Management Accounting and Different Types of System

This document provides an overview of management accounting and its different types of systems. It discusses the advantages and disadvantages of each system and explores techniques for cost analysis and planning tools used for budgetary control. The document also highlights the importance of timely production of accounting information for both internal and external stakeholders.

Management
Accounting

Contents
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
P1 Management accounting and different types of system....................................................4
P2 Explain different methods of management accounting report..........................................7
M1. Evaluation of benefits of various management accounting systems..............................8
TASK 2............................................................................................................................................9
P3 Techniques to do the cost analysis for the formulation of income statement...................9
M2 Management accounting techniques and financial reporting documents......................10
TASK 3..........................................................................................................................................10
P4. Advantages and disadvantages of various planning tools used for budgetary control...10
M3 Analyse the use of different planning tools and their application for preparing budgets and
forecasts................................................................................................................................11
TASK 4..........................................................................................................................................12
P5. Organisations adapt management accounting systems..................................................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16
TASK 1............................................................................................................................................3
P1 Management accounting and different types of system....................................................3
P2 Explain different methods of management accounting report..........................................6
M1. Evaluation of benefits of various management accounting systems..............................7
TASK 2............................................................................................................................................8
P3 Techniques to do the cost analysis for the formulation of income statement...................8
M2 Management accounting techniques and financial reporting documents........................9
TASK 3............................................................................................................................................9
P4. Advantages and disadvantages of various planning tools used for budgetary control.....9
M3 Analyse the use of different planning tools and their application for preparing budgets and
forecasts................................................................................................................................10
TASK 4..........................................................................................................................................11
P5. Organisations adapt management accounting systems..................................................11
CONCLUSION..............................................................................................................................13

REFERENCES..............................................................................................................................15
Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
P1 Management accounting and different types of system.............................................................1
P2 Explain different methods of management accounting report....................................................4
M1. Evaluation of benefits of various management accounting systems........................................5
TASK 2 ...........................................................................................................................................6
P3 Suitable techniques of cost analysis to formulate income statement .........................................6
M2 Management accounting techniques and financial reporting documents..................................7
TASK 3 ..........................................................................................................................................8
P4. Advantages and disadvantages of different types of planning tools used for budgetary
control..............................................................................................................................................8
TASK 4..........................................................................................................................................11
P5. Organisations adapt management accounting systems............................................................11
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................17

INTRODUCTIONThe
accounting is referred as the recording, analysing and summarising of the data which can
evaluated in the present and which is wholly based on the past activities of the business. The
accounting thus can be considered as the most important term in managing the effectiveness in
the business as with the help of old recorded accounts and information the organisation
formulates its planning and futuristic operations of the company. Thus in managing a firm and
controlling, monitoring, recording the overall transaction in the management of the company is
termed as the management accounting. There are multiple kind of management accounting that
are devised as per the need of the organisation.. thus it can be ascertained that the management of
accounting certainly responsible for the planning, controlling, directing and recording of all the
financial as wells non financial transaction in the firm. In this project report the main elements
and types of different management accounting along with their reforms are discussed. The major
concept of relating the company with the certain type of accounting, the advantages and
disadvantages are also elaborated in the report. Further more the type of issues that a company
faces in the accounting and other procedure, their evaluation and proposing the right set of
solutions to overcome such problems are discussed .
Management accounting is also termed as a managerial accounting system. There are
different types of Management accounts and reports that are required by a manager in order to
make their day to take decisions best effective way and formulate short term and long term goals
(Adler, 2013). This form of accounting system is mainly useful to make decisions internally in a
business organisation that mainly includes financial and non financial form of information’s.
There mainly is no particular time to formulate and use which forms of managerial report
business organisations can utilise this as per their requirement. This accounting system is
somehow different from a financial accounting system as it aid in internal aspect of entity. In
order to effectively understand practices and concepts of Management Accounting Excite
Entertainment Ltd is being used in the report. This project covers formation relating to concept
of management accounting along with its benefits. In addition with their different forms of
managerial techniques reports covered in this report. Advantages and disadvantages are covered
in this report which describes the manner in which organisations can effectively resolve their
financial issue and stimulate their performance.
