Management Accounting: Types of MAS and Managerial Reports

This document provides an overview of Management Accounting Systems (MAS) and various managerial reports. It discusses the different types of MAS, such as cost accounting system, inventory management system, and job costing system. It also explains the importance of MAS in managing expenses and making effective decisions. Additionally, the document explores different types of managerial reports, including cost accounting report, account receivable ageing report, stock report, budget report, and performance report. It highlights the characteristics of good information and the factors that may affect the break-even point. Finally, it discusses the preparation of income statements using absorption and marginal costing methods.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Different types of MAS.........................................................................................................4
P2 Various kind of managerial reports........................................................................................6
TASK 2............................................................................................................................................8
P3. Preparation of income statements........................................................................................10
TASK 3..........................................................................................................................................11
P4. Benefits and drawbacks of various types of planning tools used for budgetary control.....11
TASK 4..........................................................................................................................................13
P5 Management accounting systems to respond to financial problems....................................13
CONCLUSION .............................................................................................................................16
REFERENCES..............................................................................................................................16

INTRODUCTION
The MA is a detailed process that starts from collection of both monetary & non
monetary data and ends with preparation of internal reports. The use of this accounting is raising
in companies as it helps in each and every aspect (Fleischman and Parker, 2017). On the basis of
information provided by this accounting management department of businesses take suitable
steps in succession. It becomes possible because they determine exact financial position and as
per it utilise available resources in an effective way. Basically, the aim of project report is to
spreading detailed information about MA and its role in business entities. For better
understanding of various aspect of MA, a company is selected which is Excite entertainment
limited. This company is located in United Kingdom and operates in entertainment industry. In
addition the project report covers about variety of MAS, MA reports and planning tools. As well
as role of the planning tools and MAS in the aspect of sort out from financial issues is detailed in
project report.
TASK 1
Comparison between MAS and Financial accounting.
Management accounting – It can be defined as a kind of accounting which is related to gathering,
analysing and interpreting quantitative & qualitative information for computation of internal
reports.
Financial accounting – This is a kind of accounting that is linked with process of assessing
monetary information of business entities that is being used for preparing the financial
statements at the end of an accounting year (Gurarda, 2015).
Difference between financial accounting and MA :
Basis of difference MA Financial accounting
Kind of
information used
In the MA both type of information
qualitative and quantitative are used
in order to produce reports.
On the other hand, in this
accounting only monetary
information of various activities is
included.

Presentation
format
Under, MA the reports are prepared
without following any specific
format.
While in this accounting, financial
statements are produced on the basis
of set standards.
Legal requirement It depends on companies whether
they want to prepare reports or not.
This is not compulsory.
On the other hand, under this
accounting it is mandatory to
prepare financial reports at the end
of accounting year.
P1. Different types of MAS.
Cost accounting system – This is defined as the accounting system that is related with the
procedures of anticipating cost of several activities as well as operations. The main aim of cost
accounting system is to minimise and manage whole expenditure of organisation (Baumann,
Lehner and Losbichler, 2015). Also, it is needed through firms to delegate the monetary
resources within firms operations according to the expected expenditure of various activities.
There are many types of costing techniques that are utilised into system of accounting like direct
costing, standard costing and many more. Excite entertainment limited are utilising cost
accounting system as this aids them to control the expenses of activities related to entertainment
sessions.
Inventory management system – This is considered as the management accounting system as it
is the combination of two activities that are observing as well as maintenance of available
products into warehouse. The stored raw material may be firm's assets, final goods and others.
This is significantly required through production department of organisation as it is helpful for
developing effective decisions in respect to manufacturing. Within this particular system, several
approaches are involved like perpetual inventory system, periodic inventory system and many
more. Just in time is related with reducing manufacturing time in order to control costs. Perpetual
inventory system trace the availability of stock. Also, periodic inventory system is beneficial for
evaluating inventory amount that a firm has at the end of accounting period. Therefore, Excite
entertainment limited used this system of accounting for managing its inventories like equipment
such as music system, LED and others.

