Management Accounting and Financial Issues

The assignment discusses the importance of management accounting and reporting systems in companies, highlighting their role in managing financial challenges and variations. It also compares the performance of Jupiter PLC with Ever Joy Enterprises, identifying differences in their business operations and financial governance. The assignment concludes that management accounting is essential for achieving sustainable success, and it provides a summary of key points and references.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Management accounting system and their types.........................................................................1
Types of management accounting reports...................................................................................2
Benefits of management accounting system...............................................................................3
Evaluation of management accounting system and management accounting report integrated
with organizational process.........................................................................................................4
TASK 2............................................................................................................................................5
Marginal Costing.........................................................................................................................5
Absorption Costing.....................................................................................................................5
TASK 3............................................................................................................................................7
Advantages and disadvantages of planning tools........................................................................7
Analysis of various planning tools and their application............................................................9
Evaluation of Planning tools for Responding to financial issues..............................................10
TASK 4..........................................................................................................................................10
Compare with other organisation regarding to solve financial issues.......................................10
Management accounting leads organizations to achieve sustainable success...........................11
CONCLUSION..............................................................................................................................11
REFRENCES.................................................................................................................................13

INTRODUCTION
Management accounting is the process of preparing reports as well as accounts for the
managers. It is provide statistical and financial information in the report for the following of an
organization's goals (Abdelmoneim Mohamed and Jones, 2014). On the basis of these reports
and accounts managers are taking economic decision that is effected to organisation strategies. It
is also known as cost accounting, managerial accounting. In the context of this report selecting
the company is Jupiter PLC, it is a medium sized manufacturing company.
In this report covers management accounting system and their types, different methods of
managing accounting reports. Benefits of the management accounting system, integrated
management accounting report and management accounting system regarding to organization
process. Calculating profit and loss on the basis of marginal costing and absorption costing
method. Identify planning tools in management accounting, compare ways in organisation to
solve financial issues in management accounting.
TASK 1
Management accounting system and their types
Management accounting system consist of the internal system that an organization uses to
measure and evaluate its processes for the management of the organization. It is a effective
system that are reach all the departments of the business for manage accounting system because
in the organisations all departments are inter related to each other. These departments are IT,
marketing, Operation, Finance and sales. All these divisions of business, takes financial
information for developing reports that are further used for decision making procedures.
Price Optimisation management System
It is using as a mathematical analysis by Jupiter PLC to ascertain how customers will
react on various prices for its products and services through with several channels (Hiebl, 2014).
This system also used to regulate the prices of the company that determines for achieve
objectives such as maximizing operating profit. For optimisation of price of products, managers
of Jupiter Plc set prices on competitive rates. This would help in becoming cost leader as well.
Inventory Management system
It is the management of non capitalized assets and stock items in the Jupiter PLC. It is
on going process of moving goods into and out of a company. Inventory management including
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following, predicting and reordering of the goods for sending to vendors as well as end
consumers. In the manufacturing company for production company using different type materials
and these are classified in raw material, work in progress and finished goods. These products are
not going to wastage for this need to maintain of inventory management system. It is helping to
procedure of the management related to the inventory. For manage inventory in Jupiter PLC
apply methods such as LIFO, FIFO and weighted average cost method (Bennett 2017).
Job costing System
It is the system that ascertain manufacturing costs in systematic way to classified them in
overhead, direct labour costs and direct material and calculate them at their actual value. This
information is appropriate for submitting the data related to costs as per contract where costs are
return. These providing information are using to find out quality of the Jupiter PLC's
computation system, which should be able to provide quotation price to acquire reasonable profit
(Kennedy, 2017).
Cost accounting management system
It refers to an internal reporting system for a company where managers make decisions in
own management. It is a frame work that is used by the company to approximate the costs of
entire services and products for controlling costs, inventory valuation and profitability analysis.
Since it is difficult to compute cost of products in accurate manner for profitable operations.
Therefore, Jupiter PLC know about the products that which products are profitable more and
which are low profitable. So it helping to company to know accurate cost of the products (James,
2017).
Types of management accounting reports
Management accounting reports are important part for presents of performance of the
company by making different departments reports. For effective management accounting system
these reports are necessary to maintain. With the help of these reports planning, regulating,
measurement of the performance and decision making (Fullerton, 2017). These reports are
presents actual structure of the company for execute strategies.
Inventory management report
It is essential part of organisation because it maintains proper record of stock and with the
help of this report recording of each stock transactions that will helps to Jupiter PLC to know
how much quantity need to produced, sold and remaining. For analysing the stock using methods
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that are helping to use LIFO (Last in first out), FIFO (First in first out) and Weighted average
cost method (Widener, 2017).
