Accounting Research and Literature Review

This assignment involves a comprehensive review of recent management accounting research papers, including topics such as innovation in management accounting, sustainability assessment, and digitalization. The list of references includes various publications from 2015 to 2018, covering journals like Management Accounting Research, Journal of Cleaner Production, and Accounting Horizons. The assignment requires careful analysis of the provided papers and literature reviews, with a focus on identifying key themes, concepts, and methodologies in management accounting research.

MANAGEMENT
ACCOUNTING

INTRODUCTION
The management accounting can be defined as a type of accounting system that involves
monetary and non monetary information which becomes basis for internal decision making
(Bennet and James, 2017). Eventually, this accounting system has a significant role in the
internal management of the organisations. Herein, the project report Excite Entertainment Ltd.
company is selected who is a client of a leading accountancy firm. The company deals in
promotion of concerts, festivals at different locations of UK. Additionally, basic aim of the
project report is to provide detailed information about the various kind of management
accounting system as well as about methods of management accounting reporting and role of
management accounting in solving the financial issues. Apart from it, project report consists
information about income statement of Excite entertainment limited company from both the
methods including absorption and marginal costing method.
TASK 1.
Section (A) Explanation of the management accounting system.
(a) Comparison of management and financial accounting system.
Management accounting system- It is also known by the managerial accounting system.
Generally, management accounting system is related to the collecting, reviewing and interpreting
the needed information for internal management of the businesses. (Bromwich and Scapens,
2016).
Financial accounting system- It is a type of accounting system which contains financial
information and prepares the various financial statements for internal and external users.
Comparison of management and financial accounting system:
Basis Managerial system Financial accounting system
Legal
requirement
It is not compulsory to prepare. There
are no any legal requirement of this
accounting system.
While this is a legal requirement of
the firms. It is necessary to prepare by
the companies.
Format of
presentation
This accounting system does not
consists any particular format of
presentation of reports.
On the other hand, this accounting
system requires to follow a particular
format to present the financial

information.
Types of data
used
The management accounting system,
use both kind of data including
financial and non financial
information.
While financial accounting system
includes only financial data to prepare
various kind of statements.
Area of
coverage
within the
organisation
Management accounting system
focuses on internal part of the
businesses.
While this accounting system covers
both the are including external and
internal.
(b) Cost accounting system- It is a type of accounting system that is related to the estimating the
overall expenses that occurs in procedure of service or product offering. It consists different
kind of costs like direct cost, standard cost, process cost etc. This accounting system can be
beneficial for the Excite entertainment limited company for computing the overall cost in the
promotion of different kind of events. Some example of cost accounting system are mentioned
below:
Direct cost- These costs are kind of costs that can be directly traced to particular cost centre like
product, process, department etc.
Standard costing- Standard costing is a kind of costing system that involves analysis of variances
between actual and estimated costs. Due to this costing system companies can evaluate the level
of difference between actual and standard cost. Due to this costing system the Excite
entertainment company can aware about the difference of cost. Eventually, if actual cost occurs
low in compare to the estimated cost then it would be beneficial for the company.
(c) Inventory management system- It is a kind of accounting system which involves tracking of
inventory levels, sales, orders, deliveries etc. The Excite entertainment limited company may
apply this accounting system to manage their different media assets as well as due to this system
they can assess the need of purchasing new gadgets. The concept of inventory management
system can be understand by LIFO and FIFO methods. LIFO(last in first out) means the
inventory which comes in last that should be sold first. On the other hand, FIFO(first in first out)

defines that stock which comes first in the store, should be sold out first. As well as weighted
average method also useful in the inventory management. Eventually, inventory management
system consists a formula which is as follows: Cost of goods available for sales/ number of units
available for sale. Herein, this method the cost of goods available is the total of beginning
inventory and net purchase.
(d) Job costing system- It is a system of collecting the information about the cost that is related
with a specific job (Chenhall and Moers, 2015). For example the Excite entertainment limited
company can use this costing system for determining their cost by calculating the cost of each
job which is assigned in various activities.
Management accounting system's advantages:
Different systems of this accounting are beneficial for the companies. Like the Excite
entertainment limited company use various kind of accounting systems whose benefits are
mentioned below:
Accounting system Benefit
1. Cost accounting system It is beneficial in calculating the overall cost. Like in the Excite
entertainment limited company, they take the advantage of this
accounting system in computing their total cost in performing
various events and festivals. Additionally, this system includes
many costing system like direct costing, standard costing etc. Direct
costing helps to the company in calculating the cost which can be
traced directly to a particular area. As well as standard costing is
beneficial in analysing the variance in actual and standard cost. For
example if Excite entertainment limited company estimates the cost
of £50000 for an event and their actual cost occurs of £ 60000.
Herein, this situation standard costing can helpful in analysing the
variance (£10000) between actual and estimated cost.
2. Inventory management
system
This is important for effective management of available stock in
the warehouses. As well as it saves the time and cost of

