Management Accounting and Reporting

This document provides an overview of management accounting and its essential requirements, including different types of management accounting systems. It also discusses the methods used for management accounting reporting and how to calculate costs using suitable methods of cost examination to make an income statement using marginal and absorption costs.

Management
accounting

Table of Contents
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
TASK1.......................................................................................................................................3
P1 Management accounting and its essential requirements of different types of
management accounting systems...........................................................................................3
P2 Methods used for management accounting reporting.......................................................6
TASK2.......................................................................................................................................7
P3 Calculating costs using suitable methods of cost examination to make an income
statement using marginal and absorption costs......................................................................7
TASK3.......................................................................................................................................8
P4 Discuss advantages and disadvantages of different types of planning tools used for
budgetary control ...................................................................................................................8
TASK4 ....................................................................................................................................10
P5 Differentiate how enterprises are adapting management accounting system to respond
to financial problem..............................................................................................................10
CONCLUSION .......................................................................................................................11
REFERENCES ........................................................................................................................12
Books and journals...............................................................................................................12

INTRODUCTION
Management accounting refers to a process which is related to identification of
different cost which is implemented by Organisation in order to generate the revenue
(Azudin, A. and Mansor, 2018). It include appropriate system which is based on the current
requirement of organisation where it audit financial reports statements and accounts in order
to analyse them and using them for benefits of organisation. Under the current report, it is
based on study of CAPITAL JOINERY. In relation to the current report it is based on
discussion about management accounting. In beginning of this report, there is discussion
about various kinds of management accounting and its tools. Along with this, there is also
discussion about various management accounting reports and their advantage to organisation.
In middle of this report, there is a discussion about different financial statement as well as
practical illustration of absorption cost. In last, it consist discussion about various factors of
management accounting and budgetary tools used in financial planning along with
identification of particular business situation and how organisation deals with them.
MAIN BODY
TASK1
Principles of management accounting
Accounting is also run through some rules and systematic approach which set its
principles towards management and keeping accounting records. These principles gives an
overview of presenting data and records into well manner. Managing accounts is an essential
need of organisation so that results of past and present could be compare easily. This could be
understood below:
Designing and compiling: This principle defines and accommodate accounting
records, data, reports and statement into well categorised form so that past and present data
could be analyse easily and comparison could become reliable. It reflects accounting system
in such a way that changes could be possible for future reference.
Control at source accounting: This principle enable the organisation to control and
analyse the cost incurred during business operation and prepare to overcome the crises over

employee, machine cost, labour cost and many more. Cost should be covered at regular basis
so that management would become less complicated.
Accounting for inflation: Business profits are not constant into market, it could be
flexible because of economic changes into market rates and interest. Due to which
organisation are in need to secure their cost and and prices so that it could make moderate
level of profit at time of inflation crises. This could be done by accounting records and
statement which shows here to decline these cost and make the organisation at break even
point. Inflation crises would lead the organisation to unexpected decline of demand and
supply as buying power of customers would be go downwards due to less supply of money.
Utility: This shows the relevancy and permanency of the data, for how much time the
data is useful for the organisation operations. For example, company changes its products
and its respective strategies, in that case, existing record will not be useful and requirement
for one would arises. Organisation must not consume their time into unnecessary practices
which does not provide any terms of benefit into coming future.
Absorption cost: This cost reflects expense which are related to indirect overhead
such as, labour, materials, and other overhead expenses. Through These factors shows extra
expense and unpredictable cost could be analysed. This requires most appropriate methods to
identify and evaluate to eliminate unnecessary cost. This principle of accounting focus on
cost consumption and more of profit establishment into the organisation. Accounting are
necessary to analyses each tiny factor of cost which is incurred during production and
managing the operations. Accounting managers ensure to make adapting researches
regarding cost absorption and make useful evidence for it.
Utilization of resources: Recording of cost, income, expenses, assets valuation and
capital control enable the function of utilising resources into full and efficient manner.
Although, resources are scare and rare for an organisation that need to be prominent and
maintenance for organisation welfare. Management accounting system enables cost cutting
and availability of resources so that it would achieve high profits through finished output.

