Management Accounting Report

This report examines the concepts of management accounting and its application in a real-world scenario using Rowlinson Knitwear as a case study. It analyzes various management accounting systems, costing methods, planning tools, and their impact on profit calculation and sustainable success.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and need of various types of accounting systems..........................1
P2 Methods used for management accounting reporting............................................................3
M1 Benefits and applications of management accounting systems............................................4
D1 Critical analyses of accounting reporting system..................................................................5
TASK 2............................................................................................................................................5
P3 Calculation of costs and net income using marginal and absorption costing........................5
D2 Interpretation of data.............................................................................................................8
TASK 3............................................................................................................................................8
P.4 explanation about different type of Planning tools used for budgetary control with their
advantages and disadvantages.....................................................................................................8
M3 Applications of planning tools of budgetary control ...........................................................9
D3 Evaluation of planning tools for accounting respond appropriately to solving financial
problems to lead organizations to sustainable success................................................................9
TASK 4..........................................................................................................................................10
P5 Comparison on how organisations are adapting management accounting systems:...........10
M4 Analyses of financial problems..........................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is considered as a core activities at the time of managing firm,
this involves different techniques as well as system for preparing the reports for manager and
some other documents. As this shows the organisational fiscal position that assist investors and
another related individuals for accessing the exact records and reports of management (Banerjee,
2012). For this report, the chosen company is Rowlinson Knitwear which is a leading
manufacturer and generally sells the schoolwear, corporate wear and so on. It apply the
techniques of cost analyses such as absorption as well as marginal costing so that their they can
prepare profit and loss accounts. The purpose of this report is to describe the management
accounting and requirements of different kinds of accounting system. Methods that which is
utilise for reporting management accounting. Advantages and disadvantages if various planning
tools types used in budgetary control. Apart from this companies are compared in order to
responds towards financial problems are also mentioned in this report.
TASK 1
P1 Management accounting and requirements of different accounting system types
Management accounting can be called as a methods of formulating the managerial as
well as select various data from that documents in order to examine, understand and present data
in perceivable manner (Burritt, Schaltegger and Zvezdov, 2011). Management accounting and
financial accounting are both the different terms and management accounting includes wider
scope than the financial accounting as well it also includes the finance related issues. Rowlinson
is known as the fastest growing manufacturer in UK that applied systems of management
accounting for improving its methods of making decisions. For an effectual managing company
many systems of management accounting are used are mentioned below:
Different kinds of management accounting systems and its requirement into
business
Systems of management accounting are considered as process for analysing and
recording in order to gather knowledge regarding the position of company structure that are as
follows:
 Price optimisation systems – It is management accounting method that assist
organisation for allocating various prices to produced goods and study response of
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consumers in order to develop best pricing strategy (Vander and Stede, 2011). Rowlinson
have various prices for their products as they deliver uniform wear to consumers. This
leads them to follow price optimisation system in order to satisfy their customers need
and demand for earning maximum profits.
 Activity-based costing: It is an approach by the help of that, costs are determined which
involved in an activity performed by the organization (Christ and Burritt, 2013). For
example, in the respective organization it ascertain costs includes in different action such
as manufacturing, packaging etc. This costing helps in providing reliable results for
preparation of managerial and financial reports.
 Inventory management system: It is procedure for managing inventory that is stocked
in enterprise. Rowlinson Knitwear is retail store operating business into UK that delivers
huge number of clothes each year that leads them to stock their products. For that
purpose, corporation need impressive inventory management system which can provides
framework for managing and controlling inventories. It includes raw material and work
in progress goods so that objective of organisation can be achieved. This helps in
providing customer satisfaction and increase in profit maximisation.
 Cost accounting system – It is method that assist firm to ascertain all types of costs
involved in organisation for estimating profitability (Contrafatto and Burns, 2013). Here,
Rowlinson Knitwear can apply this accounting system in order to estimate different types
costs that can be enclosed in processes for finding clear profit.
 Job costing – It is process for ascertaining cost that is involved in particular task or job
(Ward, 2012). It aid organisation for determining various costs for products. This method
is suitable to those firm which deals in production of customised goods. Rowlinson
Knitwwear can apply such method as it produces personalised goods.
 Product costing – This is the process of ascertaining overall price included into goods
that is produced through firm involving whole costs of direct as well as indirect such as
direct labour, materials fixed expenditure and so on. Rowlinson Knitwear have applied
this product costing system in order to ascertain their goods cost so that its can apportion
price as well as determine profit.