Job costing system – This is considered as the type of accounting system that is related to
identifying income as well as expenses through every job which is allotted to several activities. It
is basically utilised in that organisation in which the portfolio of manufactured goods is large
(Oldroyd, 2017). This is because through using job costing system, the manufacturing
department can able to know about the cost of every produced units. Mainly, the main benefits of
this particular accounting system is that this allows mangers to calculate profit upon specific job
which are delegated on several enterprise activities. For example: Excite entertainment limited is
applying job costing system into its operations in order to get knowledge about the every job
costs that are included into various activities
Evaluation about how MAS and management accounting reports are aligned with
organisational process.
Various kinds of management accounting system as well as management accounting
report are related into the procedures of organisation. As per the above discussed accounting
system like cost accounting system is linked with Excite entertainment limited finance sections
for keeping the several activities cost low (Busco and Quattrone, 2015). Moreover, this particular
system match with effective management of stored stock into warehouses. Such as Excite
entertainment limited are managing the purchasing as well as supplying equipments through aids
of this accounting system. Beside this, various managerial report are also related with firm'
operation like cost accounting reports facilitates detailed information regarding cost incurred into
its activities. Also, few another reports such as performance, account receivable ageing report are
linked to various function of organisations. Therefore, this can be explained that managerial
accounting reports and management accounting system are linked with the procedures of
company.
Importance of above mentioned MAS :
 Role of cost accounting system – This accounting system is beneficial for companies in
order to manage overall expenses of various activities. In the above Excite entertainment
limited company their managers implement this accounting system for keeping under
control their expenses.

 Role of inventory management system – It is useful for business entities in the aspect of
controlling cost and quantity of stored materials in the stores (Brown, Dillard, Hopper
and Maroun, 2015). Due to information derived by this accounting system, the managers
of above company take corrective steps towards financial success.
 Role of job costing system – By implementation of this accounting system, the finance
department of companies get aware about each individual output's cost. Same as in Excite
entertainment limited company, their managers become able to keep an effective control
over cost of various jobs involved in their operations.
P2 Various kind of managerial reports.
Management accounting reports - Managerial reports is considered as the report which are
formulated according to the information that are derived from several systems of management
accounting. These reports consists the detailed information in context of monetary as well as non
monetary aspects. Therefore, few types of managerial reports are discussed below:
 Cost accounting report - This is considered as the managerial report in which the
explained information in respect of several activities expenses are included. Because of
this, organisation can able to track all the activities that incurs more costs. The accountant
of Excite entertainment limited formulate this particular report as this aids them to do
effective evaluation of whole costs and concentrated towards operational activities that
are resulting into higher expenditure.
 Account receivable ageing report - It is the type of managerial report that provides all
information regarding overall debt among which is owned through debtors of
organisation (Al-Qady and El-Helbawy, 2016). Moreover, this is helpful for firm as it
includes date on which the transaction is performed through both the parties. Because of
this, organisation can concentrate upon that debtors who are not clearing the payment
after due date. Therefore, this kinds of managerial report assists Excite entertainment
limited finance department to know about the amount which is due through its debtors or
name of the debtors. Moreover, respective transnational accountants formulate this
particular reports for knowing about the consumers who are not making payment after
due date.

 Stock report - This is considered as the managerial report that is developed as per the
inventory management system. Within this particular report, information regarding
availability stock into warehouse are involves. This report is crucial for organisation as
based upon this report the manufacturing department makes decisions regarding new
products productions. The accountant of Excite entertainment limited can formulate this
particular reports as this assist them to know about the stock availability so that they
purchase raw material accordingly and management of several equipments in effective
and efficient manner.
 Budget report - This is considered as the type of managerial reports which is formulated
as on the basis of several budget types. This report includes information regarding
anticipated income as well as expenditure about exact results. Moreover, it is
advantageous for managers as through using information regarding difference among
actual results and approximated outcomes they can able to develop future decisions.
Therefore, the accountant of Excite entertainment limited prepare this report to know
about the actual and approximated results as well as on the basis of this they make future
plans and policies so that they can decided which activities is effective and which are not.
 Performance report: This is considered as the managerial report which is formulated for
reviewing the performance of overall functional areas and also whole staff members
(Grace, Phillips and Shimpi, 2015). This report includes information regarding various
obtained results through several activities as well as operations. Mainly, this report is
helpful for the manager as the information facilitated through this particular managerial
report strategic decision is taken for further organisational growth. Also, the rewards is
given to the staff according the the work they performed. The Excite entertainment
limited accountant formulated performance report so they can make effective decision
and accordingly reward their workers as per its performance.
Characteristics of good information.
As there are various characteristics of good informations system, some of them are
discussed below : Accuracy : This is defined as the concepts which stated value into accounting records
that totally shows the whole supporting facts. So, accuracy in information is significant

