Management Accounting Strategies for Covent Garden

This assignment examines the role of management accounting in improving the effectiveness of Covent Garden hotel. It analyzes various management accounting tools, such as key performance indicators (KPIs), budgetary targeting, benchmarking, and financial governance, and explains how they contribute to achieving the hotel's objectives. The report emphasizes the importance of cost analysis, data interpretation, and decision-making processes for overcoming financial challenges and enhancing operational efficiency.

MANAGEMENT
ACCOUNTING

INTRODUCTION
Management accounting plays a crucial role in decision making and preparing strategies
for achieving organization's effectiveness. It is one of the great tools for effective performance of
management to reduce risks that occur at workplace. This project is on understanding
management accounting phenomenon for decision making regarding business operations of
Covent Garden Hotel. It is a small unit hotel in UK provides variety of food and accommodation
to customers. Different types of its systems including methods used for making report can be
determined. In this regard, through this study, learners will be able to learn various techniques
for making decisions based on interpreting data of last year's financial statements. Including this,
several characteristics and limitations of management planning tools for accounting information
will be understood. However, manner in which organization handles monetary problems would
be expressed through this report. Along with that, there will be study on budgetary tools and
planning strategies for development and enhancing qualitative services of the firm. Moreover,
vital role of management accounting for organization's development and improving efficiencies
will be determined.
TASK 1
P1) Management accounting and its types
General Manager
Covent Garden Hotel
Management accounting concept: - It is an essential planning tool including
forecasting and decision making for entity's development. It includes various kinds of
accounting systems for business financial and non-monetary decisions. For example;
economic, production and operation, risk management and so on. In this regard, several
strategies are prepared by the management accountants through analysing last years' financial
statements and business activities (Brigham and Ehrhardt, 2013). It remains effective for further
accounting and enhancing efficiency of the firm. In accordance with this, entire business
planning is obtained for financial and operational functions of Covent Garden Hotel. For
expansion of small size firm, management accountant and manager make decisions through
critical evaluation of monetary and non-economic structure of organization. However,
management accounting is considered as one of the greatest tools for decision making strategy
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related to enlargement and qualitative services of firm effectively. Including this, various
costing including marginal, absorption and cost-volume-profit analysis are determined through
this accounting concept that is helpful for systematic management of small sized organization.
Therefore, management accounting is the composition of all information standards to achieve
effective business performance (Clinton and England, 2016). It involves critical accounting
information including costing and reporting for company's effectiveness. Thus, management
accounting has significant role for rapid growth of entity.
Various kinds of management accounting systems: - Management accounting system
gathers financial data from business operations including inventory, cost, sales data and
information to analyze the accounting reports. Under this system, information is created for
recognizing cost efficiency to determine the price determination (Coad, Jack and Kholeif,
2015). In this regard, decisions are made for proper balance and implementing economic
accounting system. However, various systems of management accounting and their importance
can understand as:-
Managerial accounting: - In this accounting system, manager and accountant of Covent
Garden critically evaluate the management of business activities. It includes production and
distribution of goods as well as costing according to expenditures incurred by organization for
manufacturing and work in process. In accordance with this, as per the information, manager of
entity prepares strategy for implementation and product services including techniques to be
obtained for resource and fund allocation. For instance: if management accountant of firm is
going to implement the plans related to company's working efficiency then it is required for him
to analyze last year’s business performance (Contrafatto and Burns, 2013). It is considered as a
key component for him to make decisions for further activities and deciding the cost of
products.
Inventory accounting: - It is useful for optimum utilization of resources. In this
accounting system, manager of the organization makes plan for storing and using goods of firm
for creating balance between demand and supply of products. In addition to this, there is also
focus on the terms related to keeping goods in different branches such as warehouses, inventory
stores, etc. Therefore, management accountant of Covent Garden hotel identifies inventories
storing and process for adequate supplement of food and accommodation services. Moreover, it
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put a huge impact on the productivity and profitability of firm that is useful for effective
management of inventories (Feeney and et.al., 2016). Thus, inventory accounting is beneficial
for keeping goods in a systematic and safe manner as well remains effective for making
decision for production and supplement of products. It is considered as a management approach
for inventory control and adoption of technologies to be used for the expansion and better
quality products.
