Management Accounting Report

This report examines the significance of management accounting in Azio Corporation, a manufacturer of keyboards and electronic peripherals. It analyzes various accounting systems, reporting methods, costing techniques, and planning tools used to manage finances, improve profitability, and overcome financial challenges. The report also includes a comparative analysis with another organization, Hichrom Ltd, highlighting the importance of Key Performance Indicators (KPIs) and benchmarking in addressing financial issues.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Discussion about management accounting and its essential requirement............................1
P2: Different types of accounting reporting methods.................................................................3
M1: Various crucial benefits of using management accounting system.....................................5
D1: Critical evaluation of various reporting method and accounting system integration...........6
TASK 2............................................................................................................................................6
P3: Different types of costing methods used for calculating net profit.......................................6
M2: Different types of accounting tools and techniques............................................................8
D2: Analysis of data collected from income statement..............................................................9
TASK 3............................................................................................................................................9
P4: Merits and demerit of using planning tools used in budgetary control................................9
M3: Analysis of various planning tool and its application for forecasting...............................11
D3: Evaluation of planning tools for responding to financial issues........................................11
TASK 4..........................................................................................................................................11
P5: Comparison with other organisation to overcome financial issues....................................11
M4: Analysis of planning tools to deal with financial issues....................................................12
CONCLUSION..............................................................................................................................12
REFRENCES.................................................................................................................................13

INTRODUCTION
Management accounting play an important role in every organisation where manager use
the provision regarding accounting information in order to attain predetermined goals or
objectives. In other words, management accounting may be considered as profession in which
included management decision making, performance management system and devising planning
which support in providing financial reports (Amidu, and Effah, 2011). These are beneficial in
formulating as well as implementing organisational strategies to accomplish particular goals.
This report is based on Azio corporation which deals in manufacturing keyboards and other
electronic peripherals. It will demonstrate the management accounting system and apply a range
of management techniques for the purpose of maintaining accounts of an organisation. This
assignment will explain the uses of planning tools for appropriate management accounting.
There will be comparison of different ways in which company can use the management
accounting for responding to various financial problems as well.
TASK 1
P1: Discussion about management accounting and its essential requirement
In the present scenario, accounts management and its maintenances are must be required
for every business organisation for achieving predefined goals and get success. Azio is small
business that deals in manufacturing of keyboards and other computer electronic items in the
market place. The manager of Azio corporation consider various data and informations so that
they can organise business activities and allocate resources as per requirements. Management
accounting may be defined as the presentation of financial data in an appropriate manner for
operating business in right direction (Abor, 2011). Management generally use these kinds of
systems to manage the entire business operations and make better decision to generate more
profits as well. In this included different accounting methods, tools or techniques, and systems
which associated with ability, skills, knowledge and assessment of management activities. These
are essential in generating higher profits and revenues with the help of utilising available
resources. Accounting concern with set of procedure in which identify, measures and evaluate
the economic data for making better decisions regarding financial resources and organisation's
position.
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Definition: Management accounting may be defined as the branch of accounts which are
beneficial in providing specific informations to the top level management of organisation. It is
helpful in performing various business operations and functions including planning, organising
and controlling in an appropriate manner.
Importance of using Management Accounting:
 Helpful in producing plan: In the organisation, planning play a crucial role in getting
success. It generally used for accomplishing best possible outcomes or goals that set by
the Azio company within defined time period.
 Better decision making: Management accounting system is useful in making better or
favourable decision that facilitate in generating higher profits or revenues in adequate
manner (Carlsson-Wall, 2011). Company can achieve best possible outcomes in various
critical situations by effective decisions.
 Determination of future goals: This is essential in attaining future objectives as
management accounting support in formulation of particular goals and create path or
route to accomplish it with effective way.
Types of management accounting system: Cost accounting system: It is the best procedure that company can undertake for the
purpose of recording, categorising, allocating and evaluating the various components for
better course of action. This system has significant role in the department for controlling
their costs which are additional and improve production process in an efficient manner.
Therefore, Azio required to undertake these system so that they can produce effective
keyboards, computer electronics items and various components in an adequate manner.
There are defined different types of costing methods such as normal, actual and standard
costing and these are beneficial for organisation in managing expenses with effective
way. Inventory management system: It is defined as the supervision where considered all non-
capitalised stock items within firm. In this described the procedure by which products are
to be flowed from producers to warehouses (Kraus, and Lind, 2015). It is helpful in
managing the inventory products and store appropriate goods in well manner. In this
included various types of methods such as LIFO and FIFO and AVCO etc. which are
effective in maintaining stock of Azio organisation.
