Management Accounting Report for Capital Joinery: Analysis and Systems

This report provides a comprehensive overview of management accounting, beginning with its definition, relevance, and underlying principles. It then delves into the application of management accounting systems, including cost accounting, price optimization, job order, and inventory management. The report explores various types of management accounting reports, such as inventory management, performance, and product/service profitability reports, highlighting their benefits and integration within an organization. Furthermore, it examines cost techniques, including marginal and absorption costing, and their impact on decision-making. The report also covers budgetary control, different types of budgets, and planning tools used for budgetary control. It discusses financial problem-solving and the application of management accounting tools to address financial challenges, including the use of benchmarking and key performance indicators. The analysis is exemplified by using a case study of Capital Joinery.

Managing Accounts

EXECUTIVE SUMMMARY
Management accounting is a process of collecting, analysing, organizing and representing
information in such a way which useful in take decision and operate business in effective way.
This report is prepared to define how managerial system, techniques tools of planning use to
measure performance and help in decision making process . It is also recognize how various
technique of management accounting useful in solving financial problem.

Table of Contents
INTRODUCTION...........................................................................................................................1
SECTION 1......................................................................................................................................1
PART A...........................................................................................................................................1
Meaning of management accounting. .........................................................................................1
Relevance of management accounting. ......................................................................................1
Principle of management accounting. .........................................................................................2
Benefits of managing accounting approach in business. ............................................................2
PART B............................................................................................................................................3
Meaning of management accounting system. .............................................................................3
Types of system of management accounting. .............................................................................3
Meaning of management accounting reports...............................................................................4
Explanation of various types of reports of management accounting. .........................................4
Benefits of management accounting system................................................................................4
Integration of system of management accounting & its reports..................................................5
PART C...........................................................................................................................................5
Meaning of cost. ..........................................................................................................................5
Explanation of types of cost techniques. .....................................................................................6
Meaning of marginal costing and formulation of its statement. .................................................6
Meaning of absorption costing & formulation of its statement. ................................................7
PART D...........................................................................................................................................8
Impact of techniques of management accounting........................................................................8
SECTION 2......................................................................................................................................9
PART A...........................................................................................................................................9
Meaning of budget.......................................................................................................................9
Types of budget............................................................................................................................9
Planning tools use for the purpose of budgetary control...........................................................10
PART B..........................................................................................................................................12
Explanation regarding financial problem and how organization deal with theses problems.. 12
PART C..........................................................................................................................................12

Application of tools of planning to control financial problem..................................................12
Use of tools of management accounting to respond financial problem.....................................12
CONCLUSION..............................................................................................................................14
REFERENCES................................................................................................................................1
APPENDIX......................................................................................................................................3

INTRODUCTION
Management accounting is define as branch of accounting which applicable in every
business organization. This approach is developed for effectively use profession knowledge in
decision making process. This report is formulated to define relevance of managing accounting.
For this purpose Capital Joinery has been taken. In this report requirement of management
accounting, its principle use of system as well as how cost calculate to determine profit. It is also
measure tools of planning for budgetary control and use of benchmarking, key performance
indicator to overcome financial problem.
SECTION 1
PART A
Meaning of management accounting.
Management accounting: This term define as accounts which formulate for enhance
managerial efficiency of organization by providing accurate and relevant business data. In other
words it is concerned with provide professional knowledge in such a way which beneficial for
management of organization to formulate policies, strategies and take decision to run data to day
business operations (Bloom, Sadun and Van Reenen, 2016).
Relevance of management accounting.
Management accounting approach is useful for run business in systematic way,
management department of Capital Joinery apply this approach for following reasons:
Formulation of plan: With the use of various tools and technique of management
accounting, manager formulate their future business plan on the basis of analysis and observing
the future market conditions.
Useful in take decision: By recognize and calculate cost of each department manager
able to find out which project is much more beneficial for their organization, on the basis of that
they take decision regarding selection of projects or business alternatives.
Measure performance: Management accounting is essential as with the use of tools of
this approach, manager of can evaluate their organizations' financial performance for given time
period which beneficial for identify the position of entity in market.