Financial accounting system: - It is a monetary decision making tool for planning and
forecasting to gain proper financial management. It includes funding for sources and
investments for implementing business activities. Under this accounting system, decisions are
made related to creating economic structure and making strategies for funding. Including this,
for financial accounting standard, manager analyses last year's records including income
statement, cash flow and fund flow etc. It is the basis on which forecasting and decision making
is implemented to enhance qualitative services of Covent Garden hotel. Therefore, several ideas
are generated for preparing budget related to sources and investments for economic efficiency.
It is interrelated with the entire management of business activities for producing food and
accommodation services (Finkler and et.al., 2016).
Hence, management accounting system is valuable for the systematic management of
organization in monetary and non-economic terms. However, overall development of entity
including improving qualitative services can be effective through management accounting
approach. It is the key element for making decisions to prepare budget for developing efficiency
of firm.
P2) Different methods used for management accounting reports
General Manager
Covent Garden Hotel
Including financial statements, managerial accountant prepares accounting reports such
as cost, budget and performance to present company's working efficiency. In this regard,
systematic records of business activities is obtained to run business effectively. Therefore,
information of entire organization's expenditures, revenues, budget etc are determined by
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analyzing these recorded data (Fullerton, Kennedy and Widener, 2014). However, several kinds
of management accounting reports can described as follows:-
Cost reports:- For preparing cost report, managerial accountant determines all costs of
items incurred. Under this report, systematic record is maintained regarding purchasing raw
materials, cost on manufacturing and expenses for work in process. In addition to this, cost for
raw materials, overhead and labour are recorded for production and supplement of goods and
services. Moreover, reporting related to fixed and variable cost is prepared and maintained
through this information. Thus, by analysing this cost of items, management accountant and
manager of Covent Garden hotel determines price to set for further price determination.
However, different ideas are generated for deciding hotel reports are also prepared regarding
cost incurred on its operations which help managers make decisions ford cost effectiveness and
further implementations (Guffey, 2014). Hence, by recognizing overall incurred costs, adequate
reports are also created for business operations and decision making top enhance its
productivity and profitability. Cost reports are valuable for price determination and producing
cost for further year business plans.
Budget:- According to current business performance, management accountant prepares
budget that considered as planning tool including forecasting and decision making for further
years. In this regard, decisions are made for further production and distribution of products.
Along with manager of Covent Garden hotel identifies overall business activities and further
forecasts and takes decisions for implementation and better qualitative services. Moreover,
budget is also prepared for formulating and strategies to run company effectively. It includes
comparison between last year and current year's business performance that is useful to increase
effectiveness of entity at high level. For small scale organization, it is necessary to prepare
budget related to expansion and enhancing efficiency for firm's sustainability. Under budgeting
process, manager of company analysis financial statements and further takes decisions for
further business implementation and achieving better qualitative services (Hiebl, 2014).
Performance reports:- This management accounting report is useful for presenting
balance between expenditures and revenues regarding these amounts. However, performance of
workers are evaluated weekly, monthly, quarterly and annually. Inlcuding this, by analysing
their abilities, work is segmented according to their abilities and team building for project and
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task accomplishments. Therefore, report is prepared by which various ideas are generated to
increase their working efficiencies affect contribution in team work. Thus, performance report
also involves employees' working efficiencies and their contribution level for organization's
effectiveness. Under this report, management accountant prepare and maintain records of
business activities including transaction of goods, cost effectiveness, workers' roles and
additional performances. Moreover, these reports are prepared weekly, monthly or annually for
determining company's profile and market position. Including this, effective ideas are generated
for further implementing in hotel services (Ismail and King, 2014). It presents business and
competitive strategies of entity for further business activities and enhancing efficiency of firm.