P1 Management accounting and its essential requirements of different types of management
accounting systems
Management accounting is that part of accounting system which is related to
accounting of various management systems and identification of them in order to identify the
cost and revenue which are projected from the working of organization. It acts as an essential
part for every organization because it provides assistance to the management in observing the
cost and implementation of various strategies. This is also useful and managing different
function and providing assistance to stakeholders in order to identify the current business
position (Drury, 2018).
According to institute of management accounting "management accounting define
that part of management function with related to audit of different financial accounts of
organization in order to meet the financial obligations and identify the current financial
position of the firm. It is that part of business activity which enables organization to identify
appropriate pricing policy by analyzing different financial accounts and performing the
function to operate business in a effective way".
Management accounting is beneficial for organization in different aspects. CAPITAL
JOINERY can also avail the benefits of management accounting. Some of these benefits are
discussed below:
Helps in profit maximization: Management accounting is directly linked to
profitability of organization and performing its function in an appropriate manner. Under the
management accounting concept, organization use different benefits and system which enable
form to perform. In order to evaluating the current position of organization in identify various
processes which are involved in the development of production. This will help the
organization in using appropriate function and managing dysfunction according to the
requirements and whose profitability (Hopper and Bui, 2016).
Increase efficiency: Management accounting within organization is also useful in
increasing the efficiency of firm and managing its function in an appropriate manner. This is
because it helps in identifying the system which are based on the current business
environment as well as analyzed the cost which is implemented by the organization on

different production services. This will help in utilizing the accounts of different individuals
and analyzing the performance which can be used to boost the profitability.
Different systems under management accounting
Inventory management system: Inventory management system is an essential part of
management accounting which is helpful to the organization in achieving its objective and
performing the function in an appropriate manner. This is helpful to the management of the
organization in order to identify the requirements and perform the function according to the
current needs. There are number of options which are used under the inventory management
system by CAPITAL JOINERY . This is helpful to the manager in analyzing appropriate
system and functioning in a better way. CAPITAL JOINERY follower varied product line
which makes it compulsory for organization to use appropriate inventory management system
under the management accounting. This enables manager to divide the products in three
categories which are raw material, finished well and semi process good.
Cost accounting: cost accounting is that part of management accounting system
which is related to cost accounting is that part of management accounting system which is
related to identification of different cost which are involved by organization in order to
producing the buy organization in order to producing the products and services. This is an
essential part of organization as it is related to different cost as well as helpful for the phone
in order to meeting the process of selling of goods and services. In context of the current
business environment it is essential for organizations such as CAPITAL JOINERY to use
appropriate costing system where it can easily identify the cost and can decide the prices of
the products and services which it offer within the market (Lachmann, Trapp and Trapp,
2017).
Price optimization system: This is that part of management accounting system which
is related to calculation of various costs which are implemented by the organization in order
to generate the revenues and performing its function in an appropriate way. This system is
useful for organization in order to identify the customer behavior within the market and
discounting according to the needs and requirement of organization. Under this price of the
magician organization can follow the functions which are related to achievement of business
objectives and using this system to managing functioning. This system is also useful for
organization and deciding appropriate policies for the products and services offered by
organization with the market. In relation to the CAPITAL JOINERY , organization is

operating business environment where it offer number of products and services this essential
for organization to use appropriate system which helped the form in achieving its business
objective. In context of the current business environment optimization system can be used by
organization to manage the function of different pricing policies and using an appropriate
policy in accordance with the competition (Langfield-Smith, Thorne and Hilton, 2018).
Job costing system: Job costing system can be defined as a system which is included
under the management accounting of organization in which form used to identify the cost of
particular job or activity which is performed under some separate task. It is essential for
organization analyses the functioning and use appropriate identification of each and every
cost which are implemented in different jobs. There are a number of options which has to be
used under the job costing system in context of CAPITAL JOINERY which are helpful to
the organization in analyzing the cost of particular job which is performed by the
management. Also provide guidance to the staff according to the needs and requirements and
fulfilling the function in a way to achieve objectives.
It can be evaluated from the above that costing is an important part with organization
where it included under the management accounting system. There are number of
management accounting system which are useful for firm to achieve its business objectives
and perform them in an appropriate way.
P2 Methods used for management accounting reporting
Management accounting reporting
In context of management accounting which is also known as cost accounting system
there is great inspiration information which is received through the final accounting. There
are a number of reports which are involved under this system which are useful for CAPITAL
JOINERY in order to manage its function and identify the current requirements. This also
involve number of systems which are related to accounting and bookkeeping period which
are used to manage the function as well as perform this function in an appropriate manner.
Some of these bookkeeping methods are discussed below:
Budget reports: these are very crucial reports which are considered under the
management accounting system and are important for organization in order to analyses the
company performance and identify the work for a small scale business. In context of

