Comprehensive Management Accounting Report for Big Swing Company

This report provides a comprehensive analysis of management accounting principles and their application within the context of Big Swing Company, a UK-based dance festival organizer. The report begins with an introduction to management accounting, emphasizing its importance in decision-making, strategic planning, and overall business development. Task 1 delves into the core concepts of management accounting, including the significance of various accounting systems such as job order costing, process costing, throughput costing, inventory accounting, and cost accounting. The report then explores the different methods used for management accounting reporting in Task 2, including financial statement analysis, cost accounting, and budgetary reporting. Task 3 focuses on various costing methods and their differences, followed by an examination of the advantages and limitations of management accounting for budgetary control. The report concludes by highlighting the significance of management accounting systems in addressing financial challenges and supporting strategic decision-making, ultimately aiming to provide insights for the expansion and enhanced service quality of Big Swing Company. The report includes illustrations and references to support its findings.

MANAGEMENT
ACCOUNTING
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
P1) Management accounting and significance of its types..........................................................4
P2) Different methods used for management accounting reporting............................................7
TASK 2..........................................................................................................................................10
P3) Different costing methods and their differences.................................................................10
TASK 3..........................................................................................................................................13
P4) Advantages and limitations of management accounting for budgetary control tool...........13
P5) Significance of management accounting systems to solve out financial problems............16
CONCLUSION..............................................................................................................................19
REFERENCE.................................................................................................................................20
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ILLUSTRATION INDEX
Illustration 1: Marginal costing to prepare income statement.......................................................10
Illustration 2: Income statement through absorption costing.........................................................11
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INTRODUCTION
Management accounting is essential for decision making and preparing strategic plans
regarding business operations. In this regard, entire development of organization and effective
business performance can be obtained through utilizing adequate management accounting tools.
The present report is based on understanding different aspects of management accounting
components for Big Swing Company. It is a small sized dance festival organizer of UK that
organizes events of dance and sports in the country. In this report, different types of management
accounting systems and methods used for reporting will be determined. In addition to this,
various costing methods to present income statement and technique to decision making process
for business activities will be highlighted. However, advantages and limitations of budgetary
control as a management accounting tool are presented here. Along with this, significance of
management accounting for decision making and strategies for expansion of small business unit
and increasing its services will be discussed.
TASK 1
P1) Management accounting and significance of its types
Managing Director
Big Swing
Management accounting is the composition of all accounting systems including finance,
cost, corporate and accounting related to business activities. In this process, management
accountant of Big Swing Company recognizes business performance through financial
statements and different recorded information of entity. It leads to generate variety of ideas and
decision making process for further business operations. Therefore, price determination and
better performance of business organization can be obtained by utilizing management
accounting tools. Including this, it is essential for the optimum allocation of resources and fund
efficiently (Dobroszek and Szychta, 2015). In accordance with this, it is determined that
management accounting is helpful for the overall development of business entity and enhancing
service qualities of goods and services provided by company. Therefore, management
accounting is considered as the key component for effective business operations and systematic
management of firm. By analyzing the business performance, management accountant of entity
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makes decision for achieving organization's effectiveness at the high level by preparing budget
and making decisions regarding business operations of small business entity. Thus, management
accounting is crucial for systematic management of Big Swing. Moreover, planning is obtained
for reducing waste material and also remain helpful for proper production and distribution of
goods produced by the firm (Fayard and et.al., 2014). Apart from this, planning including
forecasting and decision making is obtained for effective growth of firm that is determined
through utilizing management accounting tools. Hence, management accounting plays an
important role in enlargement of small business unit and enhancing its service qualities
adequately.
Kinds of management accounting systems
Management accounting system is liable for financial and inventory management of
firm that put a direct impact on the organizational structure of company. Therefore, different
management accounting systems and their importance can be described as follows:-
Job order costing: - Under this accounting system, costs are assigned for each product
or bulk of goods. It is related to determine the overall expenses of product incurred for
production of goods. In this regard, cost incurred for project accomplishment is obtained that is
usable for ordering and incurring expenses. However, job order costing is related to determine
price for projection and implementing planning procedure for reaching out the set goal of task.
It is useful for price determination regarding purchasing raw material and production process
for supplying goods and services provided by Big Swing (Kreibich and et.al., 2014). In
accordance with this, recording is done for expenditures and implementing project activity.
Therefore, job order costing is relevant for recording of direct materials, labor costs and
overheads. Including this, recording also includes work assigned to each individual for working
in a team. Thus, job order costing is liable for keeping record of project activities. For instance:
if project is related to construction of any building then recording of material used, labor fees
and outstanding expenses is included under job order costing method. Including this, records are
also maintained regarding assigning work to each employee of the organization.