Other reports:- The additional reports to present business profile including
recognizing market research and satisfaction level of customers. However, it is interrelated with
determining position of hotel services that impacts on implementing services provided by firm.
Moreover, opportunities are obtained by analysing recorded information as well various ideas
are generated for reducing weaknesses occur at workplace regarding current and future trends
for effective business activities.
Therefore, above mentioned management accounting reports are useful for keeping
record of entire business activities including transaction of goods and qualitative services
provided by Covent Garden. Thus, keeping these records and its maintenance remains useful for
enhancing efficiency of firm. Analysing all these records are helpful for implementing further
business activities as well useful for increasing business and competitive strategies. However,
management accountant of organization keeps and maintains these records for recognizing
financial and other organizational structure (Lopez-Valeiras, Gomez-Conde and Naranjo-Gil,
2015). On behalf of this identification, various ideas are generated for getting effectiveness in
business performance of entity that impacts on its environment. In addition to this, actual
market position of hotel is determined for expansion of small size entity with proper planning
and evaluation of different strategies. It influences business and competitive strategies of
organization.
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TASK 2
P3) Cost analysis techniques to prepare income statement
General Manager
Covent Garden Hotel
Financial statement as income statement is a tool to present profit margin and balance
between expenditures and revenue of organization. Under this income statement, business
performance is obtained for maintaining balance between production and distribution of hotel
services. However, management accountant of firm prepares income statements through
different costing methods can understand as follows:-
Marginal costing method:-
Table 1: Income statement using marginal costing method
Particulars Amount Amount
Revenue from sales 21000
Less: Cost of production 6600
Gross profit 14400
Less: Variable Expenses
Production overheads (Non static) 1200
Sales expenses 600
Total cost 1800
Net profit 12600
Interpretation:- It presents gross and net profit of Covent Garden hotel that is company
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has gained 14,400 and 12,600 respectively. Where, gross profit is balance of revenue from sales
to cost of production. For determining gross profit margin through marginal costing method,
management accountant of organization obtains balance between revenue and expenses
incurred by hotel. Further, net profit is determined under which gross different between gross
profit and variable expenses is created. Therefore, it is recognized that marginal costing method
is quite simple and easy that includes only variable expenses for presenting gross and net profit
margin. In addition to this, under marginal costing technique, for decision making fixed
overhead are not included for determining net profit margin of entity to present financial
statement.
Absorption costing:-
Table 2: Income statement using absorption costing method
Particulars Amount Amount
Revenue from sales 21000
Less: Cost of production 6600
Gross profit 14400
Less: Variable Expenses
Variable production overheads 1200
Variable sales overheads 600
Total variable expenses 1800
Less: Fixed Expenses
Production overheads (Non static) 2000
Office expenses 700
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Cost of sales 600
Total fixed expenses 3300
Total expenses 5100
Net profit 9300
Interpretation:- Absorption costing method is quite different from marginal costing in
context for obtaining net profit margin. Therefore, management accountant of Covent Garden
hotel determines gross profit as 14,400. Further, net profit margin is obtained that is balance
between gross profit and variable including fixed expenses. However, as per recognition, it is
determined that total variable expense spent as 1800 and overall fixed expense company spent
is 3300. Therefore, sum total of variable and fixed cost occurs as 5100 that is differentiated with
gross profit and resulted to gain net profit margin as 9300.
Thus, above mentioned cost analysis method as marginal and absorption costing are
different approaches to present income statement. In accordance to this, there is only a
difference between two analyses for obtaining net profit margin is that absorption technique
includes fixed expenses. Therefore, net profit are obtained different for calculating costing
through both techniques. Both cost analyses are valuable for presenting income statements that
represent financial position of Covent Garden hotel. On behalf of which management
accountant and manager of the organization make decision for further business activities. It
emerges proper idea for creating balance between expenditures and revenues in the future.