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 Price optimisation system: The price optimisation method generally consider
mathematical analysis by organisation for the purpose of determining the customers
responds regarding pricing of goods or services. It may be defined as the numerical
evaluation which considered by the company for the purpose of evaluating the customers
responses after using goods or services (Granlund, 2011). the main purpose of this
system is to increase more profitability and revenues for Azio company in an effective
manner. Company can use this system for observing customers behaviours and attracts
them towards goods or services.
 Job costing system: It is also important method of costs in which company assign or
allocate the costs during job performance. It is necessary to undertake such cost for
gaining bets possible outcomes and it support to employees who are associated with Azio
firm. It is beneficial in producing better quality of keyboards and other electronic
equipments related to computer so that more customers are to be attracted towards
organisation. In this included various types of costing methods used within production
procedure such as Batch costing, standard and processing costing and products costing as
well.
P2: Different types of accounting reporting methods
In the organisation, management accounting must be required for formulating strategies
and plans so that better outcomes can be gained. If companies are not using such accounting
system then they may have to bear some losses while running business. Therefore, it is necessary
to consider the reporting system and analyse the production process system from starting points.
It is essential for Azio firm in maintaining entire business activities and provide better
opportunities to every departments so that they can communicate appropriate information
regarding internal and external factors in effective ways (Johnson, 2013). Reporting may be
defined as the important document which contains from various informations regarding
financials statements , accounts and non-financial details that company use for managing its
operations and increase profitability with adequate way. The shareholders and stakeholders
generally consider the financial information as well as data which is helpful in making
favourable decisions in well manner. Azio corporation undertake different reporting and
accounting system for recording, measuring and maintaining data for organisational success. The
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management accounting play crucial role in preparing report that helpful in tracking the
performance informations and manage it as per the time factor.
This is best component for organisational manager as they can collect more data or
informations in an appropriate manner which are usable in making better decision. There are
defined different roles and responsibilities of manager regarding accounting reports and they
have to determine the critical situations under system. The main aim of accounting reporting
within organisation is tracking, evaluating as well as providing information to the accounting
manager about several costs or expenses that can be occurred in Azio firm during operations
(JOSHI, and et. al., 2011). It is facilitate to investors and accountant as they can make better
decisions about managing business activities and consider the data to determine profitability of
the organisation. Many of companies undertake these system because it assist in providing clear
picture of any business entities and its current financial position in an effective manner.
There are defined different types of accounting report methods which beneficial for every
organisational departments as they can record all necessary information regarding company data.
These are as followings: Performance report: It is an important activity which is associated with project
communication management. In this included various scheme of collecting information,
data, optimise available resources and estimation of future growth etc. In the Azio
organisation, many of employees deliver their performance report for the purpose of
measuring work performances in an effective manner. It will be supportive for
employees as they can be ensured about the working performance which must be in
right direction and effective as well. Inventory management report: It is associated with supervision of non-capitalised stock
products that support in gaining best possible outcomes in an appropriate way. It can be
considered in the Azio organisation as manager can use these kinds of report for the
purpose of managing and controlling their stocks with efficient way (Klychova,2014).
In this report, opening and closing accounts are to be prepared of an organisation. It is
considered a comprehensive accounts of inventory and its records so that supply can be
balanced with well manner. This account is simple and easy to understand the
information so that investors and stakeholders can make better decisions in the future
perspectives. Inventory control is important for maintaining the right balances of stock
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in warehouses and provide better customers services in an adequate manner. In this
included various methods or techniques that are undertaken for stock valuation such as
ABC costing, EOQ and Inventory turnover ratio as well. Account receivable report: It is defined as the proceeds as well as payment system
which company received by consumers in exchange of goods or services on credit. Azio
can consider this report for making better decisions to take corrective action for future
benefits and profitability as well. This method is helpful in making more sales and
reduce transaction costs with effective manner.
 Job cost report: It enables the earning by standardised reports so that maximum
profitability can be gained by job performances (Faskhutdinova, 2014). It is known as
profitability report that associated with income statements and other recorded data that
arise while working within organisation. Azio corporation can determine the production
data and total cost with easy manner which is beneficial in making investment decision.