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TASK 1
P1 Management accounting and different types of system
Management Accounting:
The management accounting is itself a combination of two main factor and function. The
main terms in which they are devised can be ascertained as it is mainly a accounting system that
is an integral part in the business and its management which contains more operations and
activities other then the basic responsibilities of the accounting. The formulation and study of the
managerial report are also a part of the management accounting along with that it does it does
impacts on formulation of the certain planning and determining the right set of policies and
principles which can be used to attain the maximum number of profit for the firm. The
management accounting system are significantly holds dynamic kind of reforms in the company
that is used to evaluate and study of the elements in each and every department to make the
company more strong and enabling it to achieve the organisational objectives and goals in terms
of high revenue earning. The most effective system of the management accounting is defined
here by as follows :-
Management accounting is a formative accumulation of two words that are management and
accounting. It is an accounting system that is mainly related to business management internal
part. Management accounting is mainly aid in formulating managerial reports that are required
by an organisation in order to formulate plans and policies for the future purpose. Organisations
are not bound to maintain a accounting system as it is wholly depend on their actual requirement.
Moreover, accounting system hold its own importance within business organisation and some of
the major effectiveness are mentioned below:
Cost Accounting System: The cost accounting system majorly emphasis on the
monitoring and recording of all the transactions out flows that have been made out in respect to
complete the tasks and activities and all process to manufacture and delivering the product and
services to its consumers. Thus the cost of any product, procedure, task and operation is certainly
derived and planned with the help of cost accounting system. The cost accounting system is the
basic foundation in determining the cost and prising factor. Along with this it certainly plays a
major role in the business in evaluating the proper need of the finance for any activity. It helps
in creating, forecasting and comparing the estimate for any cost in curing task in the
organisation.
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This system of accounting is mainly a form of system which effectively aid in evaluating cost of
products within all the form of cost are included such as variable, fixed etc. It is essential for
organisations to have proper and appropriate estimation of their products and services cost as this
estimation of cost will effectively help them to check their overall ratio of profit and loss of a
products and services. Excite Entertainment Ltd take effective advantage of accounting system in
order to properly check their different types of cost of financial products and services. It will
directly help them to focus on their services and products section that hold more beneficiaries to
company.
Direct Cost: These types of cost can effectively be traced to a particular cost centre such
as, department, product, process etcThe direct cost is understood as all the direct expense that
has been made on the completion of any task and . the product directly. This cost is measurable
significantly before and after the expenditures.
Standard Costing: The standard cost system is the measurable outcome which is derived
from the comparison of actual cost that has been incurred in the execution of plan and the
estimated budget of the cost. It helps in evaluating the los and profit margin from the
organisational objective and helps in setting up of standards regarding the expenses by
understanding the actual differentiation .
It is a type of costing system which is mainly related to evaluation of variance in between
estimated and actual cost. This mode helps an organisation to effectively aware about cost
difference.
Price Optimisation System: This is the another form of management accounting system
in this system the major elements that effects the prising of any product or services are
considered. The discussion of pricing is thus supported by the accounting system particularly.
This accounting give a proper framework to decide the price and give all the rational to the
management in the confines of an organisation to determine the overall and maximum price for
any good or service.
This form of accounting system effectively provides a formative framework which helps to
determine price of a service and a product which is more suitable for organisation and
consumers. This will automatically aid in effective evaluation and review of consumer
perceptions at a different price range. The major purpose of price optimisation accounting system
is to effectively offer various factors that will help to set price. Excite Entertainment Ltd is
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taking effective advantage of this accounting system to set their price which is both beneficial for
customers as well as organisation.
Job Costing System: The job costing system defines all the step that will be incurred
while executing the task in the organisation to achieve the goals and objectives. Thus for an
instance to manufacture a product in the organisation there are various steps will be involved
from collecting the raw material to its marketing and distribution to the retailer. In the job
costing system all the elements that will be incurred to perform and execute each step in the
formation and production of the product will be evaluated and the job costing will be measured .
this accounting systems helps in estimating the overall cost that will be expensed in different
kind of jobs.
This accounting system includes formative calculation of total cost that occurs within the process
of providing services and product and distribution of cost to each and every individual unit
relating to products and services (Tucker and Lowe, 2014). Job costing method is mainly
effective in that form of organisations that provide different types of multiple services and
products. Excite Entertainment Ltd offer different types of financial products and services. Thus,
it is essential for entity to make proper estimation of each and every individual unit cost. Within
this situation, job costing system effectively aid in evaluating cost of numerous form of financial
services and products.
Inventory Management System: The inventory manage system is refer to the
monitoring, calculating, organising and planning of all the stock in the ware house that will be
essential in the trading of the organisation in decent amount. The inventory management also
helps in analysing the financial status of the respective product and services of the company in
the market it help in understanding the demand and need of the products and maintaining the
effective flow of supply. The inventory management is also responsible for the reporting the
important information regarding the lack of any product or over stocking (high availability) of
any product. The concept of cost thus can be analysed with the term FIFO and LIFO which
basically states the principles of first in first out and last in first out both are different form each
other in the manner of delivering and collecting the offerings of the company. In the context of
inventory management system The LIFO is termed as the last articles are needed to be sold in the
first place. Thus FIFO is known as the selling of those goods in the first series which came in the
first time. The other significant method in the inventory can be used as the weighted average
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method. In this method cost of goods that are available for sale are divided by total number of
units available.