Budget report
These reports are preparing for the performance of the company according to future time
period. Budget report are creating by whole type of companies like small, medium and large.
Each company are using budget to understand the strategies of the company (Schaltegger, 2015).
With the help of report Jupiter PLC estimate of future situation of the company and according to
this decide how to prepare strategy. This report will be follow in future so company achieve
goals and objectives.
Performance report
It is report crated by the company to taking review of the performance of Jupiter PLC as
well as each employees at the end of term. These types of reports firstly prepare on department
basis after that teams basis. Managers of the company using this report to creating strategies on
the behalf future time period. When employees getting reward and compensation are provided
according to performance report (Gibassier, 2015).
Accounts receivable reports
It is using as a critical tool for managing cash flow when extend credit of customers in
business. This reports breaking down the left over balances of clients into particular time periods
allows managers to determine the defaulters as well as find issues in the company collection
process (Ruhana Isa, 2014). In the case of Jupiter PLC prepare of periodic report for find out the
number of unpaid invoices and debtors of the company.
Sales reports
Management accounting because this report shows the sources of company's income,
highlighting those business activities that earn the most income such as sales at particular
accounts or venues, wholesale vs retails sales (Jamil and et. al., 2015). These reports are helping
to generating the most and the least income that are presents on the basis of staffing or awarding
bonuses.
Benefits of management accounting system
When company using management accounting system in the company so its effects as a
positive way as well as negative way. But it is useful for proper functioning, recording and
analysing of over all data related to business growth. The Jupiter PLC applying management
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accounting system and according to this prepare and presents management accounting reports.
Benefits of management accounting systems and their types -
Types of management
accounting system
Benefits of accounting system
Job costing system It is providing benefits to the company for keeping track of
performance of business related to efficiency, cost control and
productivity.
Inventory management system With the help of this system, managers of Jupiter Plc gain
advantage to increase productivity and efficiencies of
production. It helps in minimising inventory costs as well as
maximising sales and profitability of business. It is keeping
accurate record of the stocks and how to they manage to
convert in finished goods.
Cost accounting system It is helping to find out reason of increase and decreases of
profit and loss, guide for future production policies. It will
control on supplies and materials (Kaplan and Atkinson,
2015).
Price optimisation system This system helping to determinant the the price of each
product and examine perception of the customers regarding to
product.
Evaluation of management accounting system and management accounting report integrated
with organizational process
Management accounting system and managing report both are important for the company
for execute operational information. Jupiter PLC using two tasks of management accounting for
cooperative in order to cut down gap between the planning, group action and movement of
business performance information. These tasks are helping to reporting and recording of business
activities. Type of reporting system helping to present the performance of business operations.
Management accounting system and reports both are play vital role to conducting organizational
process because of organization activities are effected by them.
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TASK 2
Marginal Costing
The concept of marginal costing important as a allocation of resources for acquire
optimum result. It is based on activity of the cost that are change with the volume of the
production. It is also known as variable costing and it is concentrated and determined cost per
unit. Mainly marginal costing are divided in to two parts, first one is fixed costs and second one
is variable costs (Lavia López, 2014).
Absorption Costing
It is an accepted technique of find out cost related to variable and fixed costs. It covers
overall cost related to manufacturing a product such as wages of labour, raw materials, overhead
expenses, utility costs and more. Absorption costing includes both fixed and variable costs which
help in calculating budget and income cost of company in more appropriate manner.
(1) Budget – Absorption costing technique September 2018
Production cost per unit
= Direct material + Direct labour + Variable overhead + Fixed overhead
= 10 + 20 + 5 + (100000/20000)
= 10 + 20 + 5 + 5
= 40
Total production cost
Production Cost per
unit
Total (£)
Direct Material 10 18000*10 180000
Direct Labour 20 18000*20 360000
Variable overhead 5 18000*5 90000
Fixed overhead 5
Total 40 18000*40 720000
Total Cost of sales
Budgeted cost of sales September, 2018 (£)
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Cost of production 720000
Opening Inventory 0
Closing inventory -80000
Cost of sales 640000
Calculation of net profit by using marginal costing method (Budget)
Particulars Amount
Sales revenue = ( No. of goods sold * selling price = 50 * 16000) 800000
Marginal Cost of goods sold: 560000
Production = ( Marginal cost per unit * Produced units= 35*18000) 630000
closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 2000) 70000
Contribution 240000
Fixed cost 100000
Net profit 140000
Absorption costing
Absorption cost per unit = Direct material + direct labour + variable production overhead + fixed
production overhead (100000/20000)
= 10 +20 + 5 + 5
= 40
Computation of net income by using absorption costing method (Budget)
PER UNIT TOTAL
£ £ £ £
Sales 50 800000
Cost of production
Direct material 10 180000
Direct labour 20 360000
Variable over head 5 90000
Fixed over head 5 90000
40 720000
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Opening inventory 0
Closing inventory -80000
Cost of sales -640000
Standard profit 160000
Adj. For under absorption -10000
Budgeted profit 150000
(B) After the changes of production units and closing units so there is no changes coming in
marginal costing but in absorption costing profit amount will be change.