Process costing: - Under this costing method, expenses incurred for production of
products are recorded. Therefore, after manufacturing process, step forwarded to production in
which organization has to incur expenses. It includes cost on inventories, custom equipment
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cost and price of goods sold. Therefore, records are prepared and maintained regarding
incurred costs for the production process. However, management accounting tool as process
costing is interlinked with production and distribution system of goods and services provided by
company (Osadchy and Akhmetshin, 2015). However, costing recording is obtained for
processing and expenses incurred for production system. In this regard, process costing is
related with price determination of products. Under this process, Big Swing uses different
qualitative products and materials. Therefore, material and qualitative features used in this
process affects the pricing of finished goods. In this regard, it is obtained that process costing is
recording of expenses that incur in the production process of firm.
Throughput costing: - It is the costing of finished goods which is set according to
quality, features and expenses incurred for manufacturing and production process for Big Swing
organization. Thus, according to incurred price for manufacturing and production process,
actual price of goods and services is determined (Shields, 2015). It is interrelated with different
factors such as demand, competition and setting pricing related to different determinants. In this
regard, throughout process is interlinked with market essential to make position and sustain its
value for long term efficiency. Under throughout process, market activities are involved such as
launching and advertising products in the market.
Inventory accounting system: Through this management accounting system, inventories
and liquidity position of entity is analyzed. However, it is useful for optimum utilization of
resources and funds influences further business operations. In addition to this, different ideas
are generated for managing all goods and services. Thus, management accountant of Big Swing
analyses all inventories and products to be produced and supplied affects profitability and
management of entire operations effectively.
Cost accounting system: It is one of the great tool for cost effectiveness and producing
goods and services provided by entity adequately. In this regard, it is suitable for price
determination and creating balance between production and supplement of goods efficiently.
Thus, cost accounting system is essential that is related with entire business activities and
profitability of organisation.
Significance of management accounting systems
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Different management accounting tools that present the overall business performance
remain significant for operating proper business activities. Under management accounting
systems, various factors are obtained related to transaction of goods and services including
business efficiency. These are essential for the enlargement of small business unit and
improving its service qualities at high level. In this regard, actual economic and different
sectors' performance is gained that is considered as the key element for decision making and
preparing strategy for further business operations. However, management accounting systems
are useful for determining adequate pricing of products and business performance to increase its
efficiency for better services as well as for gaining a strong market position for long term
sustainability (Chiarini and Vagnoni, 2015). Thus, budgeting and preparing accounting reports
are crucial for Big Swing Company limited to increase its product’s value for long term
sustainability in the market.
P2) Different methods used for management accounting reporting
Managing Director
Big Swing
Management accounting reporting is related to entire business organization's effectiveness.
Under this tool, different determinants are involved that presents performance of Big Swing.
For example, financial statements, cost accounting, ratio analysis, budgeting and management
reporting (Fullerton, Kennedy and Widener, 2013). In this regard, there are several tools and
techniques utilized for presenting organizational structure and decision making process
regarding further business operations can express as below:-
Financial statement analysis:- Under this analysis, management accountant recognizes
financial statements such as; income statements, balance sheet, profit and loss account, fund
flow as well cash flow statements. Therefore, actual economic profile of entity is obtained
through this tool. On behalf of which, decisions are made for implementation and increasing
profitability of firm (Nielsen, Mitchell and Nørreklit, 2015). Thus, financial statement analysis
is one of the great tool of management accounting for generating different ideas that impacts on
presenting further business performance. Hence, elements of funding and profitability of small
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business entity is obtained through different tools. It is valuable for proper funding in relation to
investment and getting sources to enhance monetary profile. Therefore, preparing and
maintaining reports that present financial performance of Big Swing that is related to economic
stability and improving monetary position of organization effectively.
Cost accounting:- Management accountant of Big Swing company determines price for
producing goods and services. Under this process, different techniques are utilized for setting
price as per expenditures incurred for purchasing raw materials and work in process. Therefore,
cost accounting is an essential term for setting price of services according to demand,
competition and different ways such as marginal and absorption costing. In this regard, it is
determined that cost accounting is useful for forecasting and decision making related to market
product quality to sustain its value in market (DRURY, 2013). Under this process, various tools
are determined by comparing market price with predetermined and competitive entities set
prices. Thus, cost accounting is key essential for costing and price determination efficiently. It
is interrelated with presenting incurred expenses and earned income statement that leads to
create several ideas for creating balance between them. However, proper decision-making is
done through this process that is useful to operate further business activities. In this regard,
accounting reports are prepared that are valuable for enhancing quality services of firm at high
level.