CAPITAL JOINERY it is operating and a large-scale organization where company has to
manage each and every function by creating and overall budget to understand the schemes of
the business. A budget estimate made based on a previous experience of the organization
which always helpful in identifying the unforeseen circumstances which will rise in future. In
context of CAPITAL JOINERY managerial accounting report related to budgeting are
helpful in offering better employee incentives as well as cutting the cost in recognized terms
(Makrygiannakis and Jack, 2016).
Account receivable aging report: This is also act as an important part of managerial
accounting reporting system which involves identification of extended credit and account
receivable aging which are vital role within the organization. It is helpful in identification of
breakdown and remaining balance of the clients in order to specific time which is invested by
organizations and allowed the manager to identify the defaulter. This is also essential in
identifying the defaulter as well as using an appropriate action so that firm can easily manage
its credit policies and flow of cash at the time of requirement.
Cost management accounting reports: This is an important function which is
directly related to the managerial accounting computers of the organization and identification
of cost of different articles which are manufactured by the organization. This is an important
part because it is helpful in identification the raw material cost per overhead and any other
added cost. Of course report summary of different information which are essential for the
organization in order to perform in the capacity and realizing the cost price of the term of
selling. In contact of CAPITAL JOINERY Company always manage these reports in order
to identify the inventory waste labor working hours and various overhead cost which are
helpful in managing and achieving the objectives (Malmi, 2016).
Performance report: performance report is those functions which are created by the
organization in order to review the performance of employees as well as performing the
function in an appropriate manner. It is an essential part for organization where manager can
use performance report to make strategic decisions about the performance of different
individuals as well as rewarding them about their performance. This is also useful in
identifying the current processes as well as performing in an appropriate manner so that
managerial accounting can be established in an appropriate manner and getting the insight
about the current performance of employees. In context of CAPITAL JOINERY ,
organization is operating with different functions which are helpful to the fore in achieving its

objectives and performing the functions according to the requirement where it can used to
measure the performance and achieve the objectives.
It can be evaluated from the above mentioned information that there are a number of
reports which are included under the management accounting system and are essential for the
CAPITAL JOINERY to manage its function and perform effective systems so that it can
achieve the objectives. That's there are various function under this which has to be performed
in order to achieve the objectives and bring appropriate system.
TASK2
P3 Calculating costs using suitable methods of cost examination to make an income statement
using marginal and absorption costs
Income statement: Income statement can be defined as a fore financial statement of
an organization which shows profit and loss over a particular period of time. This is an
appropriate system which is helpful to the organization and determining the overall revenue
as well as deleting the expenses from both the operating and non-operating activities full stop
statement is one of the three statements which is used by the organization in order to identify
the financial modeling and accounting cost and other expenses of CAPITAL JOINERY
which organization in on a particular time period (McLaren, Appleyard and Mitchell, 2016).

Absorption costing: Absorption costing can be termed as a part or element of full
cost of manufacturing or providing services. Observation cost includes all those cost of
material as well as labor which are also related to the manufacturing overhead. Business
Central part of organization where the cost of each center can be detected and direct or
indirect manager as these will be identified it audit is identify the appropriate price policy
which will be followed by organization for its production services. A separate calculation of
financial statement and absorption cost in relation to CAPITAL JOINERY is discussed
below:

TASK3
P4 Discuss advantages and disadvantages of different types of planning tools used for
budgetary control
There are number of planning tools which can be used by Organisation in order to
manage budgetary control. These planning tool are useful for Organisation in order to make it
effective and execute the functions in an appropriate way so that organisation can manage
profitability and work in a group directed behaviour.
Capital budgeting: Capital budgeting can be defined as a process which is used by
Organisation in order to identify the investment profitability to the organisation (Nitzl, 2016).
An appropriate system which is used by the organisation to identify the current function as
well as used to determine various functions which are helpful and long-term investment and
managing the profitability ratio of that particular investment. It is also analysed there are a
number of tools and techniques which are used by organisation to perform its function there
are various investment which has to be made by Organisation in this machine these tools and
other functions which require appropriate return. Capital budgeting is useful to the firm like
CAPITAL JOINERY in identifying the returned from that investment which are made by
Organisation in respect to generate profit.
Advantage
 The major advantage of using capital budgeting in context of CAPITAL JOINERY is
that it is a tool which is helpful to Organisation in identifying the written on different
investments as well as identification of risk which involved under this investment so

