Management Accounting: Systems, Techniques, and Reporting

This document provides a comprehensive guide to management accounting systems, techniques, and reporting. It covers topics such as the differences between management accounting and financial accounting, cost accounting and inventory management systems, evaluation of benefits of various management accounting systems, types of managerial accounting reports, the importance of accurate and timely information, cost accounting techniques to prepare an income statement, and the advantages and disadvantages of planning tools used for budgetary control.

MANAGEMENT
ACCOUNTING

Contents
INTRODUCTION...........................................................................................................................3
SECTION A.....................................................................................................................................3
(a) Differences between management accounting and Financial accounting........................3
(b) Cost accounting system....................................................................................................4
(c) Inventory management system..........................................................................................4
(d) Job costing system............................................................................................................5
(e). Evaluation of benefits of various management accounting systems................................5
SECTION B.....................................................................................................................................5
(A) Types of managerial accounting reports..........................................................................5
(b) Explain why information presented should be accurate, relevant to the user, reliable up to
date and timely.......................................................................................................................7
(c) Management accounting system and management accounting reporting are integrated
with organisation process.......................................................................................................7
SECTION 2......................................................................................................................................7
Cost accounting techniques to prepare an income statement.................................................7
TASK 3............................................................................................................................................9
Advantages and disadvantages of different types of planning tools used for budgetary control.
................................................................................................................................................9
TASK 4..........................................................................................................................................12
Comparison of organisations to respond the financial issues by management accounting
system...................................................................................................................................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting can be defined as an integral part for an organisation which
analysis business profits by making suitable reports from the existing information. The main
motive of management accounting is to make effective decisions which leads management to
accomplish their work by maintaining financial stability for the organisation. This report is based
from the perspective of Excite Entertainment Ltd. which deals in organising entertainment and
leisure activity in the United Kingdom. Their main activities includes promotion of concerts and
festivals at location of UK. Moreover, the report highlights on management accounting system
along with its advantageous factor. It undertakes cost accounting methods, reporting system and
planning tools to control budgets of the organisation. In the last, tools such as Key performance
indicator, benchmarking etc. that explains long term profitability for the management.
SECTION A
(a) Differences between management accounting and Financial accounting
Management accounting- is defined as a process of recognising, presenting, summarising
and controlling the financial transaction for an organisation. In order to manage this effectively
management focuses on all those methods which is effective to record financial information such
as balance sheet, cash flow statement and profit & loss account. Moreover, the concept of
management accounting is linked with managing cost of business operations and its functions. It
also helps organisation to operate their business operations in order to manage funds effectively
(Adler, 2013).
Financial accounting- works as a specialized branch for accounting which is used to keep
the track of financial transactions. Further, it is based on various guidelines that is used to
transact record, summarise and present all the financial information with an effective
management system such as income statement, profit & loss account and balance sheet.
Excite Entertainment Ltd. also utilise different management accounting system which is
used too to manage financial information for organisation. The main aim to implement effective
management accounting system is to accomplish organisational goals and objective in shorter
period of time.
Difference between management accounting and financial accounting

Basis Management Accounting Financial accounting
Meaning Management accounting
considers as an effective
system which leads
organisation to make effective
plans in order to increase their
profits for longer period.
Financial accounting focuses
on preparing those accounts
that are related with monetary
value such as balance sheet,
profit and loss account etc.
which helps to know about
financial position in market.
Operator Management accounting
relates with internal
department of an organisation
who are able to make effective
plans for organisational
financial profits.
Finance related decisions are
the interest of other institution
such as investor, banks and
angel investor. As
organisation leads them to
earn more profits.
Laws and legislations There is less restriction are
monitor in management
accounting because
management prepares it as per
their need.
International standard and
some rules are developed by
industry and country such as
IRS/GAAP. So it is mandatory
for organisation to follow
decided format.
(b) Cost accounting system
This system leads organisation to analyse and evaluate all the cost related with products
either fixed or variable. By utilising cost accounting system it is easy for management to estimate
accurate price for their products. These results it helps organisation to analyse the net profits
which are earned by management in future (Ax and Greve, 2017).
(c) Inventory management system
With the implement of inventory management system it is easy for organisation to find out
the actual status about the inventory of Excite Entertainment Ltd.. The major benefit for
inventory management system is to find out the availability of their products and services that is