M1: Various crucial benefits of using management accounting system
There are various benefits of accounting system that support in attaining set gaols or
objectives in an accurate way. Azio can achieve future goals or objectives by determining
different types of accounting system for managing available resources and allocate them among
various activities so that bets possible outcomes can be achieved in defined time period as well.
Types of accounting system Benefits
Cost accounting system In this undertake various tools or techniques for ascertaining
costs that can be occurred in any situations or conditions
within organisation (Sadrieva, 2014). It is beneficial in
determining selling prices for company in several
circumstances.
Inventory management
system
It will support in improving the accuracy of stock orders and
also useful in creating different warehouses with effective
manner.
Price optimisation This generally used for knowing customers perception and
how they prefer to get products or services with affordable
prices. It help to the organisation in creating more demands
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with adequate way.
Job costing system Accessibility is helpful component which support to the
customers and investors that to know about the company in
deep manner. They can be aware about financial positions of
the company in well manner.
D1: Critical evaluation of various reporting method and accounting system integration
In this defined that accounting system is best element which generally used for getting
accurate information and provide data about financial position of Azio corporation. It play an
important role in determining necessary data or information to the accountant for managing and
keeping record with appropriate manner. There is required to undertake accounting system by
Azio organisation as they can record various types of transaction and financials data so that
better decision can be made in effective way (Mistry, 2014). On the other side, company can
consider the account receivable report which is supportive in analysing the appropriate amount
and recovery time as well.
Type of reporting Integration with Organisational process
Inventory management Inventory management report generally used
for providing necessary information regarding
actual position that kept by the Azio company
in the market place.
Job cost report Through integration with this report
organisation is able to identify expenses which
are not appropriate in nature. This will help to
improve profitability attached with particular
product
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TASK 2
P3: Different types of costing methods used for calculating net profit
Cost may be defined as the amount paid by any individual for the purpose of getting
something. In the production process, manager consider various types of elements or aspects for
the purpose of producing good or services such as raw material, equipments and tools, various
components and many more so that better items can be produced. Therefore, it is necessary to
undertake several components for completion of task within accounting period of time (Sharma,
2014). It play an important role in various businesses for operating its different function with an
accurate manner. In the Azio corporation, there is required to undertake several accounts for
analysing and managing costs which can occurred during the process so that company make
decision regarding expansion in well manner. There are defined different types of methods of
costing which are ton be undertaken by Azio for calculating profits and revenues of the
company. These are as followings:
 Absorption costing: It is associated with different types of costs which generally
raised during the production of goods or services within Azio corporation. In this
included several costs including direct materials, fixed and variable, direct labour and
other overhead charges that have chances in occurring while producing products. It
also known as full costing methods and in this, marginal costs generally used for
absorbing costs which associated with variable as well as fixed. It can be beneficial in
achieving best possible outcomes in an adequate way.
 Marginal costing: It is determined as the best techniques which must be undertaken
while manufacturing of goods or services within an organisation (Low, 2014). In this
included the variable costs by making more sales so that appropriate profits can be be
calculated in defined time period. In this identified that variable costs generally used
for determining marginal cost which is part of it where included direct labour costs,
overhead expenses or charges and other material costs as well.
Calculation of net profit by using marginal costing method:
Particulars Amount
Sales proceeds 33000
Marginal Cost of goods sold: 9600
Manufacturing cost 12800
closing inventory 3200
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Contribution 23400
Fixed cost ( 3200+1200+1500 ) 5900
Net profit 17500
Computation of net income by using absorption costing method:
Particulars Amount
Sales 33000
Cost of goods sold 14025
Gross profit 18975
Selling & Administrative expenses 3300
Total profit 15675
Break Even Analysis: It is best important method in which consider the costs and
expenses which must be provided an equal outputs within Azio Corporation. It can be said that
this analysis defined the central point where company face the situations as neither get profits
nor loss.
