Comprehensive Management Accounting Report for Capital Joinery Ltd.

This report provides a comprehensive overview of management accounting principles and their practical application within Capital Joinery Ltd. It begins by demonstrating an understanding of management accounting systems, contrasting them with financial accounting, and outlining key principles and roles. The report then explores various management accounting systems, including cost accounting, inventory management, job costing, and price optimization systems, detailing their requirements and benefits. It further evaluates different methods used for management accounting reporting, such as budget reports, account receivable aging reports, job cost reports, and performance reports. The study also analyzes the integration of management accounting systems with organizational processes, emphasizing the importance of planning tools and budgetary control in addressing financial problems and achieving sustainable success. Finally, the report delves into calculating costs using different techniques of cost analysis, providing a practical perspective on financial management within the company.

5 management accounting

Table of Contents
INTRODUCTION...........................................................................................................................4
SCENARIO 1...................................................................................................................................4
Demonstrating an understanding associated with the management accounting and varied types
of management accounting systems............................................................................................4
Evaluating varied set of methods which are used for the management accounting reporting....6
Evaluating the benefits of management accounting systems and its application within firm.....7
Critically examining how management accounting systems & management accounting
reporting integrates with the organisational process...................................................................7
Determining the varied types of the planning tools which has been used within the budgetary
control.........................................................................................................................................8
Comparing the ways within which organization uses management accounting to effectively
respond to the key financial problems. ......................................................................................9
Analysing and responding to the financial problems and management accounting can lead
organisations to the sustainable success....................................................................................10
Evaluating how planning tools are used for responding to solve the financial problems of
company....................................................................................................................................11
SCENARIO 2.................................................................................................................................11
Calculating costs using different techniques of cost analysis ..................................................11
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is considered to be as one of the key significant process which is
useful in effectively preparing the key relevant set of reports related with the business operations.
This is crucial for the attainment of the long- term goals and long- term objectives of the
employees (Fiondella and et.al., 2016, September). The present study will focus on effectively
demonstrating an understanding associated with the management accounting system as well as
the management accounting reports. Furthermore, the researcher of the study will calculate costs
by using appropriate set of techniques. Furthermore, the researcher will use varied types of the
planning tools which has been used within the budgetary control. Lastly, the study will compare
the ways within which organization uses management accounting to effectively respond to the
key financial problems. Capital Joinery Ltd. Is one of the medium sized firm which mainly has
high degree of experience in windows, doors, stairs and joineries.
SCENARIO 1
Demonstrating an understanding associated with the management accounting and varied types of
management accounting systems.
Management accounting plays one of the key significant role within the organization in
today's world. It helps in taking proper decision and helps in tracking the performance of the
business. Effective management accounting is is prominent because it is useful in managing
critical set of management accounting information. It is useful in effectively preparing the
relevant set of reports which are related with the business operations (Laguecir,Kern, and
Kharoubi, 2020). Management accounting tends to differ from the financial accounting.
Financial accounting collects accounting set of data which is useful in creating the key financial
statements. Such information are considered to be crucial for both internal as well as external
stakeholders of the company. However, management accounting is linked with the internal
process and helps the managerial of the Capital Joinery Ltd. Which has been used for internal
business process and helps in the better decision making. The key primary users of the
management accounting are employees, managers, officers, management, owners, etc. Key
principles linked with the management accounting is that, the information must be
communicated well between the departments and leads to better decision making. The

