Management Accounting Report

This report examines the application of management accounting systems and reporting in Seymour Civil Engineering Company. It analyzes different types of management accounting systems, including price optimization, inventory management, and cost accounting. The report also discusses the benefits of these systems and how they are integrated with the organizational process. Additionally, it explores the use of planning tools for budgetary control and how organizations adapt management accounting systems to respond to financial problems.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and its different type of management accounting systems............1
P2 Different methods of management accounting reporting......................................................3
M1 Benefits of different management accounting systems. ......................................................4
D1 Management accounting system and reporting are integrated with the organisational
process.........................................................................................................................................5
TASK 3............................................................................................................................................5
P4. The various kinds of planning tools utilised for budgetary control......................................5
M3. Analyse the utilisation of different planning tools and their application preparing and
forecasting budgets......................................................................................................................7
TASK 4............................................................................................................................................7
P5. Compare how organisations are adapting management accounting systems to respond to
financial problems.......................................................................................................................7
M4. Analysis of responding to financial problems, management accounting can lead
organisation to sustainable success.............................................................................................9
D3. Evaluation of planning tools for accounting respond appropriately to solving financial
problems to lead organisations to sustainable success................................................................9
CONCLUSION:.............................................................................................................................10
REFRENCES.................................................................................................................................11

INTRODUCTION
Management accounting is an accounting system which helps in the internal management
of the companies. This includes various kind of financial and non financial information that
becomes framework for the future planning and strategies. It analyse the business activities in a
conclusion way (Sánchez-Matamoros, Araujo Pinzon and Alvarez-Dardet Espejo, 2014). Herein,
it is important to know that management accounting is not a compulsory part of the companies. It
depends on the companies that whether they need it or not. To understand about management
accounting concept, its tools and techniques in the context of organisation, The Seymour civil
engineering company is selected. This company has its head office at Hartlepool, UK. It works
for different civil projects of customers.
This project report includes detailed knowledge about management accounting, its
various techniques and system. In addition it consists the way in which management accounting
system helps in solving the financial issues of the organisations.
TASK 1.
P1 Management accounting and its different type of management accounting systems.
Management accounting system is very important accounting tool for the companies. It
includes both kind of information monetary and non monetary that is required in the effective
management of the business. Apart from this, it consists various kind of tools and techniques that
enhance the decision making of the organisations for future. This accounting system does not
require to implement according to the accounting period and rules. The selected company
Seymour civil engineering company use this accounting system in their functions to improve the
services and various projects. It includes various kind of other management accounting systems
which are followings:
Price Optimization System- Price optimization system is a method of fixing the price of
different services and products. It provides a basis of analysing the level of price that can be
suitable for both to the customers and company. In addition, this also offers the way to identify
the customers’ behaviour at different pricing level (Ji, 2017). With the use of this system,
organisations can set the prices at the beneficial level. The Seymour civil engineering company
use this tool for determining the price of different construction projects and services which helps
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them in the attracting more clients. As well as it is required by the company to analyse the
behaviour of their clients at different price levels.
Inventory Management System- Inventory management system is a kind of system that
tracks the movement of different goods and services in entire process. It also helps in checking
about the quantity of raw material and finished goods that helps the companies to do production
accordingly. As well as the main key function of the inventory management system is the
keeping record of all the goods that transfer within the warehouse. The Seymour civil
engineering company implements the inventory management system in the various services and
construction projects. They use it in checking the availability of different type of raw material
like cement, steel etc. in the warehouses. This system is required to track the quantity of raw
material of different projects of company. In addition this system works according to the LIFO
and FIFO system that aligns with this for better result.
