BTEC Unit 5: Management Accounting Report for Business Decisions

This report delves into the realm of management accounting, offering a comprehensive overview of its techniques and applications within a business context. The report begins by defining accounting and management accounting, highlighting the importance of financial transaction recording, analysis, and reporting. It introduces Innocent Drinks Limited as a case study, a client of Calvin Klein, a fashion retail store, and discusses cost analysis techniques, including marginal and absorption costing, used in preparing financial statements. The report then explores various planning tools like budgetary control, capital budgeting, and cash budgets, emphasizing their role in forecasting and financial control. It addresses common financial issues, such as unwanted expenses and sales inconsistencies, and how management accounting techniques, like benchmarking and key performance indicators (KPIs), can be used to solve them. The report concludes by emphasizing the crucial role of management accounting in organizational success and growth.

Management Accounting

Contents
INTRODUCTION.......................................................................................................................................3
Part 2...........................................................................................................................................................3
Accounting techniques to prepare financial reports.................................................................................3
Management Accounting techniques used in to prepare and develop the financial reports......................6
Interpretation of data................................................................................................................................7
Part 3...........................................................................................................................................................7
Different tools of planning.......................................................................................................................7
Planning tools for forecasting budgets.....................................................................................................8
MAS to solve financial issues. ................................................................................................................8
Accounting techniques:...........................................................................................................................9
Comparison:............................................................................................................................................9
To figure out financial problems MA is used.........................................................................................10
Planning tool to figure out financial problems.......................................................................................10
CONCLUSION.........................................................................................................................................11
REFERENCES..........................................................................................................................................12

INTRODUCTION
Accounting is defined as the procedure that mainly deals with recording of financial
transaction of an organization. In addition to this, the process of accounting involves analyzing,
reporting and summarizing these transaction in order to overlook the financial condition of a
company (Agrawal, 2018). It is stated that management accounting uses those approaches of
accounting that are responsible for tracking financial and non-financial records of the
organization. In the present report, Innocent drinks limited is chosen as a base company which is
a client of Calvin Klein which is a fashion retail store established in 1968. It have multiple plans
for expansion in future.
The report comprises discussion about cost analysis techniques that helps in preparing
financial statements. It further explains information about planning tools and how different
businesses solves their financial planning to achieve sustainability.
Part 2
Accounting techniques to prepare financial reports.
Cost: The term denotes to total money that is spend by business in context of
manufacturing any product or service. There are two cost analysis techniques including marginal
and absorption costing that helps financial analyst of entity to prepare financial statements.
Marginal costing- It is an accounting technique that is related with developing of income
statement undertaking the variable expenses and fixed expenses as main and variable cost
respectively. It is analyzed that marginal cost is defined as the change in total cost that is increase
when quantity produce is raise by one unit.
Absorption costing- It is undertaken as another accounting technique related with
development of income statement. Herein, both fixed and variable expenses is undertaken as the
main cost.
Managers of company for example, Prime Furniture, uses mentioned cost analysis
techniques with the hope of preparing financial statements that are as follows:

Management Accounting techniques used in to prepare and develop the financial reports.
Management accounting is the method of preparing reports on business operations to help
management making decisions in the long and short term. It helps a company to accomplish its
goals by identifying, assessing, interpreting and providing critical knowledge to management. It
is determine that there are various types of accounting techniques used by an entity for preparing
financial reports in a proper and appropriate manner. These techniques are basically act as
framework for the users in order to follow systematically procedure that directly leads to
positive and desirable outcomes. The two different techniques that is mentioned in above section
are going to be adopt by managers of finance for developing income statement that are marginal
and absorption cost method. It is analyzed that both the accounting techniques are mainly used
by companies to develop results that are beneficial for organization performance.

Interpretation of data.
It is stated that part two income statement is developed that is interpreted in a proper
manner below:
By the help of prepared income statement that is prepared under marginal costing, it is
analyzed that there is a net profit identified in quarter 1 achieved profit is £ 1900 and 4700
respectively. Along with this, it is determined that there is some variation in net profits because
of high sales shown in month of May (Laela, 2018). Moreover, it is stated that one of the main
cause behind difference occur in total net profit in these particular technique is basically the way
they take variable and fixed cost within the overall process of preparing income statement in a
proper manner.
Part 3
Different tools of planning
There are various tools used by finance department of an organization for planning,
which are as follows:
Budgetary control : The main purpose of using budgetary control technique is to prepare
budget for coming time period through comparing actual performance with the estimated ones. It
is determine that to maintain a balance in financial performance of company, such technique will
assist out as it is directly related with all forms of entities. In addition to this, it also help in
searching out various types of variances. With reference to Calvin Klein, tool can be executed:
Capital budgeting: It is undertaken as an effective budgeting approach that is used to
measure power of projected plans of finance. It is determine that projects associated with this
approach is implemented through different methods such as net present value, payback time
period and so on (Pasch, 2019). One of the motive of adopting this form of budgeting is to
instruct higher authorities to process appropriate steps to spent or invest heavily in project.
Advantage- One of the main advantage of such approach is it assist companies to protect
themselves with any financial risk occur in future. It suggest higher authorities of Calvin Klein to
choose an appropriate and feasible option from different alternatives. Along with this, it assist
business entities to support control over the expenses that deals as investment.