information must be relevant and the value must be accurately estimated. Also, another key
principle is that the data and information must be credible to take informed decision. The key
principle is linked with the designing as well as compiling where the evidence is mainly based
upon present, past and future set of results. The origin of the management accounting is
associated with the genesis and has roots of industrial revolution within 19th century. The key
roles of the management accounting is to effectively formulate financial strategies and
effectively monitor the expenses of the company. The key prominent role is that, it helps in
coordinating the accounting operations and carry out financial analysis for the particular period.
It is useful in building business strategy and managing relationship with the auditors and
investors.
Management Accounting System are the internal accounting system which has been
effectively used to provide critical set of information related with the business operations for the
better decision making and attainment of goals (Fiondella and et.al., 2016, September). This is
useful in managing the cost and evaluate the business performance.
Cost accounting system: It is a prominent framework which has been effectively used
within the company in order to critically evaluate and estimate the cost. This is prominent in
evaluating the profitability and is relevant in controlling the cost of the business. It takes into
account all the input costs which are linked with the production and also includes fixed as well as
variable cost for better estimation and valuation.
Requirement – The system is used for managing cost records and to calculate the cost of
products and services produced by the company.
Inventory management system: It is the key prominent process which helps in tracking
the goods within the entire supply chain which starts from the production and ends in sales. It s
mainly linked with stocking of the goods and ensure that the products are stocked up on time
(Ismail, Isa and Mia, 2018). It is useful in managing accurate set of record keeping and better
solution for the inventory management within Capital Joinery Ltd. It is prominent for the
accurate inventory tracking and helps the company in fulfilling the orders on a timely as well as
accurate manner. It also results in better inventory planning as well as ordering.
Requirement – System is used for recording the movement of inventories within and outside of
organisation. It involves making use of inventory software to keep proper record of purchase,
consumption ad output of finished products.

Job costing system: This is considered to be as the key significant process through which
it is useful in accumulating the relevant information linked with the cost related with the specific
job or activity. It is useful in estimating the values of the labour, material and overhead
associated with carrying out the particular job. It is relevant in the creation of the quotes which
are competitive and helps in staying profitable for carrying out the business operations. It also
helps in breaking down of the cost for the specific job. It also helps in determining the most
efficient job which is crucial for the success of the company.
Requirement – It is used for special contract to identify cost of producing specific job. It
includes identifying raw materials, labour and overhead cost of producing the job.
Price optimization system: It is considered to be as a mathematical program which is
relevant in calculating how effectively the demand has been varied at the different price levels
(Shieldsand Shelleman, 2016). It is useful in combining the data with relevant information
associated with the inventory levels and cost in order to recommend the best possible price
which helps in improving the profitability of the business. It is significant in maximizing the
price against the willingness of the customers to pay. It is useful in maintaining the consistency
and automating the entire process.
Requirement –It helps the company to identify the most optimum prices that it could keep for
the products to earn adequate margin of profits and maintain demand of products.
Evaluating varied set of methods which are used for the management accounting reporting.
Management accounting reporting is relevant because it is useful in effectively producing
the key relevant reports for the internal stakeholders of the company. It is useful in evaluating the
performance of the business and take informed decision to attain goals of the organization. These
reports are considered to be prominent for the medium and small based company to monitor the
business performance for the specific period.
Budget Reports: The management of the company can significantly compare the actual
report with the budgeted report and in case of any sort of deviation then the managers of the
company will find out the best possible solution to the specific problem in a significant and
reliable manner. Budget report is prominent in evaluating the planned expenditure of the
company with that of actual. It eventually leads to better financial records and it helps in
accessing to the key relevant financial information to improve the business with high degree of