components as if information of accounting will not accurate then organisation can not
take effective decisions. Therefore, it is important characteristics of good information. Relevancy : It is crucial characteristics of good information as it explains that information
of accounting have to be according to the activities as well as operations of enterprises.
This is essential as because of this, organisation can able to develop effective strategies. Reliable and up to date : It is also an essential characteristics of good information as this
describe that information related to accounting have to be reliable as well as up to date
(Smith, 2015). So, this is crucial for organisation to keep their accounting data up to date
as it aids them to make significant internal decisions for the beneficial of company.
 Timely presentation of data: This characteristics of good information states that
information related to accounting have to be represented on certain time so that
organisation can make decisions timely for the effectiveness of firm.
TASK 2
Absorption and marginal costing method:
 Absorption costing method – Under this costing method, fixed costs and variable costs
are absorbed in order to prepare financial statements.
 Marginal costing method – In this costing method, fixed cost is taken as period cost while
variable cost as cost of unit.
Factors that may effect output of break even point:
* Selling price – This is the main factor that may lead to effect on above calculated break even
point. It is so because any change in selling price can impact to amount of contribution. Due to
change in contribution, break even point can be effected (Sithole, Chandler and Paas, 2017).
* Variable cost – As well as variable cost can also impact on value of break even point. This is
so because if variable cost will change then it will effect both to the contribution and break even
point.
So, these are the factors which may lead to change in value of break even point.

P3. Preparation of income statements.
Given data:
Selling price per unit £15
Prime cost per unit £4
Variable production cost per unit £2
Budgeted fixed production overheads per
month
£40000
Budgeted production per month 10000 units
Budgeted sales per month 8000 units
Opening stock 500 units
Income statement as per absorption costing:
Particulars Amount
Sales (8000*5) 120000
Less : Cost of good sold:
Opening stock (500*10)
Production (10000*10)
5000
100000
Less- Closing stock (2500*10) 25000
Absorption cost 80000
Profit 40000
Income statement as per marginal costing:
Particulars Amount
Sales (8000*15) 120000
Less: Variable cost
Opening stock (500*6)
Marginal cost of production (10000*6)
3000
60000

Less: Closing stock 15000
Marginal cost of sales 48000
Contribution 72000
Fixed cost 40000
Profit 32000
MA techniques in order to produce financial statements.
In the aspect of accounting, there are a vital range of techniques which are used for
preparation of different financial statements (Arnaboldi, Busco and Cuganesan, 2017). Basically,
these accounting techniques provide a suitable framework to accountants in order to produce
financial statements more reliable and comparable to use. The above Excite entertainment
limited company is using absorption and marginal costing methods in order to prepare income
statements for available financial transactions of various activities. Apart from it, there are some
other techniques such as activity based costing technique, standard costing and many more for an
objective of preparing financial reports.
TASK 3
P4. Benefits and drawbacks of various types of planning tools used for budgetary control.
Budget- The budget can be defined as a projection of futuristic revenues and expenditures
for a particular time period. Generally, budgets are produced for long time period with duration
of more then one year. In companies, preparation of budgets is a necessary process because it
helps in better allocation of available financial resources. The above Excite entertainment limited
company's accountant produce various kind of budgets which are as follows:
 Zero based budget- It can be defined as a kind of budget that is prepared on the basis of
justification of each new activity and past budgets activities are ignored. This budget has
different features as compare to all other budgets. It is so because under this budget last
years' budgets are not considered as basis while each financial activity is justified during
preparation of budget. Though, this budget is quite expensive but it provides accuracy in