A. Total number of product sold
Sales per unit 40
Variable costs VC = DM + DL 28
Contribution 12
Fixed costs 6000
BEP in units 500
b. Calculation of breakeven point in accordance to sales revenue
Sales per unit 40
Variable costs VC = DM + DL 28
Contribution 12
Fixed costs 6000
Profit volume ratio PVR = Contribution / sales * 100 30.00%
BEP in sales 20000
c. Calculation for getting desire profit of 10,000
Profit 10000
Fixed costs 6000
Contribution 16000
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Contribution per unit 12
Sales 1333.33
Margin of safety: It can be considered as the reliable component that related with
intrinsic values regarding cost of market stock as well (Schaltegger, 2012). This process is
helpful in defining the sales volume which depends on the break even analysis of business.
d. The margin of safety, if 800 products are sold
Actual sales in units 800
Break even sales in units 500
Margin of safety 37.5
M2: Different types of accounting tools and techniques
Under this, it has been stated that there are different accounting tools as well as
techniques which aids in taking the reliable as well as better decisions in favour of company. The
different accounting tools which are used by Azio Corporation are given below:
Historical cost- It is vital value and effective tool that company use to analyse cost of
assets which are present on the balance sheet on normal cost rather than the original price.
Marginal costing- Under this variable costs are to be charged to the fixed costs and cost
units of period which are written off against aggregate contribution.
D2: Analysis of data collected from income statement
IN context to deal with the different problems which are arise in company in the future,
there is a requirement to Azio Corporation to use the different methods of costing. Under this, it
will make the reliable as well as valuable aspects to firm which will necessary for business to
make the effective and efficient decisions (Csutora, 2012). By using the method of marginal
costing, company make profit of 17500. On the other hand, by using the absorption costing
methods, firm get 15675 profit. With the help of using the total fixed cost, all variations are
measured in an effective manner.
TASK 3
P4: Merits and demerit of using planning tools used in budgetary control
The budgetary control can be described as an essential process in which several
beneficial steps are taken for carrying out regular operational activities in desired budget and
prevent expenses to go beyond the same (Smith, 2011). A budget refers to quantitative and
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monetary statement of policy that described future period that involves planned revenues as well
as expenses in order to attain objectives of company. In case of Azio, they have to utilise an
effective as well as efficient strategy to control budget and manage the same for desired purpose
to gain better targets.
Budgetary control process: This can be explained as an appropriate procedure which
can be utilise by manager through that they manage overall budget in correct manner to monitor
and control. It includes to put efforts for save cost of manufacturing and operations in given
accounting period along with gaining better outcomes (Moser, 2012). In case of Azio, they have
to set financial and performance goals with budgets to fulfil desired targets with better
productivity. Thus, it requires proper planning which includes several effective tools for
controlling budget and some of them are explained further such as:
Forecasting tools: This is most important and effective procedure that support in
estimating the past as well as current data with accurate manner so that Azio can analysed the
trends. It support in collecting more relevant data for formulating plan so that business can
achieve best possible outcomes in the future. There are some defined some advantages and
disadvantages of this techniques such as: Advantage: The major aim and objectives of the future forecasting which is beneficial
in providing adequate information to the Azio so that they can use this in making better
decision for positive result.
 Disadvantage: In this, major drawback is that it depends on the qualitative estimation
which generally relies as per some subjective inputs whereas difficult to undertake into
account.
Contingency tool: This is effective tool which is used by the Azio to build the provisions
regarding the aspects which have some instance to happen in near future. This will aid the
organisation to effectively perform their tasks without any discrepencies. Advantages: An appropriate plan can be beneficial in facing various kinds of risks or
uncertainties so that issues can be resolved to achieve better profits. Every Azio can
consider the contingency plan for dealing with different types of circumstances in well
manner.
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 Disadvantage: The disadvantage of this tool can be consider as improper knowledge or
inadequate literature which can create barriers and conflicts during running business. It
can be complex in some situations due to qualitative nature as well.
Scenario tool: In this consider a structure that facilitate in thinking about particular
future so that Azio can consider this tool for manufacturing more varieties of keyboards with
attractive designing (Wickramasinghe, 2012). It will be support in handling different types of
critical issues and problems with well manner. Advantages: It is essential in facing and tackling several critical situations that can arise
during running business. Azio corporation can get benefits from this tool by making
corrective decisions within time frame.
 Disadvantage: Sometime, it can be difficult to make favourable decision due to lack of
reasonable occasion regarding future growth of business.
M3: Analysis of various planning tool and its application for forecasting
There is necessary to formulate better plan by using different method of controlling
budgets so that goals or objectives of company can be achieved. In this included various tools
which are beneficial in forecasting of total cost, expenses that can be occurred while performing
business activities as well (Alawattage, 2012). Therefore, it is necessary to undertake
contingency tool for the purpose of dealing with various uncertainties and risks factors of the
Azio corporation so that better outcomes can be achieved. Planning will be supportive in
generating higher revenues and incomes in more reliable way.