accuracy and relevance (Henttu-Aho, 2018). It is significant in predicting and estimating the
income and expenditure of the company for the particular period.
Account Receivable Aging Reports: It is a periodic report which is significant in
effectively categorizing the account receivables of the company. It is referred to as the gauge to
evaluate the financial health of the customer's company. It is prominent in giving the snapshot of
money which has been outstanding and due to the customers. It is relevant for the company to
identify their customers who has not cleared their dues on a timely manner. This is however
referred to as the clear sign of underlying problem. This management accounting report is
relevant to determine the allowance linked with the doubtful accounts. It estimates the amount of
bad debt to the report on financial statements of the company. It is prominent in estimating the
total amount which is to be written – off.
Job cost Managerial Accounting Reports: The job cost report is a prominent
management accounting report which helps in showing the expenses for the specific project
which in turn has been financed by the medium sized company. It is crucial to evaluate the cost,
expenses and revenues associated with the specific project which is useful in evaluating the
profitability of the job (Harelimana, 2017). These key reports are prominent in taking informed
business decision and is relevant in tracking the profitability and financial efficiency of the
specific job within the company.
Performance Reports: This is a relevant management accounting report which has been
effectively created in order to review and examine the performance of the organization. It is
prominent in taking key decision and effectively addresses the outcomes of activity. It is also
useful in displaying the financial status of the business. It is useful in providing the management
of the company with clear and precise picture linked with the business performance.
Evaluating the benefits of management accounting systems and its application within firm.
One of the key benefit of the management accounting is that, it helps in interpreting the
financial information and also helps the management to take decision and attain long term and
short term goals of the organization. It is also useful in coordinating the activities of different
departments and control cost. This leads to improved business performance and high profitability
for the Capital Joinery Ltd.

Critically examining how management accounting systems & management accounting reporting
integrates with the organisational process.
Management accounting system has been effectively integrated within the organization
because it helps in effectively responding to the key financial problems on a timely manner. It
helps in effectively evaluating the cost and helps in better decision making (Guo and Yang,
2018). Management accounting reports is useful in integrating and also emphasize with the
inside set of information and helps in measuring the business performance and also plan and
attain business goals.
Determining the varied types of the planning tools which has been used within the budgetary
control.
Budget is considered to be prominent in effectively estimating the future results by
determining the financial position of the company. Budgets are considered to be significant for
the future learning purpose and is relevant in estimating the time to time financial needs of the
company. Budgeting is significant in formulating the plan of the company (OYEBODE, 2018). It
helps in comparing the budgeted plan with the actual. In case of deviation, immediate action has
been taken. Budgeting is mainly linked with the formulation of the plan for the specified period
of time.
Budgetary control tools is referred to as the controlling of the business activities. The
budgetary control is mainly associated with the actual performance by effectively setting
appropriate set of standards. It is relevant in ensuring top management support and is relevant in
providing effective set of information related to the business performance and budget to the
internal management of the company. Budgetary control tools are considered to be as the
yardstick to effectively measure the performance of the various departments in the organization.
Activity based budgeting
This planning tool is significant in recording, analysing and researching about the
activities which adds cost to the organization. Every activity within the company mainly focuses
on incurring cost which has been scrutinized in the potential ways which is useful in creating
efficiencies.
Advantages of Activity based budgeting
This planning tool is beneficial in predicting the cost of the business. It is prominent in
identifying the key cost drivers. It further helps in breaking down the cost and determines the

profitability of the company. It is significant in eliminating any sort of unnecessary activities and
helps business in controlling cost (Shi, and et.al., 2016, November). It is relevant in tracking the
business activities. It leads to better evaluation of different business units and examine which
activity of the business is most profitable.
Disadvantages of Activity based budgeting
The biggest limitation associated with this planning tool is that, it is a time consuming
and very costly process. It is difficult to assess and also allocate the cost of the overhead related
with the business activities.
Zero based budgeting
It is a method of budgeting where all the expenditures are effectively justified for each
period. This procedure of the budgetary tool mainly starts with the zero base. It is considered to
be prominent for the everyday function and has been significantly analysed for the needs and
cost.
Advantages of Zero based budgeting
One of the key significant benefit of this budget is that it is flexible and mainly focuses
on the current operations of the business (Voznyak and et.al., 2019). This tool tends to have more
flexible set of business operations and more disciplined execution of the budget. It helps
management in effectively justifying all the operating expenses and also helps in keeping the
legacy expenses into check.
Disadvantages of Zero based budgeting
The key shortcoming regarding this budget is that, it can effectively reward short term
thinking. This is usually done by shifting the resources and generate the revenues for the
upcoming year. This budget does not take into account long term investments. It is highly time
consuming process. The data can also be manipulated by the savvy managers.
Flexible budget
It is the budget which mainly adjust to activity levels or the volume levels within the
organization. It is a financial plan which tends to vary as per the needs and goals of the company.
Advantages of Flexible budget
This budget is significant in accurately reflecting the financial state of the organization (6
Advantages and Disadvantages of Flexible Budgeting, 2016). It is useful in keeping track of the
business finance and also helps in adjusting the funds with accuracy.