that form can easily take actions and identify the return on investment (Wagenhofer,
2016)
 There are a number of benefits under these systems which are directly related to the
organisational functions and helpful in estimating appropriate system as well as return
on investment.
Disadvantage
 The major disadvantage of capital budgeting is that it decrease the decision making
ability of organisation as well as decrease the opportunities because there is
continuous changes within the environment which impact on functioning of
organisational system.
Cash budget: Cash budget can be defined as an important part of budgetary control
which is related to identification of various functions and techniques which are essential in
the organisation to manage the flow of cash and achieve the objectives. In context of
CAPITAL JOINERY , it is analysed that CAPITAL JOINERY is performing in an
appropriate way where companies identifying different functions which help in managing the
cash (Novas, Alves and Sousa, 2017). Is effective tool which is helpful in budgetary control
as organisation can identify the different functions and manage its profitability according to it
Advantages
 The major advantage of using cash budget as a budgetary tool is that it help in
identifying the current liquidity needs of organisation and using an appropriate action
so that form can perform appropriately analysing current situation.
 One more advantage of using cash budget as a budgetary tool is that it is helpful to
CAPITAL JOINERY in analysing the functions as well as using the cash flow in an
appropriate manner to achieve business objectives.
Disadvantage
 It is also identified that there are a number of benefits of using cash budget but in
some extent it also act as a demerit for organisation such as CAPITAL JOINERY
because due to changes in functioning and impact of this on working of organisation
there are various misleading situations which can create headache to the organisation.

 Sales Budget: Sales budget is prepared for the sales team in order to define the
allocation of crucial resource of CAPITAL JOINERY. It explains that how much
resources will be requires for achieving the sales target of the company. This budget
is prepared in terms of estimated expenses, sales and profit which will be compared
against the actual figures achieved. This budget estimates that how many sales are
made and the expenses incurred for achieving the sales target of CAPITAL
JOINERY. This tool can be act as a planning tool which coordinates the activities of
the sales team in order to achieve the sales target of CAPITAL JOINERY. Also, this
budget is a tool of controlling the expenses to be incurred while achieving the sales
target of the company. This budget has the following advantages and disadvantages
for the company:
Advantages:
 This budget act as a guide for the sales management team of CAPITAL JOINERY as
this defines the sales target that will be going to achieve in the upcoming period. The
already set and pre defined targets will motivate the employees of the company and
they will work with full potential towards the attainment of the sales targets.
 It is a yardstick of measurement against which the actual performance of the sales
targets are compared. Also, the sales team of CAPITAL JOINERY aims at assessing
the areas where the business can expand their sales area in order to achieve growth
and flexibility.
Disadvantages:
 The preparation of budget requires an experienced person who can prepare the budget
by estimating the requirements of the company. It is considered as time consuming
process which reduces their efficiency towards the achievement of sales target.
 Every employee of CAPITAL JOINERY have different preferences regarding the
budget and they are not willingly accept the budget prepared by the top level of
management.
Production Budget: This budget is prepared to forecast the number of units
manufactured in the company. CAPITAL JOINERY uses this budget in order to estimate the
difference between the produced units and sold units. This will provide them a brief about the

safety stock that the company maintains in order to tackle the unexpected increased
demanding budget is a basis for developing the cost budgets of the raw material and other
goods consumed in the production process. Through this CAPITAL JOINERY will decide
how much manpower will be required to be employed for achieving the production targets.
This budget is also act as a base for the other decision like advertisements, requirement of
storage spaces and so on as these are decided on the basis of number of units produced.
Advantages:
 This budget is used by CAPITAL JOINERY for planning the production process
which will help the company in deciding the number of units to be produced after the
demand analysis. This budget does not include the cost of production.
 This budget is required to analyse the need of recruitment of new personnel in order
to achieve the targets of the company. Also, CAPITAL JOINERY uses this budget for
streamlining their production process and scheduling the timings of their equipment
and machinery.
Disadvantages:
 The most important demerit of this budget that it is based on estimation and prediction
of the team. The management of inventory will involve a lot of variation. This is also
affected by the contingent fluctuation in demand of the goods.
 Although, budget is guiding tool for future actions but it involves a lot of time and
efforts from the management side. In this case, the budget estimation can go wrong
also which results in wastage of time and efficiency of management.
Purchase Budget: This budget is a representation of the plans of the company
regarding the purchase of inventory for a current accounting period. This budget is calculated
with the help of a formula; the desired ending inventory plus the cost of goods sold minus the
value of beginning inventory. CAPITAL JOINERY can use this budget in order to achieve
their purchase estimation which will help them arranging the resources for them accordingly.
This budget represents the functional strategy of organisation and their estimation regarding
the utilisation of those purchased inventory in the production process.
Advantages:

 The estimation of purchases of the company will help them in deciding the
recruitment of the workforce for the production and sale of that purchases
accordingly. Also, CAPITAL JOINERY uses this budget for deciding whether they
are need of particular inventory or not.
 This involves the analysis of the owner regarding the requirement of inventory which
will help them in utilising that inventory at the right place.
Disadvantages:
 The demerit of this budget is that if there will be any wrong estimation of the
purchase budget then there will shortage of inventory in the production and further
processes. This will impact their efficiency level.
Labour Budget: This budget determines the employees required to manufacture the
goods for the sale. CAPITAL JOINERY uses this budget to hire the labour according to their
requirements in the particular department and utilise them effectively. This also helps them in
scheduling the overtime working hours of the employees according to the requirement of the
manufacturing process. This budget also break down the labour category and their allotted
working hours which will define the need for further recruitment of the labour in the
company.
Advantages:
 This will reduce the burden over the current labour force as this will determine the
need of hiring of new employees in the manufacturing department. CAPITAL
JOINERY can use this budget to anticipate and hire effective workforce for achieving
the production targets.
Disadvantages:
 The demerit of this budget is that labour may not be satisfied with the working hours
allotted to them. Also, hiring of new labour will reduce their daily pay which will
demotivate them at the workplace.

TASK4
P5 Differentiate how enterprises are adapting management accounting system to respond to
financial problem
It is identified that current business environment is changing continuously where the financial
needs of organisation are also changing according to the time (Otley, 2016). This also gives rise to
number of financial problems which has to be managed by organisation in order to achieve its
objective. This can be analysed from the example of CAPITAL JOINERY and HOUSEDEC who are
a prime competitive in the market but facing same challenges in financial arrangements. These are
related to allocation of fund investment options identification of various financial issues like changes
in working environment and many other which are impacting on organisational performance.
Sudden expenses: There are various financial issues which reflects in Capital Joinery Ltd.
For which they make effective strategies in order to overcome the crises and unpredictable expenses.
Companies working capital need to be updated and organised so that sudden crises could be
overcome.
Late payment by customers : Due to financial problems of Capital Joinery Ltd. The
company unable to serve customers and their suppliers by making late payments and accepting orders.
This create negative image of companies services which lead to less customer satisfaction. By
preforming one function late, all the functions gets delay and incomplete so that, every department has
to suffer.
In order to analyse actual and valid performance of organisation to there are several
techniques which are described below:
KPI(Key Performance Indicators): This technique is quite popular for identifying financial
position of the company which derives two indicators one is to measure cash related crises and
another one is for analysing other issues which are not related with funds. Capital Joinery Ltd make
use of these indicators through which it could analyse and give appropriate solution of the issues.
Benchmarking: This factor shows the capabilities which organisation have to face market
challenges as it reflects its strategies to presenting goods and services to general public and made a
possibility to adopt top facilities of the market. This gives an organisation to create its unique
exposure.
Financial Governance: Capital Joinery Ltd abounded by carious laws and regulations in
relation with financial crises due to leading market situation and should be solved in proper manner.
This requires data of daily funding issues and find out where the funds are utilising.

CAPITAL JOINERY HOUSEDEC
The comany hire professional administrator
who could lookout the sudden expenses
which are hindering growth of the
organisation. It focus on every activity which
perform daily basis in terms of money out
and inflow. This process is necessary in
terms of daily checking or organisation
performance.
The comapny using staock manangement
method to evalute its cosrt, materils and
exepnses which idetify by the oragsnaition
as well as maintaing the stock would be done
easily. This is also an effecient method to
evaluation of stock and matirial at the same
time.
Cost account methods are useful to solve
problems of late payments. Accounting
manager will check on daily cash and credit
sales and make payments according to the
same.
Company faces problems of advance rates
ehich could be analsyed by optimization
method. So that comapny could make
affordable proces for customers.
This factor shows the capabilities which
organisation have to face market challenges
as it reflects its strategies to presenting goods
and services to general public and made a
possibility to adopt top facilities of the
market. This gives an organisation to create
its unique exposure. Here, benchmarking can
be used in order to improve function and
manage roles of employees.
In order to improve business function and
solve financial performance, housedec is also
using benchmarking as an tool. This help
business firm in meeting needs and
performing function where it can mange flow
of cash an control it in effective way.
In order to manage late payments, company
is using effective financial governance. This
helps in meeting needs by regulating business
and performing task in effective way.
Here, housedec use appropriate audit of
accounts which helps in meeting needs and
evaluation late payments.

CONCLUSION
It can be concluded from the above-mentioned information said there are various
functions which has to be performed by management accounting in order to meet the
requirements of stakeholders as well as analysing the financial cost and account. This is
helpful to the organisation in managing the function and achieving its objective according to
the needs and requirement. There are various functions which have to be performed in order
to analyse functioning and being a better firm. This is useful to the firm in managing the
function and achieving the objectives in an appropriate manner.

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