Vectair Holdings Management Accounting Analysis

This assignment provides a comprehensive analysis of management accounting systems and tools for Vectair Holdings. It discusses the importance of effective management accounting in making internal decisions, enhancing operational activities, and improving employee efficiency. The report highlights various budgeting costing and planning tools relevant to the business, including balanced scorecard, marginal and absorption costing. It concludes that management accounting information is useful for taking better and effective decisions in the organisation to achieve high-level performance.

Management Accounting

INTRODUCTION
Management accounting is helpful for managers to make better decisions for the
organisation. It relates to Management to take enhanced decisions as it provides financial data
and information with much ease. Also, it helps in making daily basis and short term decisions in
the organisation. Management accounting plays a vital role in a business. It gives appropriate
reports of accounting to the company. This present report is based on Vectair Holdings in UK. In
the report, definition of management accounting and requirement of different types of
managerial accounting are covered in this report. Along with this, different types of methods
which are used in management accounting reporting and cost accounting techniques are
discussed. Other than that, in the present report, merits and demerits of different types of
budgeting tools and some effective management accounting system which can be used by the
organisation are covered.
TASK 1
P1. Defining management accounting and essential requirements of its different kinds
To: General Manager
Vectair Holdings
From: Management Accounting Officer
Subject: Report to General Manager regarding management accounting
Introduction:
Management accounting is required to be implemented by Vectair Holdings so that efficiency
may be achieved and company may be able to control upon its expenditures. Financial health
will become stable by using management accounting systems and techniques.
Management accounting: - It is the process which is used to prepare management
reports and accounts that provide appropriate information of the financial position of the
business. It helps manager in making the daily basis decision which can be very important for the
Vectair Holdings organisation. Management accounting includes cost accounting. It provides
accurate reports to the managers and so, they are able to make effective decisions at workplace.
Management accounting handles different types of systems, reporting and income statements.
Through it, company can prepare their income statements and know about the entire cost which
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is used by it(Chenhall and Moers, 2015). Role of the management accounting is very important
in Vectair Holdings company. There are different types of management accounting system that
Vectair Holdings should use are the following :
Job costing system: - This is an effective and useful tool or system for the Vectair
Holdings. This management accounting system is used for tracking the cost and revenues by job
and enables standardized reporting of profitability position. There are different types of
departments and employees in the organisation and manager allotted them different types of
tasks. However, they are responsible for the tasks which are given by managers. This is their
responsibility that they will give their better performance to company.
Along with this, there are number of employees who are not able to give their effective or
minimum performance to company. So, organisation can reduce their cost from the lower
performance department (Renz, 2016). Other than that, there are number of employees who can
be able to give effective performance to company and so, management can provide them some
effective incentives and bonus. However, they will be motivated from the financial support. It is
an important management accounting system in the organisation. Moreover, it can track specific
cost of job and productivity of employees in the business.
Inventory system: - This is one of the important management accounting systems in
Vectair Holdings organisation. Through this system, company can be able to secure their entire
information and data which is used in the business. Vectair Holdings is the start-up company, so
they should use this type of accounting system in their business. When they can use it, they will
be able to keep their entire data and information in very safe place. It is very important for
company that they will use their data and keep it in a secured place.
Along with this, through inventory system, company can accumulate the sale, purchase,
and return of products. Other than that, in this system, company can make the report about sales,
purchase and return. When they are selling and purchasing their goods and services, then they
can entry in the inventory system of all data (Cooper and Qu, 2017). Thus, when they need it,
they can easily track all information about sales and purchases. Other than that, managers can
make their decision on daily basis and it is very useful process for company.
Cost management accounting system: Another useful method is cost management
accounting system for the Vectair Holdings organisation. Through it, managers can identify the
cost of entire department, products and services of company. Other than that, there are different
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types of activities which are accomplished by some machinery, department or any other system.
Company should have knowledge about all costing system as if they do not know then it will not
be able to control cost which will affect profit.
However, cost accounting system is very important and also useful for the organisation.
Along with this, though this system, they can make analysis of the all products and services cost
in the business (Lavia López and Hiebl, 2014). This helps business to eradicate unprofitable cost
which yields no profit instead reduce it. Cost system is also known as products costing system
and costing system, so organisation is able to determine cost effectively. Selling prices are also
determined as costs are analysed of the products Through cost accounting system, they can set
their effective price of products and services in business and they can be able to increase their
sale and brand value in the market.