present in the organisation. Like the number of credit supplier is recognised or analysed by
inventory management (Bloomfield, 2015).
(d) Job costing system
The job costing system leads management to calculate the overall cost of organisation that
is incurred to provide wide range of products or services to its customers. This is beneficial for
management to analysis the financial stability of organisation for longer period because it helps
to find out actual cost of each units and functions.
(e). Evaluation of benefits of various management accounting systems
All the management accounting system provides various benefits to the organisation. Some
benefits of management accounting system are as follow:
Advantage of cost accounting system: This helps the management in deciding their prices for products through analysing the
overall cost for organisation that is invested to make their products and services. It is beneficial for determining the cost which incurred them to earn high amount of
profits (Gibassier and Schaltegger, 2015).
Advantage of inventory management system:
 This leads the organisation to keep the demand high for their products through which it is
for them to match their stock with the needs of customers. With the inventory management system cost related to keep monitor and identifying the
actual cost which is required to keep the inventory safe.
SECTION B
(A) Types of managerial accounting reports
There are various reporting system for management accounting system are existed that
leads the management to identify actual position of an organisation. Moreover, management
reporting aids the organisation to make effective plans that increases the opportunities for
achieving organisational goals in short periods. In context of Excite Entertainment Ltd. this
reports includes both perspective either monetary or non-monetary (Kanellou and Spathis, 2013).
Performance report- This report is prepares with the motive of determining the
performance of employees as well as organisation. It results that management is able to gain
relevant information which is related with existing performance of employees. It results this is

easy for organisation to identify the issue which impacted on expected performance of
employees. Further, by resolving issue it is easy for management to retain their employees for
longer period in Excite Entertainment Ltd..
 Performance report benefits the organisation by making effective reports which are
beneficial for recording the financial transaction of employees.
Budget report- Budgets undertake all the policies related with cost of each activity as per
their output and techniques which is utilised to make effective results for organisation. With the
implement of this report it is easy for organisation to complete its task by using optimum
utilisation of resources. Due to which waste will be reduced for the Excite Entertainment Ltd.
which eventually increases profits for the firm (Kokubu and Kitada, 2015).
 With the budget report Excite Entertainment Ltd. leads an advantageous factor which
reduces the wastage of funds by completing the work in budgets.
Accounts receivable ageing report- With account receivable report it is easy for
organisation to analyse the number of debtors that block profitability of organisation. It governs
that it undertakes actual number of creditor who block the amount of monetary transaction. So
with the exact number of debtors finance department of Excite Entertainment Ltd. is able to
recover their amount from debtors by formulating effective plans against unpaid debtors.
 It benefits the organisation by making effective reports due to which management is able
to get the unpaid amounts which enhance profits for organisation.
Cost managerial accounting report- This report undertakes the exact and correct amount
which is invested by the organisation in its business operations. With implement of effective cost
managerial report it is effortless for Excite Entertainment Ltd. to calculate all the expenses that
are made by them to complete their product or service. So it is easy for them to evaluate the
amount which is received by organisation by selling their product in market. Its results the
overall profitability of the management is analysed by the organisation (Malinić and Todorović,
2012).
 By determining the exact amount of products. This is easy for organisation to decide
unbeatable price for their goods.