Disadvantages- It is analyzed that capital budgeting technique is applicable for big
projects and for large companies as it does not consider small companies and task as well. In
addition to this, such approach measure project efficiency that is mainly based on assumptions
which sometime leads to loss of business entity that is Calvin Klein.
Cash budget- It is another approach that involve information associated to those action
which are directed to both cash inwards and cash outwards in a specific accounting time period.
In relation to respective organization, such budget is adopted to manage cash inflow & cash
outflow as well.
Advantages- It is determined that such approach help companies to assign their cash in
an effective manner so that no loss is occur in coming time period for Calvin Klein.
Disadvantage- It is analyzed that the performance of an entity is affected by external
factors & because of this, cash budget did not give appropriate prevision of cash receipt and cash
payments as well. Along with this, they are enable to use cash due to predetermined plans
(Pavlatos and Kostakis, 2018).
Planning tools for forecasting budgets
It is significant for the higher authorities to plan a budget and forecast it in an effective
manner. In addition to this, it is analyzed that it is only possible when planning tools such as
capital budget and cash budget information associated to estimation of financial values. It is
determine that Calvin Klein make use of planning tools that are cash budget and capital budget
that directly contribute towards control and direct of financial values in an effective manner.
MAS to solve financial issues.
It has been said that there are many financial problems and issues faced by large
companies because of ineffective management. Along with this, it is analyzed that it is difficult
to identify such company who did not face any financial problems. The financial issues are given
below:
Unwanted higher expenses- It is determined that such sort of financial problems is faced
by those organization who are not capable to manage overall expenses in a proper manner. It is
stated that such issues occur in organizations due to lack of knowledge, unskilled employees,

ineffective budgeting and so on. In relation to Calvin Klein, occurrence of such issues directly
impact on sales of company in a negative manner (Saeidi, 2018).
Inconsistency in the overall sales- This financial issue is related with change of sales
revenue that is arise because of high competition and internal expenses as well. It is stated that
such financial issues reduce the level of growth and success of company. With reference to
Calvin Klein, it is determine that company is facing such issue in present due to its ineffective
pricing strategy.
Accounting techniques:
Bench marking- It is consider as an effective approach that is adopt by department of
finance in an organization in order to make comparison among current and actual performance of
company. It is analyzed that such sort of comparison is occur at workplace in order to gain an
understating about gap that as a result assist in using effective methods that leads to attainment of
benefits according to the requirements. It is determine that bench marking is beneficial as well as
effective for finance department of Calvin Klein as help in addressing areas that is weal and
needs extra efforts as well.
Key performance indicator- It is the type of accounting approach that involve financial
and non-financial aspects that is going to be measured by business entity in an appropriate
manner. In context to financial aspects, information associated to expenses, loss, profits and
return are going to be involved. In relation to non-financial aspects, all the data related with
political condition, turnover, working condition are included. This will help in assessing the
major cause of financial problems arise at workplace of Calvin Klein.
Financial governance: It is management accounting approach that is used to gather,
manage and control information or data of the company. In context to Calvin Klein, managers
uses the approach to track transactions related to finance and manage aspects associated with
compliance, disclosure and data. When it is in action them it reflect about policies addition to
systematic procedures for managing data of business and ensuring that it is accurate. It involves
financial controls, internal controls, workflow, data security and audits.
Comparison:
Base for Calvin Klein Prime Furniture

comparison
Financial
issue
It is analyzed that Calvin Klein is
facing problems associated to the
decline of their sales as compare to
its last accounting cycle. It as a
result reduce the performance level
of the organization.
In relation to such business entity, they
are facing issue related to increase in
the cost of operations. This decline the
sales of its products that impact
negatively on net margin and revenue
of company.
Technique
to recognize
issue
The finance manager of Calvin
Klein make use of bench marking
approach in order to compare its
financial performance in an
appropriate manner.
Mangers of respective organization
adopt KPI approach in order to gain an
understanding about financial problems
faced by company. It is determined that
it is usually take place by emphasizing
on financial characteristics
accompanying to expenditure and
revenue as well.
To figure out financial problems MA is used
There are different methods of accounting system that is combine with the process and
operations of the organization. It assist business entity to resolve financial issues in an effective
and proper manner. For instance, in above section two financial problems is resolved with the
assistance of price optimization system and cost accounting method. This directly shows the
contribution of management accounting system in dealing with financial issues at Calvin Klein
and Prime Furniture.
Planning tool to figure out financial problems.
It give detail information to the directors and managers which is related to estimated
income as well as expenses. In order to resolve financial issues, it is determine that such
information is beneficial and utilized by management of Calvin Klein as well as Prime Furniture.
For example, the above give business entity shows planning tools such as cash budget, capital

budgeting and many more (Taschner and Charifzadeh, 2020). In addition to this, such plans will
help company in dealing with financial issues and barriers as well.
CONCLUSION
From the above discussion, it is analyzed that management accounting system is an
effective method that assist an organization to maintain its operations for longer time frame. In
addition to this, it is conclude that management accounting and management accounting system
plays an important role on the overall success of an organization. Moreover, it is determine that
different financial techniques are key factors of an entity to attain higher growth as well as
development. Furthermore, it is analyzed that there are various financial issues arise in an
organization which can be solved by higher authorities under management accounting system.
Key approaches that are adhered by managers for the purpose of dealing with issues of finance
are KPI, financial governance and bench-marking. These guides managers in undertaking
effective practices with the hope of making sustainable business in dynamic scenario.

REFERENCES
Books and journal:
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Laela, S. F., and et. al., 2018. Management accounting-strategy coalignment in Islamic
banking. International Journal of Islamic and Middle Eastern Finance and
Management.
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Pasch, T., 2019. Organizational lifecycle and strategic management accounting. Journal of
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Pavlatos, O. and Kostakis, H., 2018. Management accounting innovations in a time of economic
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Saeidi, S. P., and et. al., 2018. The moderating role of environmental management accounting
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Taschner, A. and Charifzadeh, M., 2020. Management accounting in supply chains–what we
know and what we teach. Journal of Accounting & Organizational Change.