Management Accounting Report: Bizdaq Financial Performance Analysis

This report provides a comprehensive overview of management accounting, focusing on its application to the business Bizdaq, a small business with 50 employees. The report begins by defining management accounting and its significance in evaluating business operations and costs, emphasizing its role in internal financial reporting and managerial decision-making. It then delves into various types of management accounting, including inventory management, price optimization, job costing, and cost accounting, explaining their importance and how they can be applied to Bizdaq. The report further explores different management accounting reporting approaches such as budget reports, accounts receivable aging reports, job cost reports, manufacturing and inventory reports, and income statement reports. Each approach is explained in detail, highlighting their benefits and how they can assist Bizdaq in making informed financial decisions and achieving its goals. The report provides a clear understanding of different management accounting tools and techniques, helping to solve financial issues and improve overall business performance.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Meaning of management accounting and essential requirements of its various types ........1
P2 Various approaches used for management accounting reporting ........................................4
TASK 2............................................................................................................................................7
P3 Costs using appropriate techniques and tools .......................................................................7
TASK 3..........................................................................................................................................10
P4 Advantages and disadvantages of certain types of planning tools ......................................10
TASK 4..........................................................................................................................................12
P5 Compare how business enterprise are selecting management accounting systems.............12
Management Accounting Tools................................................................................................12
CONCLUSION .............................................................................................................................14
REFERENCES..............................................................................................................................15
.......................................................................................................................................................17

INTRODUCTION
Management accounting is also known as managerial and cost accounting which is a
beneficial tool for company to identity their financial statements. It is a process of evaluating
business operations and cost to formulate internal financial records, accounts and reports which
assist the administrator in judgement activity to attain desired goals and objectives of an
organisation (Albu and Albu, 2012). It is also defined as an act of making costing and financial
information as well as interpreting data into valuable content for officers and management in
enterprise. It is an essential and important element for the managers because it provides short
term and day-to-day message to them.
This report is based on Bizdaq which is a small business organisation and established in
the year 2015. Annual turnover of this company is £100,000 and they have only 50 employees
who are working with each other. This assignment discussed about different types of
management accounting and its importance in solving financial issues in an effective manner.
Absorption and marginal costing along with the planning tools and their advantages as well as
disadvantages are also described here. Further, different tools which support the business
manager to reduce financial problems in company are also studied in this report.
TASK 1
P1. Meaning of management accounting and essential requirements of its various types
From: Management accounting officer
To: General manager of Bizdaq
Sub: Management accounting system
This report is mainly emphasised on management accounting system and its importance in
working process. Different systems of accounting are described in this report such as price
optimisation, job costing, cost accounting and inventory management, etc.
Management accounting system:
It is an essential approach for the business entity because it promotes and encourages
workers who are involved in judgement making activity of management. It will help managers
in defining planning and performance methods effectively (Bennett and et. al., 2011). It is
executed by the experts and professional employees in making financial records or reports. In
order to formulate and implement the business strategy, this approach assists in controlling all
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activities and strategies.
Various types of management accounting: There are different kinds of management
accounting which are considered in this system. Some of these are as follows:
Illustration 1: Different types of Management Accounting
(Source: Different types of management accounting , 2017)
Inventory Management System: It is the main type of cost accounting which is essential for the
company in order to identify value of inventory. It deals with methodology, finished goods and
raw material which is used each and every enterprise company for their production activity
(Bodie and et. al., 2014). It is required by all organisations to evaluate delivers and sales of the
products, amount of orders and inventory level. It particularly needed by manufacturing
organisations with purpose to monitor their procedures for achieving more profits from their
available materials.
Application
Inventory management approach could be followed by Bizdaq in order to monitor inventory
level as well as reduce wastages cost in an effective manner (Burritt and et. al., 2011). Due to
this, company could maximise its net profit through identifying its actual resources at
2
Inventory management
system
Job costing
system
Cost accounting
system

accurate level. It is essential for the business entity to acquire maximum worth and profit in
an effective manner. Company might understand those resources which impacts business
inventories values.
