Management Accounting Report

This report provides a comprehensive guide to management accounting for EverJoy Enterprises (UK), a company operating in the leisure and entertainment industry. It covers key concepts like cost accounting, inventory management, job costing, and budgeting. The report also includes practical examples and calculations to illustrate the application of management accounting principles in a real-world scenario. Desklib provides past papers and solved assignments for students.

Management Accounting report for Ever
Joy Enterprises (UK)
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Table of Contents
Introduction............................................................................................................................................................... 3
Task 1............................................................................................................................................................................ 3
Management Accounting systems............................................................................................................... 3
a. Differences between Management Accounting and Financial Accounting...........................5
b. Cost accounting systems (Direct Costs and Standard Costing)..................................................7
c. Inventory Management Systems..............................................................................................................7
d. Job costing systems........................................................................................................................................ 8
e. Different types management accounting reports............................................................................9
f. The need for a sound accounting system and the importance of the department
producing timely, accurate and relevant information.....................................................................10
Task 2......................................................................................................................................................................... 11
a. The number of tickets that must be sold to break even (i.e. the point at which there is
neither profit nor loss)...................................................................................................................................11
b. If we want to make a profit of £30,000.00, how many tickets should be sold? ..............12
c. What profit would result if 8,000 tickets were sold? ..................................................................13
Task 3......................................................................................................................................................................... 14
a. You are to evaluate how budgeting can be used by Ever Joy Enterprises as a planning
and problem-solving tool in dealing with financial problems, but also for leading the
organization to sustainable success.........................................................................................................14
Conclusion................................................................................................................................................................ 20
References................................................................................................................................................................ 21
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Introduction
Management accounting is an integral part of the enterprises which helps them to achieve their
goals and objectives in an effective and efficient manner. This report will be prepared to reflect
and discuss the concept of managerial or management accounting and write a reference in the
context for EVER JOY ENTERPRISES (UK) that operates its business operations in leisure
and entertainment industry in the UK. This report defines the concept of job costing systems,
cost accounting systems and inventory management systems and its usage in the enterprises.
This report will also solve the given problems to assist the Ever Joy Enterprise reviewing its
performance in Manchester region to determine its feasibility by using the break-event point
formula and which present the profits and BEP at which enterprises in the position of no profit
and no loss. This report also gives suitable advice to Ever Joy Enterprises on utilizing the
budgets as planning and problem-solving tools which solve the financial problems of the
enterprises.
Task 1
Management Accounting systems
Management Accounting is the accounting branch which basically deals with providing and
presenting accounting information to the manager in such an organized manner so that it can do
its managerial functions of planning, controlling and decision- making in an efficient and
effective manner. Management accounting acts as a decision-making support system to the
manager of an enterprises (Kaplan and Atkinson, 2015).
As per Certified Institute of Management Accountants (CIMA), United Kingdom,
“Management Accounting is an essential part of the company’s management concerned with
classifying, offering, and understanding information which is utilized for framing planning,
strategy and monitoring and governing activities or events, decision- making, optimal usage of
resources of an enterprise, disclosure to stakeholders and other external to the enterprises,
disclosure to workers or employees and assets safeguarding.
Objectives of Management Accounting
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The main objective of management accounting is to offer important information to the
management for an efficient and effective execution of managerial functions. Various
objectives of management accounting are enumerated as follows:
1. Planning and policy- making: Management Accounting provides or offers important and
accurate information to the management in the process of its policy- making and planning to
attain goals and objectives.
2. Controlling: Management: Accounting applies various essential techniques or methods
such as Budgetary control, Management Audit, Standard Costing, and Responsibility
Accounting to ensure an effective management control over the resources use of the enterprise.
3. Communicating: Appropriate communication of the performance of many departments of
an enterprise to different administration levels is necessary required for planning, decision-
making and controlling.
4. Analysis and interpretation of financial statements: Management Accounting gathers,
analyses and understands the important data from the results shown by the cost and financial
accounting system, and also offers important and appropriate information to the management in
a useful and systematic manner.
5. Decision- making: Management accounting offers important and accurate information to the
management in the process of its decision- making. The growth and success of management
highly and mostly depends upon a perfect decision- making.
6. Tax planning: Management accounting assists to the management in the process of tax
planning by availing various tax rebates and reliefs and, thus, minimizes the tax burden of the
enterprise on the whole.
Role and functions of Management Accounting
Management accounting plays very critical role in managing the operations of the
business. As specified management accounting is the key in any organisation which have the
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records of every function of the organisation. The roles and the functions of the management
accounting are discussed below:
 Forecasting and planning: One of the most important function that the management
accounting play is to provide the necessary information and data for the decision making
in the organisation. The management accountants uses the techniques and the statistics,
so as to use the data collected for the planning the business objectives.
