Management Accounting Assignment - Charlotte Street Hotel

MANAGEMENT
ACCOUNTING

INTRODUCTION
Management accounting is a process of which is more or less related to the costing and
level of expenses of the company. With help of the management accounting the firm able to
determine lack of problems and constraints which are arises in the operation or production
process related to the costing. Further, it able to control over the extra expenses and improve
financial performance in adequate manner in its respective segment. In the current study there is
a small business is chosen which is operating in the hospitality industry of UK. Name of the
respective small firm is Charlotte street hotel which is located in London, UK. The report
describes different systems and approaches of management accounting along with their
requirement in Charlotte hotel to combat financial constraints. Further, it shows calculation of
net profit at the end of year by using two costing approaches such as marginal and absorption. At
the end, the report focuses on adopted planning tools by the hotel in order to control over the
budgetary as well as expenditures.
TASK 1
P1 Numerous kinds of systems or approaches of management accounting used by Charlotte
street hotel
Business Report
To,
Board of directors,
Charlotte street hotel,
Date: 15th July 2017
Subject: Various kinds of management accounting systems
Different kinds of approaches of management accounting are helpful for the company in
order to highly and effectually manage the overall business enterprise in proper way. The
Charlotte hotel of London uses some approaches to fulfil some financial related requirements
and needs by which it able to become more profitable. Higher the level of profit lead to attract
more number of customers and shareholders because they think that firm will be provide better
services and high dividend amount (Zimmerman and Yahya-Zadeh, 2011). Different
management accounting approaches or systems are enumerated below:
1

 Inventory accounting: Very first management accounting approach which is used or
adopted by the Charlotte street hotel is inventory accounting. For the every business it is
very necessary to manage level of stock in the proper way because high stock has more
number of stock then it leads to reduce performance of the firm. When the Charlotte
hotel cannot able to use or utilize the level of inventory then it has to pay different costs
such as holding, carrying etc. In order to reduce level of stock and highly use in the
operation process company requires such kind of management accounting approach.
Higher the level of inventory is not better and effectual for any kind of business,
especially for those enterprises which operates in manufacturing segment. Lean accounting: Another approach of management accounting adopted in the business
process is lean accounting where it able to decline level of extra expenses. When another
expenses will be increase then performance of the Charlotte hotel reduces and as well as
affects on the image in the negative way (Burritt, Schaltegger and Zvezdov, 2011). On
the other hand, when there are expenditures are lower, then amount of profit will be
ultimately improved. Further, image will be create in the corporate world and local
community as well which lead to become a brand in the hospitality sector of the country
UK. It can be said that the accounting approach of lean is required to the Charlotte hotel
of London for make them more profitable and reduce or eliminate wastage products and
services. Transfer pricing: Moreover, according to the another approach i.e. transfer pricing
which helps to the hotel in order to purchase products as well as services at the low price
from the parent company. When Charlotte hotel purchases from another organisation
then it has to pay more sum of money to that seller firm which lead to increase total cost
of production as well as price of hospitality services. In order to this, it has been said
that prices of services are depends on the cost of production. The respective approach is
used in the manufacturing firms, construction company as well as production unit
because they need processed as well as raw material over the time.
 Cost accounting: Apart from above mentioned all the approaches another is cost
accounting method where total cost of products and services are mentioned (Renz,
2016). In this all types of costs and expenses are to be included as well as properly
2