It is one of the most important forms of accounting system which is mainly relating to tracking
products and services. This system will effectively aid organisations to check and evaluate their
availability of products and services. Inventory management system majorly works in the supply
chain management. Further it helps in analysing financial products and services status. For
instance, if an organisation is required to track their mortgage loan's clarification thus with the
help of inventory management system they can effectively check status of that service.
Formative concept of cost can effectively be understand with the help of FIFO( first in first out)
and LIFO( Last in first out). In this, LIFO states that inventory that comes last are required to be
sold first. While, FIFO termed inventory those who first come are sold first. Along with this,
weighted average method also proves to very effective in order to manage inventory. In this
method cost of goods that are available for sale are divided by total number of units available.
Financial accounting system- The financial accounting is the basics form of accounting where
the accounting is associated as the recording, segregating, analysing and summarising of all the
financial transactions and other events and elements of finance in the organisation. the financial
accounting is based on preparing and presenting the financial statements comprising of all the
financial details of the company for a particular time of the business. The financial statements
thus helps the business to understand the position of the firm and analyse all the flows , earning
and losses of the firm in the market. It does act as the effective measure top monitor and plan the
financial activities of the company in the present as well as for the futureThe financial
accounting system may be defined as a kind of accounting system which is related with the
preparation of the financial statements that provides the financial information to the
organisations (Edwards, 2013). Eventually, this accounting system is compulsory to implement
in all kind of the companies.
(B)Advantage of timely production of accounting information to both internal and external
stakeholders.
The accounting informations are very important for both to the internal and external
holders (Comyns, Figge, Hahn, Barkemeyer, 2013). Herein, the importance of accounting
information is mentioned below:
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For internal users- The accounting informations are beneficial for the internal users
because on the basis of it, they can make the important decisions. As well as it can help the
internal users like managers in effective management by making policies, plans and strategies on
the basis of relevant accounting information. Herein, the Excite entertainment limited company it
is beneficial for their managers to manage different activities by accounting information.
For external users- Same as the internal users, the accounting informations are useful
for the external parties such as shareholders, suppliers etc. This is why because due to the
accounting information they evaluate the financial condition of the company and make invest
accordingly.
Comparison in between management accounting and financial accounting system:
Basis Management accounting system Financial accounting system
Legal requirement It is not compulsory to prepare
management accounting system. In
this there are no legal requirement.
The management accounting is
prepared for increasing the efficiency
in the management it is the voluntary
function and hence it is not enforced
by the government to implement in
the company.
The financial accounting type
is mandatory for any kind of
business organisation by the
law. Thus in an organisation it
is necessary to practice the
financial accounting
legally.This
form of system include legal
requirement which is required
by an organisation to perform.
Format of presentation This system does not include any
specified type of format.This system
is not limited with one significant
format of presentation as there are
different type of formats which are
used in the management accounting
for the presentation
While, in financial accounting
system it is important to follow
appropriate formatIn the
financial accounting it is
essential to follow the right
and suitable format of
presentation..
Types of data used This form of accounting system This system of accounting
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include both type of data such as non-
financial and financialThe data is
used comes from both the sector i. e.
from financial as well as from non
financial elements.
cover data only in financial
formThe accounting is wholly
based on the financial type of
data..
Area of coverage of
within the organisation
This system of accounting include
organisation internal management
area.The management accounting has
covering of all the aspects within the
internal management of the
organisation.
Financial accounting system
include both internal and
external area.While the
financial accounting does
covers the internal as well as
external sections of the
organisation.
P2 Explain different methods of management accounting report
The management accounting report us a type of informative document which is prepared
with a view to share the relevant data and information. There are multiple methods of
management accounting system to present a report. The management accounting report are
comprised of various statement that help the manger in different department to formulate the
planning and respective working policies. There are different forms of accounting report which is
required by an organisation. Management Accounting play essential role within a company.
tThese types of accounting reports are important within an organisation in order to perform their
internal management business in best effective way. With the help of this report managers can
formulate their decisions and strategies. These types of report cover monetary and non-monetary
aspects of information. Excite Entertainment Ltd prepares certain types of reports encompassing
of essential and effective information from various aspects of the business. These reports are as
follows :-formulates different types of reports which are mentioned below:
Performance report: The performance report is the proper statement that holds the
details of performance and its measures in the organisation, in respect to management accounting
the performance report thus can be stated as the evaluation and assessment of the performance
and qualities of the work of employees and management in the company.
