Management Accounting Project

This project analyzes the importance of management accounting in Jupiter Plc, a manufacturing company. It explores various management accounting systems and techniques, their benefits and drawbacks, and their integration within the company. The project also examines different planning tools used for budgetary control and their application in responding to financial problems and achieving sustainable growth.

MANAGEMENT ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.Explaining management accounting and requirement of different type of management
accounting system.......................................................................................................................3
2. Explaining different method used for management accounting reports.................................4
3. Evaluating the benefit of management accounting system and their importance in Jupiter
Plc................................................................................................................................................5
4. Critically evaluating the integration of management accounting process and reports in
Jupiter Plc....................................................................................................................................6
TASK 2............................................................................................................................................7
1. Calculation of profit and loss statement using absorption costing..........................................7
TASK 3...........................................................................................................................................8
1.Explaining the advantage and disadvantage of different type of planning tools used in
Budgetary control........................................................................................................................8
2. Analyse the use of different planning tools and their application for preparing and
forecasting budget.......................................................................................................................9
TASK 4..........................................................................................................................................11
1. Compare how organisation are different in adapting, management accounting system in
responding to its financial problems.........................................................................................11
2. How management accounting helps in leading the organisation to sustainable success......12
3. Evaluating planning tool that helps in responding to financial problem and business
sustainable growth.....................................................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting plays an important role in the survival and growth of an
organisation. In the competitive corporate world, there is a need for an organisation to have a
management accounting system for the efficient running of the financial and operational activity.
Management accounting system helps in providing different informations from all department so
that the management could make make decisions and strategies for enhancing the performance of
organisation. The present report is based on Jupiter Plc, manufacturing company. The present
report will help in understanding different system and techniques of management accounting
system in company. The report will discuss the important of different accounting system in
company. Report will also discuss various method for management accounting reports.
Further,the report will evaluate the integration of management accounting system and
reporting in Jupiter Plc. The report will include the income statement by using marginal and
absorption costing techniques. Moreover, the report will analyse the application of planning tool
of budgetary control in Jupiter Plc. Present report will also discuss the management accounting
helps in responding to financial problem in company.
TASK 1
1.Explaining management accounting and requirement of different type of management
accounting system.
Management accounting or managerial accounting is a process of preparing and
providing the management and higher authority the financial Information of the company. The
financial information is very important for management to make strategies and day to day
decisions regarding operations of the company . Management accounting helps the management
of Jupiter Plc to make decisions regarding planning, organising, controlling budget making for
the business.
The requirement of different type of Management accounting system for Jupiter Plc are:
Inventory management system: It is the process of supervising the inventory and its flow in a
company. Its manage the transfer of raw material from manufactures to thee finished goods in
warehouse (What is Management Accounting? , 2018). It helps the Jupiter Plc to facilitates its
sales as the inventory management will keep all the records of goods.

Job Costing: It is a process in which cost will be allocating to each product for manufacturing
that enables in determining the expenses incurred in the production processes of each product
(Kaplan and Atkinson, 2015). It will help the manager of Jupiter Plc to keep record of each
product expenses that includes, overhead, direct material and direct labour cost.
Price Optimization: It is a mathematical tool of calculating the differences in demand of a
product with changes in prices of a product (Laudon and Laudon, 2016). It helps in providing the
information of cost and inventory level to determine the price that brought the profit to the
company.
Cost accounting: It is a process of estimating the correct cost of the product to analyse the
profit, inventory valuation and cost control (Hilton and Platt, 2013). A company can ascertain the
cost of product, when the company knows a profitable value of that product. It helps the
management of Jupiter Plc to make the financial statement preparation.
2. Explaining different method used for management accounting reports.
The reports that contains the information regarding the financial transactions and
accounting are called management accounting reports. Management accounting reports are
important for the managers of Jupiter Plc to make decision regarding future goals and objective
of the business (Types of Managerial Accounting Reports , 2018). These report includes the
detail information regarding company's available cash, sales revenue, company's accounts
payable and receivable etc. the preparation of the management accounting reports are the
contentious process as it requires in decision making process regarding the operational and
financial performance of the company.
The different management accounting reports that would help the Jupiter Plc are:
Budget reports: It is the fundamental reports that helps the management of Jupiter Plc that
helps in measuring the performance of company with in a specific period of time (Schaltegger
and Burritt, 2017). A budget helps in estimating total expenses of company for a specific time
period which based on the prior year's expenses. According to that budget, cost will be allocating
to different department in the company. Budget report will help in analysing the actual
performance of company with the budgeted plan.

