Management Accounting: Importance, Systems, and Reports

Management Accounting

Table of Content
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
P1. Explaining MA and importance of its systems .....................................................................3
M1. Evaluating advantages of MA systems ...............................................................................5
P2. Presenting different MA reports ...........................................................................................6
M2. Explaining reason for presenting the information in an accurate manner............................7
D1. Evaluating the ways in which MA systems and reporting are integrated within the
operational process of firm .........................................................................................................7
LO2..................................................................................................................................................7
P3 Determining income statements using the marginal and absorption costing ........................7
M2. Use of varied of management accounting approaches and developing suitable financial
reporting documents...................................................................................................................11
LO3................................................................................................................................................12
Planning tools in management accounting................................................................................12
LO4................................................................................................................................................14
P5. comparing ways within which application of MA deals with the financial problems and
prevents financial problems ......................................................................................................14
CONCLUSION..............................................................................................................................16
REFERENCES................................................................................................................................1

INTRODUCTION
Management accounting is the provision of financial data which advice to the company
to use in its business. The present report is based on Excite Entertainment, a leisure based
industry in UK. Its main activity is to promote festivals and concerts at different locations. The
objective of this firm is to the organize entertainment programs within an overall UK.
Furthermore, it involves the difference between the MA and FA along with essentials of MA
systems. Different reports will also be highlighted which are prepared by the managers with
accuracy. Moreover the study highlights computation of profits by absorption and marginal
costing and application of different planning tools and MA systems in resolving financial
problems.
LO1.
P1. Explaining MA and importance of its systems
a. difference between MA and financial accounting
Financial accounting deals with disclosure of financial information to stakeholders in
order to help them in making suitable or informed decisions (Maas, Schaltegger and Crutzen,
2016). However management accounting is been seen as confidential and limited to disclosing
information only to an internal management of an organization for the purpose of bringing
effectiveness and an efficiency in the functioning of the company.
FA MA
It is considered as mandatory requirement for
the each and every firm in accordance to
government.
It seems to be at discretion of the management
and there is no any compulsion for doing this
accounting.
Financial accounting is governed by the
principles that is GAAP.
There does not exist any standard in
preparation of MA. Thus, it is framed on the
basis of the need of management team.
Under FA, the reports are comprised of income
statement, cash flow statement and the balance
sheet.
Under MA, reports are based on monthly,
weekly and yearly analysis of the functions,
products and the geographies.
Auditing of the financial statements under FA There does not exist any specific need relating

is mandatory in majority of the countries
(Difference between MA and FA, 2018).
to independent audit of MA reports.
The statements under FA are been published
for public at large so there is no confidentiality.
On the other state, MA are meant only for the
management and confidentiality of such reports
is counted as key concern.
b. Cost accounting system
It is the framework that is been used by Excite Entertainment for estimating its product
cost for the purpose of valuing its inventory, ensuring cost control and analysing profits. It is
critical for an enterprise to anticipate an accurate cost for attaining profitable operations. The two
main methods of the costing are as follows-
Direct cost- It means the method in which only the variable cost of manufacturing are
been assigned to an inventory and the cost of sales (Quattrone, 2016). The fixed cost of
manufacturing are been viewed as an expenses for a particular period within which they are been
incurred. It includes cost relating to direct labour, direct material and direct expenses.
Standard costing- It is referred as an accounting system that is been used by the
producers in determining differences or the variances present between actual cost of goods which
were produced and a cost that has been occurred for production of an actual goods. This method
helps in measuring deviation in the performance so that corrective measures can be taken in
order to overcome the deviations. It also ensures effective controlling for Excite Entertainment
on its business operations.
c. Inventory management system
It is the system of MA that refers to the combination of the technology, procedures and
the processes which oversee maintenance and monitoring of the stocked products. It is the tool
that allows Excite Entertainment in tracking the flow of its inventory within an supply chain
(Mirzaey, Jamshidi and Hojatpour, 2017). It helps the firm in optimising an entire spectrum
from an order placement with the vendor to an order delivery to the ultimate consumers by
mapping an overall journey of a product.
Some of the main feature of inventory management system are as follows-
 This system maintains right quantity and an amount of an inventory for each of the
product without over and under stocking any of the item.