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Performance report effectively measure of performance. In relation with Management
Accounting performance report, it helps in evaluation of performance of an organisation and its
employees. It further helps in reducing complexity in decision with the help of the manager of
Excite Entertainment Ltd can easily able to decide eligible employees for reward. In addition
with their performance report helps company to maintain a regular check on performance of their
employees in order to increase their efficiency.
Budget report: The budget report is also a type of presentation in the management
accounting where this report is used to make a comparison form the planed and determined facts
from the actual expenses and performance standards of the organisation. The budget report states
the estimate for the organisational activities and their execution for the said period of the time. It
is particularly based on the internal factors of the company. The budgets that are presented in the
budget report are considered as the end limit of expensing the unit of monetary elemnt in the
completion of the project in the organisation
This report is an internal Organisation in report which helps management to compare
their performances with actual performance along with this it also helps in formulating policies
and strategies both for present and future purpose. It effectively makes estimations of expenses
income which is related to a particular period of time with the help of the support organisations
can effectively compare their performances and fulfil their actual objectives. Excite
Entertainment Ltd by using battery powered can make proper and appropriate comparison. In
between their actual finance performance with budgeted goals. It further benefits them to make
appropriate and best effective Strategies for future purpose and increase their performances by
maintaining an appropriate and cost-effective budget.
Account receivable aging report: This form of report contains information related to
credit transactions. Account aging report is suitable for those organisations those who perform
their day-to-day transactions. It mainly included benefit for Finance Department to effectively
analyse the amount of money in a market by customers. Along with this report also cover date of
a transaction made that automatically helps in removing the complexities in credit calculation.
Excite Entertainment Ltd appropriately prepare account receivable aging reports which help
them to take their total collections from sellers in customers in bringing transparency within
credit collection from a Marketplace.
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Cost managerial accounting report: The cost managerial accounting report can be said
as the most effective type of report framework that helps in evaluating the profit and loss gained
from various types of activities. In this accounting report the total expenses before sales are
calculated these types of report help the manager to examine the conditions associated with the
sales and marketing of the product. Thus it also clarifies the company regarding the losses and
profits regarding their significant product and servicesEffectively provides appropriate
framework in which an organisation can check the profit and loss made from different types of
activities. It calculate all their expenses before selling and after which helps in further making
competition of the total expense against money earned from selling. Company by using cost
managerial accounting report can determine the expenses in profit if the expenses are more than
selling then it considered in a loss statement why selling money is higher than expenses then it is
profit. Excite Entertainment can take advantage of this report in order to analyse profit and loss
which help them to for the make their business decisions and plans (Hartmann and Young,
2013).
M1. Evaluation of benefits of various management accounting systems.
Advantage of cost accounting system:
 It is multi-dimensional in the organisation as it covers the costing elements of
each and every element from beginning to the end of a products manufacturing.
 It is supportive in building evaluation of products and services cost that offered by
an organisationIt act as a helpful tool in evaluating the cost of any product and
services as with that the company can add the significant rate of profit. .
 Cooperative in discovering causes linked to towering cost taking place in the
practice of offering products and service.
Advantage of inventory management system-
 Inventory management system is advantageous to track products and services
status.it is most beneficial to effectively tracking the record of each and every unit
available and not available in the stock places of the company.
 It helps in saving time and cost.It saves a lot of time, cost and various other
resources
Advantages of price optimisation system-
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 This system help in the decision making of the company regarding the price
distribution of the product. The standard price for any product is not too much and
not too less that can be achieved only thorough the price optimisation system in
the organisation.
 This system benefits and organisation to determine price level that is helpful for
organisation and consumers.
 It provides gives appropriate framework in order tofor the evaluation of e
consumer reaction at various level of pricing.market reaction regarding the price.
Advantage of job costing system-
 The main benefit from the job costing system is its calculations and estimation regarding
the total expenses that will be incurred to accomplish a task.
 Another major advantage of job costing system is that it keeps tracking of the on going
task and the jobs in the organisation that helops the management to effectively monitor
the operations and process
 Benefits in effective assignment and calculation of each and every segment cost in an
individual way.
 It benefits in measuring and tracking overall activities of an organisation specially within
cost occurring activities.
TASK 2
P3 Suitable Ttechniques of to do the cost analysis to for the formulation ofe income statement
Abortion Costing: This method is one of the most effective costing method with the help
of which appropriate calculation of overall manufacturing cost is done. It mainly include
variable and fixed cost. Absorption costing method is also termed as full costing method.
Marginal Costing: In this method of costing variable cost is mainly considered as an fixed
cost are basically considered as an period cost and variable cost as unit cost.