Disadvantages of Flexible budget
This planning is not disciplined and enables cheating and manipulation of the data. It is a
time consuming process because it requires more planning in order to keep proper record of the
expenses.
Comparing the ways within which organization uses management accounting to effectively respond to the
key financial problems.
Benchmarking
Capital Joinery Ltd. Company effectively comply with the benchmarking as a significant
management accounting technique which helps in effectively pointing out the key significant financial
areas which helps in keeping the company ahead of its competitors (Shieldsand Shelleman, 2016). It is
considered to be as the significant process which is useful in evaluating the various aspects related with
the key process in association with the best practice within the company. It is considered to be prominent
in the adoption of the best business practice and is significant in improving the business performance.
This leads to higher operational growth and better efficiency of the business.
Benefits of benchmarking
One of the key benefit linked with the benchmarking is that, it helps the internal management of
the company in gaining independent perspective regarding the performance of the company. It is
significant in drilling down the performance gaps and also identify the key areas of the improvements
(Harelimana, 2017). This tool is relevant in setting the key performance expectations and also helps in
developing standardized set of of metrics for the continuous improvement of the business performance.
Key performance indicators
Hicks Holdings company tends to use key performance indicator which in turn is considered to be
as the type of performance measurement tool. This is significant in examining and also evaluating the
success of the organization. It is a quantifiable measurement which in turn has been used to effectively
gauge the overall long term business performance. It is also prominent in determining the company
strategy and leads to operational achievement.
Benefits of the Key performance indicators
One of the key significant benefit of the key performance indicator is that, it is very beneficial in
improving the decision making process and also tends to have complete overview related with the
progressing towards the goal of the company (Laguecir,Kern, and Kharoubi, 2020). It is considered to
be crucial in effectively determining the current business position and better performance expectations. It
is a relevant management accounting tool by effectively outlining the key important aspects for gaining

key attention of the business. It is significant in outlining the key important aspects for gaining relevant
attention within the business and leads to improved business performance and efficiency.
Comparison of organisation using marginal accounting method
Problem Statement
Capital Joinery – Increasing cost of material storage
Marks Company – Inappropriate profit margin calculation.
Use of management accounting method to solve the problem
Capital Joinery – Company was facing the problems of increasing storage cost and as it was
making bulk purchases. It affected the operations and profits of business. It caused the business
to adopt just in time inventory management method to make on the spot purchases. It allowed
company to make purchases when needed urgently reducing storage cost. Proper supply chain
was established to meet production requirement on time.
Marks Company – The company was having adequate sales but the profits were declining. It
was due to inappropriate measurement of profit margins. It adopted cost accounting method to
compute each cost involved in the production of products. Based on this per unit cost was
determined and it kept margin of 20% on cost to identify proper selling price of products and
services.
Analysing and responding to the financial problems and management accounting can lead
organisations to the sustainable success.
The management accounting of the company can significantly lead the organization
towards high degree of sustainable success (Fiondella and et.al., 2016, September). The
organization focuses on complying with the management accounting reports and management
accounting systems which helps in responding to the key strategies which leads to higher
business performance and leads to improved business performance and efficiency. This way it
helps in solving the key financial problem and leads to higher sustainable growth by addressing
key financial problems on a timely manner. The management accountant of the company must
analyse the internal reports and take necessary decision.
Evaluating how planning tools are used for responding to solve the financial problems of
company.
Budgetary control planning tools helps the management accountant to compare the actual
expenses with the budgeted report. This helps in determining the deviation within the study. This

