Management Accounting and Governance

This assignment delves into the world of management accounting and corporate governance. It examines the use of costing methods to determine net profit and the role of planning tools in resolving budget control issues. The document also touches on the significance of transparency in good corporate governance practices.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
(a): Difference between management accounting and financial accounting..........................1
(b): Cost accounting system...................................................................................................2
(c): Inventory management system:.......................................................................................2
(d): Job costing systems..........................................................................................................2
(e): Different types of management accounting report...........................................................3
(f): (i): Advantage of sound accounting system.....................................................................4
(ii): Advantages of timely production of accounting information....................................4
TASK 2............................................................................................................................................4
Breakeven point and quantity.................................................................................................4
(a):...........................................................................................................................................5
(b): Desired profit: 30000.......................................................................................................5
(c): Desire profit=?.................................................................................................................5
TASK 3............................................................................................................................................5
(a): Advantage and disadvantage of using planning tools......................................................5
(b): Evaluate how strong financial governance......................................................................8
CONCLUSION..............................................................................................................................10
REFERENCE.................................................................................................................................11

INTRODUCTION
Management accounting is one of the primary aspects which will be used by a various
organisation for the purpose of recording, summarising, evaluating and communicating the
accounting information into their respective format. It is basically aimed to make improvement
of the company’s finance and profit. “Ever Joy Enterprises (UK)” is a company which is
operating in leisure and entertainment industry. This project report aims at providing all crucial
information related with the management accounting and reporting systems to the company.
Apart from this, use of costing methods in order to calculate the net profitability for Ever Joy
Company is discussed effectively in this report. Understandings of planning tools that are use for
the purpose of controlling budgets are also mentioned properly. At the end, discussion related
with the financial issues and their solution are examining clearly in the below report (Amoako,
2013).
TASK 1
(a): Difference between management accounting and financial accounting
Management accounting: It is known as effective process of formulating management
reports and accounts that can provide accurate and timely data and statistical information as per
the requirement of manager to make short or long term decision.
Financial accounting: It refers to the essential process annual report which is mainly for the
external stakeholder. It generates monthly or weekly reports for “Ever joy enterprises” for
internal audiences such as department managers as well as higher authority. It is related with
measuring overall performance of the business in terms of increasing efficiency, growth and
proper utilisation of resources etc. This will assist in assessing risk which can be further
transformed into revenue (Brewer, Sorensen and Stout, 2014).
Basis Management accounting Financial accounting
Legal
requirements
It has been seen that there is no any
kind of statutory requirements is
necessary.
It is entirely legalise to prepare
financial accounts for every company.
Format of
presentation
There is no any set format used for
the presenting data in front of
management.
Financial accounting has vital to make
use of specific formats for the
recording and presenting data.
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Areas of
coverage
within the
organisation
It only used to cover the internal
department for the purpose of
management.
It is taken into account for the external
parties such as potential investors and
outside stakeholders.
Type of data
used
Historic as well as predictive data are
primary base of decision making.
Only historic or statistical information
is basis of effective decision making.
(b): Cost accounting system
It is known as effective framework that has been used by the firms to estimate the cost of
their products for the purpose of analysing profit, inventory valuation and cost control.
Predicating the accurate cost of goods is vital for profitable operations. There are various types
of costing techniques that are mentioned below:
 Batch costing: This is said to be overall addition of job costing. A batch can be
representing a wide number of small orders that passed through the factory in batch size.
Ever joy enterprise has need to determine per units cost of tickets by dividing the cost of
total people.
 Service costing: these particular sectors which render various kinds of services as distinct
from those which associated with service delivery sector. Ever joy is the one who is
related with providing all kind of entertainment related services to various customers
(JOSHI and et. al., 2011).
(c): Inventory management system:
It is simply known as supervision of non-capitalised inventories and stock related products.
An element of supply chain management, stock analysis tends to provide information about the
flow of producers to warehouse and from these services to the point of sales. As it can be used in
manufacturing sectors but, ever joy enterprise can use this in the form of examine total
availability of tickets that are booked or vacant. Like, assets tracking and inventory management
solution are primary based for the company. Such as, barcode scanners and printers for tickets
and global positioning system are some examples that are vital for the company.
(d): Job costing systems
It is known as one of the effective system that is assigning in production related costs to an
individual products or group of products. Basically, job order costing system is used only when
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the items are recorded is sufficiently different from one another. It is a kind of cost that tracks the
cost and revenue by its job and enables all the standardized reporting of profitability. For any
accounting system to deal with job costing, it can allow job numbers to assign to single items of
expenditure and earnings from the sales of tickets. Examples designing a software program that
can record information related with the sales and booking of tickets (Klemstine and Maher,
2014).