However, income statement is prepared and maintained for implementing economic profile of
entity that is useful for enhancing business profile at high level. Including this, it is considered
as effective technique for enlargement of small scale organization for increasing services of
hotel entity affects its productivity and profitability.
Marginal vs. absorption costing:
Table 3: Marginal vs absorption costings method
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Bases Marginal costing Absorption costing
Profitability Net profit is measured using
profit volume ratio.
Profitability affected because
of inclusion of fixed cost.
Emphasis It sets vision for selling and
pricing aspects.
Focuses on production of
goods.
Belief It is believed that only variable
costs are appropriate for
decision making regarding
financial statements.
It is considered in absorption
costing that fixed overhead are
needed to take decision for
further business activities.
Time periodicity Suitable for short term
managerial decisions.
Appropriate for long term
management accounting plans.
The main difference between marginal and absorption costing is inclusion of fixed
overhead. Both costing methods have different beliefs to determine income statement that is
under marginal costing, net profit is obtained only by using variable cost. While, absorption
costing approach believes that fixed cost is essential to present its economic position. Moreover,
marginal costing is valuable for short term decision making decision while absorption costing is
for long term decisions. However, under absorption costing fixed overhead are involved
therefore specific decisions are taken by management accountant. In comparison to absorption,
marginal costing includes only variable costs and obtains gross as well net profit margins
(Noordin, 2016). Thus, both costing have different approaches to present but similarly both are
useful for preparing and maintaining income statements that present financial position of
Covent Garden hotel. However, cost analysis leads to make income statement which affects on
management accounting plans.
TASK 3
P4) Advantages and disadvantages of different types of planning tools used for budgetary control
General Manager
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Covent Garden Hotel
It is considered as a tool for controlling over business operations to gain effectiveness.
Under this technique, management accountant of Covent Garden hotel analysis financial
statement and additional business activities (Otley, 2016). On behalf of which budget is
prepared for planning and proper management of organization. However, various techniques are
involved under budgetary control approach such as; variance analysis, simulation, cash and
capital budget, Zero Base Budgeting (ZBB). In this regard, variance analysis is useful to
compare last year's and current business performances that detes minimize the utility of
budgetary control system. Moreover, responsibility accounting is also budgetary control
technique that creates cost, investment and profit centers. Therefore, effective performance of
business organization is achieved. Including this, zero base budgeting is helpful for creating
balance between production and distribution of goods that involves situation of no profit no
loss. There is any transaction of products get adjusted. Thus, various budgetary planning tools
are useful for implementation and creating effectiveness of organization. In this regard, its
favorable and unfavorable aspects can be described as follows:-
Characteristics:- Budgetary control techniques are useful for analyzing actual business
performance including financial and other business activities. It generates different ideas for
systematic management and expansion of organization. However, fix targets are presented to be
gained that remains helpful for preparing strategies. It provides tools and techniques for
planning and controlling over business activities. In this regard, cost effectiveness and proper
balance between production and distribution of goods is gained to increase profit earning
capacity of firm. Moreover, budgetary control technique considers as supportive for reducing
cost of production by eliminating wastage expenditures (Quattrone, 2016). Therefore, optimum
utilization of resources is obtained for economic and overall development of organization.
Various advantages of budgetary control tool can express as below:-
 Useful for analyzing actual business performance.
 Helpful for adequate resource and fund allocation.
 Several ideas are obtained for expansion and enhancing qualitative services of firm.
 Usable to gain better coordination among departments of entity.
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 Systematic management of business organization for increasing its efficiency.
 Preparing action plans for solving out issues occur at workplace.
Limitations:- Management accountant feels difficulty while preparing budget. It is
because of various limitations can describe as follows:-
 Wrong interpretation of financial statements and inefficient market research.