Principle of management accounting.
While applying approach of management accounting following are some principle which every
organization need to follow, these are define below:
Relevance: It is essential that every information which collect by accountant is relevant
and reliable. As on the basis of data collect from using different managing accounting tools
manager take decision on the basis of observing these data.
Value analysis: Management accounting principle based on the connect that each and
every detail and calculation useful in analysis value of organization (Botzem and Dobusch,
2017).
Communication: This is consider as most important principle of managerial accounting. This
principle states that every information and decision must be communicate in such as way which
help in decision making process. It is easily understand by each department. As well as
information provides by managing reports must be understood by internal & external
stakeholder. Thus manager of Capital Joinery need to formulate reports in such a way which is
easily communicate to every department of organization.
Product & strategies: This principle is useful apply for practical life, t is based on the
assumption is that, product and strategies holds be made in such a way which beneficial to
satisfy customer demand.
Benefits of managing accounting approach in business.
Following are the benefits of applying this approach:
Provides reliability: By using management accounting approach it provide base to
formulate financial statement which showcase relevant and reliable information regarding
financial performance of Capital Joinery.
Raise profitability: On the basis of using techniques of cost calculation manager
recognize which activity or item is the reason of arising of high cost, on the basis of tat manager
formulate polices to cut cost of operating operation which useful in raise profits. By using
effective pricing strategy also beneficial for Capital Joinery to increase their rate of generate
revenue (Bourmistrov and Kaarbøe, 2017).
Better services to customer: On the basis of analysis market condition they analysis
demand of customer and formulate their product design in such a way which helpful in satisfy
their customers.
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Useful to spread business share: On the basis of using effective pricing strategies they
increase their profitability rate and improve quality of product which beneficial in build strong
goodwill which is helpful in spread market share of Capital Joinery.
PART B
Meaning of management accounting system.
Management accounting system: These are consider as system which manager use for
implement strategies and management accounting approach in order to successfully manage
organization (E]Guindy and Basuony, 2018).
Types of system of management accounting.
Following are the system which management department of Capital Joinery implement within
their organization:
Cost accounting system: This system is implement for calculate cost of each business
activity. Manager of Following are the system which management department of Capital Joinery
implement within their organization: use different technique which includes, marginal,
absorption and standard costing to evaluate cost of each business activity which useful in find
out activities which incurred high cash outflow and measure rate of profit (Bakhodirovna, 2019).
Price optimization system:This system help in provide various approach to apply
pricing strategies, manager of Following are the system which management department of
Capital Joinery implement within their organization have option to choose, price penetration,
price skimming, discounting and premium strategy, with the implementation of correct pricing
strategy , they can satisfy their customers able to generate profit (Hörisch, Schaltegger and
Freeman, 2020).
Job order system: Manager implement this system for find out cost required to complete
requirement of order of each job. On the basis of that manager can evaluate time require for
completion of demand of customer and revenue generate from completion of each order of
customer. Theses type of system useful for organization which work on the basis of demand of
different customer (El Guindy, and Basuony, 2018).
Inventory management system: This system is implemented within the organization for
evaluate cost of managing stock as well as time required to conversion of raw materials into
finished goods selling inventory to their final customer. Stock is consider as essential element of
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business organization, thus manager of Capital Joinery by using ABC analysis, VED and LIFO,
FIFO method of accounting able to manage and control their level of inventory (Hörisch,
Schaltegger, and Freeman, 2020).
Meaning of management accounting reports.
Management accounting reports: Theses are documents which are used for the purpose of
collection of data wand represent them in such a way which beneficial for decision making
process (Hyndman and Liguori, 2016).
Explanation of various types of reports of management accounting.
There are different types of managerial accounting reports which are formulated by
manager of Capital Joinery, these are define below:
Inventory management report: This report is formulated on the basis of collection of
data of from technique and tools use in system of inventory management. This report define all
the essential information regarding time require for management of stock and delivering it to