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P2 Methods used for management accounting reporting
Management accounting reporting are refers as the documents of management that shows
the real picture of firm's finance position, constructions of management accounting reports are
essential work to do because this needs effective skills(Fullerton, Kennedy and Widener, 2014).
Various reports are there that can be developed such as reports of costs and finances. But reports
of management accounting can not represent the actual information of company's financial as
well as management position.
Rowlinson knitwear have recruited a professionals group that considered after their
reports and accounts of management so that they can be assure about investors and another
related individuals can able to access actual document as well as reports for manager.
Management accounting reports types
Management accounting report can facilitates data that is required to cut costs, rewards
the effective performer workers, invest into products which offer good returns for businesses.
Some of the reports that can be prepared by Rowlinson knitwear are mentioned below:
 Cash flow report – This report involves whole organisational transactions of cash that
effects their performance. Also, considered the overall transactions of cash inflow and
outflow which incurred from the activities of operating, investing as well as financing.
Rowlinson knitwear made a statements of cash flow for short term that can be
advantageous for firm to access the estimated monthly expenditure.
 Sales report – This type of management accounting report involves the performance of
sales during financial year. It assists company to determine which sources are beneficial
as well as find out those individuals of sales who can produce effective revenue.
Rowlinson Knitwear prepare this report so that they can determine whole sales done
during year and examine which kinds of distribution channel can produce more income
such as retail or whole sale distribution channel (Giovannoni, Maraghini and Riccaboni,
2011).
 Performance report – This kinds of reports are prepared by the firm for getting
knowledge about whole organisational performance involving all workers of each
section, manager of company measure and examine the workers performance as well as
compare it with different benchmarks. Rowlinson knitwear make this report so that they
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can get actual outcomes for improvement of its strategies that lead them towards
accomplishment of their objectives.
 Job cost report – It is the kinds of management accounting report that ascertain the cost
included in many jobs done within the firm. This assist company such as Rowlinson
knitwear to measure as well as find out the job activities that has capability of generate
profit as a results their manager can concentrated upon gainful activity.
 Account receivable report – This report is considered as a documents that included lists
of whole consumers who do not paid amount with its times, dates and so on. It is made
to know about overall unpaid purchaser so that they can receive all due amount, in case
any unpaid customers do not pay the amount that should be mentioned in the reports of
bad debts separately or in that particular sections.
M1 Benefits and applications of management accounting systems
System of management accounting are prepared for the comfort of firm and it is
applicable in al over the world. Many systems are suitable for various kinds of company based
on their nature, size and scope. Advantage as well as application of management accounting
system are explained below:
Price optimisation system It is suitable system for that types of company which have
variety into their goods because of which it is applied at the
time of price allocation to various manufacture products.
Activity based cost system This type of system is applied on that firm in which there
are various sections as well as complexness into activities
such as Rowlinson knitwear.
Inventory management system It is the system which is advantageous for those firm that
have many inventory stock such as grocery shops.
Cost accounting system This management accounting system is advantageous for
all company because it assists in ascertaining the costs that
is included in whole activities as well as goods of firm.
D1 Critical analyses of accounting reporting system
Management accounting is considered as presentation of business activities analysis to
internal management so that it can make effectual decisions. Reports of management accounting
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are constructed with the assistance of management accounting system (Lambert and Sponem,
2012). Cost accounting system is utilise so that manager of Rowlinson knitwear can prepare
performance report likewise report of inventory management are formed with the aids of
inventory management system that highlights the both reports as well as system of management
accounting integrated mechanism.
TASK 2
P3 Calculation of costs and net income using marginal and absorption costing
Marginal costing – This is the techniques of costing at which whole variable costs are
incurred against sales in order to compute contribution and overall fixed costs are charged
against contribution for determining the net profitability of the company (Otley, 2016). Variable
costs are refers as the whole calculation of marginal cost which includes direct material, labour
and another production costs.
Marginal costs are utilise by Rowlinson knitwear so that it can determine their capability
of profit making after incurring whole costs by applying the below given formulae:
Sales revenue – Marginal costs (Direct material+Direct labour+Direct expenses+Variable
overheads) = Contribution – Fixed costs = Net income or profit.