(e): Different types of management accounting report
In every organisation, it is crucial for them to maintain all kind of data that are associated
with the transactions. Reporting must be done on regular basis so that changes of mistakes can be
avoided in near future time. A management reporting system is essential part for controlling
systems that can provide business information. This can be in the form of reports and statements.
The system is framed to assist members of the management through providing accurate and
timely data. It would assist in collecting data that is required by managers to operate an effective
business in near future time. The data could be from financial, employee headcount and customer
assets in custody. There are various benefits which are attained by the help of using appropriate
reporting system (Lim, 2011). Some of them are discussed below:
 It has been found that effective management reporting lead to improves responsiveness to
issues and deliver organisation services.
 A management reporting system is expected to be more accurate. There could be any
discrepancy in terms of reporting.
Performance report: It is prepared for the purpose of analysing the performance of
company’s financial stability. They are routinely prepared through government bodies which
would be being financed by public money. Ever joy enterprises need to examine last two year of
performance so that actual results can be determined.
Account receivable report: As per this account report that consists of unpaid lists of
customer’s detail invoices as well as unused credit memos according to the mentioned date. It is
the primary tools used by collection individual to examine which invoices is maximum overdue
for the payment.
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(f): (i): Advantage of sound accounting system
There are various benefits of using accounting system for collecting, keeping and processing
financial and accounting data those are used in effective decision making. Some of them are
mentioned below:
 Accuracy: People used to make errors most of the time while recording of transaction in
order to deal with all these issues, a computerised accounting system is being designed to
reduce the errors.
 Automation and productivity: With the digital recording manager can overcome issues
and increase productivity. It is less time consuming as of manual procedure.
(ii): Advantages of timely production of accounting information
With the timely delivery of data to internal as well as external would lead to enhance the
overall growth and productivity of ever joy enterprise. It is vital for an organisation to create
value to their stakeholders by providing them maximum percentage in profit or shares (Tessier
and Otley, 2012).
TASK 2
Breakeven point and quantity
Revenue is known as overall unit quantity that can be sold multiplied with the selling cost
per unit. To determine total cost manager initially multiply the unit quantity which would be sold
by the variable cost per unit after that fixed cost is included in it order to get net profit. The
breakeven point or level is said to be essential aspects for determining sales amount during the
time. It is the production level where total earning must be equal to total expenditure. In other
words, breakeven point indicate company to manage their resources as well as total number of
sales that is sufficient enough for earning maximum profit (Van der Stede, 2015).
Breakeven quantity: It is said to be total number of units a small business need to sell to
accomplish every cost that are incurred with the production process. It is basically done at
internal management accounting tools that can examine the relationships among cost, volume
and profit.
Selling price: 20
Variable cost: 10
Contribution: 10
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Fixed cost; 60000
PVR= Contribution/Sales*100
: 10/20*100=50%
(a):
BEV (in amount): Fixed cost / PVR
: 60000/50%= 120000
BEV (in unit): Fixed cost / contribution
: 60000/10
: 6000
(b): Desired profit: 30000
Contribution: Fixed cost + profit
: 60000+3000=90000
Selling price: Contribution /PVR
=90000/50%= 180000
Sales = 180000
Sp: Sales /per units
: 180000/20=9000
(c): Desire profit=?
Sales (in units): 8000*20=160000
Contribution = sales *PVR
: 160000*50%=80000.
Desire profit=contribution-fixed cost
= 80000-60000=20000
TASK 3
(a): Advantage and disadvantage of using planning tools
Budget: It is said to be an estimation of future expenditure that can be going to be invested
during the time. In the other words, it a financial plan for a defined duration that can consists of
planned sales, volumes and earning, costs as well as other finance related aspects. The budget
period if the time which is authorized to spend the capital awarded and can meet the essential
requirements of the company. There are various types of budget which are needed to be
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analysing by the help of planning tools (Zoni, Dossi and Morelli, 2012). Some of them are
discussed below:
Sales budget: it is known as the management overall estimation of sales for upcoming
financial time period. A business uses sales budgets to set department goals and determine
earning and estimate production related requirements. It can affect both operating budgets and
overall master budget of the ever joy enterprises. It has been seen that generally, income
statements begin with sales, the budgeting procedure begins with the total sales estimation. This
types of budgets can provide early balance to the ever joy in producing products as per the total
sales.
 Advantage: The major benefits of using sales budgets are to offers essential benefits to the
company. It would assist in farming sales plan so as to attain the total sales targets of the
firm. It is also applicable of resources to various goods, sales and nation.
 Disadvantage: It has been seen that sales predications are not always profitable for the
company. It will take much time to cover all the targets that are planned early by the Ever
joy regarding the sale of tickets and earning profits (Lavia López and Hiebl, 2014).