Income statement by absorption costing method:
Marginal costing method- The marginal costing method is a kind of costing method in
which fixed cost is considered as the period cost and variable cost as the unit cost (Talley, 2017).
This costing system is also known by the variable costing method.
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Absorption costing method- The absorption costing method is a type of costing method
which considers both the cost (fixed and variable) as the unit cost The absorption costing method
which is widely used for the cost analysis that is done by calculating both the fixed and variable
cost and taking all the related consideration as a unit itself (Fisher and Krumwiede, 2012).
Marginal costing method- The marginal cost method is an other type of cost analysis method
based on the principle in which the fixed cost is taken as the period cost while the variable cost is
cinsideered as the only unit cost. The other name of this method is the variable costing method
(Talley, 2017).
Income statements of Excite entertainment company for month of may(Absorption costing
method)
Particular Amount(in £)
Sales
Less- Cost of good sold
Gross profit
Less- Selling and manufacturing expenditures
Net profit
120000
60000
60000
-
60000
Income statements of Excite entertainment company for month of may(Marginal costing
method)
Particular Amount(in £ )
Sales
Less- Variable cost
Contribution
Less- Selling and manufacturing expenditures
Net profit
120000
501000
7069000
-
6900070000
Working note*
1. Calculation of sales- 8000*15= 120000
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2. Calculation of variable cost- (Opening stock+ production overhead- closing stock
: 500*6+ 10000*6- 2000*6= 51000)
Income statements of Excite entertainment company for month of may(Absorption costing
method)
Particular Amount(in £)
Sales
Less- Cost of good sold
Gross profit
Less- Selling and manufacturing expenditures
Net profit
120000
85000
35000
-
35000
Working note*
1. Calculation of sales- 8000*15= 120000
2. Working Notes*
Calculation of sales(25*10000) - 250000
Calculation of cost of good sold - 140000
(Direct material+ Direct labour+ Variable manufacturing overhead+ Fixed manufacturing
overhead: 50000+30000+20000+40000)
Calculation of selling and manufacturing expenses - 60000
3. (Variable selling and manufacturing overhead+ Fixed selling and manufacturing
overhead : 30000+30000)
4. Income statement by marginal costing method:
5. Working Notes*-
Calculation of marginal cost of sales - 130000
(Direct material+ Direct labour+ Variable manufacturing overhead+ Variable selling and
administration expenses: 50000+30000+20000+30000)
Calculation of fixed cost - 70000
(Fixed manufacturing overhead+ Fixed selling and administration expenses: 40000+30000)
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6. Interpretation: As per the above mentioned report, it is evaluated that
within both method of costing, entity is gaining net income in a equal manner.
While in the absorption method, 50000 is the net income along with the same in
costing method.
7.
8. Income statement by absorption costing method (When 5000 units
sold)
9. Income statement by marginal costing method( When 5000 units sold)
10. Interpretation: As per the above mentioned numerical, it has been
evaluated that, entity is facing loss form both of the costing method. Within
absorption method, 75000 is net loss along with 75000 same amount of loss in
marginal costing.
11.
12. Financial reporting document with labour and material variances:
2. Calculation of cost of good sold- (Opening stock+ production overhead- closing stock:
500*10+10000*10-2000*10=85000)
M2 Management accounting techniques and financial reporting documents
The management accounting techniques are the most effective tools and can be said as the
tactics that are used by the managers in order to record and evaluate the financial and non
financial; elements of the organisation in its internal environment. There are certain documents
that are required by the organisation in order to complete its working. The main documents
among them are P&L, trading account and balance sheet and so on.
Management accounting techniques acts as an one of the most important tool which helps in
creating financial statements and reports. Organisations are require to effectively prepare and
formulate financial documents that include, P&L and balance sheet and more with the help of
accounting tools and techniques. Accounting tools effectively provide appropriate tools and
accounting techniques that are mainly required to frame financial reports (Renz, 2016). Excite
Entertainment Ltd. Appropriately formulate financial statements by taking help of various forms
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of accounting methods and techniques as in order to get effective financial data in order to make
financial statements that are available through management accounting tools.
TASK 3
P4. Advantages and disadvantages of different typesvarious of planning tools used for budgetary
control.
Budget:
It is a formative plan in a monetary term. It is a pre-determined statement of a particular
period of time. It provide a standard with the help of which organisation can measure their past
performance with present. Within Excite Entertainment Ltd. Management effectively designed
budget in order to analyse organisation financial nature for a specified period of time. The budget
can be said as the preparatory document which is formulated for determining the use of the
monitory resources in the organisational activities either for the business operations or for the
essential expenses. There are various methods which can control the budgetary elements in the
firm
Sales budget:
The sales budget is associated as the planning of sales of particular product or services
within the organisation for a specified period of time. In relation to Excite Entertainments Ltd.
the main profit and loss evaluation is based on its sales budget. It is mainly a plan that include
estimated amount of goods and services that are required to be sell by an organisation in a
marketplace within a specified period of time. In context with Excite, sales budget cover overall
income form sales.
