Management Accounting and Reporting Methods

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and the requirement of various type of management accounting
system..........................................................................................................................................1
P2 Diverse methods of management reporting methods.............................................................4
TASK 2............................................................................................................................................5
P3 Calculation of cost using marginal and absorption costing...................................................5
TASK 3............................................................................................................................................7
P4 Different planning tools using in budgetary control..............................................................7
TASK 4............................................................................................................................................8
P5 Compare how organisation are adopting management accounting systems to respond to
financial problem........................................................................................................................8
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11
.......................................................................................................................................................11

INTRODUCTION
Management accounting considers as an effective technique that implement by the
manager with the aim of evaluating as well as determining the ability of company to attain their
set goals and objectives. It is one of the important activity for business organisation to execute
their operational activities in effective way. Mainly, it is carry out every year that assist manager
of company in taking best decision for future period of time (Abernethy and Wallis, 2018). The
main benefit of management accounting is to systematically manage entire financial activities
that support in attaining their predetermined target. Current report is based on the Excite
Entertainment Ltd, is operate in leisure and entertainment industry in the UK. The major
activities are the promotion of concerts and festivals at location through the UK. Report is going
to discuss about management accounting systems and its requirement for company. Along with
this, different methods of management reporting are also discussed in this assignment.
Calculation of cost using marginal and absorption costing is mentioned in this report that may
assist in determine the income statement of company. At last, different planning tools are
mentioned in used in budgetary control of the firm.
TASK 1
P1 Management accounting and the requirement of various type of management accounting
system
Management accounting: It refers to the effective technique that implement by
company to analysis, control and monitor the overall effectiveness of operations. In context of
Excite Entertainment Ltd., the main focus of manager is to manage entire financial activities
because it supports in evaluating the actual efforts made by business in order to attain their set
targets. Mainly, it helps company in making decision by gathering actual and relevant data
towards the company performance (Alawattage, Wickramasinghe and Uddin, 2017). By this,
firm can easily reduce the chances of arising financial errors.
Financial accounting: This type of accounting is one of the effective that mostly used by
both big and small company to determine their actual performance at market place. The manager
of Excite Entertainment Ltd., is focus on the evaluating entire financial statement that support
them in analysing the profit and loss of company.
a) Difference between management and financial accounting:
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Basis Management accounting Financial accounting
Aim Management accounting is refers to
make informed business decisions.
The main aim of financial
accounting is to provide relevant
data to outside parties such as
customers, investor, creditors and
many more.
Time frame This type of report is prepared as per
the requirement of business
organisation.
Financial statements are prepared
at the end of the accounting year
which refers to the one year.
b) Cost accounting systems:
It refers to an effective system which is used with at the aim of determining the actual
cost of the company that faced by them at the time of executing as well as performing
operational activities within the organisation. In this regards, manager of Excite Entertainment
Ltd uses this system in order to finding the actual causes towards the expenses. With the help of
this, manager of company can easily determine the factors that are resulting in high cost. Mainly,
this system includes two type of costs such as:
 Direct cost: Under this, all the expenses are related with the business activities and occur
when company promote their concerts and festivals in over the UK. In this costing
different types of costs are included such as direct material, sakes commissions and many
more. Herein, underneath a worked example of direct cost is mentioned in such manner:
Particulars Amount (in pounds)
Direct material 20
Freight in cost 50
Consumable supplies 40
Total direct cost 110
 Standard costing: It is also considering as an effective costing techniques that used by
company to collect information about the factors that are related in variation between
actual cost and standard cost. This is used in order to make comparison between actual
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and estimated cost. It can be favourable or unfavourable like if actual cost is less than
standard cost then this will be favourable, vice versa. Herein, underneath worked
example of standard costing is mentioned in such manner:
Particulars Actual
cost
Standard
cost
Difference
Labour cost 500 600 100 (F)
Material cost 200 400 200 (A)
c) Inventory management systems:
It is considering as an effective combination of technology such as hardware and
software and procedures that used by company to monitor and maintain stocked products. It can
be company assets, raw material and finished products that are read to deliver end customers
(Anderson and Dekker, 2014). By using this system, Excite Entertainment Ltd can easily
maintain the record of stock of company. As it includes different type of methods are as follows:
 Last in First Out (LIFO): It refers to the inventory evaluation method in which firm focus
on the inventory that is bought in last and used first in manufacturing process. With the
use of this type of system, Excite Entertainment can easily manage the stock and improve
their production activities.
 AVCO: This type of method is also considering as an effective as it implements by
company for set the product price on the basis of average cost. In context of Excite
Entertainment, they use this technique with the aim of setting the product price as per
average cost of production process in order to manage their stock.
 First in First Out (FIFO): This type of method is also effective that refers to the first in
first out in which company bought goods first and also used first in production process
(Hertati and Sumantri, 2016). By implementing this method, Excite Entertainment can
easily manage their stock and at the same time also improve their production process.
Furthermore, these are the effective methods for company to manage their stock but in
context of Excite Entertainment Ltd use FIFO method as it helps in effectively utilise entire
resources. This will aid in managing the overall stock of company in an effective manner.
 EOQ: It is considering ideal order quantity in which company needs to buy to minimise
inventory cost like shortage costs, order cost and holding cost. In this, business
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