Sales budget
Particular Q1 Q2 Q3 Q4 Total
Units 10000 15000 17000 28000 70000
Selling prices 10 10 10 10
Total sales 100000 150000 170000 280000 700000
Note: Values are taken as on assumption
Production budget: After the accomplishment of the sales budget, the company always go
for the preparation of production budget. It is entirely based on total expected level of sales,
whether the company wants to make any changes in the level of inventory. Any kind of decision
regarding the outsourcing production are analysed before the formulation of this budget. In this
the production capacity of every department required to be worked out and figures must be
mentioned all kind of limitations.
 Advantage: There are various kinds of benefits of using production budgets such as plant
and machinery can be utilised to a maximum extent. It would also help to reduce production
expenditure as there is uniform production.
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 Disadvantage: Inaccuracy is the biggest issues that are based on a lot of assumption in
estimating the expenditure and earning. Time consuming and costly for the company to
prepared report sometimes (Klychova and et. al., 2015).
Example: Production budget
Particular 1 2 3 4 year
Estimate sales units 5000 5500 5800 6000 22300
Add: Desire ending finished goods units 825 900 975 1050 3750
Total unit needed 5825 6400 6775 7050 26050
Less: Beginning finished good units 700 825 900 975 3400
Required production unit 5125 5575 5875 6075 22650
Note: The value taken are based as on assumption.
Cash flow budget: It is said to be an estimation of all cash receipts and expenditure that are
expected to arise during a particular period of time. Estimated cost can be made on monthly,
quarterly and yearly that can have included nonfarm income and expenses as well as other items.
It is also called as little advance planning that can avoid short-term reduction of cash for the
company. Only by the help of planning the use of funds within Ever joy can be managed
properly. The main purpose of this cash budget is to prepare detailed of a company’s total cash
inflows and outflow during a particular budget period.
 Advantage: A company can easily be able to avoid all kind of debts. Once company is run
out of cash, manager can no longer is going to spend anything’s. At the same time, company
would also become more resourceful that can provide efficiencies by using other financial
resources and techniques.
 Disadvantage: The biggest issues with this are related with the company is having plenty of
documentation that cans tracks of company’s cash movement to protect against theft.
Sometimes, it would have limited in recent time to accept cash for certain activities that are
performed during the time.
Budget variance: It is said to be difference among the budgets or baselines amount of
expenditure or earning and actual amount. The budget variance is more favourable in case the
actual budget is much higher than the budget or the actual expenses which is less than the
predicated budget. A variance is difference among budgeted, planned or standard cost that can
be computed for both costs and earnings (Bennett, Schaltegger and Zvezdov, 2013).
Significance to Ever joy:
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Variance analysis deals with overall analysis of deviations in the budgeted and actual
financial performance of Ever joy. The causes of variation among actual results and the budgeted
number are determined to showcase the areas of improvement for the company. Variance
analysis deals about as a control system. Examination of wide deviation on key things helps the
organization in knowing the causes and it enables management to investigate possible methods
for how such deviation can be overcome.
Planning is important tool which is used by minimise and avoid various problems which
arises in the organisation. Planning tools are discussed as below :
Scenario tool : This tool can be used by the Ever joy Enterprises know about upcoming
scenario which is associated to the effectual structure. The main aim of this tool is to set up
projected results which is distinct from common known scenario. As a result organisation can
prepare effective plan so that it can handle with the upcoming scenario.
Advantage : It helps in risk management and the process of budget. With the help of it
Ever joy Enterprise can tackle uncertain circumstances which help to make effective future
strategies.
Disadvantage : Future is uncertain so that so it is not easy to develop future scenario
matrix. As a result Ever joy Enterprise can not take future decisions for the growth of
organisation.
Forecasting tool : This tool can be used by Ever joy Enterprise to estimate upcoming
future trends and outcomes with the help of analysing the past data. It is very useful tool which
help the organisation for future growth.
Advantage: For the future strategies about growth of organisation Ever joy Enterprise
can use it can achieve its organisational goal.
Disadvantage : Forecasting can be done accurately if organisation have relevant
information and data and due to the unreliable information Ever joy Enterprise can not achieve
its organisational goal and objectives.
Contingency tool : For analysis of risk contingency tool is helpful for the organisation
and it is helpful to meet some uncertain contingency. Ever joy Enterprise can use this tool to find
the solutions of contingent situations as a result it can make effective strategies for the growth
and development of business.
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Advantage: It help the organisation to analyse uncertain business risk and help the
company to make effective strategies to solve the business problems.
Disadvantage: Ever joy Enterprise cannot control the negative impact of internal and
external factors by using this tool.
(b): Evaluate how strong financial governance
Financial governance: It refers as important ways a company used to collect, manages,
monitors and control financial data for the company. It consists of various companies and control
of financial transaction, managing performance and compliance and disclosures in appropriate
manner. It is that system of rules, practices and processes through which a firm is been directed
and controlled properly (Financial governance, 2017).