financial operations. The accountant of Excite entertainment limited company prepares
this budget for their financial activities for upcoming time period.
Advantages – As above mentioned, this budget is beneficial for business entities in making
financial transactions up to date and cost effective. Due to this budget, the managers of
companies allocates funds in business operations as per the requirement.
Disadvantage – The issue under this budget is that it is costly as well as not suitable for small
business entities.
 Production budget – It can be defined as a type of budget which is prepared by companies
for estimating total cost and quantity of material which may occur in process of
manufacturing of products (Parker and Northcott, 2016). For example this budget is being
applied by manufacturing department for controlling activities of production. In the
context of above chosen organisation, Excite entertainment limited their accountants are
preparing this budget in order to take corrective steps regards to manufacturing. It has
some benefits and limitations that are as follows such as :
Advantages – This budget helps to companies in effective allocation of raw materials in the
production process. As well as due to this budget, business entities become able to control and
manage their overall cost of production below estimated cost.
Disadvantage – Main drawback of this budget is that companies can not relay completely on its
estimations because any wrong projection can lead to huge financial lose of company.
 Incremental budget – This is a kind of budget which is prepared by accountants by taking
previous years' financial information. Basically, the incremental budget is prepared by
making some minor changes in business entities last years' budgets. As well as in this
budget, managers can make update according to change in current year time period. In
the aspect of above Excite entertainment limited company they are preparing this budget
according to past years' budgeted activities. Same as the above mentioned budgets, it also
has some advantages and disadvantages such as :
Advantages – The key benefit of this budget is that it is less costly and consume less time in
preparation. As well as it is simple to implement in companies various departments due to
flexibility feature.

Disadvantages – Apart from the advantages, this budget has some limitations also like it forces
managers to do higher spendings on different operations to achieve desirable outcomes. In
addition, lack of innovation is another drawback of this budget.
Budget variance- This can be defined as difference between actual outcome and estimated
outcomes. It is measured in terms of quantitative aspects. In the case when actual revenues are
more then estimated revenues then it is considered as favourable condition. On the other hand, if
expenditures are more then estimated expenses then it will be considered as adverse condition. It
is beneficial for management department in order to trace the actual financial issues and finding
possible alternatives to sort out. Such as the management department of Excite entertainment
limited company are compares actual and estimated cost. On the basis of it, they track the
difference and focus on those aspects that are resulting as huge cost.
Use of planning tools for preparing and forecasting of budgets:
The planning tools of budgetary control are useful for accounting perspective. Under the
planning tools variety of budgets are included such as zero based budget, production budget,
incremental budget and many more (Hemmer and Labro, 2017). All these budgets help to
accountants for preparation and forecasting of futuristic income and expenses. Such as in the
aspect of above chosen company, Excite entertainment limited they are applying different
budgets like ZBB, production budgets etc. These budgets provide an idea of future financial
transaction which may occur and as per it their accountants take suitable steps for projection of
budgets.
Role of planning tools in order to sort out from financial issues :
In business entities there are different kind of financial problems which occur due to
ineffective allocation of financial resources (Hoque, 2018). It becomes possible because by help
of crucial financial information derived from planning tools, managers get able to find out
possible alternatives to sort monetary issues. In the above Excite entertainment limited company,
they are implementing various kind of planning tools such as zero based budget, production
budget and many more. All these tools are benefiting in the condition when they face any
financial issue.

TASK 4
P5 Management accounting systems to respond to financial problems.
Financial governance – This can be defined as a process of gathering information about
financial transaction of business entities in a systematic manner (Seal and Mattimoe, 2016). By
help of this approach, the managers can easily find out the financial issue and can gather possible
alternatives to solve. In the aspect of above Excite entertainment limited company, this can be
find out that they are involved in process of organising various kind of events. In recent time
period, the cost of organising different events is increasing which is resulting as financial issue
for above company. In this aspect, the implementation of financial governance is necessary in
order to control additional cost. It is so because if they will integrate their financial activities
with this approach then cost which is occurring due to poor management will be reduced.
Full Compliance system : This can be defined as a type of system which is related with
implementation of laws and regulations in order to make effective control over wrongful
conduction of operations and activities (Chiapello, 2017). Basically, it is beneficial for financial
entities in order to minimising ineffective financial activities. Such as in the context of above
Excite entertainment limited company, this can be find out that there is mismanagement of
supplies of instruments and gadgets at various events. Due to this, they are facing additional cost
of fines and wrong decision regards to purchasing. In this aspect, role of full compliance system
can be beneficial in order to control all kind of deficiencies in their operations and activities.
Importance of compliance and consequences of non compliance :
In the aspect of business entities, compliance can be defined as a concept that is
associated determining whether they are operating their activities and operations as accordance
of rules and regulations or not. In the context of above Excite entertainment limited company,
below advantage of compliance and consequences are mentioned that are as follows :
 Helps in effective decision-making – These approaches are useful for companies in order
to take better decisions. It becomes possible due to preparation of reports on regular time
interval and as per it managers derive useful information for better decision-making.