Absorption costing: In terms of accounting the absorption generally refers to obtain. It is
the types of costing that obtain whole costs which is charged at the time of producing specific
products unit. This system provides information about total cost but can not considered as
relevant for taking decisions.
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D2 Data interpretation
Profit computed by using marginal costing method is 140000 which is less than
absorption costing profit amount. This variation incurred because marginal costing involves the
variable production costs but in case of absorption costing, it involves both variable and fixed
production costs. Likewise contribution amount into marginal costing is more than gross profit
computed with the use of absorption costing.
TASK 3
P4 Explanation about different type of Planning tools used for budgetary control with their
advantages and disadvantages
Zero-based budgeting: This considered as a process of budgeting at which whole
expenditure are to be even for all new period. The zero based budgeting methods initiates from
zero base as well as each functions in firm is examined for their costs and requirements (Tucker
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and Lowe, 2014). It is used by Rowlinson knitwear to reduce the unnecessary cost by viewing
that where cost can be cut. In order to prepare zero based budget participation of the workers is
needed. Therefore, some advantage and disadvantage are mentioned below:
Advantages:
Followings are the various advantages of respective budgeting planning tool:
 zero base budgeting is more accurate than other method.
 This helps the supervisor in efficiently allocation of resources.
Disadvantage:
Following are it's disadvantages of zero based budgeting:
 This is a very time consuming tool.
 It requires the high manpower and high trained managers.
Rolling budget: It means the continuous updating of accounting period after completion
of earlier accounting period (Parker, 2012). Rolling budget is a flexible budget in which changes
can be done whenever required. It is like extension of an existing budget model. These are used
in long term financial planning. It requires more managerial attention while preparing it as few
activities are repeated in it.
 Advantages: Rolling budget is flexible in revising the assumptions from the last budget
made. It helps in extending the period of existing budget.
 Disadvantages: Rolling budget preparations are not advisable when many changes are
there. It is a wastage of time and money to prepare the rolling budget.
M3 Applications of planning tools of budgetary control
Budgetary control planning tools such as contingency, scenario and forecasting assists
Rowlinson knitwear to prepare many reports of budgets like cash flow statement as well as other
budgets.
Cash flow statement –This is considered as a documents of accounting that shows the
overall outflow as well as inflow cash transaction in order to get net cash that can be determined
within company along with the cash which is available for activities of operating, investing and
financing.
Budgeting –This is refers as a methods of budget preparations that can provide an
approximation of different functions such as sales, manufacturing and so on. Budget are
considered as a estimation for upcoming profit and the cost that can be incurred.
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D3 Evaluation of planning tools for accounting respond appropriately to solving financial
problems to lead organizations to sustainable success
Different planning tools provides positive results in order to resolve the financial issues
which leads Rowlinson knitwear firm to sustain successfully into market. These tools facilitates
a effective base in planning the upcoming business activities as per their previous information
and anticipation.
TASK 4
P5 Comparison on how organisations are adapting management accounting systems:
Management accounting system are considered as techniques as well as process that are
utilised to prepare the reports of management accounting and provides relevant and appropriate
information that can be further helpful for the manager at the time of decision making methods
(Renz and Herman, 2016). Company such as Rowlinson Knitwear and Unicorn grocery limited
have adopted system of management accounting like inventory as well as price optimisation
system so that they can enhance the quality of its enterprises and to face financial problems that
represent in their firm. Also, sustainability effects the decisions of pricing and budgeting,
strategic planning and investment valuation. Financial issues and sustainable business challenges
from which these organisations tackle and also these are linked with strategy, business model etc,
are discussed below:
 Regulations and compliance – Both compliances and regulations are different in all
types of firm depending upon their nature. Modification in these rules create it tough for
the company so that to overcome with these changes certain strategies are developed
(Soin and Collier, 2013). All organisation is needed to be registered, for this it has to
carry out whole registration requirements. Overall documents are needfully to be
complied with the complying of whole regulations that is set by authorities.
 Legal issues – Legal issues such as changing legislation as well as laws regarding
business. This creates problems for the company like Unicorn grocery and Rowlinson
Knitwear for managing their funds, flexibility in financial regulations of UK as well as
fixed policies government are huge problems which is tackle by company during
financial management. Organisation develop models of business in order to acquire and
deliver value to consumers.