 It is considered as risky for taking high level decision regarding funding.
 Improper strategy for systematic management of business activities.
 Lack of coordination
 Changes in external environmental factors.
 High level of expenditures are obtained that business cannot afford effectively.
 Difficulty in preparing budget because of inflationary conditions.
Thus, budgetary control techniques includes above mentioned drawbacks that occur
difficulty for proper management. There is also issue obtained related to wrong analysis of
financial statements. In addition to this, lack of support is determined due to misunderstanding
and do not support all departments of organization. It affects environment of Covent Garden
and also strategies are not followed efficiently. For small scale business, it is difficult to afford
high level expenses and adopting new technologies therefore issues occur for implementing
strategies. Moreover, it is risky for Covent Garden hotel to get adjusted according to external
environmental changes (Renz, 2016). Therefore, high level of expenses and accepting
innovative ideas for expansion and operating new branches is not easy cake. Thus, various
problems are occurred for implementing budgetary control techniques. Similarly, it is
determined that several issues occur for business activities related to economic and additional
operations.
Hence, it is required for Covent Garden hotel to set goals and make plans related to
business activities effectively. It is needed for management accountant of organization to create
environment positive for adequate balance between production and distribution of goods. In this
regard, implementing smart plans such as; meeting small goals in short time is necessary to
expand and enhancing qualitative services of firm. However, by applying strategies for proper
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management and effective coordination is useful for preparing budget efficiently. Thus,
systematic planning, organizing and controlling over business activities can lead to succeed
budget planning tools effectively. It is valuable for enhancing good market reputation and
effectiveness of firm (Thomas, 2014).
P5) Significance of management accounting systems to solve out financial problems
General Manager
Covent Garden Hotel
Management accountant of Covent Garden makes decision through accounting systems.
It is useful for overall development of organization. Under this system, current business
performance is analysed that includes different determinants to expand small scale entity.
Financial statement including profit and loss account, cash flow and fund flow statements and
other financial notes are recognized (Wagenhofer, 2016). Therefore, actual difference between
expenditure and revenue is obtained that generate varieties of ideas for further business
activities. Further, on behalf of current business profile, management accountant prepares
strategy for maintaining and enhancing efficiency of hotel services. In accordance to this,
management accounting system includes approaches for example; cost, inventory and
performance accounting system that is beneficial for entire growth of entity including monetary
and non economic terms. Including this, various innovative ideas are generated for solving out
economic problems and additional business activities.
Thus, management accounting system plays crucial role firm's effectiveness. Including
this, developing market position and management of inventories are obtained. By applying cost
accounting system, financial position of Covent Garden can be increased. It is possible through
identifying last year's financial records and statements. Including this, forecasting and decision-
making is implemented for further business activities. Moreover, business and competitive
strategies are generated to present business profile. It is interrelated with other sectors of
organization that is marketing, production, operational, research and development etc.
However, inventory management for Covent Garden is obtained to increase financial and non-
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monetary profile of entity (Covent Garden hotel, 2016). It is useful for adequate resource and
fund allocation. Thus, it increases efficiency for enlargement of small business unit and
effective market research that impacts on organization's performance.
Management accounting systems are helpful for increasing effectiveness and qualitative
services of firm. It is considered as key component to run business smoothly. It is valuable for
expansion of business entity and adopts innovative ideas for solving out financial problem of
entity. It is interconnected with different business activities to make position in market.
However, preparing budget is one of the effective tool for economic stability and enlargement
hotel at large scale. It is adequate tool to establish contact with other business that is usable to
gain cost effectiveness. Including this, management accountant can use this system for overall
development and increasing quality services of business activities (Fullerton, Kennedy and
Widener, 2014). In accordance to this, systematic information is obtained as well planning
procedure is implemented for Covent Garden hotel's expansion and food including
accommodation facilities. Therefore, cost effectiveness, optimum utilization of resources,
financial management and adequate approach for implementation and high level efficiency of
firm can be determined. It is beneficial for organization to manage inventories adequately as
well proper management related to production and distribution is recognized through this
system.