Cost Accounting System- Cost accounting system is a systematic way of estimating the
total cost of products and services so that companies can analyse the profitability and loss on
different product and service (Proctor, 2012). This accounting system is categorised into two
parts: job order costing system and process costing system. It is required in the organisations to
calculate all the costs so that company can control over the cost. The Seymour civil engineering
company use both of the system of cost accounting which are described below:
Job order costing system- It is a costing system that is applicable in both service and
products providing industries. This costing system use the job cost sheet, material and labour
cash flows to analyse the cost of various products and services. As well as it works when the
customers give order for any particular service and products. The Seymour civil engineering
company applies this costing system for evaluating the cost of different kind of services which
they offer in the market. They use it calculating the cost of various kind of civil projects and this
helps them in proper analysing in the terms of profit or loss.
Process costing system- Process costing system is a method for assigning the total cost to
different units of output. Herein, this method the entire cost of different processes is calculated
then it is considered as the sum of total cost of various product and services (Zhang, Uchida and
Bu, 2013). The Seymour civil engineering company use this costing system for estimating the
total cost of projects by analysing costs at various stages or processes of civil projects.
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P2 Different methods of management accounting reporting.
Management accounting reports checks the performance of business because it includes a
wide range of reports in it. With the use of these reports organisations can analyse the level of
efficiency of their several activities. It does not matter that what kind of business nature,
management accounting reports work similarly for all to achieve the goals and objectives. There
are many kind of reports that protects the business from the competitors. In addition, on the basis
of these accounting reports organisations takes important decisions for future policies and plans.
The Seymour civil engineering company prepares different kind of management accounting
reports which are mentioned below:
 Budget Reports – Budget reports are those reports which are used by the
management department to compare the actual performance with budgeted targets.
Basically, these reports are important for internal management of the organisation.
Reports are prepared for the particular time period that can be annually, monthly or
quarterly (Hoque, Covaleski and N. Gooneratne, 2013). Managers of Seymour civil
engineering company use this report for comparing the actual result with the budgeted
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Management Accounting
System
Price Optimization System Inventory Management System Cost Accounting System
Job order costing system Process costing system

standards. As well as it helps them in analysing which engineering projects are
profitable and which ones are not.
 Performance Reports- Performance reports are the reports that are prepared to
evaluate the performance of different activities. These reports are very important in
the context of the organisations because it helps them in checking about which
activities are giving the expected results and which ones are not. Basically, project
reports work on the basis of comparing the actual result of a particular activity with
the standard. In this context, it is important to determine the standard of performance
measurement because in the absence of accurate level of standard it can be difficult to
measure the performance. The Seymour civil engineering company use this report to
evaluate their performance and to take futuristic decisions regarding to the multi-pal
projects. The company use this report to check the performance of the various kind of
projects profit and loss.
 Cost managerial accounting reports- Cost managerial accounting reports are kind
of reports that are related to the computing the overall cost which occurs in offering
products and services (Kalkhouran and et.al, 2015). It provides a framework to make
comprehensive analysis of total cost that incurred and total money earned by selling
of all units. Herein, if costs are more than selling amount then it would be loss and if
cost is less then sold money that would the profit. So with the help of this companies
can make decision about which products and services are needed to be produced more
and which ones should stop. In the Seymour civil engineering company their
managers use this report for calculate the total cost of projects and then analyse about
the revenue and loss.
 Account receivable ageing report- Account receivable ageing report is helpful in
making list of those customers who have credit transaction with the company. Due to
this report organisation can check about how much amount they are needed to receive
from the customer. As well as it contains the date on which transaction took place,
this helps the company in listing about how many customers crossed the date of
payment (Zirkler, 2013). The finance department of Seymour civil engineering
company prepares this reports to see the total collection in the market so that they can
make future policies and plans accordingly. In addition, it also minimises the
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headache of keeping remember about credit transactions because they are involved in
the business of construction projects in which lot of credit transactions occurs.
M1 Benefits of different management accounting systems
Management accounting system consists different kinds of system in it. Each accounting
system has its own importance. The Seymour civil engineering company apply a range of
management accounting systems whose advantages are given below:
Price Optimisation System:
 This system helps in determine the price of products and services (Stechemesser,
and Guenther, 201). Herein, the Seymour company provides them a framework
for assigning the price of civil projects.