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 Financial management – In firm which have diversity in their operations so this is a
hard task for them to maintain whole activities of finance. Company with various
functions becoming a challenge for to managing overall financial activities. Therefore,
firm such as Rowlinson Knitwear have adopted cash flow system based on the cost
system in order to maintain as well as manage its activities of finances. These techniques
of management accounting aids them to face whole financial problems that occur into
enterprise.
 Uncertain future – The main enterprise challenge faced by Rowlinson Knitwear is to
keep on anticipating the current taste and preference of customer for sustainable business.
Following recent innovation and trend brings profitability to business by generate more
and more cash inflow.
 Technology – As per the current scenario technology is changing vastly for the
development of global, but because of it continuous variation occurred in technology and
firms are facing sincere financial problems (Shah, Malik and Malik, 2015). Organisation
such as Unicorn groceries which is a small scale enterprise so this is tough for them to
modify their technology techniques oftenly as it does not has funds for its machineries.
 Maintaining reputation – Developing a image of brand as well as maintaining the
reputation into competitive market is becoming a challenge for the company specially for
Rowlinson Knitwear who has various number of rivals in marketplace because of these
issues it adopted the scenario and contingency planning tools in order to resolve whole
financial problems that occur at6 the time of developing reputation within market.
M4 Analyses of financial problems
Management accounting is methods of making the reports as well as documents of
accounting for managers in order to facilitate appropriate data regarding financial position of
firm and sustainability effects for informing the decisions of pricing and budgeting, valuation of
investments and strategic planning. It also includes many process as well as techniques that
assists company to accomplish sustainable success. Resolve whole financial problems with the
techniques of management accounting system such as cash flow statement and marginal costing
that aids in ascertaining overall costs of the firm.
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CONCLUSION
As per the above report, it have been concluded that management accounting is the
essential aspects for company. This can assist manager to record its transaction with the
assistance of applying appropriate system. Herein, accountant required many kinds of reporting
as well as systems. Methods of costing are utilize to calculate gross net profit. In order to get
appropriate solution planning tools advantage and disadvantage are analyzed effectively into
controlling budgets. Valuation of different financial problems which are incur in the firm. This
will be ascertained to get over from those problems which manage the whole growth and
sustainability in upcoming time periods.
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REFERENCES
Books and Journals
Banerjee, B., 2012. Financial policy and management accounting. PHI Learning Pvt. Ltd..
Burritt, R. L., Schaltegger, S. and Zvezdov, D., 2011. Carbon management accounting:
explaining practice in leading German companies. Australian Accounting Review,
21(1). pp.80-98.
Christ, K. L. and Burritt, R. L., 2013. Environmental management accounting: the significance of
contingent variables for adoption. Journal of Cleaner Production, 41. pp.163-173.
Contrafatto, M. and Burns, J., 2013. Social and environmental accounting, organisational change
and management accounting: A processual view. Management Accounting Research,
24(4). pp.349-365.
Fullerton, R. R., Kennedy, F. A. and Widener, S. K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting practices.
Journal of Operations Management, 32(7-8). pp.414-428.
Giovannoni, E., Maraghini, M. P. and Riccaboni, A., 2011. Transmitting knowledge across
generations: The role of management accounting practices. Family Business Review,
24(2). pp.126-150.
Hilton, R. W. and Platt, D. E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Lambert, C. and Sponem, S., 2012. Roles, authority and involvement of the management
accounting function: a multiple case-study perspective. European Accounting Review,
21(3). pp.565-589.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014.
Management accounting research, 31. pp.45-62.
P. Tucker, B. and D. Lowe, A., 2014. Practitioners are from Mars; academics are from Venus?
An investigation of the research-practice gap in management accounting. Accounting,
Auditing & Accountability Journal, 27(3). pp.394-425.
Parker, L. D., 2012. Qualitative management accounting research: Assessing deliverables and
relevance. Critical perspectives on accounting, 23(1). pp.54-70.
Renz, D. O. and Herman, R. D. eds., 2016. The Jossey-Bass handbook of non profit leadership
and management. John Wiley & Sons.
Shah, H., Malik, A. and Malik, M. S., 2011. Strategic Management Accounting-A Messiah For
Management Accounting?. Australian Journal of Business and Management Research,
1(4). p.1.
Soin, K. and Collier, P., 2013. Risk and risk management in management accounting and control.
Van der Stede, W. A., 2011. Management accounting research in the wake of the crisis: some
reflections. European Accounting Review, 20(4). pp.605-623.
Ward, K., 2012. Strategic management accounting. Routledge.
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