Management Accounting

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Management accounting systems..........................................................................................1
P2: Management accounting reporting........................................................................................3
M1: Benefits of Management accounting systems......................................................................4
D1: Critical evaluation of management accounting systems and management accounting
reports..........................................................................................................................................4
TASK 2............................................................................................................................................4
P3: Calculation of costs...............................................................................................................4
M2: Accurate application of management accounting techniques..............................................5
D2: Producing of financial reports for accurate analysis and interpretation of data...................5
TASK 3............................................................................................................................................5
P4: Advantages and Disadvantages of planning tools.................................................................5
M3: Analysis of different planning tools and their applications:................................................6
TASK 4............................................................................................................................................7
P5. Organisations are adapting management accounting system to respond to financial
problems:......................................................................................................................................7
M4: Analysis of responding management accounting system over financial problems:.............8
D3: Evaluation of planning tools.................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Management accounting refers to a process in which the use of various types of methods
and techniques by the managers of an organization so that they are able to ensure that they can
better manage the firm's financial data, facts and information in a highly effective manner
(Apostolou and et.al., 2016). Its use is quite crucial from the point of view of the organizations
so that they are able to achieve their short-term, medium-term and long-term goals and
objectives in the future. For this report, Capital Joinery Ltd. has been selected. It is a firm which
manufactures joinery, made-to-measure doors and windows. In this report, focus will be made on
demonstration of understanding of management accounting systems, calculation of costs,
explanation of the use of planning tools. Additionally, focus on Comparison of ways in which
the firms can make use of management accounting to respond to the financial problems will be
discussed as a part of this project.
TASK 1
P1: Management accounting systems
Management accounting is a tool which is used for the purpose of decision-making by the
management in a highly effective manner by the management (Management Accounting, 2020).
Its use can be made by Capital Joinery Ltd. so that it is able to ensure that its goals and
objectives can be attained highly effectively and efficiently.
Different types of systems can be used by the organizations in Management accounting.
These systems can be explained as follows-
Cost accounting system- In this system, the organizations are able to ensure that they
can calculate the various types of costs in a highly effective manner (Astami and et.al., 2017).
Thus this system is used for the purpose of identification of costs, their segregation and ensuring
that proper techniques can be applied for ensuring their reduction. Therefore the use of this
system can be made by Capital Joinery Ltd. This will ensure that they are able to achieve their
varied goals and objectives easily.
Essential requirements-
 In this system, there must be use of different methods so that the costs can be effectively
identified. Therefore in this manner this will help Capital Joinery Ltd. to be able to asses
costs effectively and efficiently.
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 This system has to ensure that the use of cost reduction techniques can be made so that
Capital Joinery Ltd. Is able to reduce the costs effectively and efficiently.
Inventory management system- In this system, the use of different methods and techniques is
made so that the level of inventory can be managed in the right manner (Dinh, Kang and
Schultze, 2016). Thus in this way, Capital Joinery Ltd. Is able to ensure that it can manage stock
in the right manner. Therefore this raises the overall level of efficiency and effectiveness in the
management of inventory.
Essential requirements-
 The use of this system ensures that the organizations are able to manage their level of
stock in a proper manner. Thus in this way Capital Joinery Ltd. is able to ensure that it
can manage inventory by making use of techniques like LIFO, FIFO, Weighted Average
Cost etc.
 In this system the use of certain types of techniques must be made which ensures that a
reduction in the level of overall costs related to the level of inventory can be made
effectively and efficiently. Therefore, In this way the management of Capital Joinery Ltd.
Will be able to reduce the maintenance costs effectively and efficiently.
Job costing system- In this system, the use of appropriate methods and techniques can be made
so that the management of the job orders can be done in the right manner effectively and
efficiently (Egan, 2018). Thus, In this way Capital Joinery Ltd. Can make sure that it can manage
its job orders in an appropriate manner.
Essential requirements-
 In this system, the use of right methods and techniques should be made so that the job
orders can be managed in the right manner. In this way, Capital Joinery Ltd. Can ensure
that the management of job orders can be done effectively and efficiently in an
appropriate way.
 This system has to ensure that the use of methods and techniques can be made for the
purpose of ensuring a reduction in the overall level of costs in the right manner. Thus in
this way Capital Joinery Ltd. Will be able to reduce its costs effectively and efficiently.
Price optimization system- This system ensures that the use of mathematical and statistical
models can be made so that the prices are set correctly for earning higher-level of profits
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(Ellström and Larsson, 2017). In this way, Capital Joinery Ltd. can ensure that it can achieve its
higher-level of goals and objectives.
Essential requirements-
 In this system, there must be use of mathematical and statistical models and techniques
for facilitating forecasting of price. Therefore in this way Capital Joinery Ltd. Will be
able to ensure that it forecasts the different prices in the right manner effectively and
efficiently.
