Management Accounting Report: Bizdaq Business Performance and Analysis

This report provides a comprehensive analysis of management accounting principles, focusing on their application to the business operations of Bizdaq, a small-scale UK-based company. The report begins with an introduction to management accounting, defining its role in evaluating business operations and aiding in decision-making. It then delves into the meaning and types of management accounting, including cost accounting, inventory management, and job costing systems, highlighting their significance for Bizdaq. The report explores various methods used for management accounting reporting, such as account receivable aging reports, performance reporting systems, and operating budgets, emphasizing their importance in controlling business performance and profitability. Furthermore, the report discusses different costing techniques, including absorption and marginal costing, and their application in analyzing costs. Finally, the report examines the limitations and benefits of planning tools and compares how business organizations choose management accounting systems, providing valuable insights into enhancing performance and profitability. The report concludes by summarizing the key findings and implications of management accounting practices for Bizdaq.

Management
Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Meaning of management accounting and types of management accounting .......................1
P2 Various methods used for management accounting reporting...............................................3
TASK 2............................................................................................................................................5
P3 Costs using appropriate techniques .......................................................................................5
TASK 3............................................................................................................................................7
P4 Limitation and benefits of planning tools .............................................................................7
TASK 4..........................................................................................................................................10
P5 Compare how business organization are choosing management accounting systems.........10
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................13
.......................................................................................................................................................14

INTRODUCTION
Management accounting also known as cost and managerial accounting, it is an effective
activity of evaluating business operations and cost. In order to prepare internal financial record,
account and report that aid managers in decision making process and accomplishing business
objectives. In simple words, management accounting involves giving and preparing timely
statistical and financial data to company administrators so that they can create short-term or day-
to-day decisions (Zimmerman and Yahya-Zadeh, 2011). It is the best process of measurement,
analysis, accumulation, identification, communication and preparation of financial data used by
administration to control, evaluate and plan within the enterprise as well as assure proper use or
accountability for its resources. This assignment is based on Bizdaq, it is a small scale and
developed in 2015. There are 50 employees are work together for accomplishment of
predetermined objectives. Annual sale of the organisation is £100,000, in order to increase
turnover they should provide proper information to the customers. This report determined about
different types of management accounting and its importance in the business. Advantages and
disadvantage of planning tool which is also shown in this study. There are various system of
management accounting used by the company to increase their performance and profitability, it
is also described in this report.
TASK 1
P1. Meaning of management accounting and types of management accounting
Management accounting is the best term that followed to determine accounting
techniques, systems and methods which linked with specific ability and knowledge, support
administration in its task or work of increasing profits and decreasing losses (Management
accounting, 2017). It is blending with each other into a cost accountancy, coherent whole,
financial accounting and entire aspects prospects of financial management (Ward, 2012). It is the
best system of presentation and collection of accurate economic data relating to the company for
controlling, planning and decision making. It is very essential and important part of the company
to maintain their daily basis record and achieve maximum profits. Bizdaq is a small business in
United Kingdom, they provide different essential information or data to the clients. They offers
monthly subscription services to its users and owner can deal their concern for a charge as little
as £500.
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Performance and growth of the company is mainly depend on different tools which can
give better growth opportunities. Management accounting very important for the company to
keep their all reports and data in daily basis. Some significance are determined as below:
Significance of management accounting:
It support in achieving groups goals: Utilisation of accurate accounting system or
methods, it arranges productions factors, organised or assembles the various resources to
accomplish predetermined goals and objectives of company.
Optimum usage of resources: In the process of production, manager of the Bizdaq use
different resources such as human, physical, technology and many other (Vasile and Man,
2012). All these are essential for the organisation to increase their turnover and maintain long
lasting relationship with customers.