 Beneficial for focusing on missions – It is important for companies to focus on missions
so that their overall objectives can be achieved (Trenca and Nørreklit, 2017). In the
aspect of above Excite entertainment limited company, the compliance system is
beneficial for assessing internal and external regulations. Due to this, it becomes easier
for companies to identifying their mission towards different aspect of economy.
Consequences of non-compliance :
The term non compliance can be defined as a situation in which organisations fail to
implement their operations and activities as accordance of legal laws and regulations. The
companies who do not apply compliance system effectively can lead to dissolution. Such as in
the aspect of above Excite entertainment limited company, if they do not apply compliances in a
systematic manner then it may cause to monetary lose.
Monitoring systems in order to track variances from standards :
In the aspect of business entities, this is important to assess actual performance so that
futuristic steps can be taken accordingly. In order to assess actual financial performance, this is
important to compare actual output with the estimated outputs. Due to this comparison actual
variance is presented in front of managers. Basically, it is necessary for companies to track the
variances so that activities which is needed to improve can be highlighted. In the aspect of above
Excite entertainment limited company, they are tracking their actual financial performance and
taking corrective steps accordingly.
Given financial issue:
Estimated fixed cost £120000
Variable costs per unit £10
Proposed selling price per unit £40
BEP to attain desired profit = Fixed cost + desired profit / contribution per unit
= 120000+90000
= 210000/30
= 7000 units
Profit at sale of 7000 units

Sales (7000*40) 280000
Less- Variable cost 70000
Contribution 210000
Less- Fixed cost 120000
Profit 90000
Monetary issue- This can be defined as a a situation in which companies do not have enough
amount of funds in order to pay their liabilities and debts. Apart from it, there are some other
financial issues such as:
 Lack of sales revenues- This is a kind of financial issue in that companies sales units start
to decrease and as a result total sales revenues fell down. In the aspect of Excite
entertainment limited company, this issue is being faced by them.
 Increased amount of expenditures- It is a type of monetary issue under which business
entities do not have enough amount of profits due to increased value of expenditure.
Reason of this issue is mismanagement of financial resources.
Identifying monetary issues:
 Ratio analysis- It is a kind of approach that is being used in order to find exact issue.
Under this different types of ratios are calculated and interpreted for deducting issue.
Such as the above Excite entertainment limited company is using this technique for
finding issue. They calculates sales turn over ratio to identify the issues in an effective
manner.
 KPI- This is a type of technique in which those monetary and non monetary aspects are
focused which are consuming higher cost or generating higher revenues. Due to this
managers of companies become able to find deviation in monetary aspects.
Comparison:
Basis Excite entertainment limited company KEF entertainment limited

Monetary
issue
The company is facing the issue of
lack of sales revenues in order to
cover invested amount in different
operations and activities.
While they are getting monetary
problem of increased amount of
expenditures. They do not earning
expected return on their operations and
activities.
MAS Their managers are using price
optimisation system to sort the issue.
The reason of applying this system is
that under it prices of products are
revised at a level that is acceptable by
customers. In such manner, the above
companies sales is increasing and
monetary issue is sorted.
This company's finance department is
using cost accounting system in order to
trace and manage overall expenditure.
As a result they are able to control
expenses in an effective manner. Thus,
their financial issue has been sorted out.
Role of MAS in order to sort out financial issues :
In the companies, there are different operations and activities are operated by various
departments. Thus, any kind of financial issue can be arise due to errors in allocation of funds or
any other reasons (Mitchell, 2017). In the aspect of above Excite entertainment limited company,
their financial issues can be sort out by help of vital range of accounting systems like cost
accounting system, inventory management system and many more.
CONCLUSION
As per the above report, this have been concluded that management accounting is not
crucial to execute but considering their significance, it is seen that this accounting is significant
to apply in firm. Moreover, there are several accounting system like job costing, cost accounting
and others to track the activities costs and so on. Also, there are many managerial reports such as
inventory, performance etc. which help company to know about the availability of stock,
evaluate the staff performance etc. In addition to this, income statement are formulated with the
help of marginal and absorption costing. There are few planning tools for budgetary control like
Zero based budgeting, increment budgeting and so on.

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