Price optimising system: - This management accounting system is based on prices of
products and services of business. This is a mathematical determination to identify the response
of all customers in the market. When company sells their products and services in the market,
then they can know response of customers for products or services. Through this system,
manager can know about feedback, review and response about products and services of the
company. Other than that, customers have the power that they can influence prices of goods and
company may be able to determine whether customers are ready to buy goods at quoted price ot
not. (Messner, 2016). Management can take decision whether to quote the same price of goods
or not in the market.
However, they can change the process according to situation and requirement in business.
Moreover, if company will use price optimising system in their business, then they will be able
to achieve responses of customers whether they are ready to purchase goods at prevailing price
or not. Vectair Holdings can use this technique to analyse perceptions of the customers and
hence, it is useful method. Through this, it will be able to produce more profits from the market
and as such, brand image may be made effectively.
P2. Different types of methods using in the management accounting reporting
Management accounting reporting is the process for making a performance report of
Vectair Holdings organisation. Through this report company or manager can monitor the entire
performance and presentation of the company. Along with this, with help of management
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accounting reporting, company can prepare the different types of report for the business. That
report are as job costing report, budget report, manufacturing, account receivable ageing and
inventory report. These all reports are very important and useful for Vectair Holdings, so they
should use in their organisation. However, they can able to increase their profitability and brad
value in the market (Kotas, 2014). Through these entire reports, company can know about the
performance of the business. Other than that, there are different types of department and
employee in the organisation, so they can know about the performance of the department and
employees in the company.
Moreover, management accounting reporting play the vital role in the business. With the
help of this reporting system, company identifies about lower and higher performance of
department and employee in company. It is very useful process of Vectair Holdings company,
however they should follow the entire rules and regulations of the management accounting
reporting system. There are different types of reporting system, but Vectair Holdings should use
some following management accounting reporting for their business:
Budget report: - It is an internal report used by the company to compare budgeted with
actual results to analyse variance. There are number of employees and different types of
department in the Vectair Holdings company, and manager allotted them different types of task
and work. However, company can identify the performance of the entire department and
employee in the organisation. It is very important process for effective performance. Other than
that, there are number of employee who are not giving their effective performance to the
company, so company will reduce the budget on the lower performance department or
employees.
Along with this there are many employees who are giving their effective performance in
the company, so manager can provide them some bonus an incentive. With help of the budget
report, company can compare between lower and higher performance of the department and
employees. Through it, they can able to make a decision (Hopper and Bui, 2016). In that decision
they can increase their budget on the higher performance of the department and employees and
decrease the budget on the lower performance of the department an employee in the
organisation.
Accounts receivable ageing report: - This report is based on the unpaid customer
invoices. Vectair Holdings company is providing a credit services to their valuable customers.
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Through accounts receivable ageing report then can identify about the customers who are not
paying their outstanding amount to the company. Organisation is selling different types of
products and services and provide credit facilities to their customers. There are number of
customers who can able to pay their pending amount to the company, but some of them do not
pay the remaining outstanding amount to the company. In that condition, this report will help
company in describing the customers who are not paying the credit balances to the organisation.
Other than that, through it manager can prepare a report of the unpaid customer invoices
(Bromwich and Scapens, 2016). One of the important benefit of this report is, company can get
their outstanding amount. Other than that, through this report, they can able to increase their
profitability in the business.
Inventory report: - There are different types of products and services in the company
and they are selling in the market to the customers. Sale and purchase data can be saved in the
inventory system. Further, manager can know about the estimated cost and future profit, then
they can comparison between past expenses and profit, so it will help company in increasing
their profit and revenue form the business. Other than that, Vectair Holdings is selling different
types of products and services to their valuable customers, then they can know about the
response of the customers. When they will be able to get this entire things, then manager can
prepare a report of inventory. Through this report, they can evaluate about the past expense and
present expenses which can used in the products and services. This is the important process and
report of the company. Through it, company can increase their profit and revenue of the
business.
Other than that, organisation can secure their all data and information of the products and
services which are sold and purchased by the company (Lapsley and Rekers, 2017). Along with
this, manager can save their data and when they will need it, they can use their data in the
company. Moreover, company is selling number of products and services, so they should know
about the cost of the products. It is very useful for the organisation, because if they will be able
to know about the cost of the products then they can set the minimum prices for the customers.
However, they can easily purchase the products of Vectair Holdings company.
Job cost report: - JIt is a report that analyse manufacturing costs of each jobs in the firm.