Price optimisation: It is another important tool which assists organisation in measuring price of
the product through applying mathematical approaches such as sensitivity, graphical and liner
equitations methods (Cadez and Guilding, 2012). It is highly required by the enterprise to
combine various data's of information's which is relate to demand and price of goods. With the
use of this tool, company achieves their desirable worth and profit. In today’s business, large
number of the organisation is struggling in order to analysis accurate price and cost which is
impose from buyers and vendors. Therefore, this method is imply those approaches, which
determines a point or value on a chart, where meets more profits use of demand curve.
Application
Bizdaq is a small organisation that could apply this tool to identify accurate optimal outcomes
for proper cost value through valuing a better point at which organisation is making more
revenue or profits and its need.
Job costing system: It is an essential type of management accounting which is needed by each
and every organisation in their business operations (Callahan and et. al., 2011). This approach
assists an enterprise in capturing manufacturing product’s costs which is connected to specific
job as well as reduced process price. Who's business organisation selected this system with
purpose of evaluating particular job cost by retaining feasibility of business information and
data.
Application
Bizdaq follows this approach for tracking various kinds of jobs like material, direct labour and
wages cost which is assigned overhead costs or price. An organisation could follow this tools
to evaluate entire activities and plans connected to profitability that would support company in
evaluating its loss and profit during a year.
Cost Accounting system: It is an important part of the management accounting which is needed
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by an organisation. This tool describes the financial framework through measuring product cost
in a systematic manner. It assists enterprise in measuring cost budget or fund for the upcoming
year.
Application
Bizdaq follows this approach in doing all their activities in a long period. Business could refer
absorption and marginal costing aspects to calculate its net worth in the recent year.
P2 Various approaches used for management accounting reporting
From: Management accounting officer
To: General manager of Bizdaq
Sub: Management accounting report
In this study, various kinds of management accounting systems have been determined in a
detailed manner. In order to make this report, business organisation can make better decision
which is valuable for them in achieving the desired objectives and goals.
Management Accounting Report
This report assists companies through determining the business functionality in an effective and
efficient manner (Chan and et. al., 2014). It is not same with financial accounting because
accounting report prepare company's external and internal stakeholder essentially. It has to be
supplied sporadically for understanding actual status of organisation and monitor financial
performance or execution of business. This report considers for providing casuistical and timely
data to manger so due to this, they make short term and day-to-day judgements in an effective
and systematic manner. Main aim and purpose of applying this approach is to achieving
statistical and financial data from day to day (Chenhall and Smith, 2011). Due to this, manager
of the business follow this is to making short-term and time to time managerial judgements.
Various kinds of management accounting approaches: There are different types of
management reporting system which are determined under this:
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Illustration 2: Different types of Management Reporting
(Source: Different types of management Reporting , 2017)
Budget Report: It is very essential and beneficial tool fore each and every organisation which
help them in evaluating actual performance of the enterprise (Chiwamit and et. al., 2014). It is
also identify as a mixture of internal records or reports which is highly used by administration
in order to compare their current execution with accurate figures.
Application
Bizdaq applied this kind of approach in order to achieving long term goals and objectives in
an effective manner. In this business changes which identify as an actual and estimated cost of
business. In regards to fulfil gap, an organisation is utilising sound approach to acquire
accurate estimations.
Accounts Receivable Aging report: This kind of method is receives by business organisation on
given time period. It is very important and essential part of the business success and
development (DRURY, 2013). With the use of this aspects company can identify their
performance in an effective and systematic manner. In this, an enterprise also identify financial
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Methods of Management Accounting Report
Budget Report
Accounts receivable
Aging Report Job costs Reports Inventory reports
Income statement
report Cash flow report

position of its buyers. It is complete in an effective way which is being gathered more slowly.
Application
Bizdaq company apply this approach in identifying minimum amount balance which
permitted for giving allowance on debts. Business organisation made this kind of budget
technique's through grouping sales sound which are never provided yet. It is mainly based on
buyers and ledger date's. This are made to update for grouping data and information in sales
invoice regularly.
Job costs reports: It is identify as a process and activities of clarifying and simplifying those
costs which are linked to specific work of organisations (Fourie and et. al., 2015). Construction
industries are mainly used this approach in order to assign costs of personal tasks of business
construction.
Application
Bizdaq apply this tool through developing various categories of plans of fund utilisation. It is
sort out the all activities which acquires maximum funds and capital than to another. Best and
valuable example of this tool is selling, distribution, production costs reports.