Different types of management accounting:
Price Optimisation System: It is one of the main and essential method in order to
determine customer response regarding product and services price. It is also used to identify the
costs that the referred organisation will meet with their objectives and increasing operating
profit. Bizdaq used this methods in different terms such as historic prices, inventories, operating
costs and sales. With the use of this tool business easily accomplish their long term goals and
objectives in limited time period.
Cost Accounting System: It is also known as product costing system, it is an effective
framework used by enterprise in order to calculate the cost or price of their commodity for
inventory valuation, profitability analysis and cost control. This tool is very important for the
Bizdaq in determining the closing cost of work in progress, material inventory and finished
goods for the aim of preparing financial statement.
Inventory Management System: It is the ongoing activity of transferring products and
parts into businesses locations. In this an enterprise handle their inventory or stock on a regular
basis as they locate fresh orders for services and products out to clients. This tool support in
accurate management of inventories products and non-capitalized assets (Van der Steen, 2011).
It monitor entire activities and function which undertake from production.
Job costing system: It is an essential system or method for assigning manufacturing
values to a specific product or collection of goods. It is only used when the commodity
manufactured are not same from each other. It is a best approach of recording the price of a
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manufacturing activity, rather than procedure. With the use of this method, accountant and
project manager can maintain path of the job cost.
P2 Various methods used for management accounting reporting
Management accounting reporting: It is very useful and essential part of the company to
analysis their entire performance and profitability. With the use of this report business maintain
their daily basis report, accounts and records systematically. This system help the manager to
accomplish predetermined goals and objectives of company in limited time period. One of the
main aim and purpose of this reporting is to producing necessary statement for the external users.
It is prepared by the manager of Bizdaq in order to analysis financial position and profitability of
the company. It assist the company managers and owners control the business performance and
profitability (Van der Stede, 2011). This report mainly depend on project types and the data, an
owner may request this statements in monthly, daily, weekly and quarterly basis. It is very
important for the company, some essential points are determined as below:
Role and duty of control method: In this target and objectives are already set by the
company. Management accounting report help the manager to allot all tasks or work to juniors as
per its skills and knowledges. In this manger control all data and information regarding business
and maintain long lasting relationship with employees.
Supportive in profitable operation: Management accounting reporting is helpful and
beneficial for the company to achieve desired goals and objectives. It is also essential for the
organisation to increase their turnover and sales within given time period. This report display the
way of moving business operation in different level. In this management can give accurate data
as to increase profitability and performance to its employees. It is also essential for the enterprise
to reduce risk and problems which are faced by the company during production of product and
many other activities.
Different kind of reporting system: There are some types of reporting system which are used by
the Bizdaq in their business operation and activities. These are determined as below:
Account Receivable Aging report: This kind of report is important for each and every
organisation that provides credit to audience (Tucker and Parker, 2014). It gives an overview and
outline credit balance as per the age, atypically considering separate parts for products that are
60, 90 and 30 days late. It can assist to alter credit policies or plan to match with capabilities of
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consumers repayment. In this report, role of manager is to analysis their income and expenditure
as well as maintain this in an effective and efficient manner.
Performance Reporting system: It is also very important and valuable method for the
company to measure their performance or profitability as compare to other enterprise. For
proceeding proper judgement in the achievement of business objectives, they require to create
performance report or statement at the last year. In this company allot different task to the
various employees as per its performance and capabilities, thus company easily measure all
performance of workers according to its work and time duration of its project (Parker, 2012). It is
one of the best and essential technique that identify the business and individual performance in
the company. Bizdaq is a small firm that give necessary services to the customers, so in this they
required different tools and technique's in regards to measure profitability and effectiveness of
organisation.
Job costing report: This report display expenditure for a particular project or task. They
are mainly related with a calculation of revenue so the business entity can analysis job's
profitability. It will assist in identifying the top-earning places of the organisation so the Bizdaq
can emphasis its activity there alternatively of wasting money and time on jobs with minimum
margin of profit.