organisations. For example in Excite entertainment limited
company, they manage their media gadgets with the use of this
system. Like they can check that how many instruments are in use at
different locations as well as how many are stored in the stock.
3. Job costing system It is useful in computing the cost of each job assigned to a certain
activity. Eventually, this is useful in the manufacturing industry. For
example the Excite entertainment limited company can use the
benefit of this costing system by calculating cost of each job
associated in any event or function.
Section(B) Various kind of methods used for management accounting reporting.
Management accounting reports- Management accounting reports are those reports that
are prepared with the use of monetary and non monetary information to make the interim
decisions for the organisation. Herein, the Excite entertainment limited company, they prepare
different kind of reports which are as follows:
 Cost managerial accounting reports- Cost managerial accounting reports are those reports
which consist information regarding to the different costs that incurs due to various
activities. These reports are beneficial for the companies to know detailed information
about the cost as well as due to this costs can be control (Maas, Schaltegger and Crutzen,
2016). Like in the Excite entertainment limited company they prepare the cost
managerial accounting reports to analyse overall cost of arranging any event or show.
 Budget reports- Budget reports are those reports which contains information regarding to
the actual income, expenses and estimated income, expenditures. Eventually, these
reports are beneficial in measuring the actual performance by comparing actual income
and expenditures with the budgeted targets. Excite entertainment limited company makes
these reports to evaluate their actual level of performance.
 Performance reports- As the name assists, the performance reports are the reports which
includes information related to the performance of different activities of the organisation.
Basically, performance reports are useful in measuring the actual performance of
company to make further decisions. As well as it is beneficial for the external parties to

know about the company's performance. The Excite entertainment limited company
prepares this report to evaluate their actual performance.
 Inventory cost reports- The inventory cost reports consists the detailed information about
the cost which occurs in storage of stock and material. This report includes cost like
ordering cost, carrying cost etc. As well as these reports provide information regarding to
the material available in the stores. These types of reports are important for the
organisations in having the information regarding to the available stock in the
warehouses. In the Excite entertainment limited company, they use these reports for
proper management of costs of inventory and their media assets.
So these reports are being prepared by the Excite entertainment limited company for
efficient management. Herein, it is important to know that these reports should be prepared with
accurate information. This is why because these reports are beneficial for not only to the internal
users but also for external parties like shareholders, stakeholders etc. Due to these reports
external parties can know about the performance of the company. Like performance reports,
budget reports are useful for external users as well as inventory cost reports, cost reports are
needed for internal management.
Evaluation of how Management accounting system and reporting are integrated within
organisational process.
Management accounting system and reporting are integrated with the process of the
organisation. This is why because various kind of management accounting systems are being
used by the departments of companies (McVay, Kennedy and Fullerton, 2016). As well as the
needed data for preparation of management accounting reports derives from the accounting
systems. Herein, the Excite entertainment limited company their different departments use the
management accounting system. Like finance department use the cost accounting system as well
as management department applies the inventory management system for managing the media
gadgets. This shows that management accounting system and accounting reporting are integrated
within the organisational process of the Excite entertainment limited company.

TASK 2.
Calculation of income statement from absorption and marginal costing method.
Absorption costing method- It is a method which is useful for calculating the income
statements (Nilsson and Stockenstrand, 2015). In this costing method, both the costs including
fixed and variable are considered as the product cost.
Marginal costing method- It is a type of method that consider fixed cost as the period cost
and variable cost as the product cost.
Income statements of Excite entertainment company for month of may(Marginal costing
method)
Particulars Amount(in £ )
Total sales (8000*15)
Less- Variable cost
Contribution
Less- Selling and manufacturing expenditures
Net profit
120000
51000
69000
-
69000
Working note*
11 Computation 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)
Particulars Amount(in £)
Total sales(8000*15)
Less- Cost of sales
G.P (Gross profit)
Less- Selling and manufacturing expenditures
120000
85000
35000
-