Thus, systematic management and development of organization can be obtained by
using management accounting system for increasing demand for food and accommodation
services. In accordance to this, various tools are determined for managing business operations
of small scale entity and increasing in qualitative services of organization. Financial problem
and overall development of firm can be obtained through this accounting system. In accordance
to this, different methods are obtained for developing small scale entity as well high level of
satisfaction form customers can be obtained. Along with management accounting is considered
as composition of all accounting such as; financial, cost and corporate that indicates overall
business activities to increase product value and cost effectiveness for enlargement. Hence, it is
obtained that management accounting system plays effective role in decision making regarding
expansion of small business unit. In addition to this, several tools and techniques including
budget, auditing, preparing and analysing financial statements are determined for proper
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financial management of firm. Including this, it impacts on productivity and profitability of
Covent Garden hotel that is useful for long term sustainability of organization (Feeney and
et.al., 2016). It is beneficial for economic stability and expansion of small business unit. Thus,
proper utilization of resources and financial management can be determined by using
management accounting information as a tool for decision-making.
By using below mentioned management accounting tools will be effective to reduce
financial position and increasing profitability of Covent Garden as:
 Key performance indicators (KPI): Through this management accounting tool,
performance indicators of any enterprise are analysed by which different ideas are
generated for further implementation. In this regard, hotel entity's performance is
identified in respect of economy, operations and workers' contribution in team work
(Renz, 2016). On the basis of recognising these indicators, decisions are made for
further business operations and managing all of them effectively. In this regard, using
key indicators' software is helpful to collect data and analysing actual position of the
enterprise. Therefore, different ideas are generated for improving quality services and
implementing further business operations.
 Budgetary targeting: It is essential tool for optimum allocation of resources and fund
for adequate production and distribution of food services of the hotel entity. However,
actual performance of Covent Garden can be analysed on which strategies are prepared
for reducing financial problems and increasing its monetary position. In addition to this,
budgetary targeting affect management of business operations and remains helpful for
enhancing its profitability systematically (Coad, Jack and Kholeif, 2015). Thus,
budgeting as management accounting is helpful for decision making on further business
operations to reduce financial issues and increasing profitability efficiently. Different
budgets are prepared for systematic planning and reducing wastages like; cash, sales,
purchase and capital budget. Therefore, effective planning can be made for further
implementation and decision making regarding business activities.
 Benchmarking: It is competitive tool to identify market position and competitiveness
of Covent Garden hotel. In this regard, comparison of hotel entity with other
competitive organisations is done by which different ideas are generated for financial
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development and improving quality services of organisation effectively (Noordin,
2016). Thus, applying benchmarking is an effective approach for enhancing profit level
and productivity of the entity efficiently.
 Financial governance: Under this management accounting system, taking financial aid
of governance remains effective for increasing profitability and growth level of entity
(Fullerton, Kennedy and Widener, 2014). However, adequate fund can be allocated as
well return on investment can be increased affect economic position of Covent Garden.
Thus, financial governance is essential for hotel entity to manage its operations
effectively. In accordance to this, taking financial aid from government and financial
institutions, economic issue of the hotel entity can be reduced effectively.
CONCLUSION
The report concludes that management accounting is an effective tool to run business
entity effectively. Different types of information system and methods are determined for making
decisions regarding business activities. However, importance of management accounting for
preparing strategies to achieve Covent Garden hotel's effectiveness is considered. In addition to
this, cost analysis and data interpretation tools are recognized for forecasting and decision
making process. Through this study, advantages and criticisms of planning tools are obtained for
implementing plans related to solving out financial problems occur at workplace. Moreover, role
of management accounting for reducing monetary issues and other problems related to business
activities are obtained.
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REFERENCE
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