Preparation of financial report for Excite Entertainment Ltd
Added on 2021-02-18
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Management Accountingreport for ExciteEntertainment Ltd
Table of ContentsINTRODUCTION...........................................................................................................................3LO 1.................................................................................................................................................3P1 Management accounting and types of management accounting system................................3P2 Different methods used for management accounting reporting.............................................5M1 & D1 Integration of management accounting system and management accountingreporting......................................................................................................................................6LO 2 ................................................................................................................................................7P3 Calculation to prepare income statement using marginal and absorption costing.................7M2 & D2 Application of management techniques in preparation of financial reportingdocuments...................................................................................................................................9LO 3...............................................................................................................................................10P4. Explaining the benefits and the limitations of various planning tools that are used for thebudgetary control......................................................................................................................10M3. Analysing the applications and uses of several planning tools in formulating andforecasting the budget. .............................................................................................................12LO 4...............................................................................................................................................13P5 & M4 Adaptation of management accounting systems to solve financial problems indifferent organisations...............................................................................................................13CVP analysis.............................................................................................................................15
INTRODUCTIONManagerial accounting is that branch of accounting which helps the managers of thecompany in taking various decisions like preparation of budgets, making policies, changingprocedures etc. of the company to maintain its profitability and sustainability. The report willtalk about difference between financial and management accounting along with describingdifferent management accounting systems. With systems the report depicts various types ofmanagement accounting reporting along with its application in Excite limited. This companydeals in event planning of various functions including providing different kind of props anddecoration. Moreover, the report will analyse the advantages and disadvantages of differentplanning tools which are used to control the budget of the company. At last the report will showvarious performance indicators which will help the company in solving its financial problems.LO 1P1 Management accounting and types of management accounting systemThe combination of two words which is management and accounting means study ofaccounting with the perspective of managers. It helps the management of the company informulating policies, appreciating effectiveness, and making decisions for the betterment of theorganization. It helps the management to coordinate and control the operations of the business bymaking budgets for the company. The tools of management accounting like standard costing andbudgetary tool helps in controlling performance (Hopper, 2016).Management accounting is different from financial accounting in many ways as financialaccounting records and summarize financial transactions of the company whereas managementaccounting helps in taking effective decisions of the company. Financial accounting showsaccurate and fair picture of financial transactions whereas management accounting helps intaking steps and strategize. Financial accounting deals with quantitative aspect whereas the otherone deal with both the aspects, qualitative and quantitative aspect. It is compulsory to dofinancial accounting whereas management accounting has no such requirement (Zhang and et.al,2019). Financial accounting prepares financial statement that are for stakeholders and investorsof the company whereas management accounting is only for management.The different types of management accounting systems are: Inventory management system – Inventory management system helps the company intracking entire supply chain of the business or the part of the business in which it operates. The
inventory management system covers everything from production to retail, warehousing toshipping and all the movement of stock. It helps Excite limited in recording each new andreturned product as it leaves and enters in the warehouse. It uses variety of data to keep the trackof the goods as they move through process, lot numbers, cost of goods and the dates when theymove through the process which maintains the inventory in Excite limited (Panchenko, 2018).The system uses different types of methodologies like Just in time, ABC analysis and stockreview which focuses on minimizing cost of inventory along with the ability to provide tocustomer the products in timely manner. It consists of two methods which are:FIFO – First in and first out assumes that good purchased at first will be sold at first tooLIFO – Last in first out assumes that goods purchase at last are the first goods sold.Cost accounting system – Cost accounting system is the framework used by firms whichhelps the company in estimating the cost of the products for analysis of profitability, valuation ofinventory and controlling cost. It estimates accurate cost of products which is important forprofitable operations in Excite limited. This helps the company in knowing its profitable and nonprofitable products (Drake, 2016). The product costing system helps in estimating closing valueof inventory materials, work in progress and inventory of finished goods which helps in makingfinancial statements of the company. The cost accounting system consists of direct and indirectcostingDirect costing – A direct cost can be assigned to specific cost objects which can beproduct or a service. Direct cost included cost of labor, materials, wages etc. direct cost variesand hence tend to be variable cost.Indirect costing – This cost are assigned to do cost analysis. These costs are part ofcorporate overhead which exist even when the specific product or service is not created. Theseare more likely to be fixed cost which includes salaries, quality control etc.Job order costing system – It is a system that assign and collect manufacturing cost ofan individual unit of output. This method is used by Excite limited as items and servicesproduced by the company are different from each other and have different cost. The jobs costingsystem needs information on the direct materials, labor and overheads. Once the job has beencompleted by the company, the job costing system may close down. Job costing system containsmany specialized rules but are not applicable to all the jobs. The job order costing systemconsists of Job order costing and process costing.
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