 Organizing: This helps the management accountant in organising the resources available
within the organisation. They organise the accounting and the finance functions of the
business on the trends that are followed in the modern market
 Coordinating: The management accountant uses this function to enhance the efficiency
of the organisation and to maximise the profits by making coordination among the
employees. It helps the management by reconciling the cost and finance accounts and by
preparing the budgets and setting the targets.
 Financial analysis and interpretation: The function of the management accountant is to
provide the data and make this available to the management along with the comments
and suggestions. This will help the managers to take the decisions and make the policies
accordingly.
a. Differences between Management Accounting and Financial Accounting
Points of Difference Financial Accounting Management Accounting
Objective Objective is to account for the
day-to-day financial
transactions, and determine
the financial health of an
enterprises (Maynard, 2017).
Main objective is to report to
the management information
so that they can take proper
decisions (Weygandt, et. al.,
2015).
Purpose Beneficial both for internally
as well as stakeholders to
assess the financial
performance of the company.
Beneficial mostly for internal
management for making
decisions, for instance,
budget, or spending plan etc.
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Frequency Generally, it is prepared as
per statutory requirements:
yearly statement, quarterly
and half-yearly.
Mostly prepared as per
management requirements.
No fixed interval at which
the management accounts
should be prepared.
Compliance Statutory compliance
required.
Statutory not required.
Focus Financial reports are prepared
on the basis of historical
information and reports are
prepared for a fixed period of
time.
Management accounting
focuses mainly on present
data and forecasting future
reports.
Users External and internal parties Only internal management
Auditing and Publishing Compulsory to be published
and audited by statutory
auditors.
Neither published nor
audited by statutory auditors.
Scope The scope of financial
accounting is narrow.
The scope of management
accounting is broad.
b. Cost accounting systems (Direct Costs and Standard Costing)
The cost accounting systems can assist the company in so many ways. It provides an exact
product cost, delivers valuable operational and financial information, and also evaluates the
performance. The cost accounting includes measuring, recording, and reporting of product
costs. This system assists to the Ever Joy Enterprises to estimate the cost of their products for
profitability analysis, valuation of inventory, and control the cost. The Ever Joy Enterprises can
utilize this framework to assess the productivity in the procedures and this framework likewise
helps in making the upgrades in the up and coming procedures of the enterprises. It will
likewise help the enterprises in value obsession of the item and limits the wastages in the
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assembling procedure (DRURY, 2013). It additionally gives helpful data to the administration
bookkeeper for the further arranging of the items.
Types of costs
Direct Costing: It is a type of costing method which uses only variable manufacturing costs are
allocated to cost of goods sold and inventory. This method can be used internally and not for
external purpose. While preparing the financial statements both fixed cost and variable cost are
considered and assigned to the products (Weygandt, et. al., 2015).
Standard Costing: In standard costing some standards are fixed by the manufacturer regarding
product or service. The manufacturers identify the variances in between actual and standard
costs. If the enterprises had incurred more than the standard costs, then the enterprises will not
meet its projected or estimated net income (Maynard, 2017).
c. Inventory Management Systems
The stock administration frameworks will allude to the way toward bookkeeping in which
inventories including the completed merchandise and work in advancement will be overseen
and revealed properly and convenient for making progress in the creation limits. The stock
administration will be vital for the venture with the end goal to accomplish the ideal dimension
of stock to be held in the organization which will result in opportune accessibility of stock and
will likewise help with accomplishing least expense of stock held in the organization (Holm,
2018). The essential points of executing stock administration framework in the enterprise are:
 Attaining an ideal stock level of stock that must be kept up in the enterprise with the
goal that no requests are postponed and the expense of support is least for the enterprises.
 Identifying the ideal level of placing the orders for buying of different materials and
building the concept of just in time inventory.
The inventory management system will use different kinds of methods which are summarized
as below:
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 First in first out method: This is the method used by the organisation in which the
inventory that has came first is sold out first. This method is useful for the organisation that has
high ratio of turnover and the products are not durable. This will help the organisation in
maintaining the products expiry and removing the old stock first.
 Last in first out method: In this method the stock that has came last in the store is sold
out first. This type of method is used in the industries which uses the market trends to sell their
product. As the organisation has to sell the products as per the current demand of the customers.