(b) Explain why information presented should be accurate, relevant to the user, reliable up to
date and timely.
The management of Excite Entertainment Ltd. can make an effective decision for the
betterment of an organisation only if they receive an accurate and reliable information available
in financial statement which includes profit and loss account, balance sheet, cash flow statement
etc. Due to this, it is important for finance manager to record business transactions happened on
daily basis in accurate way so that the chances of errors can be minimised and actual financial
position of an organisation can be easily identified (Mokhtar, Jusoh and Zulkifli, 2016).
(c) Management accounting system and management accounting reporting are integrated with
organisation process.
To gain the high benefits it is mandatory for Excite Entertainment Ltd. to match the
management accounting and reporting. As they both are related with the concept of effective
decision making such as to make effective plans and strategies which leads organisation to
achieve their objectives in short period. For example- inventory management system helps
organisation to use management accounting by recording accurate requirement of inventory
(Mitchell and et al., 2015).
SECTION 2
Cost accounting techniques to prepare an income statement
Cost- This is defined as the value that is provided by the organisation for their products
and services through investing funds in the operations and functions. Moreover, this is required
at each stage so it is for the organisation to boost their performance and sale them to the final
customers (Nitzl, 2016).
Absorption costing- It is defined as one of the total cost that is invested for manufacturing
actual product and services. This is also known as full costing method because it undertakes
fixed cost as well as variable cost (Absorption costing, 2018).
Marginal costing- This method is used for calculating the net profits for organisation
including variable cost. Marginal costing is adopted by small and medium organisation due to
which profits for the organisation is identified on daily basis

In the context of Excite Entertainment Ltd. it use costing method as per their objective and
purposes. In this part calculation for net profitability by using marginal as well as absorption
method is mention as below:
Income statements of Excite entertainment company for month of may(Marginal costing
method)
Particular Amount(in £ )
Sales
Less- Variable cost
Contribution
Less- Selling and manufacturing expenditures
Net profit
120000
51000
69000
-
69000
Working note*
▪ Calculation of sales- 8000*15= 120000
▪ Calculation of variable cost- (Opening stock+ production overhead- closing stock
: 500*6+ 10000*6- 2000*6= 51000)
Income statements of Excite entertainment company for month of may(Absorption costing
method)
Particular Amount(in £)
Sales
Less- Cost of good sold
Gross profit
Less- Selling and manufacturing expenditures
Net profit
120000
85000
35000
-
35000
Working note*
▪ Calculation of sales- 8000*15= 120000

▪ Calculation of cost of good sold- (Opening stock+ production overhead- closing
stock: 500*10+10000*10-2000*10=85000)
Techniques for management accounting and financial reporting
Management accounting is more useful to maintain all documents that are related with
financial reporting. Like income statement, profit & loss account, cash flow statements are some
of the techniques which are used to analyse the actual financial position of organisation in the
market (Qian, Burritt and Monroe, 2011).
Financial reports that applies for interpreting business activities
Every organisation which are related with management accounting need to prepare their
financial reports by making balance sheet as per to identify the actual position as per market
needs. For this, management requires for interpreting all transaction related with business
activity.
TASK 3
Advantages and disadvantages of different types of planning tools used for budgetary control.
Budget- This works as one of the most integral part for organisation that helps the
organisation. It leads management to perform their work as per the income and expenses which
is used to make specific time period. This also helps management to enhance their work
performance which is used to make budgetary control in order to set long term objectives for the
organisation. Along with this it also helps the organisation to compare the actual figures by
forecasting it effectively (Schaltegger and Burritt, 2017).
Preparing a budget- By performing the budget there are various steps must be followed
by the organisation and its managers. In the present scenario, the existing status of organisation
is determines to the manager and its available resources. On the other hand, it is required to make
effective changes as per the plans that is required to make effective as per the monetary
transaction of plans.
Several types of budget
Capital budget- This is one of the most effective budget which is related with the
existing information and activities to make large investment for the organisation. On other hand,
it leads organisation to track the record for financial performance. This also helps management to