Job cost Report: This reports help in analyse the management the cost incurred in the project
than the revenue earned from that project (Epstein, Verbeeten and Widener, 2018.). This report
helps the management in showing the most profitable area or department of the company, so that
management could focus and allocate the cost to such areas rather wasting revenue on noon-
profitable job or activities.
Account receivable Ageing: such reports helps manager to mange the cash flows in the
company. If company provides credit to its customer and distributors, this report will help in
determining the defaulter and helps in making the correct decision in company collection
process. As adequate cash flow is important in company, tighten the credit collection system is
important to maintain the smooth operation of company.
Cost managerial accounting reports: a cost report helps in summarising the information
regarding the cost incurred in manufacturing a product (Soltyk, 2018). It includes the cost of
material, overhead, labour with the amount of product produced. It helps the management to
decide the selling price of that product.
3. Evaluating the benefit of management accounting system and their importance in Jupiter Plc.
Management accounting system is important in company to different information for
decision making and evaluating performance of company. Following are the benefits and
drawbacks of different management accounting system with its uses in the company.
Inventory management system:
This system helps in controlling and supervising the flow of inventory in company. It
helps in supervising the components of supply chain management of Jupiter Plc (Cohan, 2018).
The benefit of application inventory management in Jupiter Plc that it helps in controlling the
flow of raw material to manufacturers and finished goods in warehouse and ultimately in selling
process. Accurate inventory management will help in improving the flow of goods to customer.
It would help in maintaining the over-stock and need to inventory in stores. It helps in
maintaining the track record of stock that saves the times and efforts in moving products.
However, inventory management is a complex system and requires high skills professional to
manage this system. Establishing the system can be costlier to company.
Job Costing system:

It is an accounting system that helps in estimating the accurate cost manufacturing a
product with its overhead, material cost and labour cost. It is an important system to be applied
in Jupiter Plc. It will help the manager to determine the profit earned by a specific job, which
assist the manager to know which job area is more profitable to company (Gilchrist, 2018). The
application of job costing will help the company to get information of production statistic of an
individual department. On the contrast of that, it will requires an extra of maintaining track
record of each items used during the job. It will relies on statical calculation rather than actual
input.
Cost Accounting:
It is a process of estimating the correct cost of the product to analyse the profit, inventory
valuation and cost control. There are certain benefits for Jupiter Plc to be applied in its
accounting system. It helps the manager to ascertained the profitable and unprofitable activities
of a particular activity or a job. It helps the management to measure the efficiency to maintain
and improve the operation. The manger will be able to eliminate the waste activities from the
operation that will save the time and efforts of the management (Kristandl and Quinn, 2018).
However, the cost accounting system doest nor considered the flexible factors and circumstances
in activities like issues of material and labour that affect the profitability of that activity.
4. Critically evaluating the integration of management accounting process and reports in Jupiter
Plc.
Integration accounting system is an software application that helps Jupiter Plc to
successfully integrate the financial transaction and information. It assist the manager to integrate
the management reporting activities of different areas in company. It standardized the application
of management accounting system and financial reporting activity of Jupiter Plc (Hepworth,
2018). The application of integrated management accounting will helps the management in
enhancing its speed, accuracy and efficiency of processing the financial information and
transactions of the Jupiter Plc. Integrated management accounting helps in eliminating the needs
to check the the transaction separately with different methods. This system helps the
management in getting high quality information.
However, the integrated management accounting system mix up the information that
creates problems for the management to prepare the financial statement as there are lot of

financial reports that has to be merge in financial statement of company. It includes the
unnecessary information in system that would requires extra efforts from the management of
Jupiter Plc.
TASK 2
1. Calculation of profit and loss statement using absorption costing.
Absorption Costing: in this costing method, all the manufacturing cost are involved in
calculating the net finished cost of the inventory. In costing method, both variable and fixed cost
will be considered. It gives an accurate cost of inventory.
Marginal Costing: It is also known as variable costing as it only considered the variable
expenses and estimates the portion of fixed cost to be constant during the period.

