Management Accounting Activities: Systems, Reporting, and Planning Tools

This report discusses different management accounting systems, reporting methods, and planning tools used by organizations to respond to financial problems. It also evaluates the integration of MA systems and reporting within organizational processes. The report includes an income statement based on absorption and marginal costing and a statement of cash flows.

MANAGEMENT
ACCOUNTING
ACTIVITIES

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
LO 1.................................................................................................................................................3
P1 Management Accounting and essential requirements of different Management accounting
systems.........................................................................................................................................3
P2 Methods used for Management Accounting reporting...........................................................4
M1 Benefits of MA system and their application in business context........................................5
D1 Integration of Management accounting system and reporting within organizational
processes......................................................................................................................................5
LO 2.................................................................................................................................................6
P3, M2, D2 Preparation of income statement through marginal and absorption costing............6
LO 3.................................................................................................................................................8
P4 Explanation of advantages and disadvantages of different types of planning tools used for
budgetary control.........................................................................................................................8
M3................................................................................................................................................9
LO 4...............................................................................................................................................10
P5 Comparison between different organization's management accounting systems they used to
respond to financial problems....................................................................................................10
M4..............................................................................................................................................11
D3...............................................................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is a modern tool for management which involves presentation of
accounting information in a manner which results in assisting managerial decision-making, so
that policies and strategies can be created for the day to day business operations (Ameen, Ahmed
and Abd Hafez, 2018). With reference to Snooker England Limited, different types of MA
systems will be discussed in this report. Also, various MA reporting methods, pros and cons of
planning tools for budgetary control and MA to respond to business's financial problems will be
discussed in this report. At last, it would be highlighted that how with the help of introducing
MA, organisations can ensure their sustainable success.
MAIN BODY
1. Evaluation of integration of Management Accounting systems and management accounting
reporting within organisational processes
MA is a profession which includes assisting management while making decisions,
devising plans and policies, applying performance management systems, preparing financial
reports and establishing control over the internal processes of the organization by formulating
and implementing strategies. Various financial reports such as inventory reports, budget reports,
etc. are used for facilitating decision-making to effectively and efficiently undertake operational
activities (Saukkonen, Laine and Suomala, 2018).
There are various MA systems applied within Snooker England having different essential
requirements, such as the following:
Cost accounting system: It is framework used by Snooker England to undertake estimation of its
product's costs to facilitate cost control, profitability analysis and inventory valuation (Ostaev
and et.al., 2020). In this way, records can generated pertaining to cost of manufacturing concern
by grouping costs into different categories such as direct, indirect, fixed and variable costs. This
system is essential for the company to determine per unit cost of its product and setting its final
price.
Inventory management system: With this system, Snooker England can value its inventory by
applying different techniques such as LIFO, AVCO and FIFO. Also, tracking of inventory of
materials and final products can be possible throughout the supply chain. It is essential for setting
selling price, determining further requirement of products and materials and any loss associated
with it (Endenich and Trapp, 2020).

Job costing system: With the help of this system, Snooker England can accumulate data about
costs associated with particular job (Azudin and Mansor, 2018). It is helpful in determining
whether a particular job is profitable or not. Accordingly, resources can be easily diverted among
low profitable and high profitable jobs.
Management Accounting reporting
MA has become very crucial while managing organizational performance and it is
recommended to Snooker England to utilize different methods of MA, so that managerial tasks
can be accomplished in efficient manner. The various MA reporting methods are as follows:
Budget report: This report helps in establishing budgetary control through which future aspects
of Snooker England can be determined (Pasch, 2019). It depicts spending plan of the company
and accordingly, arrangement for the amount of money can be done in advance to avoid
shortages. Also, steps could be taken while comparing actual performance against what has been
budgeted to ensure that the organization is moving towards its end goals.
Account receivables ageing: This report shows record of unpaid invoices along with indicating
the duration of their being outstanding (Kostyukova and et.al., 2018). This procedure within MA
allows Snooker England to determine those invoices that are open and also keeping those clients
on the top who are considered to be slow paying one. Accounting, effective collection and credit
management can be ensured and policies associated with it can be modified as per the
requirements.
Job cost reports: It is a comprehensive documentation of all the costs associated with specific
jobs concerning the organization through which expenditure plan can be created to ensure its
accomplishment on time without any shortages (Maheshwari, Maheshwari and Maheshwari,
2021). Also, with this report cost can be tracked for all jobs that is ongoing in the real time.
Inventory & manufacturing report: This method of reporting allows for identifying material in
stock, shortages or loss of materials and sales rate of the final product. Snooker England can
make decisions on whether it should manufacture more or not and in how much quantity.
Integration within organizational context
MA systems benefit organization in many aspects, like cost accounting system is helpful in
ascertaining the cost of the business operations accurately, which in turn allows for creating
effective budgets to ensure cost controlling and higher efficiency. Similarly, inventory