Through this report, company can know about their all department and employee performance in
the business. Other than that, appropriate job cost reporting begins with a great estimate.
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Company should start every job by managing the estimate in the same cost categories that will be
used to accumulate the actual job cost information. In the job cost report, manager should
estimate about the budget on the lower and higher performance of the employee and department,
then they can evaluate and reduce or increase their budget on the departments (Shields, 2015).
This is the very useful report for the company.
The job cost report helps company to have detailed analysis of equipments, material and
labour. The report is helpful, for analysing costs involved in materials and labour. The
expenditures involve in this can be reduced if output is not sufficient and as such, job costs report
are important element of organisation as various costs are controlled effectively. This
identification is very necessary in the company. Along with this, they should identify about the
need to measure the cost if various independent or job phase activities and need to know about
the actual cost and estimated cost on work units. When company will able to know about these
entire information, then they can able to control their cost and expenses on the activities.
Cost reporting during the job is very critical to controlling costs. When they are using or
preparing job cost report, they face some conflict in the business. It is very critical report which
is prepared by the project manager. Other than that, there are different types of department and
employees in Vectair Holdings organisation (Budgetary control, 2017). They also have
responsibility that they will achieve the target and goal of the company. If they will able to get
the goals and target of the organisation, then company can increase their profitability and
revenue from the business. When they will use this report in their company then it will be
beneficial for the organisation.
When Vectair Holdings company will use management accounting system and
management accounting reporting in their business, then they will be able to prepare all types of
reports in the organisation. Through these reports, company will come to know about expenses,
credit balances of the customer, budget and job costing information. Further, they can able to
invest in the effective areas of the business. Other than that, through this entire activities,
company can make some effective strategies and planning for more profitability and revenues in
the business. So, they should use above mentioned accounting system and management
accounting reporting for their business (Luft, 2016). It will give lots of profits and benefits to the
business. Other than that, company can increase their customers and satisfaction from the
products and services of the company. Along with this, company can get the faith and loyalty of
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the customers. Moreover, it is all thing is very important for Vectair Holdings, so they should use
this all system and report of the management accounting in their business.
TASK 2
P3. Income statements by marginal and absorption cost
Marginal cost: It is decision making tool helpful when additional units are produced by
the firm. is known as marginal cost. Under the marginal costing, company can only apply the
variable cost. Along with this, the variable cost is taken as goods cost while fixed cost is are
period costs. According to marginal costing, company can measure profitability by profit volume
ratio of the business. Other than that, itis forwarded to ascertain total cost of contribution of each
and every product of the company. (Suomala and Lukka, 2014). Along with this, it is the fixed
and variable costing, so company can change their income statements report in the business. It is
very useful and easy process for preparing the income statements from the marginal costing.
Income statement by marginal costing:
Absorption costing: - Vectair Holdings company can also use this cost system for
prepare the income statement. Absorption of total manufacturing costs is assigned to cost centre
in order to determine the total cost of production is known as absorption costing. In the
absorption cost, fixed and variable cost is considered as product cost in the business. As fixed
cost is included, profits gets reduced, so it is not more beneficial from the marginal cost. Other
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than that, it is the method for which inventory is valued valuation whereby all then
manufacturing expenses are assigned to cost centres to ascertain cost of production. There are
some another types of absorption costing as activity based cost, process cost and job costing
(Williams, 2014). This is very useful costing for the business. Along with this, through
absorption costing Vectair Holdings organisation can make their income statements account and
know the all cost and profitability of the business.
Income statements by absorption costing:
TASK 3
P4. Various kinds of planning tools and their merits and demerits
It refers to how good company use budgets to control the cost and operation in a given
financial period. In other word, it is the process for entire manager of the organisation to prepare
the financial and performance goals with budgets. Further, they can control and compare the real
results, and then adjust performance according to requirement in the company. Through this
system, company can control the actual income and spending income with planned income and
then manager can change In order to make more profit. There are different types of budgetary
control available, but Vectair Holdings should use the following types of budgetary control tools
in their business:
Financial budget: - One of the important budgetary control tool is financial budget in the
business. This budget is based on the profit and loss of Vectair Holdings company (Chiarini and
Vagnoni, 2015). Through financial budget, company can examined about the all income which is
earned in the particular time. In the organisation, numbers of department and employees are
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working, and manager allotted to them different types of work and task according to their
knowledge and profile. When they accomplish their target and goals, then it will be the profit of
the organisation which is earned by the employees and departments. Through this budgetary
control, company can reduce their budget on the lower performance departments and employees,
and increase their budget on the higher performance of the employees and departments.