 Price optimisation system gives a basis of analysing the effect on customers due
to different pricing.
Inventory Management System:
 It tracks the movement of goods and services that works in proper management of
stock. In the selected company it helps for them in checking the availability of
raw material of different projects.
 This makes possible efficient use of available resources for the company because
it helps in the checking which project requires resources and which ones are not.
5
Management
Accounting Reports
Budget Reports
Performance Reports
Cost managerial accounting
reports
Accounts Receivable
Ageing Reports

Cost accounting system:
 Cost accounting system is important for computing the overall cost of the
projects.
 This accounting system evaluate about the actual profitability of company
by comparing the total earned amount with incurred cost.
D1 Management accounting system and reporting are integrated with the organisational process.
Management accounting system includes many accounting systems like cost accounting
system, inventory management system etc. Each accounting system is important for preparation
of accounting reports because the required information receives from the various accounting
system (Boyns, Edwards and Nikitin, 2013). In addition, this link between management
accounting system and reporting is integrated with the process of organisation. The Seymour
civil engineering company is using several accounting systems that helps for them in making
different accounting reports and it impact to the organisational process significantly.
TASK 2
Annex (A)
Budget 2019 2020 2021
Cost
Centre
Budgeted
production
overhead
costs in £)
Basis of
production
(overhead
absorption)
Cost
per
Hour Hours Cost Hours Cost Hours Cost
A 66000 22000 3 24200 72600 26620 79860 27500 82500
B 75000 15000 5 16500 82500 18150 90750 19500 97500
C 83600 41800 2 45980 91960 50578
10115
6 51500
10300
0
Annex (B)
(a) Labour hour: -
Product X = £6000*1 = £6000
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Product Y = £8000*2 = £16000
Labour hour = £2,64,000
------------
22,000
= £12 per hour.
Overhead absorption on labour hour: -
X Y
Overhead absorption = 1*12 = 2*12
= 12 = 24
Total Overheads = £6000*12 = £8000*24
= £72,000 = £192,000
(b) Using ABC approach: -
Machine hour per period:
Product X = £6000*4 = £24,000
Product Y = £8000*2 = £16,000
Cost driven rate: -
Production set up = £179,000 = 2893 per set up.
60
Order handling = £30,000 = 416.666 = 417 per order
72
Machine cost = £55,000 = 1.375 per order
40,000
Overhead using ABC approach: -
X
Set up = 15*2983 = 44,745
Order = 12*417 = 5004
Machine cost = 24000*1.375 = 33,000
Total 82749
Y
Set up = 45*2983 = 134,235
Order = 60*417 = 25,020
Machine cost = 16000*1.375 = 22,000
Total 181,255
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TASK 3
P4. The various kinds of planning tools utilised for budgetary control.
Budget is mainly a financial plan or a formal statement of approximated revenue as well
as expenditure based on upcoming plans and goals. Also, it forecast the financial positions and
outcomes of a firm. This is usually prepared by Seymour civil engineering company for
allocating finances for many kinds of methods and functions after examining the incomes,
expenditure as well as previous years’ profits.
Budgetary control is considered as a process for managers for setting financial as well as
performance objectives with budgets, compare exact outcomes and set performance according to
the requirements (D. Parker and Guthrie, 2014). This method is helpful for tracking and
managing budget which is ascertained for activities and procedures. Also, this is done through
seeing the variation between expected and actual outcomes for making decision how successfully
the budget is formulated in the firm. Within Seymour civil engineering company, this is used by
manager for valuing variances into budget and related that variances with performance to
prepared effectual strategies as well as policies in order to decrease those variances.