This will help the organisation in maintaining the stock and selling the products with the current
price trends.
d. Job costing systems
Job costing systems is a system for assigning the production or manufacturing costs to a specific
batches or products. Basically, this costing system is utilized only when the products produced
are different from each other. Job costing includes the accumulation materials, labor and
overhead costs for a particular job. For instance, a job costing is useful in the designing a
software program, manufacturing a small batch of products, constructing a custom machine
(DRURY, 2013). This costing system will help the Ever joy company in defining the prices of
the products of the company in useful manner. As the company is dealing in service sector so it
will help them to specify the cost of the task in the proper and efficient manner. The company
would be able to know the specific cost of the service and will be able to determine the price of
the different services that it provides.
In a job costing it includes the following activities which are listed below:
 Materials
 Labor
 Overhead
Job costing assists to the Ever Joy Enterprises by providing useful information regarding
particular job in an accurate manner. The management easily accumulated the price of job and
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estimated how much cost involved in this job. The whole data are stored in the database of the
company which provides relevant information to the management and its customers.
e. Different types management accounting reports
Reports Description Use in Ever Joy Enterprise
Cost and revenue reports The cost and revenue reports
give data with respect to cost
engaged with different
procedures and income
created there from. It
empowers the administration
to dissect the operational
productivity of the business
(DRURY, 2013).
It will empower the
administration of Ever Joy
Enterprises (UK) to plan
future business
methodologies and
furthermore follow if there is
any wasteful procedure.
Performance reports Performance report is an
explanation that evaluates the
result of an action over a
predefined time allotment. It
is set up to survey the
execution (Kaplan and
Atkinson, 2015).
Performance report can be
instrumental in Ever Joy
Enterprises (UK) to evaluate
its arrangements dependent
on their execution/result and
it can outline the future
systems appropriately.
Inventory reports Inventory report condenses
different things having a
place with a business,
industry, association. It gives
a record of inventory level in
an organization including raw
material, finished goods, etc.
(Holm, 2018).
Inventory reports can be
utilized in Ever Joy
Enterprises (UK) to monitor
stock and different things.
Budgetary reports Budgetary report is a report
that empowers the
administrator to think about
the projections made toward
the start of the year with real
execution. It is intended to
decide concerning how close
be the real execution with the
planned execution (Maynard,
2017).
Ever Joy Enterprises (UK)
can utilize Budgetary report
to dissect the productivity of
the business. In the event
that there is any deviation
between the genuine
execution and planned
execution it can discover the
purpose behind a similar
which will empower it to
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frame better business
methodologies in future.
f. The need for a sound accounting system and the importance of the department
producing timely, accurate and relevant information.
A sound accounting system is a precise method for gathering and recording of the monetary
exchanges with the goal that it can empower every one of the partners to survey the execution
of the enterprise. Bookkeeping should be possible either physically or through mechanized
projects. However, a sound accounting system enhance the profits and efficiency of the
enterprise and also enhances the goodwill or reputation of the enterprises (Vanderbeck, 2012).
Following are benefits of a sound accounting system which are discussed as below:
Assists in decision making: A sound bookkeeping framework helps the administration to settle
on better choices for the business. Since the data given by the bookkeeping framework is
precise so it empowers the administration to painstakingly evaluate and examine every single
viewpoint and shape the future systems likewise.
Compatibility: It gives a system to the business to effectively share money related information.
Assume an organization buys another organization and the two are having a sound bookkeeping
framework set up then it would be anything but difficult to coordinate the records and would
spare part of time and exertion.
Improves the proficiency of a business: A sound bookkeeping framework annihilates any
odds of inconsistency and presents data convenient and precisely which thus builds the
profitability of the business. Presently days with the appearance of electronic bookkeeping
frameworks different reports can be produced with the dash of a catch which empowers the
administration to take the choices opportune that helps in the development of the business.
High level of accuracy: A sound bookkeeping gives a high level of precision in the
introduction of the last records. It limits the odds of any theft and uncovered the shortcoming
assuming any. Sound bookkeeping disposes of odds of blunders and introduces all the monetary
information definitely and precisely.
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Task 2
a. The number of tickets that must be sold to break even (i.e. the point at which there is
neither profit nor loss)
Calculation of Contribution per ticket
Particulars Amount (£)
Fixed Costs 60,000
Proposed ticket price for the concert 20
Variable Cost per ticket 10
Contribution per ticket 10
Calculation of Break Even Point (per ticket)
Break Even Point= Fixed Cost/Contribution per ticket 6000
Interpretation: By applying the break-even point formula which is stated above, Ever Joy
Company will have to sell at least 6,000 tickets in order to cover its variable and fixed costs. It
is the situation where the company faces no profit or no loss.
b. If we want to make a profit of £30,000.00, how many tickets should be sold?