prepare master budget for creating an effective financial plan. Some advantages and dis-
advantages of budget are as follow:
 Capital budget helps the organisation to make effective result that is used to make large
projects as per monetary resources.
 With the Bird’s eye view that is used to make business as per the stakeholders which is
used to determine financial performance of organisation (Wickramasinghe and
Alawattage, 2012).
Dis-advantage of capital budget
 In capital budget, due to lack of specific items as it collects information for all
departments.
 It is difficult to monitor the information of organisation as per the data is collected and
relate with different departments.
Operating budget- This works as an effective budget which is generated as per the projects
all the estimated incomes and expenses. It is used to forecast the sales as well as revenue for the
organisation. This is generated with Excite entertainment Ltd. that helps to make their products
according to monetary terms. Some advantages and dis-advantages are as follow:
Advantages of operating budget
 This helps business and their owners to analyse all the financial resources that they are
utilised in accurate manner or not.
 By the evaluation of the current expenses it is easy for management to perform their
work in effective manner.
Dis-advantage of operating budget
 It can recognise revenue and figures as per the statements of organisation due to which
they are not more effective.
Zero based budgeting- The zero based budgeting starts from the zero numbers. Under this
budgeting expenses related with business are justified for each period effectively. This is related
with Excite Entertainment Ltd. which is used to reduce the cost of their operations (Zaleha Abdul
Rasid, Ruhana Isa and Khairuzzaman Wan Ismail, 2014).
 Merit- Each year organisation requires a different budget for perform their operations in
appropriate manner. It governs it helps Excite Entertainment Ltd. to formulate budgets
for every year.

 De-merit- Zero based budgeting is not able to make appropriate results in the short term
planning.
Cash and traditional budgeting- This works as a projection for the outflow as well as in-flow
for the organisation. It determines that there are different payments are generated by Excite
Entertainment Ltd. to make payments on quarterly as well as monthly basis.
 Merit- This is beneficial for identifying the loss by analysing financial statements of the
organisation in effective manner.
 Demerit- It reduces the ability of the organisation by making deal for the organisation
on credit basis.
The use of different planning tools and their application to prepare and forecast budgets
Budgetary control assist in presenting a clear images of an corporation through imparting
equipment and techniques which might be beneficial for Excite Entertainment Ltd. for getting
ready and framing future financial performance and aims by way of figuring out the preceding
finances. The making plans tools for preparation and forecasting budgets are income, production
budgets. Sales budgets are used to keep and monitor the sells units of the goods and merchandise
which are produced by way of the company. Production budgets are beneficial for managing
production fee and handling manufacture units which might be synthetic in a specific duration.
These planning tool are used by the control of the enterprise for prepare and forecast the
budgetary sports which can be beneficial for making earnings in addition to hold financial
positions in competitive surroundings.
Evaluation of planning tools for accounting respond to solve financial problems.
Planning is helpful in framing strategies in advance for the future form keeping smooth
functioning of the activities and operations of Excite Entertainment Ltd. This organisation face
several issues cause of various unexpected situations (Wood, 2016). The management
department of Excite Entertainment Ltd. Implement different planning tools such as sales budget,
production budget and cash flow statement to predict and forecast from various unexpected
issues and problems in order to increase the effectiveness and efficiency or make improvement in
the profitability by resolving its financial hurdles in an effective manner and way.
Planning is beneficial in framing techniques for the future form retaining smooth
functioning of the activities and operations of Excite Entertainment Ltd. This organisation face
numerous problems due to contingent situation. Managers of Excite Entertainment Ltd.

Implement extraordinary planning tools such as sales budget, production budget and cash flow
statement to expect and forecast from numerous sudden issues and issues which will boom the
effectiveness and efficiency or make improvement within the profitability through resolving its
monetary hurdles in an effective manner and manner.
TASK 4
Comparison of organisations to respond the financial issues by management accounting system.
Management accounting plays an important role in resolving financial issues faced by
Excite entertainment ltd through estimating cost and perception of buyers towards pricing policy
of company by using cost accounting system and price optimisation system respectively.
 Calculation of contribution per unit-
Selling price per unit
Less- Variable cost per unit
40
10
Contribution 30
Interpretation- On the basis of above calculation, it has been analysed that company's
selling price per unit is of £40 which is deducted by variable cost per unit to calculate the
contribution per unit of 30.
 Calculation of break even point- Fixed cost/ contribution per unit
120000/30= 4000 (in units)
Interpretation- From above solved numerical it has been analysed that break even point
is calculated by dividing fixed cost (120000) by contribution per unit (30). Hence the break even
point is of 4000 (in units).
 Calculation of cost volume profit analysis- Fixed cost+ desirable profit/ contribution
(120000+60000)/ 30= 6000 units.
Interpretation- On the basis of this solved financial problem, cost volume profit analysis
is calculated by dividing addition of fixed cost and desirable profit from the contribution. The
CVP is of 6000 units.
 Profit at the sales of 4000 units-
Sales (4000*40) 160000