Advantage:
 The sales budget helps in formulating the plan and estimate of the sales to achieve the
profitability in firm.It is important in order to formulate sales programming as to achieve
sales objectives.
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Disadvantage:
 It is a tome consuming procedure and sometime become hard for organisation individual
to accept.The major drawback is that it is a time taking process.
Production budget: The production budget is considered as the type of financial plan which
undertakes all kind of activity and related expenses that takes place during and before the
production in the firm.
It is a financial plan that include estimated number of units that are required to be manufactured
in a course of time. This budget is framed by managers on order to effectively monitor the
amount of units required to be used for effective accomplishment of goals.
Advantage:
 Within Excite Entertainment, the production budget helps in achieving the target of firm
by using the minimal resources and giving the optimum outcome form them, it is
essential to reduce cost of production in order to maintain proper balance in inventory
section for this production budget proves to very effective in order to control cost of raw
material.
Disadvantage:
 It is complex process and have lack of flexibility as variable in this continuously keeps on
changing. The process is quite complex, along with that the production budget is also
very rigid as the viable cost of different elements are changeable as per the market
conditions
Cash Flow Budget: Within ExciteThis type of budget is formed by considering all the types of
inflow and outflow of cash in the company. , this termed as an total estimation of inflow and
outflow of cash for a specific period of time.
Advantage:
 It helps on monitoring cash as to use that in other essential activities.The cash is
effectively monitored by the firm with the cash flow budget,
Disadvantage:
 There is a lack of flexibility in this and it is a time consuming procedure. The cash flow
budget is less beneficial as it does not help in increasing the flexibility with the cash in
the firm.
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M3 Analyse the use of different planning tools and their application for preparing budgets and
forecasts
Budget Variance:
It is a differentiation among budgeted or baseline amount which is related to expensed
and revenue (Lee, Pujowidianto, Chen, Yap, 2012). It is an effective measure that are formed by
managers to evaluate difference in between actual figures against budgeted.
Advantage- On the basis of budget variance, organisations can see the actual level of
performance between the actual and estimated value. As well as due to this companies can
evaluate the difference between the estimated expenses and actual expenses. Herein, the context
of the Excite entertainment limited company, the budget variance helps them in measuring actual
performance by comparing actual data with the estimated data.
The use of different planning tools and their application to prepare and forecast budgets.
Budgetary control is utilized by the directors to screen and control the finance related activities
like expenses subject to a particular accounting duration. It is a strategy, which assist in figuring
the future financial requirement to execute operations by dividing the past budgetary plans. Such
planning tools provide an estimation of earnings and costs with organisation for a particular
budgeting period (Kotas, 2014). Apart from financial position in the business environment also
be more contingent. It encourages the senior level directors to oversee the work and the
execution of activities in such a way in which organisation make more benefits. The supervisors
of Excite Entertainment Ltd think about different elements to set budgetary and non-financial
aim to control and coordinate financial exercises inside different sectionThe different course that
are essential in the formation of planning and control of the budget are called as the tools by
which the management formulates the most effective plan and estimate the budget for the various
departments and organisational activities. These tools are described as follows :-s.
To determine the effectiveness of planning tools used in budgetary control various type of
planning tools with advantages and disadvantages are defined as follows :
Forecasting tool: The forecasting tools is associated with the anticipating of upcoming
activities and events of the business . The forecasting tool is used to determine the certain
possibilities of the futuristic outcome of the activities and operations of the business by
evaluating the past records and figures of the business. In context to Excite Entertainment Ltd.
The forecasting tool will be utilized by breaking up the fiscal elements in the organisational
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aspects. The benefits and the drawbacks of the forecasting tool in relation to the Excite
Entertainment are as follows :- It assist in anticipating upcoming events and circumstances by
examining the trend in time duration (Schaltegger and Burritt, 2017). Forecasting tools are
utilized to estimate the results and cautious planning based on past data just as circumstance
within the organisation. This also helps in determining method to help the directors of Excite
Entertainment Ltd to guide and analyse the future need and necessity by breaking down the
fiscal reports. Following are some advantages and disadvantages of forecasting tools as follows:
Advantages: The benefits of estimating apparatuses are as per the following:
• Excite Entertainment Ltd Limited can be beneficiated by keeping its customers
conscious through giving them the evaluated suppositions dependent on their
budgetary reports.