Calculation of net profit by using marginal costing method (Actual)
Particulars Amount
Sales revenue = ( No. of goods sold * selling price = 50 * 16000) 800000
Marginal Cost of goods sold: 560000
Production = ( Marginal cost per unit * Produced units= 35*19000) 665000
closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 3000) 105000
Contribution 240000
Fixed cost 100000
Net profit 140000
Computation of net income by using absorption costing method (Actual)
Particulars Amount
Sales = (Price of selling * no. of units sold = 16000 * 50) 800000
Cost of goods sold- 640000
Production = ( Absorption cost per unit * Produced units= 40*19000) 760000
Closing stock = ( Absorption cost per unit * Closing Stock Units = 40 *
3000) 120000
Gross profit 160000
Less – under absorb fixed production cost 5000
Net profit/ operating income 155000
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Conclusion – After the all calculation profit will become different because of marginal costing
method not including fixed cost but in absorption costing method it is included that. In Actual
result changes of absorb closing balance and productions units.
TASK 3
Budget
It is a statement for estimation of revenues and expenses for a particular future time
period. It will be made for supported organisation objectives and goals are accomplish in future.
In the other words, with the help of this statement know forecasting of costs related items
divided in to different departments for acquire future goals (McLane and Atrill, 2014).
Budgetary control
It is the procedure of controlling business activities on the basis of budget estimation. In
the budget forecasting cost related to each department after conduct activities it is compare with
actual result and standard result to examine budgeted figures.
Advantages and disadvantages of planning tools
Scenario tool
This tool related to planning tool that are helping to estimate future situations to examine
of Jupiter PLC. Scenario tool is a method to calculate future possibilities to affect strategic
objectives. Predication about future is complicated but for growth of the business it is needful. It
enables to develop organizations strategies related to product and services for changing world.
Advantages – It is useful tool of budgetary control that are helping to reduce various
uncertainties of several departments. It will helping to management for taking efficiently and
productive decision regarding to company for up coming time period (Management accounting,
2018).
Disadvantages – Future estimation is difficult so every time accurate estimation is not possible.
So it is also effected to decision making and effect to future growth of the organisation.
Contingency tool
It is budgetary control tool that are describes to several elements that are related to
various department. It is helping for providing timely and accurately financial and non financial
data for future time period. This tool helping to estimate business disruptions and future
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strategies that are happen suddenly (Mokhtar, Jusoh and Zulkifli, 2016). So according to these
are planning about the linear thinking .
Advantages – Contingency planning tool are helping to creating effective strategies that are
helping to handle-ling unpredicted changes in market and business. It will helping to overcome
difficulties that are happen in future and effect to business growth. Jupiter PLC with the help of
this tool change management policies.
Disadvantages – It is a tool for suggestions always good but not possible all times it will apply
practical decision that are not suitable some kind of situations.
Forecasting tool
It is technical tool that are estimate of future trends that will effected to business
activities. In the context budgetary control budgets are helping to expected future expenses that
are allocating of budgets for deciding policies. In the last stage it is helping to data analysis and
determinant of hypothesis and after that it is confirmed. With the help of this tool verify of
standard outcomes and actual outcomes (MOUSAVI and Shakeri, 2014) .
Advantages – This tool helping to statical information of Jupiter PLC that will helping to mostly
financial department. Because on the basis of this taking decision for future prospectives and
provides flexibility according to financial information.
Disadvantages – It is not including particular quantitative research so on the basis of qualitative
research decision will be wrong. These wrong decision not relies of subjective accounts as well
as inputs of the account.
Types of Budget
Flexible budget – This budget prepared according to flexibility it means any activity that are
change to business operations and situations to according to this budget also modify. It is more
refined and useful than a static budget.
Master budget – It is the set of operating and financial budget related to particular accounting
period. These types of budgets are prepared quarterly or annually basis and it is categorised
according to business nature and size. Operating budgets are related to daily activities that are
conduct by business in financial terms. Advantage of this budget is helping to prepare strategic
plan and it will taking decisions for long term strategy as well as current year forecasting.
Cash budget – It refers to estimate the cost inflow and outflow to make budget over a specific
period of time. It is used for further estimating whether business has adequate amount of cash for
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operating business and fulfil debts as well. Benefit of this budget is that it provide all information
about cash receipts and cash payments. So mainly with the help of this budget predict about the
cash situation in future.