 The use of this method should allow the firms to be able to ensure that they can reduce
the overall job costs. Thus in this way Capital Joinery Ltd. will be able to make sure that
it can facilitate a reduction in the job costs.
P2: Management accounting reporting
In Management Accounting the use of different types of reports can be made so that a
proper analysis an interpretation can be made effectively and efficiently. Therefore the use of the
of the following reports can be made by Capital Joinery Ltd.-
 Job costing reports- In these reports, a detailed report of the inflows and outflows of the
overall job orders can be prepared (Farooq and De Villiers, 2019). Thus in this way
overall job costs can be effectively identified by the organization in the right manner in
the firm effectively and efficiently. Therefore this can be quite useful for the managers of
Capital Joinery Ltd. so that they are able to assess their job costs effectively and
efficiently. Thus in this way the management of job costs can be done in the right manner
by the company. If the are any deviations or variations which are identified then they can
be easily rectified using proper methods as well as techniques in the right manner.
 Accounts Receivable Ageing Reports- In these reports, there is a detailed analysis of the
different forms of Debtors in the organization. Therefore, In this manner it is quite crucial
that an overall summary of these Debtors can be prepared effectively and efficiently. In
the context of Capital Joinery Ltd. It is highly crucial that these reports are framed for the
purpose of identifying those debtors who have not paid their dues since a long time which
will help a lot in getting the payment from them within time.
 Operating budget report- In these reports, there is a detailed report of the operating
revenues and expenses in a highly effective manner. Therefore, In the context of Capital
Joinery Ltd. It is very important that these reports are prepared to assess the efficiency
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and effectiveness level of the operations. Therefore in this way the company can target
higher-level of operational profits.
 Product/service profitability report- In these reports, a detailed analysis of the overall
products and services can be made in a highly effective manner in the organizations
(Fitriyani, 2019). Thus, In the context of Capital Joinery Ltd. It can be highly useful to
ensure that the products and services which are not making appropriate profits can be
identified so that a suitable action is taken by the management to improve their overall
profitability level.
M1: Benefits of Management accounting systems
Cost accounting system can be beneficial for the organizations to identify and assess the
various types of costs. Also it can be used for the purpose of ensuring that costs can be
effectively reduced. Inventory management system can be beneficial for the firms to identify the
level of inventory in the organization. Also is use can be made so that the costs related with the
maintenance of stock are reduced effectively and efficiently. Job costing system can be
beneficial for the firms to focus on the right management of the job orders. Also this system can
create an advantage for the organizations to reduce the costs of maintaining the job orders. Price
optimization system can be beneficial for the organizations to set a right price. Also this system
can be helpful for the firms to target higher-level of profits in the future.
D1: Critical evaluation of management accounting systems and management accounting reports
These systems and reports can be easily integrated in the overall processes of the
organization. In Capital Joinery Ltd., the focus has to be put on ensuring that both of them can be
effectively and efficiently used so that the company is able to achieve its goals and objectives in
the right manner. Thus in this way the management of the firm will be able to manage the
functioning of the organization correctly.
TASK 2
P3: Calculation of costs
Marginal costing- It is a technique through which the organizations can calculate the
overall level of profits as well as also ensure that Break-Even Point can be calculated (Gulluscio
and et.al., 2020). It is a point where there are neither profits nor losses for the organization.
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Therefore, In the context of Capital Joinery Ltd. This technique can be used so that the
profitability level is effectively determined.
Absorption costing- In this technique, it can be ensured that the overall level of expenses
can be calculated effectively and efficiently (Matsler, 2019). Therefore, In this way it ensures
that a proper treatment of the overheads can be done in the right manner. It can be done through
ensuring their right allocation according to the various types of expenses of the different
departments. Therefore, In Capital Joinery Ltd. This technique can be used so that the
profitability level can be assessed and the proper allocation of overheads is made.
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Interpretation: With the use of both Marginal and Absorption costing techniques it has
been found that the Profit for May and June under Absorption costing technique is 6500 and
4500 respectively. Also under Marginal costing technique the Profit for May and June is 14500
and 10400 respectively. Thus it has been interpreted that there has been a decrease in the overall
profit within a space of 1 month.
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M2: Accurate application of management accounting techniques
The use of both Marginal and Absorption costing techniques can be made by the
organizations to ensure that they are able to assess their profitability level effectively and
efficiently. Therefore, In this way both of these techniques can be used by Capital Joinery Ltd.
So that it is able to determine its profits effectively and efficiently. In this way the various types
of goals and objectives can be achieved in the right manner.
D2: Producing of financial reports for accurate analysis and interpretation of data
Through the use of financial reports, organizations like Capital Joinery Ltd. Are able to
ensure proper analysis and interpretation of data in a highly effective manner. The use of
Marginal and Absorption costing techniques can be made so that financial reports can be
prepared through which analysis and interpretation can be done in the right manner. Thus in this
way conclusions and recommendations can be derived which can be highly useful.