Manufacturing and Inventory reports: It is valuable type which involves joining values of
different inventories such as retailing, whole-selling and manufacturing. It is highly needed by
the business organisation because it combination of total sales and revenues at above all
production stages (Hiebl, 2014). It is entirely valuable for superior in order to do their inventory
management.
Application
Company follow this approach to determine present source or factor for combination of
different productivity activities and process. It will help business in regular cycle time and its
information towards variances which is present in monthly, weekly and daily basis.
Income statement report: It is also very important and vital part of the management accounting
report which is used by the financial administration in regards to measure and identify the net
worth in actual financial year (Ihantola and et. al., 2011). It will assist business entity in
determining its actual performance through business previous and current year statements.
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Application
Business organisation follow this approach in order to determine actual performance and profit
of the company in during a year. In this, Bizdaq also understand about payments, arrears and
outstanding expenses etc. All these are important sources where entity can attain more income
in future period.
Conclusion: As per the above discussed all types of management reporting is very important
and essential for the business in order to identify their financial resources in an effective
manner. Useful and valuable kind such as cash-flows, inventory management which are needed
by the business manager in an effective manner. All these are define the how much income,
expanses of the company are present in during the year. These reports and systems are needed
for the distribution and allocation of unicorn capitals between various functions division.
TASK 2
P3 Costs using appropriate techniques and tools
Management accounting: It is useful and valuable tool of the financial which objective
is to making proper reports. In this marginal and absorption cost are very important part for
identifying net worth and income of the company (Kotas, 2014). Cost is identify as an amount
which is created by business for manufacturing services and products. It is mainly presented in
non-financial as well as financial terms which covers changes effects, utility consumed risk
associated and resources with that specific goods.
Marginal Costing: This type of cost mainly emphasis on additional expenditure, due to
this, business organisation has to build extra profit in during the year. It is mainly and
fundamentally focuses on variable costs which is essential for the company because with the use
of this they can decrease their product price. It is used by the business managers in order to make
essential and effective judgement towards items cost which is high for applying this tool.
Absorption Costing: It is also known as traditional approach of measuring product costs
in an effective way. One of the main benefits of using this method is to show the actual expanses
and income of the business entity (Li and et. al., 2012). In this methods certain aspects are
includes such as labour, wages and direct material, all these are added to the sum of
manufacturing goods.
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Difference between Absorption and Marginal costing
Basis Marginal Costing Absorption Costing
Meaning It is define as a decision-
making activity and tool for
ascertaining or insuring the all
production cost.
It is identify as a total
production cost which is
determine in an appropriate
manner.
Cost recognition In this variable cost is highly
involved as per the product
value. When fixed cost and
prices is identify as period
costs which is important for
business performance (Lukka
and Vinnari, 2014).
In this both cost such as
variable and fixed are involved
as per the product cost.
Classification of overheads With the use of this approach,
product cost is mainly
classified into variable and
fixed.
With the use of the methods,
company classified their
overheads in administration,
distribution, selling and
production etc.
Profitability Profitability of the company is
calculated by profit volume
ratio.
Profitability of the company is
being effected by the fixed
cost which is being included.
Cost per unit With the use of this tool,
closing and opening stock
variance not effects on cost per
unit.
Closing and opening stock
variances affected the per unit
product cost (Morales and
Lambert, 2013).
Highlights Manager of the company
mainly highlights the per unit
of contribution.
Manger of the business entity
is fundamentally highlights the
net profit per unit.
Cost data It will presented contribution This approach will presented
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per unit. in way of conventional.
Below is the measurement of income statement with the use of absorption and marginal costing
technique's are determine under this:
Net profit calculation on the basis of marginal costing
Per unit price(£) No. of units Amount(£) Amount(£)
Sales revenue 35 600 21000
Less: Marginal cost
Opening Inventory Nil
Total Variable production cost 14 700 9800
Less: Closing Inventory 14 -100 -1400
8400
Contribution 12600
Less: Fixed overhead
Production overhead -2000
Administration cost -700
Selling cost -600
-3300
Net Profit 9300
Direct materials 6
Direct labour 5
Variable production Overhead 2
Variable sales overhead 1
Total Variable production cost 14
Net profit on the basis of Absorption costing
Per unit price(£) No. of units Amount(£) Amount(
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