelis and Yu, 2013). Various tools such as benchmarking,
performance indicators and financial governance is use by enterprise. These method guide
employees in perform their job roles in an effective manner.
Financial issues in UCK furniture Level of profit: This is one of the major issue which is face by UCK furniture, due to
ineffective performance of various business function, firm is unable to generate adequate
amount of revenues.
 Quality of product and service: Quality of product and service offer by UCK is one of
the main reason behind probability level of firm. Ineffective management approaches is
one of the main reason behind this.
Tools to overcome financial problems KPI(Key performance indicators): Mainly performance indicators are divided into two
category known as financial and non financial (Bennett and James, 2017). Profit and loss
accounts are come under category of financial indicators while factors such as worker's
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participation in business activities and customer relations is come under non financial
indicator. Benchmarking: Under this manager set performance standard for every employee and
after that compare their actual performance with standard one to identify the gap.
UCK furniture UCK woodwork
UCK furniture face issues of extra expenses
during it production process. Concept of
financial KPI support enterprise in understand
various expenses. All this assist manager in
control extra expenses which enhance profits
of enterprise.
Firm operate on a global level and offer its
service in various areas. Various eternal factors
are there which impact of business operations
and also impact on profits of company. In this
situation, financial governance help enterprise
in operate in an effective manner.
It is discovered by management that various
employees are confuse during perform their
job roles and are not clear about their final
objectives. In this kind of situation, manager of
company decide to growth the concept of
SMART objectives for remove confusion from
mind of staff members.
Standards can be set by manager of firm for
employees as this will improve their overall
performance. Benchmarking can be used by
firm for this.
Ratios Formula UCK furnitures UCK woodworks
ROCE(Return on
capital employed):
Operating profit/Capital
employed*100
5890+3600/23100+
31930*100
=9490/55030*100
=17.24%
6955/81230*100
=8.56%
Assets turnover Revenue / Net assets 13000+24900/2310
6+31930
=0.68 times
8150/81230
=0.100 times
Operating profit
margin
Operating profit / sales *100 9490/13000+24900
*100
6955/81230*100
=8.56%
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=25.03%
3.2 Management accounting system improve financial performance of firms
One of the main benefit of management accounting system is that it improve financial
performance of business (Haimes, 2015). This can be better understood by the points given
below:
 It support in development of strategies and policies which contribute in sustainable
development of firm.
 These systems assists is prepare report which provide various useful information to
manager and increase effectiveness of decision making process.
3.3 Planning tools used in management accounting
One of the main benefit of various planning tools is that it support enterprise in identify
the problems which may be faced by firm in future (Galliers and Leidner, 2014). All this
collected information assist manager in formulate business plans and policies for achieve set
objectives which contribute in development of business firm.
CONCLUSION
From the above project report, it can be concluded that effective use of management
accounting system help enterprise in overcomes with all issues and major business problems.
Number of tools are there which support enterprise in respond to financial problems take place in
business process. Various costing methods are there which can be used by manager of UCK
furniture to determine the final cost of product and to better satisfy the needs of its customers.
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REFERENCES
Books and journals
17