Net profit 35000
Working note*
11 Calculation of cost of sales- (Opening stock+ production overhead- closing stock:
500*10+10000*10-2000*10=85000)
Management accounting techniques to produce the financial reports.
Management accounting techniques are useful in preparation of financial reports. Herein,
the report the income statement of Excite entertainment limited company is prepared for month
of May. The income statement is prepared by both methods including marginal and absorption
method. As well as both the methods of income statement presenting different net profits. The
sales amount is same in both the method which is of £120000 (8000*15). In the marginal costing
method, the net profit is of £69000. While, in the absorption costing method, the net profit is of
£35000. This is why because the in the marginal costing method, variable cost is of £51000
while in the absorption method, cost of good sold is of £85000. Due to this the net profit is
different. Apart from it, rate is also different. In the marginal costing method the multiplying rate
is of £6 (4+2) and in the absorption costing method rate is of £10 (40000/10000).
Financial reports which accurately apply and interpretation of the data for a range of
business activities.
The Excite entertainment limited company prepares the financial statements with the use
of marginal and absorption methods (Nørreklit, 2017). Eventually, both the methods have some
benefits and drawbacks. The absorption costing is beneficial in preparation of income statements
because it consists both the costs as the unit cost. As well as this method is suitable for the
smaller companies so lower capitalized companies can also use this method. Apart from these
benefits, this method has some disadvantages like it make difficult to calculate CVP analysis.
The marginal cost has the feature of controlling the cost by dividing the cost into fixed
and variable costs. While this costing method has the disadvantage that it becomes unrealistic in
the case of high fluctuation of production.
The Excite entertainment limited company should use the absorption costing method
because it is suitable for them as well as it considered both the cost as the unit cost. As well as,

this costing system is also suitable for smaller organisations so it would be easy for above
company to implement it.
TASK 3.
Advantages and disadvantages of various planning tools.
Budget:
It mentions to a plan that describes in usually pecuniary positions which covers a
particular period of time usually one year or a financial year. According to J.R. Brown and L.R.
Howard, A budget indicates a pre-determined evidence of management argumentation during a
given period which offers a standardized for equivalence with the result actually attained
(Schaltegger and Burritt, 2017). In Excite Entertainment ltd., the management department of the
company design budget fro analysing the financial nature for a predefined period usually for a
period of one year. There are various kind of budgets and some of them are mentioned below
that are commonly used and applied by the management department of this company:
Sales budget- It refers to a program of the measure of products and services that an
organisation require to trade in specific industry in a specific time period and expects to gain cost
and fund from them in term of profit. In Excite, a sales budget include the sales in units as well
as the estimated income from these sales. Without a sales budget, the firm can not track process
or make improvement in process. It can be ideas and program that a firm must develop for
manufacturing and trading of the products or offer services in a specific period.
Advantages
 It is beneficial and useful in formulating sales programming so that the firm can achieve
its sales objectives.
 It is beneficial for allocation of resources to different goods, sales territories and others
for realising the forecast sales.
Disadvantages
 It is time consuming process and easily accepted by the people of an organisation.
 Sales budget can not efficaciously prediction the future ways of events.
Production budget- In Excite Entrainment Ltd., a production budget refers to a financial plan
that consist number of units that are manufactured during a period (Senftlechner and Hiebl,
2015). It can be report which include the number of units that are manufactured by a company in

a particular time period. In this company, this budget is equipped by the superior and senior so
that they can monitor that how many units will need to produce in future on the future
approximation sales numbers. With the help of this budget, managers can get information about
the producing units and those units or products which are required for manufacture so that they
can fulfil consumers demands.
Advantages
 In Excite, it is important for reducing production cost manage or maintain production
units to manage inventory (Shields, 2015).
 Production budget useful and beneficial for making corporeal activity of raw material,
work in progress and finished goods stock.
Disadvantages
 Production budgeting is complex process because when the managers get involved in this
process than they track various production crew.
 In Excite, there are lack of flexibility in this budget because during the manufacturing
process, there are various variable that are changed quickly.
Cash flow budget- In Excite Entertainment Ltd., it refers to an approximation of the cash
inflows and outflows over a particular period of time for a business.
Advantages
 This tool help the firm to monitor whether more cash is maintained that could be
otherwise used in amentaceous activities.
Disadvantages
 There are lack of flexibility and time consuming process such as, this activity include
creating numbers to design budget, commercial the budget numbers and dispense it to the
firm's management department.
Budget Variance- It indicates to the difference among the budgeted or baseline amount
of expense or revenue and the actual amount. In Excite Entertainment Ltd., it refers to a measure
which is used by the managers to specify the difference between budgeted and accurate figures
for a specific accounting category (Shipman, Swanquist and Whited, 2016). In this company
budget variances generates and occurs due to forecasters because they are unable to anticipate
the future costs and revenue with complete accuracy.