Financial budget – It is helping to estimate revenues and expenditure of the company on short
term and long term basis. Financial budget prepared on detailed based that is estimated of
financial statement like as balance sheet, income statement and cash flows. These financial
statements are evaluated on a monthly, quarterly, half yearly and annual basis.
Capital expenditure budget – It is a formal plan that states the amounts and timings of fixed
assets are buying by the company for improve efficiency. It is related to upcoming year to
execute business activities in proper way. With the help of this budget purchase purchase new
fixed assets that are provide benefits to an organisation.
Analysis of various planning tools and their application
For reduce financial issues using different methods of planning tools that are helping to
controlling of budgets of Jupiter PLC. There are many tools that are helping to evaluate financial
issues so for solving this using firstly scenario tool that are helping to prepare effective budget
process. After that contingency tool that helping to controlling those risks are grow up in
different departments. Forecasting tool helping to provide financial information that are helping
to know used total incomes and also help to know total expenses of the business. These types of
planning tools are helping to prepare effective budget process and also for proper allocation of
the budget (Pavlatos and Kostakis, 2015).
Evaluation of Planning tools for Responding to financial issues
In Jupiter PLC face several types of financial issues that are develop in the management.
With the help of these tools are taking contingency, forecasting and scenario tools. In forecasting
tool used to estimate future issues those are affecting to business performance. It can resolve
problems by using methods Key indicator performance and benchmarking.
TASK 4
Compare with other organisation regarding to solve financial issues
In Jupiter PLC can applying management accounting system that are helping to manage
financial resources of business. After adoption management system using these methods that are
helping to solve financial issues, they are as follows -
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Key performance indicator (KPI)
It is technical tool which is used for measuring performance of employees. It is an
effective approach is made by achieving business objectives. Jupiter PLC is evaluating success
in order to reach targets. It will helping to reduce unplanned expenses that are occurrence when
conduct activities of business. The focus of employees is made by relating with different
departments. The performance are made on the basis of effective decision. In this, it is helpful in
reducing complex nature and cover overall performance (Schaltegger and Burritt, 2017).
Benchmarking
It is a process used by company is measuring performance by making process, services,
products which are compared by Jupiter PLC. The company is leading with the purpose of
making internal possibility of enhancing improvement. It will compare performance with other
organisation and helping to improve it.
Financial governance
It is using for collects, carry off, monitors and control financial information related to the
company. So when financial issues are origin that time it will helping to solve it with the help of
KPI and benchmarking.
Differences between Jupiter Plc and ever joy enterprises
Jupiter plc. Ever joy enterprises
In company that is involved in manufacturing
method use inventory management system. As
it records inventory that will be ascertain
opening and closing cost .
It is construction organisation which involves
in construction process uses job costing
system as it boost efficiency if price of every
project and job will be determined. Some
technologies are used in this. It take resource
from other firm that bring effectualness.
Financial indicators are proper tools so that
they handle and control price in company
which cause major issues. As there are scarcity
of resources and they required to placed for
alternative use.
Some financial risk like improper budgeting
which will be resolve by using the budgetary
system reports in industry. It help to trace
record of expenses and income.
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Management accounting leads organizations to achieve sustainable success
Management accounting applying in an organization as a tool that will manage financial
challenges and variation for better control. This will helping to Consolidating the changes with
several sources and aspects. With the help of effective managing skills and accounting system
are flow of information become more smooth and fluent to address the value of organisation
among management and operations. Different types of financial and non financial issues can be
overcome and treated in adequate way to lead organisation to sustainable success. Management
accounting has contributed valuable efforts in term of enhancing the scope of business at large
level. Organization when working properly to reduce financial issues and sustaining success in
Jupiter PLC. In business management accounting system as well as managing report are helping
to accomplish over all growth of the company. It can be help to achieved success to on the basis
of performance of the company. Success is directly related to decision making and also related of
the performance of the company. (Zaleha Abdul Rasid and Khairuzzaman Wan Ismail, 2014).
CONCLUSION
From the all above discussion it is concluded that management accounting and managing
report are important for companies and their types also. These systems and reports are helping to
know performance of the business along with business activities. For calculation of profit and
loss of Jupiter PLC using marginal and absorption costing method that are helping to know
actual profit and loss and budgeted profit and loss. Financial issues are grow up in every
company so for solving this using KPI and benchmarking. Budgetary control tools are helping to
know future estimation and helping to know future uncertainties. For solving issues company
Jupiter PLC with Ever joy enterprises that will helping to improve performance of the company.
With the help of this reduce these problems for business growth. Management accounting
helping to business for acquire sustainable success.
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REFRENCES
Books and Journals
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