In every business, it has been seen that most of the company are having difficulties related
with the finance. As finance is one of the key parts of an organisation without which no any
company can be succeed for longer period of time. It consists of how companies overall tack
financial transaction, manage performance and control data and operations etc. Company used to
coordinate effective strategies for managing the broad issues of corporate governance and risk
management. Corporate governance is an essential system of rules, practices through which a
firm is directed and managed effectively. It is basically consisting of balancing the interest of a
company’s total stakeholders such as customers, suppliers and government. Good administration
is an indistinct term utilized in the worldwide improvement literature to determine how public
organizations lead open issues and oversee community assets. It is a vital system through which
companies are directed and controlled properly. Owner of the Ever joy is held responsibility for
the governance of their companies. Compliance is either a state of being in respect with the
establishment of rules or specification. In common, compliance is conforming to a rule like as a
specification, policy and law.
Regulatory compliance used to describe the aims that an organisation aspires to attain in
their efforts to ensure that they can be aware of and take vital steps to comply with associated
laws, policies and regulations. By the help of accurate compliance, the changes of financial
issues can be reducing up to an extent. It will assist in increasing maximum changes of growth
that can be further helpful in attaining overall aims and objectives (Transparency, 2017). The
other reason compliance is the most critical is action, regardless of whether it is guaranteeing that
it does not happen by following administrative consistence, or by giving proof that all essential
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and sensible moves were made with the action in respect to prevent any kind of incidents. A
principle of food governance is that internal stakeholder would be informed regarding the
company’s overall activities that are done in the future and any risk associated in their business
strategies (Bovens, Goodin and Schillemans, 2014).
Benefits of compliance
The growth of ever joy is associated with an efficient management. This application can
ensure that balance among the companies is related with the cost management, risk evaluation
and compliances management. It would be realized that all the customers in the course of
implementation a smart, rigorous compliance issues in heavily regulated sectors such as ever joy
is deal with in recent times. With the good quality improvement can help in total reduction in
extra cost as well as other mistakes that are related with the finance. Having set up a reasonable,
successful and comprehensively imparted consistence program causes you signal to key partners
that consistence is a best need for an organization. It would indicate companies promise to
working together the correct route, to the most elevated moral standards.
Consequences of non-compliance
There are certain issues that are affecting the financial stability of the company.
Sometimes, it has been seen that it would fails to meet the state and other guidelines for
compliance can outcomes in serious consequence for their business. Along with making all the
essential changes company need to use legal statue, which can leave company vulnerable to
legal, government agencies which can conduct audits and enact fines as well as dissolves Ever
joy business entirely. In accordance with the non-compliance which is commonly taken in regard
to a patient that does not take a prescribed remedies or follow appropriate techniques that can
resolve their financial issues. Monitoring and controlling effective process at international level
can seen all the activities and metrics which is essential to ensure that approved and authorized
project is within the scope limit. An evaluation is a systematic and aims examination can be
concern with specific objective that are set by the company during the time. It is vital monitoring
on overall variation of the actual and standard data can be analysing effectively within an
organisation. It will be essential for attaining overall aims and objective that are set during the
time.
Monitoring systems put in place to track variances
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A project activity can easily be monitor with the use of key determinates or by taking
corrective actions. If falls to the project manager to make sure that the combined monitor system.
It can determine balance between actual and standard costing difference. The overall production
expenses are easily being control and monitor by the company ever joy during the period of time.
cost accounting system is one of the essential system that can track the overall flow of variance
within an organisation. The standard costing is necessary part of the costing system that can plan
in fulfilling the additional expenses of the company.
Comparison between Hair Dry Enterprises and Evergreen.
Hair Dry Enterprises Evergreen
After evaluating the situations of Hair Dry
Enterprises it is identified that company is
facing problem of finance and cost like
uncontrollable cost of production. Therefore to
overcome from this problem, Hair Dry used
benchmarking tool which help them to control
cost and achieve the effectively in the
production process.
Evergreen is facing over expenditure issues .
So, to overcome from this issue, Evergreen
use Key Performance Indicator(KPI) as this
assist to set the standard of performance by
measuring this and it also evaluate the success
of the Evergreen by achieving key business
objective.
It utilise job costing reporting system because
this report is made to keep and mange the cost
records which are incurred in a particular job.
This report is also used to compare actual cost
with budgeted costs to calculate the variances.
Evergreen use inventory management report
system as this help them to prepare reports of
sales, purchase etc. This report also assist them
in maintaining the optimum level of inventory
and also trace the different products of the
company to meet the demand and supply.
CONCLUSION
From the above project report, it has been concluded that management accounting is one of
the essential aspects for an organisation. For this purpose, it is vital to make use of accounting
systems and report. Use of costing methods to determine net profit are discussing effectively in
the above report. Use of planning tools in resolve budget control is examined properly. All these
thinks can be vital to reach at their definite aims and future growth in near future time.
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