Management Accounting - Excite entertainment limited Assignment

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
TASK 2............................................................................................................................................8
TASK 3..........................................................................................................................................11
TASK 4..........................................................................................................................................13
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................17

INTRODUCTION
The management accounting can be defined as a kind of accounting that is linked with
process of acquiring quantitative and qualitative information in order to produce internal reports
for managerial aspects (Elmassri, Harris and Carter, 2016). These reports play an essential role in
the context of managing internal functions and activities of companies. It is so because by using
these internal reports, managers of business entities take further decisions. Basically, the main
aim of this project report is to describing concept of management accounting in the context of
internal management of businesses. In the project report, a company is selected that is Excite
entertainment limited which is located in UK. This company is a client organisation of a leading
accountancy firm and operates in entertainment industry. This project report covers different
topics such as MAS, MA reports, income statements under costing methods and many other. In
addition, role of MAS in overcoming from financial issues is also covered.
TASK 1
Section A
(a) Comparison between MAS and Financial accounting.
Management accounting – In this accounting, monetary and non monetary information is
used by accountants for development of internal reports.
Financial accounting- In this type of accounting only financial information is considered
for preparation of different financial statements which are presented to external stakeholders and
are also used internally (Smith, 2015).
Comparison:
Basis Management accounting Financial accounting
Legal
requirement
There is no legal requirement of
developing management accounting
reports.
In financial accounting, it is a legal
compulsion to develop financial
statements for stakeholders.
Types of data
used
In this accounting both financial and
non financial data are used.
On the other hand, in this accounting
only financial data is used.
Format of
presentation
There is no any particular format of
presentation of MA reports.
It is important to present financial
statements to stakeholders in a standard

format regulated by IFRS.
Different kind of MAS:
(b) Cost accounting system –
It is an accounting system which is linked with process of predicting cost of various kind
of operations and activities. Main objective of this accounting system is to manage and reduce
overall expenses of business entities. In addition, this is essentially required by companies to
assign the financial resources in companies operations as per the predicted expenses of different
activities (O’Grady, Morlidge and Rouse, 2016). There are various kind of costing techniques
which are used in this accounting system such as standard costing, direct costing etc. The
standard costing includes absorption costing system in which both kind of costs are taken as unit
cost. While in direct costing marginal costing is included in which only variable cost is taken as
unit cost. These costing systems help to companies in keeping effective control over
expenditures. In the aspect of above respective company, Excite limited they are implementing
this accounting system in order to control expenditures of activities regards to entertainment
programs. Such as absorption costing is helpful in tracking the profit accurately and marginal
costing is beneficial for controlling the cost of production.
(c) Inventory management system –
This accounting system is combination of two activities which are monitoring and
maintenance of stored goods in warehouses. The stored material can be companies' assets, raw
material, finished products etc. It is essentially needed in companies by manufacturing
departments so that they can make a better decision regards to production. In this system, various
approaches are included such as just in time, perpetual inventory system, perpetual inventory
system and periodic inventory system. The Just in time is related with minimising time of
production so that cost can be controlled. In addition, the perpetual inventory system tracks the
available inventory balance in warehouses. While periodic inventory system benefits in assessing
amount of inventory which a company have at the end of an accounting period. As well as
Above respective company is applying this accounting system to manage their inventories such
as equipment like LED, music system and many more.
(d) Job costing system –

It is a kind of accounting system which is associated with identification of expenditures
and income by each job that is assigned to various activities (Sithole, Chandler, Abeysekera and
Paas, 2017). This accounting is mainly used in those business entities wherein portfolio of
produced products is larger. It is so because by use of this accounting system, the production
department can become aware about each produced unit's cost individually. Basically, the main
advantage of this accounting system is that it permits managers to compute profitability on a
particular job that assigns on various business activities. Such as the Excite entertainment limited
company is implementing this accounting system in their operations so that they can aware about
each job cost which involves in different activities.
(e) Evaluation about how MAS and management accounting reports are aligned with
organisational process.
Different types of MAS and management accounting reports are linked within process of
companies. Like above described accounting systems such as cost accounting system is linked
with finance department of Excite entertainment limited in order to keep cost of various activities
lower. As well as inventory management system aligns with the proper management of stored
inventories in warehouses (Brown and Dillard, 2015). For example, in above respective
company, they manage purchasing and supply of their equipment by help of this accounting
system. Apart from it, different MA reports are also linked with company’s operations such as
cost accounting reports provide detailed information about how much cost is occurring in their
activities. As well as some other reports like account receivable ageing report and performance
report are linked to different functions of companies. Thus, it can be stated that MA reports and
MAS are linked with organisational process.
Benefits of above mentioned MAS :
 Importance of cost accounting system – This is helpful for companies in keeping cost of
various kind of operations lower from the standards. In the above company, Excite
entertainment limited they are using this system which is benefiting them in reducing cost
of their operations. In addition, different costing systems like standard costing system is
helping them in providing information of actual variances in total costs.