• Forecasting tool can maximise the profit capability of organisation by defining better
management by thinking about the important financial dataThe forecasting tool will
be beneficial for the company in formulating the strong planning and budget
estimation for the business and for its effective survival and growth in the market..
Disadvantage:
Various inconveniences related with forecasting tool used as portrayed:
• There is a risk with the forecasting as it does not give any surety with the continuous
changing environment of the market
It is crucial in contingent situations for the managers of Excite Entertainment Ltd Limited to
anticipate the exact future and in like manner planning plans.
• The data gathered by the directors of chose organisation from various divisions may not
be appropriate for making systems and projects for future activities.
Contingency tool: The contingency tool is associated with the contingency planning
which means in the contingency plan it constitutes the major courses of action that is based on
the solutions to the threats of various kind of adverse condition that can affect the business with
any kind. The contingency tool emphasises on the negative circumstances that might happen in
the time of executing the operation or even after that . Along with that it does contain the
methodologies, back up plans and timetables to dispose of the complexities. The advantage and
disadvantage of this tool s as follows
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Contingency planning is an instrument that helps in building up of different plans, systems to
conquer certain issues emerging at the work place. This tool is utilized to look out different
threats related with abrupt or inadequate circumstances in the organisation. This kind of planning
approach helps Excite Entertainment Ltd Limited to deal with different back up plans,
methodologies and timetables to dispose of the complications in recording day by day
transaction along with navigate negative circumstances in the association.
Advantages
 This planning tool benefits the chose association by limiting the odds of dangers,
misfortunes and disappointment by planning powerful back up plans (Kokubu and
Kitada, 2015).
 It helps in tending to and taking remedial activities against any sudden issues in Excite
Entertainment Ltd Limited. The contingency planning has its significant benefits mainly
it is capable of handling the certain issues that may be emerged as a problem for the
organisation.
Disadvantages: The hindrances of Contingency planning tools is as follows:
Reinforcement plans in serious situation remain silent that can prompt conflict among the
administrator to manage individual circumstance.
This includes immense expense to analyse period accepting procedure, prior approval from
supervisor remain required in this case.
 The contingency planning is a time taking prices it does need a specialised manger and
planner to ensure the effectiveness of the plan. Thus it also becomes as most cost taking
process.
TASK 4
P5. Organisations adapt management accounting systems
Financial problems: The financial problems are referred as the lack of proper financial
resources in the organisation. That restricts to practise of essential task and activities in the
company due to low availability of cash and monetary terms. The Excite Entertainment Ltd
makes an assortment of provisions by which financial problems can be dealt with.
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The financial pressure which is suffered by organisation to meet their basic needs is referred to
as financial problems. There are different difficulties and issues which creates direct impact on
profitability as well as operational efficiency within organisation. Different stages are created to
overcome various issues by which efficiency can be attained with respect to profits. The Excite
Entertainment Ltd makes an assortment of provisions by which financial problems can be dealt
with.
Calculation of contribution per unit-
Selling price per unit
Less- Variable cost per unit
40
10
Contribution 30
Some of the financial problems which are associated with this are mentioned below:
Interpretation: As per the above mentioned calculation, it has been evaluated that organisation
selling price is 40 Euro.
 Calculation of break even point- Fixed cost/ contribution per unit
120000/30= 4000 (in units)
 Calculation of cost volume profit analysis- Fixed cost+ desirable profit/ contribution
(120000+60000)/ 30= 6000 units.
 Profit at the sales of 4000 units-
Sales (4000*40)
Less- Variable cost (4000*10)
Contribution
Less- Fixed cost
Profit/ loss
160000
40000
120000
120000
0
 Profit at the sales of 6000 units-
Sales (6000*40)
Less- Variable cost (6000*10)
Contribution
240000
60000
180000
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Less- Fixed cost
Profit
120000
60000
Advice: Company is required to sell 6000 units in order to get desirable profit. In addition with
this, organisation sell estimated amount of 6000 units by doing this they can able to effectively
earn approximate amount of 60000 profit.
 Problems of cash flow: These problems within organisation arise when they do not
necessary cash by which they can pay for their liabilities. The major reason behind this is
that profits earned by them can be low or they might be at more losses. Excite
Entertainment Ltd face this problem as they are more concerned about marketing of their
brand on which they spend heavy amount due to which they cannot pay back to their
creditors. Furthermore, some expenditure occurs in form of taxes which are being paid to
government, employees and many other factors.
 Risk management:Another major factor which is necessary for sustaining within
competitive environment is management of unidentified risks which are involved in the
organisational activities in terms of their performance. All organisations have designed
their own strategies by which they eradicate the risks which are related in their
operations. Risky situations often lead to instability as well as financial uncertainty in the
performance of employees. The Excite Entertainment Ltd Limited has designed policies
through which they can these risks but it is always not possible to succeed.