Income statement as per absorption costing.
Profitability statement

Income statement as per marginal costing

TASK 3
1.Explaining the advantage and disadvantage of different type of planning tools used in
Budgetary control.
Budgetary control is a process in which the actual performance of the company is being
compared to budgeted performance. The expenses and revenue are being compared with the
planned income and expenses. The budgetary control help the management of Jupiter Plc to
monitor and control the operations and cost of the company in a specific time period.
The planning tools for budgetary controls that helps the Jupiter Plc are:

Cash Budget: It is a the estimation of the firm's cash position in the company. It is a plan made
for cash receipt and payment for a specific time period in a company (Kaplan and Atkinson,
2015). These cash flow includes the revenue collected, expenses and loan paid. Cash budget is
important to estimate the cash position of company in a specific time period.
Advantages of Cash budget:
 Appropriations are on the cash basis and helps in limits of payment and annual
commitments.
 It helps in coordinating the activities of all the department in an organisation.
Disadvantage of Cash budgets:
 It depends on the estimates future events. The budget depends on the future sales and
future collection received on those sales. This estimation may limit the cash budget as
manager do not considered the facts.
 Once, budget report prepared and published it is not easy to do any correction or enter
any data. It provides lack of flexibility .
Zero based budgeting: it is a method of budgeting in which every expenses are made for each
new period. This budget system starts with a zero base and each activity in the organisation is
analysed to prepare the plan and budget and need of cost for the year. In this the budget are made
without considering the previous year budget.
Advantage of zero based budget:
 It facilitates the business in the allocation process of resources more efficiently, as it
considered the actual performance rather than past performance (Miller, 2018). It helps in analysing each activity of the business and its cash flow which helps in
computing their operational cost. It helps in cost reduction and give more accurate
budget.
Disadvantage of Zero based budget:
 As the process of this budget starts with zero, it will requires man power to analyse every
activity of the business .

 The zero based budgeting is a time consuming process as making a budget by estimating
each activity requires lot of time for management.
2. Analyse the use of different planning tools and their application for preparing and forecasting
budget.
Feb
(in million)
March
(in million)
April
(in million)
Receipts £50 £70 £85
Cash sales 30 40 45
Credit sale receipts from debtors 20 15 10
Other income received 15 20 45
Total receipts (a) 115 145 185
Payments 20 20 15
Purchases 25 12 10
Wages- Labour and overheads 15 10 12
Fixed costs 20 15 15
Capital expenditure – machinery 10 10 10
Promotion campaign 5 7 10
Total Payments (b) 95 72 72

Surplus/Deficit (a) – (b) 20 73 113
Balance b/f 20 93
Balance c/f 20 93 206
TASK 4
1. Compare how organisation are different in adapting, management accounting system in
responding to its financial problems.
Different management accounting approaches that Jupiter Plc has adapted to respond its
financial problem are:
Balance Scorecard: It is a management system that helps in translating the company's goal into
a set of performance objectives which can be measured, monitors and changed as according to
the need of the company. Balance scorecard provides a measurable matrix to the manager of
Jupiter Plc in measuring financial performance in the area of customer satisfaction and product
innovation. Measuring the performance of business activity have great impact on the company.
With the help of balance scorecard, manager of Jupiter Plc measures the short-term goals like
return on investment, increase in sales and achieving operating income. The performance
measured helps in making strategies and solving issues which help the company in responding to
its financial problem.
KPI's: It is a measurable value which helps in determining the effectiveness of company in
achieving its business goals and objectives. Jupiter Plc adapted Key performance Indicator as a
management accounting approaches, as it helps to evaluate the success of company in reaching
its target (Sainaghi, Phillips and d’Angella, 2019). KPI helps the higher authority in getting the
performance information that enables the manager to evaluate of the company is performing
according to its objective and goals (Introduction to Key Performance Indicators Examples ,