management system allows for avoiding excess stock and stock outs which helps in saving
sufficient costs and efficiency can be achieved with the appropriate implementation of this
system (Matambele and van der Poll, 2017). At last, job costing system ensure better utilization
of scarce resources by diverting it from low profitable to highly profitable operation or job and
thus, overall higher performance can be ensured throughout the organization.
MA systems and reporting facilitates provision of quantitative and qualitative information
on both financial and operational performance of the organization. For instance, Snooker
England can be implement inventory management system to determine how much quantity of
equipment and goods it should manufacture on the basis of demand resulting from Snooker
industry (Ostaev and et.al., 2020). Therefore, shortages and excess production of equipment can
be avoided along with savings costs both nominal and actual costs. In the same way, cost
accounting system helps in determining per unit cost of its equipment and accordingly, it
determines the final selling price of its products. MA reporting method such as accounts
receivable ageing report can be prepared by listing all the debtors in an order when they become
due, so that timely collection can be done and credit policies can be formulated to avoid bad
debts.
2. Production of financial reports that could applied and interpreted for business activities
Income statement based on absorption costing
Particulars Amount in £
Annual sales 2500000
Less: Cost of goods sold
Opening inventories 275000
Variable cost of production 400000
Fixed overhead absorbed 70000
Less closing inventories 125000
Cost of sales 620000
Gross profit 1880000
Add: Over absorbed fixed overheads 10000

1890000
Less: Administration expenses 40000
Sales department expenses 80000
Finance expenses 60000 180000
Profit 1710000
Income statement based on marginal costing
Particulars Amount in £
Annual sales 2500000
Variable production cost 400000
Add: Opening inventories 275000
Less: Closing inventories 125000
Less: Cost of goods sold 550000
Gross profit 1950000
Less: other variable costs
Administrative expenses
Sales department expenses
Finance expenses
Fixed costs
40000
80000
60000
80000 260000
Profit 1690000
Reconciliation statement
Particulars Amount in £
Net profit as per marginal costing 1690000
Add: fixed overhead charged under marginal costing 80000

Fixed overhead under absorption costing
Less: over-absorbed fixed overheads
Less: Fixed overhead charged under absorption costing
70000
-10000
60000
Profit as per absorption costing 1710000
Interpretation: The difference lies between the amount of profit derived from absorption and
marginal costing is due to the way fixed production overheads are treated (Saukkonen, Laine and
Suomala, 2018). In case of marginal costing, whole amount of fixed overhead has been charged
to the profit in the year it has incurred while in the case of absorption costing, fixed overheads
are charged to the extent manufactured goods are being sold in the year.
Statement of cash flows
Particulars Amount in £
Cash generated from operations 275000
Less: Tax paid 22000
Net cash flow from operating activities (a) 253000
Cash flow from investing activities
Purchase of property 50000
Net cash flow from investing activities (b) -50000
Cash flow from financing activities
Decrease in long term borrowings -25000
Interest paid -8000
Dividend paid -40000
Net cash flow from financing activities (c) -73000
Add: Cash and cash equivalents in the beginning (d) 120000

Cash and cash equivalents at the end a+b+c+d 250000
3. Evaluation of planning tools in MA to respond to financial problems for leading organizations
to sustainable success
The different types of planning tools that is available to the Snooker England Ltd for their
budgetary control along with its advantages and disadvantage are as follows:
Budgets: This is a planning tool of management accounting with the help of which
Snooker England company estimates the revenue and expenses of future period (Abdusalomova,
2019). The various budgets prepared by Snooker company is production budget, sales budget,
cash budget, material purchase budget etc.
Advantages:
 It helps in controlling the unnecessary expenses and wastage of resources as it assists in
planning which must be achievable.
 The coordination and communication between the different departments of Snooker
company get improves because of budgets preparation.
Disadvantages:
 Preparation of monthly cash and other activities budgets are quite time-consuming which
sometime distracts the managers from their main goals.
 As budgets are based on estimations, which does not provide accurate information the
impact of which any wrong estimation may leads to heavy financial loss to company
(Maheshwari, Maheshwari and Maheshwari, 2021).
Marginal Costing: This is another planning tool which helps in budgetary control with
the help of the break-even analysis. The break-even analysis defines the sales level at which
Snooker company will neither earn any profit nor it will incur loss.
Advantages:
 It helps in identifying the margin of safety which means the sales level above break-even
where Snooker company starts earning profit.
 It is also one of the best and effective tool to control the cost of sales of the products and
services (Nørreklit, 2017).
Disadvantages:

 It does not consider the semi-variable and fixed cost which is difficult for the Snooker
company to analyse overheads.
 It does not provide the best result of sales and profit as time elements are ignored while
classifying total cost into fixed and variable (Rikhardsson and Yigitbasioglu, 2018).
Pricing strategies: This is a tool which the help of which Snooker England Ltd able to
expand its profit margin, market share etc. Basically, Snooker company adopted cost-plus
pricing strategy to set the selling price of its products by adding mark-up to the cost.
Advantages:
 It is one of the simplest method to determine cost and also takes few resources such as
research and development.
 It also provides a consistent rate of return because it calculates cost per items and
products.
Disadvantage:
 As this strategy does take consumers into account which further result into the creation of
profit losing isolationism (Weetman, 2019).
The above discussed planning tools have to be adopted and applied by the Snooker
England Ltd within their business in order to prepare and forecast the budgets. This will help the
company in increasing the productivity and efficiency. For example, Snooker company can also
able to meet their target and achieve goals in specified time-frame if they adopt the planning
tools such as standard costing, variance analysis and budgets (Caglio, A. and Ditillo, 2021).
However, it also causes heavy loss if there is no proper communication between the departments
of company. This might leads to wrong assumptions on various budgets. Thus, the company
further have to adopt two-way communication.
MA systems to respond to financial problems
The various management accounting systems adopted by different organizations in order to deal
with the financial problems are as follows:
 Just-in-time inventory management: This is a method of inventory management system
which is used by Tesco Plc within their organization at the time when the demand of their
products are high. The financial problem face by Tesco within their business is that
during the high demand or peak time, the company unable to produce goods and supply it

to the supermarkets & stores. This has also affected its sales to the large extent. So, in
order to deal with this financial problem, company has adopted Just-in-time method of
inventory management system (Caglio and Ditillo, 2021). It also helpful in reducing
waste, inventory holding cost and improve cash flows within business.
 Activity Based costing: This is one of the method of cost accounting system with the
help of which the company can allocate its overheads and indirect cost to products and
services. This system of management accounting is uses by Verdant Leisure company in
order to solve the financial problem (Ameen, Ahmed and Abd Hafez, 2018). The
problem faces by Verdant is low profit margin because of the unprofitable services. With
the help of activity based costing, the company identifies the profit and loss of its
different products and services and further stop the unprofitable services. The impact of
which the wastage of its money over unnecessary activities get decreased and its profit
margin get increased.
 Price-optimization system: This is a method which is helpful for the company to
analyse how the demand of their products varies at the different level of prices of
products. The financial problem faces by Snooker is low profit which might be because
of the high price of its products and services. In order to solve this problem, the company
have to adopt the price-optimization system of management accounting (Lebedev, 2019).
Here, the company need to analyse the demand of consumer of its products on different
level of prices before setting final price. This is one of the best method which help the
company in increasing its profit.
Along with the price-optimization system, it is also recommendable to Snooker England
Ltd is that they have to adopt the investment appraisal techniques in order to identify the best
and high return option for investment (falih Chichan and Alabdullah, 2021). This helps the
company in improving their cash flows within the business.
An effective management accounting system will definitely help Snooker England
organization in their sustainable success. It is because these systems manages and utilizes all
available resources such as tangible and intangible to create value of sustainability. For example,
if Snooker company will adopt the management accounting system then their ability to analyse
the internal and external factors of business environment get increased. The impact of which they

can further identify opportunities and threats to their business including strength and weaknesses
(Zhang and Niu, 2019). This will help the company in gaining opportunities and competitive
advantage which leads to sustainable success.
The planning tools of management accounting such as pricing, budgets, marginal,
standard costing etc. will help the company to solve various financial problems. For example,
with the application of standard costing tool of MA, Snooker England Ltd can compare the
actual data with its budgets. This will provide the result of variance and gap between the both
which further work as a base for the company which help them in estimations of upcoming
periods (Maheshwari, Maheshwari and Maheshwari, 2021).
CONCLUSION
The report has concluded the concepts, various tools, techniques and systems of
management accounting which help them in solving their financial problems and managing
sustainable success. Further, the report has also prepared the income statement and cash flow
statement. The income statement under both marginal and absorption costing are calculated
under this report. Lastly, the report has also compared the different management accounting
system used by organization to solve their financial problems.

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