D3: Evaluation of planning tools for responding to financial issues
In this analysed that every organisation face different types of problems or issues which
can be raised while operating business. Therefore, the best method of dealing such problems is
forecasting which support in preparing plans and estimate future. It has significant impact on
company performance as issues can be resolved in an adequate manner with the help of Key
Performance Indicators.
TASK 4
P5: Comparison with other organisation to overcome financial issues
In every business organisation, manager focus on managing and resolving various kinds
of issues or problems that may arise during running operations. These can affect on the
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accounting report that support in making favourable decision for the Azio corporation regarding
utilisation of available resources so that maximum outputs can be gained (Windolph, and
Moeller, 2012). Therefore, company is focusing on price optimising and strategies for the
purpose of generating higher revenues or profits. Here are defined some financial issues such as: Rules and regulation aspects: There is necessary for every organisation that to enrolled
in effective way so that they can run business with legal manner. If these documents is
missing then it can create complex situations for the firm in business operations.
 Products and service quality issues: This is general issue that can have major impact on
the business as they required to undertake products or services quality for satisfying
customers needs and desired expectation. If there is bad quality of product then company
may have to face various situations including losses and decreasing sales volume as well.
KPI: It is effective tool which is used by the organisation to overcome from financial
issues. This will be of two types which are known as financial and non financial. Financial KPI
includes the indicators like Income statement, balance sheet which provides the information
about the performance of organisation. Through this organisation make strategies regarding
aspects which are not up to mark and required improvements. On the other hand, Non financial
KPI help in improvement of behaviour of employees. This will aid to attain targets within
specified period of time.
Benchmarking: It is effective tool which is used by Azio to set the benchmarks which
guides the employees to achieve their target in effective manner. Specifying target regarding
quality aspects aid to meet standards.
Azio corporation Hichrom Ltd
This company is dealing with various
products including manufacturing of
keyboards and other computer electronic
items. They consider the financial problems
which can be occurred during running
business so, they prefer better implementation
of Key Performance Indicators.
This organisation is dealing with various
accessories and manufacturing high
performance chromatography columns so
there are huge chances of occurring financials
issues. Therefore, they are required to
implement the financial governance as well as
other accounting tools.
The main issue related with the organisation
was to overcome the financial challenges
The main financial issues that occurred in
organisation was managing the accounting
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subject to tearing the quantity of stocks and
stability subject to negotiating changes and
variations in stores departments. It enhanced
the cost of carrying inventories in
management.
information according to structure of
organisation. These information was majorly
analysed with containing the
Management committee implemented
inventory management accounting system to
incorporate changes and variations was
facilitated due to lack of proper management
and control upon inventories. This enhanced
the structure of business for compelling the
changes in various forms.
This challenge was overcome by
implementation of Management Information
System. This will help to manage the flow of
information and reduce the reporting time to
senior management committee. This will
reduce the cost increased due to lagging of
getting information at right time.
M4: Analysis of planning tools to deal with financial issues
It can be analysed that accounting system must be undertaken in every business
organisation. There are various kinds of accounting tools which used for different purposes such
as effective formation of organisational accounting and record important information through
marginal accounting so that business can be developed with effective manner (Zainun Tuanmat,
2011). there are number of accounting system which support in resolving issues so that
organisation can generate higher profits and revenues in adequate way.
CONCLUSION
From the above report, it has been concluded that management accounting play an crucial
role in every business organisation for getting success. Azio corporation can consider several
accounting system which facilitate in improving financial conditions. Therefore, manager has
required to undertake the different types of accounting system as well as reporting method for
maintaining transaction of organisation.
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REFRENCES
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Granlund, M., 2011. Extending AIS research to management accounting and control issues: A
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Johnson, H.T., 2013. A New Approach to Management Accounting History (RLE Accounting).
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Schaltegger, S. and Csutora, M., 2012. Carbon accounting for sustainability and management.
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Ward, K., 2012. Strategic management accounting. Routledge.
Wickramasinghe, D. and Alawattage, C., 2012. Management accounting change: approaches
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Windolph, M. and Moeller, K., 2012. Open-book accounting: Reason for failure of inter-firm
cooperation?. Management Accounting Research. 23(1). pp.47-60.
Zainun Tuanmat, T. and Smith, M., 2011. Changes in management accounting practices in
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Scenario planning. 2018.[Online]. Available through: <https://papers.ssrn.com/sol3/papers.cfm?
abstract_id=1736110>.
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