Inventory management report: It is also very useful and beneficial report for the
company to maintain their inventory cost in systematic way. It is used by the Bizdaq in order to
create their manufacturing activities more efficient and effective. These type of report includes
few items such as per-unit overhead, hourly labour cost or inventory waste. It is also essential for
the organisation to control and mange their stock. In order to handle inventory, business use
certain tools such as inventory turnover ratio, ABC costing approach and EOQ in a systematic
manner.
Operating budget: This report assist company manger in order to evaluate their
performance and profitability. Such kind of report is mainly related with cost of production
including expenses and income of Bizdaq during the financial year. Main aim of following this
tool is to analysis actual cost of product at the period of producing (Otley and Emmanuel, 2013).
There are certain elements to calculate operating expenses or cost such as sales, production and
many other budget. It assist business managers to know and monitor costs values across the
organisation, whether it's a incorporate company or has some department. By measuring
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expenditure in superior years, it get possible to evaluate budgets or program for the upcoming
year and analysis locations to cut costs.
TASK 2
P3 Costs using appropriate techniques
Cost: It is identify as an amount of expenditure or income i.e. notional or actual which
incurred on and attributable to a provided thing. In order to business activities and functions
accurately, cost is most essential and necessary part. With the help of this company easily
increase their sales and revenues in limited time period.
Costing: It is very important tools and technique's for the company to develop business
operation and activities in an effective or efficient manner. It is a calculation of entire costs that
covered in a business venture and project (Nixon and Burns, 2012). It mainly analysis of the cost
of goods, process and many other for the aim of budgeting, pricing, monitoring etc. It can be
observe as the term of indirect and direct cost which is useful for the organisation to measure
their profitability and productivity ration in an effective and systematic manner. This type of cost
are effective in nature at the period of crucial judgement for the aim of creating future plan or
policy. There are mainly two types of costing methods which are used by the Bizdaq in order to
analysing their sales and turnover. It includes absorption and marginal costing which are useful
for the organisation to analysis their performance and profitability ratio in limited time period.
These are determine as below:
Absorption Costing: Principles of absorption costing must be followed when preparing
and designing financial record for external motive. This cost mainly related with the production
of services and products. It is very essential for the enterprise to calculate their performance and
profitability as compare to another enterprise (Morales and Lambert, 2013). It also help manager
to evaluate their sales and turnover essentially and systematically. It is a best approach of costing
a goods in which entire variable and fixed costs are distributed to cost area where they are
considered for applying absorption rates.
Marginal Costing: Principle of marginal costing are followed in decision making process
for internal purpose. It is calculated by bifurcating variable and fixed cost effectively. It is
analysed in which condition where the BEP (Break event point) has been accomplished in the
term of fixed cost. In the process of decision making, marginal costs are basically followed on
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the basis for selecting product in order to make an effective process in an easy manner. It is also
known as incremental costing which is valuable or useful for the company to increase their sales
or revenues in systematic manner.
Difference between marginal and absorption costing: There are some points which are
determined as below in a detailed way:
Basis of Comparison Marginal costing Absorption costing
Meaning A decision making tool or
concept for ascertaining the
entire cost of manufacture is
called marginal costing
(Macintosh and Quattrone,
2010).
Distribution of entire costs or
values to the cost area in order
to analysing the whole
production cost is called
absorption costing.
Cost recognition Variable cost included as the
cost of product while fixed
price is related as a period
cost.
In order to measure business
profitability, variable and fixed
cost are highly included as a
cost of product.
Categorization of overheads Marginal costing mainly
classified into variable and
fixed cost.
Absorption costing is
categorised into production,
selling, distribution and
administration cost.
Profitability Profitability of the company is
mainly calculated or evaluated
by Profit Volume ratio.
Profitability of the
organisation is mainly
measured of fixed cost (Lukka
and Vinnari, 2014).
Cost per unit Variances and Difference in
the closing and opening stock
do not effects the cost per unit
of production and output.
Variances and difference in the
opening and closing inventory
influence the cost per unit.