customers and cost require storing of inventory, maximum, minimum and normal level of stock
require for specific period of time. These information are given in inventory management report,
on the basis of that manager take decision for managing inventory.
Performance report: This report is formulate for define summery of each report, it
includes the performance of each department, time require for manufacturing of product ,,
delivering of service, rate of employee turnover, their performance, on the basis of that manager
of Capital Joinery formulate polices and give rewards to employee by evaluate their
performance.
Product / Service profitability report: This is consider as one of the most relevant
report of management accounting. Product report is formulate to measure the rate of profitability
and income generate by running business operations (Jack, Florez-Lopez and Ramon-Jeronimo,
2018).
On the basis of data summarised in this report manager of Capital Joinery find out which
product or service provides them more benefit as compare to others.
Benefits of management accounting system.
System Benefits
Job costing This system is implemented for recognise cost
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required for completion of each job. Job
costing system help in evaluate time require for
completion of demand on the basis of that
manager formulate policies regarding each job.
Costing system Manager of Capital Joinery implement this
system for evaluate cost of each business
operation, on the basis of formulation of cost
statement manager recognize which alternative
is benefit for the purpose of minimize cost and
generate high profit (Kruis, Speklé and
Widener, 2016).
Price optimization On the basis of using this system manager
select pricing strategy which help in generate
profits. By applying price skimming strategy
manager of Capital Joinery able to generate
profit and attain competitive business
advantage.
Inventory management system This system is apply for controlling cost
require to manage and store of inventory. On
the basis of tools use by this system
Integration of system of management accounting & its reports.
Manager of Capital Joinery use various concept of management accounting they apply
system of cost, inventory and job order system on the basis of that they collect essential
information which beneficial to proved base for formulation of accounting report. Thus
integration of systems in reports require to play essential role while applying this approach.
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PART C
Meaning of cost.
The term cost define as amount of money which organization spend in order to
formulation or production of their products and providing of services. This amount is useful in
determination of profit. The process of determining cost is known as costing.
Explanation of types of cost techniques.
There are various technique though which manager can analysis or evaluate cost of
business operations. Following are define below
Fixed cost- Theses type of cost includes those expense which amount is not vary for
changing of production units. Theses expense remain constant (Li, 2019).
Variable cost: These includes those expense which are change with changes of outputs.
Thus these expense known as variable expense. Generally it help in find out impact of cost on
changing of outputs.
Meaning of marginal costing and formulation of its statement.
Marginal costing: It is define as technique which help in measure changes in cost per
unit by changing in outputs. Marginal costing also known as variable cost. Because while
calculating of profit it only consider variable elements (Bakhodirovna, 2019).
Note: Data regarding this calculation is define below in appendix section.
MARGINAL COSTING
Particulars May £ June £
Sales 25,0000 18,7500
Less: Variable Costs
Sales Commission 5000 3750
Variable production overhead 2,0000 1,5000
Direct Material 6,0000 4,5000
Direct Labor 4,0000 3,0000
Total Cost 12,5000 9,3750
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MARGINAL COSTING
Contribution 12,5000 9,3750
Less: Fixed Cost
Fixed Selling 1,0000 1,0000
Fixed Production Overhead 2,0000 2,0000
Fixed Administration 3,0000 3,0000
Net Profit 6,5000 3,3750
Working Note: (May) £ Amount
Sales 250 * 100 25000
Direct material 60 * 100 6000
Direct Labor 40 * 100 4000
Variable production
overhead 20 * 100 2000
Working Note: (June)£ Amount
Sales 250 * 70 187500
Direct material 60 * 750 45000
Direct Labor 40 * 750 30000
Variable production overhead 20 * 750 15000
Meaning of absorption costing & formulation of its statement.
Absorption costing: It is define as technique of costing which consider each element of
costing. It includes fixed as well as variable element (Dillon, Oliveira and Abbasi, 2017).
ABSORPTION COSTING
Particulars May £ June £
Sales 25,0000 18,7500
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ABSORPTION COSTING
ABSORPTION COSTING
Particulars May June
Sales 25,0000 18,7500
Less: COGS
Variable Sales Commission 5000 2750
Variable Manufacturing Cost 2,0000 1,5000
Direct Material 6,0000 4,5000
Direct Labour 4,0000 3,0000
Fixed Production Expenses 2,0000 2,0000
Gross Profit 10,5000 7,4750
Less: Selling and Distribution
Costs
Fixed Selling 1,0000 1,0000
Fixed Administration 3,0000 3,0000
Net Profit 6,5000 3,4750
Working Note: (May) Amount
Sales 250 * 1000 last five year
250000
Direct material 60 * 1000 60000
Direct Labour 40 * 1000 40000
Variable production overhead 20 * 1000 20000
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