 Importance of inventory management system – It benefits to organisations in effective
management of stored materials such as raw material, finished goods etc. Such as in the
above chosen company, they are applying this accounting system. This is helping them in
minimising the cost of storage as well as in managing their equipment.
 Importance of job costing system – This accounting system is linked with process of
providing detailed information about each job cost. In the aspect of above Excite limited
company, they are applying this accounting which is benefiting them in providing
information about total cost of job that is assigned into their activities.
Section B
(a) Various kind of managerial reports
Management accounting reports - The MA reports can be defined as those reports which are
prepared as per information derived from various management accounting systems. Under these
reports, detailed information regards to financial and non financial aspects is included. Herein,
below some kind of MA reports are demonstrated which are as follows :
 Cost accounting reports – The cost accounting report can be defined as a kind of report
which contains detailed information related to expenditures of various activities and
functions (Burritt and Christ, 2017). Due to this business entities can trace those activities
which involve high costs. In the Excite entertainment limited company, their accountants
produce this report which help their managers in proper evaluation of overall cost as well
as in focusing those operational activities which are resulting in higher expenses.
 Account receivable ageing report – This can be defined as a kind of report which details
information about total debt amount that is owed by debtors of a company. It becomes
useful for companies as it consists date also on which transaction done by both parties.
Due to this, business entities can focus on those debtors who are not making payment
even after crossing of due date. This report helps to finance departments by providing
information about how much amount is due by their debtors as well as which debtors are
making delay in payment. Like in the context of above respective company, Excite
limited their accountants are preparing this report in order to get information about due
amount from customers.

 Inventory report – It is a type of report which is prepared on basis of inventory
management system. In this report, information about quantity of stored material in
warehouses is included. The stock report is essential for companies because as per the
information provided by this report, production department takes decision about
producing new products. In the above respective company, Excite entertainment limited
their accountant produce this report which is helping them in effectively management of
their various equipment as well as in providing information about how much quantity of
stock they are needed to buy.
 Budget report – It is a kind of report which is prepared on the basis of various kind of
budgets. Under this report, information about predicted income and expenses as well as
about actual outcomes is included. This report is beneficial for managers because by use
of information about variances between actual and estimated outcomes, they take further
decisions. Such as in the above Excite entertainment limited company, they are using this
report for assessing information about evaluating variance between actual and estimated
outcomes. As well as on the basis of it, they prepare their further plans and policies about
which activities should be carry forward and which ones should not.
 Performance report – This is a kind of report which is prepared by companies in order to
review the performance of whole departments as well as of each employee (Laing and
Perrin, 2018). Under this report, information regards to produced results by various
operations and activities is included. Basically, the performance report is useful for
managers because as per information provided by this report they take strategic decision
for future of companies. As well employees are awarded individually on the basis of their
performance. The accountant of Excite entertainment limited company, produce this
report which becomes an essential framework taking decision about their employees and
operations.
(b) Characteristics of good information.
Below some characteristics of good information system are elaborated below which are
as follows :

 Accuracy – Accuracy in the information is an essential element because if accounting
informations will not be accurate then businesses will fail to move right steps. Thus, this
is a crucial characteristics of good information.
 Relevancy – The relevancy is an important feature of good information that defines that
accounting information should be as per business operations and activities. It is important
because due to relevancy in accounting information, companies can make better
strategies.
 Reliable and up to date – This is an another characteristic of good information which
state that accounting information should be reliable and up date. It is necessary for
companies to keep their accounting informations reliable so that they can take important
internal decisions.
 Timely presentation of information – The accounting informations should be presented
on time so that businesses can take decisions on time (Meidell and Kaarbøe, 2017).
TASK 2
Section (A)
Absorption and marginal costing method:
 Absorption costing method – This can be defined as a kind of method in which fixed and
variable costs are taken as cost of product.
 Marginal costing method – It is a kind of costing method in that fixed cost is taken as
period cost and variable cost is considered as cost of product.
 Contribution = Selling price per unit – Variable cost per unit
Selling price per unit £40
Less: variable cost per unit £10
Contribution per unit £30
 Break even point = Fixed cost / contribution per unit
Fixed cost = £120000
Contribution per unit = 30
So, BEP = 120000 / 30