Highlights Calculation of the marginal Measurement of the absorption
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costing mainly highlights on
contribution per unit.
costing is highlights on net
profit per unit.
Cost data or information It mainly outline the total
contribution of each product.
Cost data mainly presented in
the formal and conventional
way.
Measurement of Net profit with the use of absorption costing
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
Less:
Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
Measurement of Net profit with the use of marginal costing
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2 - 7800
Closing stock: 100*13 - 1300 -6500
Contribution 11000
Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
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Total Profit / Loss 7500
TASK 3
P4 Limitation and benefits of planning tools
Budget: It is an estimate of revenue, resources and costs over a particular time, reflecting
of future financial goals and conditions. It is identify as financial plan for a specified time,
usually one year (Lukka and Vinnari, 2014). It consists planned sales volume, cash-flows, assets,
liabilities, expenses, resource quantities, revenues and costs. It is used by Bizdaq and many other
business in order to express strategic activities, events and plans in measurable ways. It is very
important and essential for the company to measure their performance and profitability
effectively. In this business set an appropriate budget which help business to analysis their
position in marketplace.
Budgetary Control: It is a management control system in which actual spending and
income are balanced with planned spending and income, so in this business entity can observe if
plans or policies are being used and if those policies or plans required to be modified in order to
create maximum profit (Li and et. al., 2012). It is the use of comprehensive method of budgeting
to assist administration in implementing its activities and functions like control, coordination and
planning. It is an effective process and activity of formation of budget relating to different action
and examining the figures of budget with the real performance (Budgetary control, 2017). It is
very essential and important part of the company to control and plane effective policy.
Process of Budgetary-control: In order to control business budget in systematic manner,
company use various process which are determined as below: Consult with managers: It is identify as first process which is important for the Bizdaq
manager to gather all information regarding business services and products. It has been
essential for the administrator to create effective evaluation by proceeding data from each
other (Albelda, 2011). Role of manager is to communicate properly with the employees
regarding to maintain budget yearly, monthly, in daily basis. Do effective Premise: After gathering comment from business, need of manager is to
create a premise in regards to assist coming losses. One of the main aim of budget
planning or preparing is to monitor the extra cost and future plans.
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 Fixed data for budget to achieve objectives: In this activity entire information and data
are mainly related with business objectives and goals which are essential for the
organisation to maintain business performance (Kotas, 2014). In this stage manger should
try to gather all data regarding market trend and customer preferences. Calculation of data or information with budgeted: In this process, role of business
manager is to calculate budget and identify some issues in this. The performance of the
Bizdaq is calculated with the use of absorption and marginal costing. Both technique's
are essential for the referred firm to easily increase their sales or revenues. Review analysis: It is identify as a last process which is useful for the organisation to
analysis all information in an effective and efficient manner. In this manager observe that
above entire phase are used in accurate way or not. If all things goes in am accurate way
then it is conveyance to top management.
Planning Tool: Planning is an effective process and activity of thinking about and creating the
actions needed to attain a desired and long term objective. It involves maintenance as well as
creation of a plan which help company to keep their performance and profitability essentially.
These are those technique's or concepts which assist administrator's in order to create an
effective plan. In each and every enterprise planning tool is critical and plan essential role in
management (Herzig and et. al. 2012). There are different planning tool which are important for
the company, these are determined as below:
Forecasting Tools: It is a part of planning tool which is valuable and beneficial for the
company to determine their past information directly. So it means forecasting is done as per the
behaviours, skills and knowledge of administration. It is required in order to managing upcoming
activities or plans effectively.
Advantages Disadvantage
This tool assist the Bizdaq to analysis desired
objectives and targets. For using this technique
manager of the organisation can predict the
amount of sale which are accomplishing in
future time.
This technique is not useful in making actual
estimation related to business revenues and
expenses. It incurred by organisation in future
which create negative impact on profitability
and performance of enterprise.
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