Calculation of the ticket to be sold in order to achieve the desired profits
Particulars Amount
(£)
Desired Profits 30,000
Fixed Costs 60,000
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Contribution per ticket 10
Ticket to be sold in order to achieve the desired profits
(Fixed costs + Desired profits/Contribution per ticket)
9000
Interpretation: Above calculation shows that Ever Joy Company will have to sell 9,000 tickets
or sales will be £ 1,80,000 (9,000 x £20) to meet the desired profit of £ 30,000.
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c. What profit would result if 8,000 tickets were sold?
Calculation of Profits
Particulars Amount (£)
Sales of tickets 8,000
Contribution 10
Fixed Costs 60,000
Profits = (Sales x Contribution per ticket) – Fixed Costs 20,000
Interpretation: Above calculation shows that Ever Joy Company would achieve £ 20,000 as a
profit while selling of 8,000 tickets.
The break-even point is very essential method of management accounting which study the
relationship between fixed costs and variable costs and revenue. The break- even point shows
that at what moment the sales will commencing a positive return to the enterprises. It is a
helpful apparatus to choose if the organization ought not or should begin creating and offering
an item. It is otherwise called Critical Point. On the off chance that the deal at which the
aggregate income is equivalent to the aggregate expenses, all things considered, the
organization would be in the circumstance of no benefit and no loss. For another situation, if the
deals are lower than the costs, it is a misfortune for the organization. Everything which is over
the Break-Even Point can be reserved as benefits for the organization. The principle advantage
of a break- even point is that it clarifies the connection between the costs, income, and
production units (Sandalgaard and Nikolaj Bukh, 2014).
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Task 3
a. You are to evaluate how budgeting can be used by Ever Joy Enterprises as a planning
and problem-solving tool in dealing with financial problems, but also for leading the
organization to sustainable success.
Source: Budget types ( 2018)
Budgeting
Budgeting is the way toward making an arrangement to spend the cash in the most proper way.
The spending plan is known as a financial plan. While making a spending plan it permits the
managers of the enterprises to decide ahead of time whether the enterprises will have sufficient
capital or cash to spend on the up and coming plans or not (Lavia López and Hiebl, 2014).
The Ever Joy Enterprises can used budgeting as a planning and problem-solving tool in dealing
with the financial problems. The budgets set the income and expenses that the enterprises have
to be spend in the future projects. The budgets create a road map for the management and its
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Diagram 1: Types of Budgets

departments for achieving their goals and objectives in an appropriate manner. The budget sets
the target for the enterprises and leads to sustainable success to them. In budgets the targets are
set in volume and in amount which shows overall income and expenses to the management of
the enterprises.
Types of budget
 Sales budget: It is the main and the basic component of the budgetary system. This
budget shoes the expected number of sales unit and the expected revenue that will be generated
from this. It also shows the total number of turnover. This budget influences various parts of the
master budget.
 Production budget: Production budget helps the manger to calculate the number of units
that the organisation wants to manufacture for the current period. It is derived from the sales
forecast that has been predicted by the sales department. This budget is typically presented in
monthly or quarterly format. This helps the other departments such as raw material department
to know that the quantity of the material to be procured.
 Cash budget: it is the estimate by the financial department of the organisation which
predicts the cash flow within the organisation. This budget helps the organisation to know
whether the company has sufficient amount of cash available with them or not. The sales and
the production department help them to create this budget. Hence if the company does not have
the liquidity in the business than it will have to raise the capital from the sources so as to
operate the business in efficient manner.
Benefits or advantages of budgeting:
1. Budgeting assists the Ever Joy Company in defining the weaknesses and strength on
which the entity can concentrate.
2. Budgeting increases the possibility that the company objectives and goals will be
achieved.
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3. With the help of budgeting, there is effective coordination of activities in each
department of the company.
4. Budgeting also helps the manager of the company to allocate the resources to each
department.
Disadvantages or limitations of budgeting:
1. Lack of coordination in between the functions or departments, which may result in
operational plans of the company being in conflict.
2. Departments may be demotivated, if the targets set are too rigid or does not identify
themselves with the assigned targets.
3. In a company, if a department does not fulfill its budgeted target or standards, the
department manager may blame to other departments that provide services to it.
4. It mainly concerned with the distribution of cash or money to the activities which are
estimated and expected outcome or results of the business transactions. Budgeting is not deal
with the other issues like products quality or services provided to the customers.
b. You are to also evaluate how strong financial governance can help to pre-empt or
prevent financial problems for Ever Joy Enterprises and the means by which management
accounting systems can contribute.