Less- Variable cost (4000*10)
Contribution
Less- Fixed cost
Profit/ loss
40000
120000
120000
0
Interpretation- On the basis of above statement, it can be analysed that if company
sells the 4000 units then they will not be able to gain any profit. As well as there will be zero
loss.
 Profit at the sales of 6000 units-
Sales (6000*40)
Less- Variable cost (6000*10)
Contribution
Less- Fixed cost
Profit
240000
60000
180000
120000
60000
Interpretation- From above solved numerical, it has been analysed that company has to
sell 6000 units to gain the desirable profit of £60000.
Advice- From the above calculation art, it came to know that an organisation need to sell
6000 units in order to achieve desired profit. The reason is that if the company sell 4000 units
then the chances of earning profits will get minimised whereas if company should sell 6000 units
then earning profit possibilities goes to 60000 which is clearly mentioned under the above
financial statement.
There are various financial issues that shows the organisational lacking issues of financial
resources. Excite Entertainment Ltd. face some issues that needs to be identified and resolve by
implementing strategies that are as follows: Sudden expenses: This challenge is faced by the Excite Entertainment Ltd. as they have
lack of planning so that it can suffers from unplanned expenditures this will effects the
company's financial statements.
 Delay in customers payment: Excite Entertainment Ltd. gives their products and services
to its customers on credit basis as a result it lacks in collecting payment back which
impacts on the company's operational activities.

Excite Entertainment Ltd. is liable to analyse the cause of challenges and measures strategies to
overcome from it. For this a consultant use several techniques that are as follows: Key performance indicator: It is most useful tool to measure the company's performance
and used for financial as well as non-financial terms like identify the unnecessary
expenditures as well as issues of supply chain and operational issues.
 Benchmarking: This defined as a measurement tool that are used to compare business
performance with the other players that are available in the marketplace. This is used
by Excite Entertainment Ltd.asset management to examine the debt issues or delay in
payment problem of Excite Entertainment Ltd.'s and compare it with its competitors in
order to formulate strategies.
Basis Excite entertainment limited company Abbott Mead Vickers
Financial
problem
An organisation faces financial issues
related with shortage of finance in
terms of executing other tasks. Due to
this, their income reduces on
continuous basis. The main cause of
arising such financial issue is lack of
efficiency in plans and policies framed
by management for managing and
arranging events.
An organisation is faces issues of
financial due to spending more than
actual revenue. This will create
differences between cash inflow and
cash outflow in cash flow statement..
Method to
solve
Benchmarking is considered as best
tool to adopt as it assist managers to
analyse its rivals strategies and make
plans and policies accordingly which
brings target among employees to
achieve within given time frame.
KPI is most suitable tool for company
to adopt as it facilitate management in
analysing the profitability of company
by comparing actual with standard.
This will restrict various departments to
spend more than required.
CONCLUSION
From the above report, it has been concluded that management accounting act as an
important role for an organisation in the process of achieving growth in their profitability and

success in competitive market For this, accounting manager need to get sufficient financial
information from various financial records such as profit and loss account, balance sheet, cash
flow statement etc. Application of various management accounting system such as cost
accounting, job costing etc. is also necessary as it support managers to prepare various kinds of
accounting reports which transmit valuable information to the management in making an
effective decision for the betterment of an organisation. Apart from this, using of different
costing methods is also must required in order to make easy for management to make decision
which costing method need to adopt which can retain loyal shareholders and attract new one.
Using of planning tools to control budget help an organisation in controlling their unnecessary
expenses. The management accounting system must also required to adopt which help manager
to deal with financial issues and maintain a good financial position of an organisation.

REFERENCES
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Online:
Absorption costing. 2018. [Online]. Available through:
<https://www.accountingtools.com/articles/what-is-absorption-costing.html>.