2018). This information helps the manager in their decision making process and to further
strategies to improving the performance of company and responding to its financial problems.
Financial Governance: it is process through which company collects, manages, monitor and
control its financial information. It is an important approach of management accounting,
financial governance helps the manager to properly manages the business data and information
and ensure that the information and financial data are correct. It the policy and procedures which
helps the company in internal control, making financial policies, controlling funds in company.
Using financial governance enables the manager of Jupiter Plc in collecting and presenting the
financial information according to the regulatory rules (Grabel, 2018). Accurate data and
information helps in making timely financial decisions and policies which helps the company to
improve its financial position.
On the contrary basis, the Agmet Ltd, a manufacturing firm has adapted different
management accounting approaches to respond its financial problems.
Bench-marking: it is a process of comparing company's performance and strategies against
another companies with the same industry. It helps in improving the internal performance of
company. Agmet Ltd has adapted bench-marking as management accounting techniques. By
comparing and measuring performance and strategies with superior performance will help the
management of Agmet Ltd to change in its policies and procedures and implement it to improve
its performance level. It helps the company to become more efficient and profitable in respond to
its financial issuers.
2. How management accounting helps in leading the organisation to sustainable success.
In responding to financial problem of Jupiter Plc, management-accounting helps in
leading the organisation to sustainable success with its different techniques:
Balance scorecard: Jupiter Plc are using balance scorecard to measure its performance on the
basis of its organisation goals and target. It helps in measuring the performance in the basis of
four perceptive, financial performance, internal business process, customer satisfaction and
learning and growth opportunities. It helps the company in making decisions to improve its
performance on these perspective in achieving its target which will help in business success.
KPI: it helps the higher authority in getting the performance information that enables the
manager to evaluate of the company is performing according to its objective and goals. It is a

measurable value which helps in determining the effectiveness of company in achieving its
business goals and objectives (Cull and et.al., 2014). The manager than able to make strategies
for improvement which helps growth of business organisation.
3. Evaluating planning tool that helps in responding to financial problem and business
sustainable growth.
The planning tool for accounting used by Jupiter Plc in respond to its financial problem
are:
Cash Budget: It is a the estimation of the firm's cash position in the company. It is a plan made
for cash receipt and payment for a specific time period in a company. It helps in maintaining the
sound financial position of a company for a specific period of time.
Zero based budgeting: It helps in evaluating each activity of organisation to prepare the
budgeted plan for the year. Every activity will be analysed that helps in eliminating waste
activity and cost of organisation. It saves time and efforts of the company which can be used in
other activity that will improve the financial position and the business performance.
CONCLUSION
By summing up the above report, it can be analysed that management accounting is very
important in making effective strategies and decision making for further growth of company. The
present report has analysed different management accounting system and techniques of Jupiter
Plc. The report has concluded different accounting system and its application in company. The
report has analysed different method of management accounting reports. An income statement
using absorption based costing system has been included in report. Further, the report has
discussed various planning tool for budgetary system. A detail comparison had been concluded
of different management accounting approached used by company in responding to its financial
problems.

REFERENCES
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Online
What Is An Integrated Accounting System? . 2018 [Online] Available
Through:<https://smallbusiness.chron.com/integrated-accounting-system-74430.html>
What is Management Accounting? . 2018 [Online] Available
Through:<https://www.myaccountingcourse.com/accounting-dictionary/management-
accounting>
Types of Managerial Accounting Reports . 2018 [Online] Available
Through:<https://smallbusiness.chron.com/types-managerial-accounting-reports-58384.html>
Introduction to Key Performance Indicators Examples . 2018 [Online] Available
Through:<https://www.klipfolio.com/resources/kpi-examples>