Financial governance alludes to the manner in which an organization oversees, gathers, screens
and controls the money related data. The budgetary administration incorporates how the
organization tracks its money related exchanges, control information; oversee execution,
activities, consistence, and exposures (Nitzl, 2018). The financial governance uses the tools to
overcome the issues. Some of the tools that the organisation uses are:
Operational controls: With the use of operational controls the organisation uses to control the
workflows within the organisation. The integrity of the business process will improve with the
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use of this technique. As the manager will be able to closely monitor the exceptions and the
risks.
 Risk assessment: By using this technique the manager will be able to accelerate the
response time and would be able to prioritize control activities.
 Regulations compliance: The organisation should use the regulation compliance so that
they are not indulged the in the legal processes. As these legal process makes the organisation
work slower, by complying with them it will make them function smoothly.
The sound financial governance helps the enterprises to solve the financial problems for Ever
Joy Enterprises in the following ways:
 It enhances the reputations of the company in the competitive market.
 It protects the enterprises from heavy penalties.
 With the help of financial governance, the management can take proper decision
regarding enterprises growth and success.
 Good governance attracts the external stakeholders to the enterprises which assists the
enterprises to enhance their capital and funds also.
The accurate and correct information from the relevant reports helps the management to prepare
the strategy for the future growth and development. With the help of financial governance, the
management can prepare financial policies and procedures according to their needs. The strong
and effective financial governance attracts the financial institutions how provides loans and
other benefits to the enterprises when the shortage will be incurred. By conducting regular
audits of accounts and reports the financial reports shows the transparency in each account
which attracts more investors to invest in the enterprises. The management can easily assess the
risk in the business operations with the help of financial governance (Griffin, 2017).
There are various tools and techniques used by the Ever Joy Enterprises in order to
reduce the financial problems and enhances the level of performance. Some of them are
mentioned as below:
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Benchmarking: A measurement of the quality of an enterprises product, programs, strategies,
policies, etc., and their comparison with standard measurements, or similar measurements of its
peers (Mayne, 2017). The main objectives of bench marking are:
 To analyze how organizations, attain their high-performance levels
 To determine what and where improvements are called for
 To utilize this information to enhance or improve the performance
By using benchmarking, the Ever Joy Enterprises can check their performance level in
competitive market and also check the quality of their products or services with the prescribed
standards. Some of the useful financial benchmarks include:
 Financial benchmarking
 Benchmarking from an investor perspective
 Performance benchmarking
 Process benchmarking
 Functional benchmarking
 Product benchmarking
 Strategic benchmarking
Benchmarking does not provide a solution to all the problems rather it examines the situations
and processes and assists in improving the performance of an enterprises. It is a continuous
improvement process and it improve the overall performance of the departments or divisions in
the enterprises. In this process, an enterprises major business operation is compared and
measured with the competitors and acknowledged leaders of the industry (Maher, et. al., 2012).
Key performance indicators: A key performance indicator is computable value that shows
how efficiently an enterprise is attaining key business objectives. The Ever Joy Enterprises use
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key performance indicators at multiple levels to assess their growth and success at reaching
goals. It is a form of measurement performance and are commonly used in the organization
(Rogulenko, et. al., 2016). The Ever Joy enterprises can use the KPIs to measure and evaluate
the financial performance which is listed below:
 Profitability ratio
 Liquidity, debt and solvency ratio
 Break- even analysis
 Operating ratio
 Turnover ratio
 Other useful ratios (capital structure ratio)
With the help of above ratios company can evaluate the performance level. The Ever Joy
Enterprises can compare the past performance with present performance with the help of this
above ratios. KPIs also assists the management to evaluate the performance of employees and
how they achieve their targets in an effective and efficient manner. In other words, KPIs is kind
of performance measurement that assists the enterprises to understand how the enterprises or
divisions is performing. A good key performance indicator should act as a compass which
assists the enterprises and its employees whether both are taking the right path towards strategic
goals prepared by the managers (Di Vaio, et. al., 2018).
Conclusion
This report is concluded that the management accounting tools and techniques helps the
company to achieve their targets and goals in an effective and efficient manner. This report also
shows that how different management accounting systems assists the Ever Joy Enterprises to
enhance their productivity and its business operations. While using Break-even analysis, it
shows the situation where the company in the position of no profit or no loss. This report also
tells how budget can solve the financial problems of the company and act as an effective
financial tool for the management of an enterprises. The good and strong financial governance
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assists to the company in solving the financial problems and attracts the investors to the
enterprises. The Ever Joy Enterprises use various methods like KPIs and Benchmarking to
check their performance level and other things in an accurate manner.
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