Seymour civil engineering company has to manage and control the figure of budget as
well as many process and functions for attaining sustainability in the growth and maximised
profitability. Organisation have to develop an effective plan for controlling budget that are
required to assure that functions are performed effectually. So, few crucial planning tools which
is applied through the Seymour civil engineering company for setting up the budgetary control
are explained below: Forecasting planning tools: It is the kinds of planning tools that is utilise by business
organization for developing a framework for future occurrences and events this is done
with the aids of last as well as present trends adjustments (Kastberg and Siverbo, 2016).
For profitable outcomes of this tools, it is necessary to apply appropriate and reliable data
through the external as well as internal sources of the organisations. Forecasting tools is
utilised by the Seymour civil engineering company for collecting future trends which can
influence the firm in future in negative manner.
Advantage:
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This aids manager of respective firm in identifying upcoming happenings and
opportunities which can impact the decisions of the business organization.
Disadvantage:
As it is hard to assume upcoming happenings so with the assistance of this tool Seymour
civil engineering company are not able to made effective approximation.
Contingency planning tools: It is the tools that are useful in valuing and apportioning
risky factor that can affects the organisational operations, growth, activities, performance and so
on in upcoming years (Kraus and Strömsten, 2012). Seymour civil engineering company apply
this tools for examining as well as measuring financial positions related to net and gross
profitability performance and conditions of many activities of firm. Also, selected organisation
have to analyse these factors also formulate strategic strategies for resolving them as early as
possible.
Advantage:
It aids Seymour civil engineering company to find out effective resources in case some
trouble created at the time of operations related to already recognise or recent resources.
Disadvantage:
This tools are too time consuming as well as costly.
Scenario Planning tools: It is the tools that developed a structured and managed manner
for improving structures for strategical planning of organisation. This is helpful for creating a
base to assume potential impacts of enterprise environment within firm (Jones, 2014). Seymour
civil engineering company can utilise scenario planning tools for finding and analysing possible
happenings which can effects the segments of enterprise in upcoming years.
Advantage:
This planning tools is also known as a flexible tool as it can perform as per the stimulated
scenarios.
Disadvantage:
Seymour civil engineering company can not use this tools practically as it is time taking.
M3. Analyse the utilisation of different planning tools and their application preparing and
forecasting budgets
After examining different types of planning tools that are utilise for budgetary control
such scenario, forecasting and contingency tools. This is clear that it assists the Seymour civil
9

engineering company management for maintaining the process that is linked to budgeted
planning and formulation. These planning tools provides Seymour civil engineering company a
framework so that they can formulate blue print for managing whole functions that are useful to
ascertain organisational performance as well as growth. Management of respective firm can also
apply these tools for identifying possible threats and opportunities. For the effectualness of
planning process budgetary control plays a significant role.
Annex (c)
Year X PV@ 12%
Dis Cash
Flow Y PV@ 12%
Dis Cash
Flow
0 -5000 -8000
1 2500 0.893 2232.143 1500 0.893 1339.286
2 1000 0.797 797.194 2000 0.797 1594.388
3 1000 0.712 711.780 2500 0.712 1779.451
4 500 0.636 317.759 1000 0.636 635.518
5 1500 0.567 851.140 1000 0.567 567.427
6 1000 0.507 506.631 2500 0.507 1266.578
Total 5416.647 7182.647
Payback Period = Initial Investment
Average Cash Flow
Project X = 5000 = 4
1250
*Average Cash Flow = 7500 = 1250
6
Project Y = 8000 = 4
1750
*Average Cash Flow = 10500 = 1750
10

6
NPV: -
Project X = Dis Cash Flow – Initial Investment
= 5416.647 – 5000
= £416.647
Project Y = Dis Cash Flow – Initial Investment
= 7182.647 – 8000
= - £817.353
TASK 4
P5. Compare how organisations are adapting management accounting systems to respond to
financial problems.
Now a days every firms are facing problems related to money which is known as the
financial issues. When organisation do not have sufficient funds for implementing the operations
of the activities. Seymour civil engineering company is also facing few problems that are
effecting the business implementation activities of organisation. Some finance related issues of
firm are mentioned below:
Improper funds management system: In Seymour civil engineering company funds
management system is not appropriate as their managers do not usage suitable principles of
accounting. This is essential for firm to recruit proficient employees whole accounting related
function are performed effectively.