TASK 3
P4: Advantages and Disadvantages of planning tools
The different types of planning tools can be used by the businesses. These tools are
explained as follows-
Fixed budget-
In these type of budgets, there is a very little scope of flexibility (Opute and Madichie,
2017). They have constant figures which cannot be changed. The use of this budget can be made
in Capital Joinery Ltd. for ensuring a higher-level of consistency.
Advantages-
 In this budget, there is a particular level of consistency. Therefore in this manner Capital
Joinery Ltd. has an advantage here.
 This budget can be implemented quickly in the organizations. Thus in this manner this
creates and advantage for Capital Joinery Ltd.
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Disadvantages-
 This budget does not offers flexibility. Therefore the change in sales cannot be made.
Thus in this way it can crate an advantage for Capital Joinery Ltd.
 When this budget is used areas of improvement cannot be identified. Therefore, for
Capital Joinery Ltd. an advantage can be created.
Flexible Budget-
In this budget, a higher-level of flexibility can be offered to the organizations. Therefore
in this manner the different goals and objectives of the company can be attained highly
effectively. Thus in this way the use of this budget can be made by Capital Joinery Ltd. For
ensuring that a higher-level of flexibility can be maintained.
Advantages:
 Through this it is easy to calculate the quantity and amount of output produced in the
organization to achieve set profit level.
 Through this sales , cost and profit status of organization is easily determined.
Disadvantages:
 It use past data for measure flexible budget so historical data will be accurate.
It is expensive method because skilled worker should be require to maintain the flexible budget.
 It is expensive method because skilled worker should be require to maintain the flexible
budget.
Production Budget-
In this budget, the requirement from the organizations is that they must estimate their production
requirements for a specific period of time. By estimating these requirements they will be able to
manage their production effectively and efficiently.
Advantages-
 This budget allows in the estimation of the level of production in the firms. This allows
the management of Capital Joinery Ltd. To enhance their production level they can
identify various ways.
 In this budget the companies can ensure that they are able to find out problems and issues
with the production and can solve them. This will allow the management of Capital
Joinery Ltd. To gain an advantage.
Disadvantages-
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 In this budget a lot of skills are required for the purpose of preparing the budget. This can
lead towards a disadvantage for the management of Capital Joinery Ltd.
 This budget's preparation is quite costly. Thus in this way this creates a disadvantage for
the management of Capital Joinery Ltd.
Labour Budget-
This budget is useful for the organizations so that they are able to estimate the labour
requirements effectively and efficiently. Therefore In the context of Capital Joinery Ltd. This is a
useful budget.
Advantages-
 This budget is useful in ensuring that the labour requirements can be easily identified in
the organization. In this way this helps the managers of Capital Joinery Ltd.
 In this budget there must be a use of estimates and requirements for the purpose of
enhancing the level of labour efficiency and effectiveness. This helps the management of
Capital Joinery Ltd.
Disadvantages-
 This budget is costly to prepare for the organizations. In this way this creates a
disadvantage for the management of Capital Joinery Ltd.
 This budget's preparation consumes a lot of time. Therefore in this way Capital Joinery
Ltd. Faces a disadvantage.
Sales Budget-
In this budget, an overall forecast of the level of sales is made during the future time
period. Therefore, In the context of Capital Joinery Ltd. It is a useful budget so that the
attainment of goals and objectives related to sales can be done effectively and efficiently.
Advantages-
 In this budget, a forecast of sales in the future time period can be made. For the
management of Capital Joinery Ltd. This can create an advantage.
 This budget ensures that comparison between the sales of organizations can be made
effectively and efficiently. Therefore, for Capital Joinery Ltd. This creates an advantage.
Disadvantages-
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 In this budget, the forecasts which are made can be wrong and thus in this way an impact
can be created on the organizations. For Capital Joinery Ltd. A disadvantage can be
created due to this reason.
 It is a time-consuming process to prepare this budget. Therefore, In the context of Capital
Joinery Ltd. A disadvantage can be created.
Purchase Budget-
In this budget, the forecast of purchases to be made in the future is made by the
organizations. Therefore, Capital Joinery Ltd. Can make its use so that it is able to keep its
expenses related to Purchases in check.
Advantages-
 This budget ensures that the various types of details regarding the Purchases can be found
out effectively and efficiently. Thus, In this way Capital Joinery Ltd. Can arrange its
Purchases properly.
 The use of this budget is very helpful in keeping the amount of expenses on Purchases in
check. This can therefore be very helpful for the management of Capital Joinery Ltd.
Disadvantages-
 In this budget, the details which are related with Purchases can be inaccurate if its
estimates are wrong. For Capital Joinery Ltd., this can create a disadvantage.