 Money management:It is a technique which is associated with spending, budgeting,
saving and tracking the monetary resources which are possessed by organisation. It will
assist organisation to make effective use of resources by which they can attain enhanced
profit. Excite Entertainment Ltd have created different provisions by which they are able
to manage money in appropriate manner within different departments.
 Working capital:It refers to money which is available with organisation for carrying out
their day to day operations with respect to their financial liabilities. In shortage of such
capital, organisation undergoes various problems. The Excite Entertainment Ltd may face
problems like lack of working capital, shortage of debts which creates a strong impact on
everyday operations.
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Financial governance: The financial governance is the way to manage, monitor, control and
collect all the information of the finance related operations in the firm. The financial governance
helps in assisting the management in order to make it more stable and effective that it can take
the necessary decisions in the way to attain the goals of the organisation. A way in which
organisation makes collection, management, monitoring and control operations related with
financial information is known as financial governance.
Good financial governance assists in management of challenges by taking into consideration
future perspectives (DRURY, 2013). Higher managers are responsible for controlling the
financial statements of Sunrise Energy.
Management accounting approach:Itapproach: The management accounting approach is
considered as It is defined as a use of accounting techniques which assists in resolution of
problems which occurs within organisation.
This approach provides exact information to managers as well as employees related with
efficient use of organisational resources which are available.Excite Entertainment Ltd resolves
their financial problems by using right technique. Some of the approaches are provided given
below:
 Key Performance Indicator (KPI):It is used to determine the performance of
organisation by doing making the comparison with other organisations companies for
the purpose to attain short and as well as long term goals. Effectual KPI leads
organisation to focus on business functions as well as processes. This approach is
considered as an essential tool for measurement of progress by which strategic goals and
target performance can be attained. KPI technique benefitsExcitebenefits Excite
Entertainment Ltd to formulate and make comparison in their standards to measure their
goals, performance and progress of organisation.
 Benchmarking:It is a technique which is used by an organisation for measuring the
performance with respect to their different competitors (Renz, 2016). The organisation
needs to make comparison by considering different factors such as quality, program,
strategy and measures with respect to various organisations to identify alterations and
improvements in requirements. This approach is used to determine the opportunities for
enhancement and to eliminate the gap with respect to other competitors by monitoring
21

their day to day performance. This approach focus to define and interpret , measure and
interpret the individuals, group and organisations performance towards their objectives.
Comparison amongExcite Entertainment Ltd and Brightstar Financial Limited.
Basis of Difference Excite Entertainment Ltd Brightstar Financial Limited
Problem The major problems which are
faced by Excite Entertainment Ltd
Limited are ineffective or poor
management of money. There
revenue is short with respect to
their expenses. These problems
create unconstructive affects on
working of organisation. Therefore,
the selected organisation is going
through different issues which are
related with lack of working capital
or inadequate money to meet their
expenses.
The problem through which
Brightstar Financial Limited
undergoes is problem and risk
management of cash flow. This
organisation fails to formulate
as well as analyse strategies
which are associated with
reducing the uncertain risks.
Approach The organisation must overcome
these problems for this they can
make use of Key Performance
Indicator for doing comparison and
formulating effectual strategies
against their competitors by which
they manage their money as well as
working capital (Ward, 2012).
Brightstar Financial Limited
has opted to make use of
benchmarking to build reports
associated with risk
management and formulation
of strategies for managing their
working capital to eliminate
the competition among their
competitors.
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CONCLUSION
As per the above mentionedAccording to the above findings in this report it hasit can be
concluded been concluded that, Management Accounting is a acts as a most essential and
effective element to be practiced in the within organisational boundaries and in the management
of various department as each and every department of the company is linked and depended on
the finance. The management accounting system is most helpful in the determination of all the
important policies in the organisation as well as in the decision making of small to large factors
in the company. The management accounting does emphasis on the financial aspect within
the organisation and all the non financial elements which do have any meaning for the firm are
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recorded in the significantly separate books of the company s with the help of which they can
effectively achieve their goals and objective. Management system consist different types of
elements such as price OPrice optimisation system, cost accounting system, inventory
management system and job costing system. are the types of system of management accounting
system.All the systems are effectively helps an organisation to accomplish their predetermined
targets and goals. In addition with this report covers different types of techniques that can be
used by an organisation to prepare their income statements. While ith the help of there are
different types of planning tools like contingency planning, forecasting tool and flexible planning
a company can perform their roles in effective manner and can identify their issues. In addition
with their with the help of different type of approaches like API and benchmarking with the help
of which organisation can resolve their problems relating to financial and attain sustainable
success.
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