` Late payment by customers: Many times customers purchase products or avail services
on credit. They generally make payments not on time which leads towards financial problems.
This impact the operative efficiency of Seymour civil engineering company. So, it is crucial for
their managers to change the credit policy in order to recover the the outstanding amounts on
time.
Seymour civil engineering company Arrowbuild & Civil Engineering Ltd
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This company is facing the financial problems
like late payment by customers, improper
funds managements. Both issues are affecting
the performance of the business.
This organisation is facing issues related to
inventory which shows the ineffective turnover
ratio of inventory.
In order to manage the funds properly and
make payment on time, respective firm use the
cost accounting system so that cost can be
recorded appropriately and managed the
money. Also, the price optimisation system so
that they can set suitable product or services
rates so customers do not think to purchase
products on credits.
It use the financial governance tool as it guides
respective company to execute the whole
proper principles in order to prepare
appropriate accounts and also the improper
funds management is solved by complying
correct principles.
In order to maintain the inventory and decrease
the wastage into construction process,
respective firm use the inventory management
system as well as create a group for inventory
management so that it can set the benchmark
for minimising wastage.
Also, it apply KPI in order to measure the the
company and each members of inventory
management team so that objectives can be
accomplished on specified time periods.
For setting up effective system of management some management accounting approaches
are applied through firm. These approaches assures that organisation can achieve their targets
and sustainable success. Few are explained below:
Financial governance: With the assistance of this organisation can accumulate, maintain
overall financial information. It includes whole transactions, manage performance and also
control data operation etc (Woon and Lo, 2013). This is an procedures as well as policies action
by which Seymour civil engineering company able to manage information related to funds as
well as finances.
Key performance indicators(KPI): It is useful for identifying performance in
comparative to the targets of the business organisations. It describes the manner to accomplish
goals in effective way and also it is of 2 types High KPI as well as low KPI. High KPI is used to
measured the whole company performance and low KPI measure the employees of particular
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departments. Seymour civil engineering company apply this approach to maximise particular
activities efficiency and resolve problems of specific work.
M4. Analysis of responding to financial problems, management accounting can lead organisation
to sustainable success
Management accounting aids organisations for accomplishing the sustainable success
while responding to financial issues into company (Grötsch, Blome and Schleper, 2013).
Seymour civil engineering company are facing various issues like improper funds management,
late payment by customers and so on. All these are problems create a negative effects on their
profitability. Therefore, management accountant can improve their KPI that supports its
sustainability and effective goals. Also, aids them to overcome from their financial problems.
Seymour civil engineering company apply price optimisation system and cost accounting system
to keep all records related to cost and so on. In order to solve financial issues.
D3. Evaluation of planning tools for accounting respond appropriately to solving financial
problems to lead organisations to sustainable success.
Seymour civil engineering company management are utilising contingency, forecasting
and scenario planning tools. All these aids them to deals with financial issues like improper
funds management, late payment by customers through predicting them in advance. Also, all that
assists their managers to be ready for upcoming issues so that can be solve effectively. Planning
tools guide the management to take effectual actions during the time of problematic conditions
so that it can responds in successful way (Miller, Proctor and Fulton, 2013).
CONCLUSION:
From the above report it have been concluded that management accounting is an
accounting system which helps in the internal management of the companies. Different
management accounting systems such as price optimisation system, cost accounting system and
so are applied by firm to implement operations of business in proper way. Also, some
management reports like cost managerial accounting reports, account receivable ageing report
etc for formulated by managers of firm to keep the records of organisational data. Contingency,
forecasting and scenario tools of planning are used to formulate effectual budgets. Manager
usage various accounting tools which aids in solving financial difficulty that advantageous to
gain income and performance.
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