= 4000 tickets.
Section (B)
 Factors which can change the above calculated outcome :
* Selling price – If selling price change from £ 40 to any other amount then contribution will also
change which may lead to change in BEP.
* Variable cost – Another factor that can cause to change in above outcome is the variable cost.
This is so because change in variable cost can impact to contribution per unit and due to this BEP
can be effected.
Section (C)
BEP to attain desired profit = Fixed cost + desired profit / Contribution per unit
= 120000 + 60000 / 30
= 6000 tickets
Profit at sales of 4000 tickets
Particulars Amount (in £ )
Sales (4000*40) 160000
Less - Variable cost (4000*10) -40000
Contribution 120000
Less- fixed cost -120000
Profit/loss 0
Profit at sales of 6000 tickets
Particulars Amount (in £ )
Sales (6000*40) 240000
Less : Variable cost (6000*10) -60000
Contribution 180000
Less : fixed cost -120000
Profit/loss 60000

Hence, 6000 tickets are needed to sold to attain the desirable profit. This is so because at sell of
4000 tickets, there is no profit and loss.
Income statements as per absorption costing method :
Particulars Units Price Total
Sales 8000 15 120000
Less : Cost of good sold
Opening stock
Production
Total units
500
10000
10
10
5000
100000
105000
Less : Closing stock 2000 10 20000
Cost of good sold (105000-
20000)
85000
Gross profit 35000
Income statements as per marginal costing method :
Particulars Units Price Total
Sales 8000 15 120000
Less : Cost of good sold
Opening stock
Production
Total units
500
10000
6
6
3000
60000
63000
Less : Closing stock 2000 6 12000

Cost of good sold (63000-
12000)
51000
Contribution 69000
Fixed cost 40000
Net profit 29000
Working Note:
1. OAR = 40000 / 10000
= 10
2. Full cost = 6 + 4
= 10
3. Closing stock
Production = 10000
Less: Units sold = 8000
Closing stock = 2000
Management accounting techniques and produce financial statements
Management accounting techniques are important in order to prepare different types of
financial statements (Gomez-Conde, Lunkes and Rosa, 2019). This is so because these
techniques provide a particular framework in order to prepare financial statements. Such as in
above Excite entertainment limited company, they are using various kind of MA techniques like
absorption and marginal costing systems in order to produce income statements. It shows that
management accounting techniques are useful in order to prepare financial statements.

TASK 3
Advantages and disadvantages of different types of planning tools used for budgetary
control.
Budget – This can be defined as an estimation of futuristic income and expenses. The
budgets can be prepared for long and short time period as per requirement. For business entities,
preparation of budgets is essential because in the absence of it financial resources can not be
allocated properly.
There are different kind of budgets that are prepared by the management in order to understand
the trends of market and business circumstances which are discussed below:
Zero based budget: This is one of the popular budgeting methods that aims to predict
expectations and possibilities. The process of ZBB starts from nothing without considering the
last year spending or any activity thus every expense is justified to be part of budget. The
respective company prepare this budget for the scratch with a Zero base which includes re-
assessment of line item of cash declaration of cash flow and explanation of all costs to be born
by the company. There are few advantages and disadvantage of ZBB that are discussed
underneath:
Advantages:
 This enables to allocate funds efficiently (department-wise), because it does not consider
historical figures but appears at actual numbers.
 Through avoiding any unproductive and repetitive tasks this contributes to the discovery
of potential and much more value-effective ways of doing business operation which help
in attaining the desired results of excite limited.
Disadvantages:
 This is a time taking exercise because every time management have to make new
estimate regarding income and expenses.
 In context to explain each line item or price is a challenging task that involves expert
managers which can be costly for company.
Program budget: A program plan or budget is a process through which the corporation
distributes its funds to multiple departments, projects, business activities and controls the
organization's cash flows (Saeidi., Othman, Saeidi and Saeidi, 2018). Each form of budget

contains one specific venture-related expenses and revenues any other project income or cost is
combined with this particular project. Some advantages and disadvantage are discussed below:
Advantages:
 This Budget help manager in identifying the main project of company so that proper
funds can be allocated to reach the predefined targets.
 In Excite Limited this Budgets help in spotting the business areas which are profitable
and require more funds to increase profitability.
Disadvantages:
 In case if a specific program budget goes wrong then it will definitely increase the overall
cost of business. This Budget is time consuming as it requires detail information to detect the actual
requirement of resources to run particular operation in excite company.
Incremental budget- This budget is a crucial part of management accounting that is
depended upon the assumption of making a little change within the existing budget in order to
make new budgets. This approach to incremental budgeting begins with the premise that the
prior year's expenses will be the starting point for the current year's projections. There are few
advantages and disadvantage which are listed below:
Advantages:
 This budgeting approach is quite simple to implement and therefore does not require any
complex calculations. This can be done without much difficulty for different
departments, as no detailed analysis is required which saves cost and time for excite
limited.
 In Excite limited this budget help to remove the competition and build the value by
maintaining stable budgets year by year.
Disadvantages:
This strategy may appear to increase manager's expenditures for Excite limited because
budgets become easily available that can result into unnecessary expenses of funds that may not
be justified.
Use of planning tools for preparing and forecasting of budgets:

In the aspect of planning tools various kind of budgets are included such as ZBB,
program budget and incremental budgets (Hemmer and Labro, 2017) These budgets are
important in order to produce and prediction of budgets. It becomes possible because in these
planning tools financial information is included that act as framework of preparing budgets. Such
as in above company, they are using various kind of planning tools like ZBB, program budgets
etc. in order to preparation of budgets.
Planning tools to solve financial issues :
Planning tools of budgetary control consists vital range of information about financial
transaction of business entities. Due to this, it becomes easy to companies to track monetary
issues and possible alternatives to sort out the issue. In the Excite limited company, they are
producing various kind of planning tools in order to assess financial problems.
TASK 4
Management accounting systems to respond to financial problems.
Financial governance: Financial governance is considered as an integrated system to
supervise the financial activities (Hoque, 2018). This helps to form an effective structure of
financial control. Financial governance helps in assessing the departmental needs and assist the
planning process effectively. The company provide promotion of concerts and festival decoration
services in the UK. It is observed that the cost of organizing events is increasing which impacted
the profitability of organization. Financial governance is required to comply with in operations
subject to control the budget planning to reduce access cost of planning. Formation of financial
governance helps in reducing burden of financial control for finance managers and they would be
able to focus upon key projects.
Full Compliance system: It refers a set of rules and regulations to control the misconduct
of operations or non-adherence actions. In the compliance system the misconduct and
misappropriation are treated by strict laws and regulations. Mostly, this system is used in
financial and banking industries. In Excite company the managers found a loophole between the
reporting system in stores. After conducting physical verification, it is observed that supplies
register is not updated properly. This procedure leaded organization to huge fines and loss of

rebate in GST. Full compliance system can make the procedure of recoding the transactions
authentically and stores managers be able to more answerable to company.
Benefits of compliance and consequences of non-compliance:
In business the term compliance is defines as concept which support company to make
sure that weather they are doing business as per the industry rules, obligation and standards.
There are number of benefits of compliance to excite entertainment limited which are listed
below:
 Uncover better data for better decision: It include harmonization of data and system
which help in preparation of accurate, complete and timely reports about expenses and
revenue which bring transparency within Excite Entertainment limited. This clarity of
good data support in making effective results which aid in attaining the desired results. It helps company to realize mission: Mission statements from most organizations provide
data on corporate responsibility, patients' value and the benefits they offer to society.
Compliance program help excite company in a way to address not only external
regulation but also a company's internal and external aspirations. Therefore it not only
support company to understand what is legal or what is required but define the ways to
perform right thing.
Consequences of non-compliance :
Non compliance is defined as the failure of company to comply with legal laws,
regulation and term of conduct that creates problem to run business operations (Beske-Janssen,
Johnson and Schaltegger, 2015). In many cases non compliance can results into mandatory
shutdown of business activities or could even led to imprisonment to business owner. In case if
Excite limited do not follow the compliance while preparing accounting records and doing
business operation then it can led to heavy plenty and losses.
Monitoring systems to track variances from set targets:
In modern business era, monitoring and measuring of performance is one of the crucial
phase as manager keeps a sharp eye on each and every business happening so that target can be
attained in particular time frame (Chandler, 2017). Every company needs proper monitoring and
measurement which provide crucial inputs that support in future development and modification
of a policy which help in reaching targets. In excite entertainment limited manager can use

financial governance that help in maintaining a valid and systematic record of entire business
process and operation. This support in identifying the areas of improvement which can assist to
reach the desired targets in specific period. The role of financial governance is to guide business
entities for tracking financial issues and providing alternatives to solve issues.
MAS to solve financial issues :
Different MAS are important for solving financial issues, this is so because these
accounting systems consists detailed information about financial aspect of companies (Farrell
and Gallagher, 2015). Such as cost accounting system is useful to solve issue regarding to
increased expenses. As well as price optimisation system plays an important role in sorting
problem of lower sales. Thus, it can be stated that MAS are useful for solving monetary issues.
CONCLUSION
On the basis of above project report, this has been articulated that MA is not essential to
implement but looking at its importance, this accounting is becoming compulsory to apply. In the
project report, different accounting systems such as cost accounting system, job costing system
etc. are included. In addition, various MA reports like stock report, account receivable ageing
reports etc. are mentioned. Further, income statements are prepared on the basis of absorption
and marginal costing. As well as some planning tools like ZBB, incremental budget are
described in a detailed manner. In the end of project report, role of financial governance in order
to assess financial issues is mentioned.

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