 Preparation of this budget is quite costly from the point of view of the managers.
Therefore, for Capital Joinery Ltd.'s managers this can create a disadvantage.
M3: Analysis of different planning tools and their applications:
Planning tools helps in to estimate future plans for organisation so that managers can take
appropriate decisions. Budgetary control helps organisation to pre estimate its expenses and
income for future so that firm can work according to plan. This helps Capital journey Ltd. To
achieve its goals and objectives in the future. It helps firm to identification of problems and using
proper approaches to overcome with the problems.
TASK 4
P5. Organisations are adapting management accounting system to respond to financial problems:
Financial problems: financial problems are in which, organisations are not able to meet
their expenses or financial needs. It can put impact on overall performance of an organisation.
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The firm, Capital journey Ltd. Can face financial problems during their operations. Financial
problems which can face by a company including:
 Lack of cash flow: an organisation can face this problem, without the sufficient capital,
firm's will not able to pay their expenses. Lack of cash flow the firm capital journey Ltd.
Cant survive, it will affects firm's operations and revenues. Every business can better
performance when it has sufficient cash with it.
 Poor accounting practices: Accounting and budgeting plays crucial role in financial
management. Due to change in technology and methods firm has to train their
professional accountant so that they can do their performance in efficient way. Doing
work according to old era it affects firm's financial position. It can affect Capital journey
Ltd., firm must take care of popular accounting software or rules so that it can manage its
financial operations in efficient manner.
Techniques to solve financial problems:
 KPIs: Key performance indicators are quantitative measures that helps organisation to
evaluate its success . Different type of KPIs used by business to evaluate its performance
such as net profit, net profit margin, gross profit margin,current ratio, quick ratio etc.
These indicators helps organisation to overcome with less cash flow problems and help it
to estimate future funds so that organisation can manage its cash flow.
 Benchmarking: This technique is used for solving inventory, finance and customer
related problems. In context to Capital journey Ltd., it helps firm to solve poor
accounting practices problem as by setting standards, it will ensure firm how to manage
financial problem and how can it change its accounting methods according to popular
software.
 Financial governance: It refers to identify he way in which company can manage,
monitor and control its financial operations effectively. In context to, Capital journey Ltd.
It helps firm to manage and analyse its financial performance and it can solve financial
problems efficiently and effectively.
COMPARISON OF ORGANISATIONS
Basic ASDA ALDI
Financial problem The firm faced financial
problem related to its fund
This firm faced financial
problem related to lack of cash
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management. flow.
Management accounting
system used
To solve this problem firm use
inventory management system.
To solve this problem firm use
price optimising system of
management accounting.
Application of management
accounting
Under this management
accounting system it is
concerned with overview or
monitor to stock and funds of
an organisation. So that firm
can previously measure the
necessity of funds to manage
its inventory and other
operations.
Under this system, it is used to
control expenses occurs upon
resources. Price optimization
can help firm to manage
required cash flow, by it can
tailoring the prices for the
customers segment.
From the above discussion about financial problem management of Capital journey Ltd.
Must learn from both the firms such as Asda and Aldi, in favour to that it can solve its financial
problems through management accounting system. Thus it can solve its cash flow related
problems and accounting practices related issues. So that It can manage its pricing strategy and
accounting methods effectively and efficiently.
M4: Analysis of responding management accounting system over financial problems:
In context to solving various financial problems organisation's can use management
accounting system or its techniques. Through the management accounting system, Capital
journey Ltd. Will be able to solve its financial problems in right way or effective way. It is
important for organisation's manager to identify the best accounting system so that they can
implement it on their issues. Requirement for this system is to identify the problem and then
solve it out in best manner. It will helps firm to done its operations in effective and efficient
manner.
D3: Evaluation of planning tools
For the success of any organisation it is important to use planning tool that can ensure it
in make frame for short term and long term plans in the future. It is typical to analyse that these
plans can can help firm to achieve its goals and objectives. In the context of Capital journey Ltd.,
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for the firm's future actions it is important to make proper planning so that it can ensure the firm
to complete its operations according to expected planning. To use of proper planning will assure
firm to achieve its sustainable achievement for the future.
CONCLUSION
From the above report it has been concluded that management accounting is a process of
managing, monitoring and controlling financial information so that mangers of the firm can take
future decisions. Different systems of management accounting helps to solve problems occurs in
the organisation. Marginal and absorption costing helps firm to identify net profits of the firm.
Planning tools such as budgetary control can help firm to framing appropriate plans for the
future. Effective planning and effective use of accounting system will assure firm to achieve its
goals and objectives.
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REFERENCES
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Online
Management Accounting. 2020. [Online]. Available through:
<https://efinancemanagement.com/financial-accounting/management-accounting>
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