Budgetary report:- This report is prepared for proper forecasting and decision making
towards further business operations. It is helpful for best use of resources and fund that affects
productivity and profitability of Big Swing. According to analyzing business performance,
different strategies are prepared for reducing issue occur at workplace as well implementing
service qualities of small business entity (Fayard and et.al., 2014). It is beneficial for controlling
over excess of business operations. However, through budgetary system, proper directions are
obtained for increasing efficiency of Big Swing. Including this, uncertain changes occur in
entity are also get managed through preparing strategies by recognizing issues. In this regard,
decisions are made and planning procedure is obtained for enlargement of Big Swing company
to sustain its market position for long term sustainability. In this process, management
accountant of organization prepares budget through analyzing current business performance.
Therefore, by reporting budget as strategies to be followed are benefited for better quality
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services and improving entity's effectiveness. It is useful for optimum allocation of resources
and fund efficiently that affects productivity and profitability of firm.
Management accounting report:- It is an approach for transferring information of
business organization from one place or one way to another. Under this system, different tools
and techniques are utilized for exchanging data that emerges varieties of ideas for
implementation and actual business performance is obtained. Therefore, decisions are made
through this system for increasing efficiency of small business unit. It is one the essential
management accounting tool that remains useful for expansion and enhancing service qualities
of firm at high level (Fullerton, Kennedy and Widener, 2013). By preparing accounting reports
related to overall business performance are able to make decisions related to activities as well
remains able to expand entity as well enhancing product services. In this regard, decisions are
made for better quality of organization. However, management of entire business operations is
possible through this report affects organisation's effectiveness and services provided by it.
Including this, overall strategies are prepared as well implemented for managing all activities
and improving them efficiently. Including this, it is helpful for controlling over excess of
production and reducing cost on additional expenditures. Thus, management accounting
reporting is vital for effective production and distribution of goods and improving services
efficiently.
Management reporting:- It includes different tools to present business performance and
organizational structure. Management accountant of Big Swing company prepares accounting
report as per financial profile and management of business operations. Under these tools,
various factors are determined for example; production and distribution of products, economic
structure, profit and loss account and balance sheet (Kaplan and Atkinson, 2015). These
identification are highly useful to management for exercising employees' performance and
several determinants for quality and budgetary control of entity. Therefore, by recognizing
management reports different ideas are generated for enlargement of Big Swing company and
also useful for expanding its service qualities. Thus, planning is proceed to make decision for
further business operations and gaining systematic management of entire business activities.
Management reporting presents economic and other sectors' enhancement for implementing
business operations effectively. In this regard, overall management of entire business operations
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at large scale.
Hence, above mentioned tools and techniques of management accounting reports are
useful for presenting business performance and making decisions for further business
operations. In accordance to this, systematic management of entire business activities is
presented through utilizing all the management accounting tools. Therefore, on the basis of
management accounting tools, effective management of all business activities can be obtained
to gain better performance and enhancing quality services of firm at large scale (Management
Accounting, 2016).
TASK 2
P3) Different costing methods and their differences
Managing Director
Big Swing
Costing is considered as price determination method. Under this process, costs of product
is obtained through different methods. It is useful for effective income statement to present
financial position of small business unit. As per incurred expenses over purchasing raw material
and production process, price is determined for producing goods and services (Lavia and Hiebl,
2014). However, costing in marginal and absorption costing can be explained as below:-
Marginal costing:-
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Illustration 1: Marginal costing to prepare income statement
Interpretation:- Through marginal costing method, management accountant uses simple
and easy method to determine net profit. Under this process, fixed overheads are included for
determining net profit. Therefore, gross profit is obtained by subtracting revenue to expenditure
incurred over business operation that is 13,200. After getting gross profit, net profit is obtained
by differentiating gross profit to total variable expenses. By calculation, total expenditures
incurred on variable overhead is 3900. Thus, net profit is obtained as 9300. It is beneficial for
short term business operations. However, absorption costing believes that only variable cost is
useful is appropriate for obtaining net profit.
Absorption costing:-
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Illustration 2: Income statement through absorption costing
Interpretation:- Absorption costing technique beliefs that total expenses must include overhead
for determining effective net profit. Under this process, after determining gross profit as
111500. Thus, total variable expenses company incurred as 1900. In this regard, overall
expenditure is obtained as 9600 that is addition of variable and fixed overheads. It is useful for
further operations and improving services of entity effectively.
Marginal vs absorption costing:-
Through above mentioned income statement methods, it is determined both marginal
and absorption costing are different from each other for presenting financial position of firm.
There are some differences between both costing methods can express as follows:-
Profitability:- It is determined that marginal costing obtains profit through profit volume
ratio. Under which, gross profit is only deducted by total variable cost and determines net profit.
While, for absorption costing, profitability is affected because of inclusion of fixed cost
(Macinati and et.al., 2014). Under absorption costing method, fixed overheads are added to
variable costs and further determines net profit.
Focuses on:- In comparison to margin costing to absorption, it is obtained that both
income statements concentrate on different factors. Thus, marginal costing is valuable for
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