Advantages:
 Though financial budget, company can aware about all financial system of the business.
 They get the business opportunities from the financial budget. Through opportunity,
company can achieve the goals and target of the business (Gibassier and Schaltegger,
2015).
 The can make some effective financial planning and strategies for the business. Other
than that, having a monthly financial budget can highly improve the process of creat5ing
annual reports.
Disadvantages:
 Financial budgeting technique is based on the estimations and assumptions as the future
would always remain uncertain.
 Wrong decision of financial budgeting can affect the long term durability of the
organisation (Management accounting, 2018).
Operating budget: - This budget is based on the expenses, expected cost of future, and
forecasted income over the course of the annual. Operating budging is accomplished in advance
of the accounting period, because they need the estimated expenses and revenues. This is another
important tool for the controlling the budget (Tucker and Schaltegger, 2016). When company
evaluate the estimate expense and cost of the future, then they can know about the future costing
and expenses. However, they can able to reduce their budget on the future expenses. This is the
effective procedure of the organisation. Through it, company can save their fund and able to
invest in effective areas of the business. Through operating budgeting company keep their
information accurate and use it when they need the information in the future. Vectair Holdings
company should use the operating budget for budgetary control system, so they can able to
increase their profit and revenues and decrease the expenses and cost in the business.
Advantages:
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 Through budget, company can keep their information accurately in the business.
However, when they require the information, then they can able to get it again in the
company (Fourie and Kumar, 2015).
 They can manage the current expenses and cost of the business.
 They can able to projecting their future expenses, and reduce it for the business.
Disadvantages:
 One of the main disadvantage of operating budgeting is lack of flexibility and it will not
be beneficial for the organisation.
 Another disadvantages are manipulation and lack of non-financial factors in the business.
 When company prepare the operating budget, they required lot of time, however, they
cannot able to provide too much time for operating budgeting (Soderstrom and Stewart,
2017).
P5. Management accounting system for responding to financial problems
Organisation is using different types of management accounting system for their
business, but some time they are not able to get appropriate resolutions of their issues, however,
they should use some other management accounting system for the enterprise. There are different
types of problems which are facing by the organisation, so they can adapt the effective
management accounting system for their business. It will be very important process for the
business. Other than that, through another adaptive management accounting system, they can
prepare the entire types of report and budgeting report for the business. Along with this, there are
different types of another management accounting system, however, company should adapt the
following system for their business:
Balance scorecard: - This is the effective management accounting system for the
organisation. Balance scorecard is the performance metric used in the strategic management to
identify the internal and external function of the enterprise and their outcomes (Tucker and
Lowe, 2014). Other than that, through this system, company can improve their internal and
external functions and outcomes of the business. In the company, numbers of employees are
working, so they should collect the data of higher and lower performance of the employees.
However, they can know about the productivity of the entire employees. Other than that, balance
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scorecard is used to measure and provide feedback to the company. Through this management
accounting system, company can easily identify the factors of performance and strategies which
can be changed by future scorecard.
Financial governance: - It is important that rules are followed so that adeqaute
information can be obtained. Vectair Holdings should use this types of management accounting
system for their business. Through financial governance, company should keep the all data and
documentation which is required in the company according to government (McLaren and
Mitchell, 2016). There are different types of rules and regulations of the law and government,
however, they should follow the entire rules and guidelines of the government. Through this
system, company can get the number of benefits. They can secure the all financial processes, and
regain trust stakeholders in company. Vectair Holdings should use the financial governance in
appropriate way, so they will not face the problems related to governance and law. Finance
governance is the necessary process of the organisation, however, they should prepare all
documentation and follow the rules and regulations of the law and government.
CONCLUSION
Hereby it can be concluded that such information is useful for management to take
certain internal decisions which are utmost important for the betterment of Vectair Holdings.
This information enhances quality of operational activities in the firm. Moreover, present report
highlights several budgeting costing and planning tools which are relevant for the business to
perform well in anticipation of future aspect. Balanced scorecard is useful tool for the
management to assess efficiency of employees in the organisation. Costs are determined with
much ease by using various techniques and as such, control is initiated so that expenditures do
not exceed revenue. Marginal and absorption costing is being analysed for the current period and
net profit has been ascertained quite effectively. It can be concluded that management accounting
information is useful for taking better and effective decisions in the organisation to achieve high
level performance.
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