Significance of Budget Variance- It is important because it is one where revenue comes
in higher than budgeted or expenses are lower than predicted. In Excite Entertainment Ltd., if the
variances are considered material than they are beneficial for investigating to monitor the cause.
If a material variance continue oven an protracted period of time than the management for the
firm require to evaluate its budgeting process.
The use of different planning tools and their application to prepare and forecast budgets
Budgetary control help in offering a clear images of a company by offering tools and
techniques in form of strategies and policies that are useful for Excite Entertainment Ltd. For
preparing and framing future financial performance and aims by monitoring the past budget.
This kind of control help this organisation to design the outcomes and financial place for similar
future periods by monitoring current and previous budgets (van Helden and Uddin, 2016). The
planning tools for preparation and forecasting budgets are sales, production budgets. Sales
budgets are used to maintain and monitor the sells units of the goods and products that are
produced by the firm. Production budgets are useful for managing production cost and managing
manufacture units that are manufactured in a specific period. These planning tool are used by the
management of the company for prepare and forecast the budgetary activities which are
beneficial for making profit as well as help in developing and maintaining the financial position
in competitive market and atmosphere.
Evaluation of planning tools for accounting respond to solve financial problems.
Planning is helpful in framing plan of action in progression for the future form keeping
fine-textured functioning of the activities and operations of Excite Entertainment Ltd. This
organisation face several issues cause of various unexpected situations (Wood, 2016). The
management department of Excite Entertainment Ltd. Implement different planning tools such as
sales budget, production budget and cash flow statement to forebode and prognostication from
various anticipated issues and problems in order to increase the effectiveness and efficiency or
make improvement in the profitability by resolving its financial hurdles in an effective manner
and way.

TASK 4.
Comparison of organisations to respond the financial issues by management accounting system.
This is useful in solving the different kind of financial issues. Companies use accounting
system on the basis of nature of problem. Herein, the project report financial issue of Excite
entertainment limited company is resolved which is mentioned below:
 Computation of contribution per unit-
Selling price per unit
Less- Variable cost per unit
40
10
Contribution per unit 30
Interpretation- On the basis of above calculation, it has been analysed that company's
selling price per unit is of £40 which is deducted by variable cost to calculate the contribution
per unit of 30.
 Calculation of BEP - Fixed cost/ contribution per unit
120000/30= 4000 (in units)
Interpretation- On the basis of above solved numerical it has been analysed that break
even point is calculated by dividing fixed cost (120000) by contribution per unit (30). Hence the
BEP is of 4000 (in units).
 Calculation of cost volume profit analysis- Fixed cost+ desirable profit/ contribution
(120000+60000)/ 30= 6000 units.
Interpretation- On the basis of this solved financial problem, cost volume profit analysis
is calculated by dividing addition of fixed cost and desirable profit from the contribution. The
CVP is of 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

Interpretation- On the basis of above statement, it can be analysed that if company
sells the 4000 units then they will not be able to gain any profit. As well as there will be zero
loss.
 Profit at the sales of 6000 units-
Sales (6000*40)
Less- Variable cost (6000*10)
Contribution
Less- Fixed cost
Profit
240000
60000
180000
120000
60000
Interpretation- As per the above solved numerical, it can be analysed that company has to
sell 6000 units to gain the desirable profit of £60000.
Advice- As per the above solved numerical, company should sell the 6000 units to
achieve their desirable target of profit. This is why because if they sell 4000 units then, company
does not receive any profit and loss. Apart from it, if company sells 6000 units then they will be
able to earn their desirable profit of £60000 which is mentioned in the above financial statement.
Apart from it, management accounting is also beneficial solving other financial issues
that occurs due to lack of fund. Herein, comparison of two organisations are mentioned below
which states about role of management accounting systems in overcoming the financial
problems.
Financial issue- The financial issue means lack of money to implement all the functions.
Due to this all other activities of the organisations get impact negatively (Otley, 2016). There are
many financial issues some of them are mentioned below:
 Lack of fund- In this issue, companies face the issue of lower fund and because of it
various operations get stuck.
 Spending more then income- If companies continuously spend more and earn less then
after some time period, this arises a big financial issue.
Management accounting methods- There are different type of accounting methods to
solve the financial issues. Some of them are mentioned below:

 Financial governance- Financial governance refers to way which states about the process
through which company manage the financial data and information (Quattrone, 2016).
 Benchmarking- It is a kind of framework which is related to the comparing process, plans
and policies with other companies of environment (.Rikhardsson and Yigitbasioglu,
2018).
 KPI (key performance indicator)- The KPI is a type of method which analyse about the
way in which organisation achieving its goals effectively (Ruch and Taylor, 2015). As
well as it emphasis on focusing those activities which are more beneficial for the
companies.
Basis Excite entertainment limited company Abbott Mead Vickers BBDO
Financial
problem
The company is facing the issue of lack
of fund for implementing other tasks.
Due to this their revenue is decreasing
continuously. The main reason behind
this financial issue is that company's
plans and policies to arrange any
consort or event is not effective.
This company also having the financial
issue of spending more then earning.
The reason of this issue is that their
profits are decreasing by each month
expenditures are increasing
continuously.
Method to
solve
On the basis of above mentioned issue,
their problem can be resolve by
appropriate management accounting
techniques and that is “benchmarking”.
It is a kind of approach which
compares the process and polices with
successful industry of the environment
and then provide guidance to resolve
the issues (Wood, 2016). If above
company applies this method then it
will be easy for them to overcome from
their financial issue by applying
Herein, this situation of the company,
their financial issue can be sort out by
applying KPI (Key performance
indicator). Basically, this method helps
to the companies in focusing those
activities which are beneficial for them.
If above company use this, then they
will be able to earn higher revenue by
investing on wroth-full activities.

accurate plans and policies in
management of their events.
CONCLUSION
From the above information it can be summarized that management accounting play an
essential role in a company by helping in attaining its objectives. It consist various kinds of
systems like cost accounting system, job costing system and inventory management system etc.
there are various kind of documents like execution report, budget report and others are defined in
the assignment in context of selected firm uses for management accounting. The Excite
Entertainment Ltd. applies different planning tools like sales budget, production budget and cash
flow in management accounting and their advantages and disadvantages are defined clearly.
Different conceptualization like benchmarking, KPI are described to firmness the financial
problem in order to attain success.

REFERENCES
Books and journal:
Bennett, M. and James, P., 2017. The Green bottom line: environmental accounting for
management: current practice and future trends. Routledge.
Bromwich, M. and Scapens, R. W., 2016. Management accounting research: 25 years on.
Management Accounting Research. 31. pp.1-9.
Chenhall, R. H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, organizations and
society. 47. pp.1-13.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment,
management accounting, control, and reporting. Journal of Cleaner Production, 136,
pp.237-248.
McVay, G., Kennedy, F. and Fullerton, R., 2016. Accounting in the lean enterprise: providing
simple, practical, and decision-relevant information. Productivity Press.
Nilsson, F. and Stockenstrand, A. K., 2015. Financial accounting and management control. The
tensions and conflicts between uniformity and uniqueness. Springer, Cham.
Nørreklit, H. ed., 2017. A philosophy of management accounting: A pragmatic constructivist
approach. Taylor & Francis.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014.
Management accounting research. 31. pp.45-62.
Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser?.
Management Accounting Research. 31. pp.118-122.
Rikhardsson, P. and Yigitbasioglu, O., 2018. Business intelligence & analytics in management
accounting research: Status and future focus. International Journal of Accounting
Information Systems. 29. pp.37-58.
Ruch, G. W. and Taylor, G., 2015. Accounting conservatism: A review of the literature. Journal
of Accounting Literature. 34. pp.17-38.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Senftlechner, D. and Hiebl, M. R., 2015. Management accounting and management control in
family businesses: Past accomplishments and future opportunities. Journal of
Accounting & Organizational Change. 11(4). pp.573-606.
Shields, M. D., 2015. Established management accounting knowledge. Journal of Management
Accounting Research. 27(1). pp.123-132.
Shipman, J. E., Swanquist, Q. T. and Whited, R. L., 2016. Propensity score matching in
accounting research. The Accounting Review. 92(1). pp.213-244.
van Helden, J. and Uddin, S., 2016. Public sector management accounting in emerging
economies: A literature review. Critical Perspectives on Accounting. 41. pp.34-62.
Wood, D. A., 2016. Comparing the publication process in accounting, economics, finance,
management, marketing, psychology, and the natural sciences. Accounting Horizons.
30(3). pp.341-361.