leads to improved business performance and efficiency (Shi, and et.al., 2016, November).
Finding the best possible solutions and controlling the cost of the organization is significant n
solving the key financial problems and helps the organization to attain high degree of sustainable
success. Complying planing tools helps in better decision making and also assess the financial
problems of the organization with high degree of accuracy.
SCENARIO 2
Calculating costs using different techniques of cost analysis
Different techniques used under the cost analysis are marginal costing and absorption
costing which provides the company to measure its profit from the production.
Marginal Costing
It could be describes as the costing technique where the marginal cost also called variable
cost is directly charged to the cost units (Nan, 2019). The technique do not consider fixed cost as
part of the production cost and writes off against contribution completely. Marginal cost refers to
additional cost for producing single extra unit.
Advantages
 It enables comparison between units.
 Do not involve complex under/over absorbed overheads.
 It is simple and easy to calculate and understand than absorption costing.
Disadvantages
 It is not accepted under accounting standards.
 Method does not involve fixed cost in calculating the product cost.
Absorption Costing
The full absorption costing is also a method used in cost accounting for measuring the
cost of product. The method is used for assessing all the cost related to manufacturing a
particular product (Hamamura, 2018). This technique involves both variable and fixed cost in
calculating the cost of the unit.
Advantages
 The method is more reliable as cover all cost.
 Method is acceptable as per accounting standards

 Give accurate profit figures and value of closing stock.
Disadvantages
 It involves complex calculations as compared to marginal costing.
 The method is not used for comparing cost of the two units.
Income Statement as per both the cost techniques
Income statement as per Marginal Costing
Particulars May June
Sales Revenue 25000 18750
Marginal Cost of Sales
Direct Materials 6000 4800
Direct Labour 4000 3200
Variable sales commission 500 375
Variable Production Overheads 2000 1600
12500 9975
Add:
Opening Stock 0 0
Less:
Closing Stock 0 600
12500 9375
Contribution 12500 9375
Fixed production overheads 2000 2000
Fixed selling cost 1000 1000
Fixed administration cost 3000 3000
Net Income 6500 3375

Income statement as per Absorption Costing
Particulars May June
Sales Revenue 25000 18750
Cost of Sales
Direct Materials 6000 4800
Direct Labour 4000 3200
Variable Production Overheads 2000 1600
Fixed production overheads 2000 1600
14000 11200
Add:
Opening Stock 0 0
Less:
Closing Stock 0 700
(Under)/over absorbed Fixed prod o/h 0 -400
14000 10900
Gross profit 11000 7850
Fixed selling 1000 1000
Fixed administration cost 3000 3000
Variable sales commission 500 375
Net Income 6500 3475
Reconciliation of profit figures
May June
Profit under absorption 6500 3475
Difference in units of inventory * fixed production overhead p/u 0 100
Profit under marginal costing 6500 3375

Calculation of Material Variances
CALCULATION OF VARIANCES:
i) Material Price Variance = Standard Price - Actual Price
= (std price - actual price) x actual qty)
(£12 - £9.3) * 2400 kg
6480 (Fav)
ii) Material Usage Variance = Standard Usage - Actual Usage
= (std qty - actual qty) x std price)
(2000 kg - 2400 kg) *£12
-4800 (Adv)
iii) Material cost variance = Standard cost for actual output – Actual cost
= (Std qty* Std price)-(Actual qty * Actual price)
(24000-22400)
1600 (Fav)
Inventory ledger
Inventory ledger record using LIFO method
Date Goods purchased
Cost of goods
sold Inventory balance
Jun-
01 Beginning Balance
£350 (10 units *
£35)
Jun-
09
15 units *£38
=£570 £570 (15 units *£38)
Jun-
15 £456(12*£38)
£350 (10 units *
£35)
£114 (3 units *£38)
Jun-
20
10 unit * £32=
£320
£350 (10 units *
£35)
£114 (3 units *£38)
£320 (10 unit * £32)

Total 23 units £784
Jun-
23 £320 (10 * £32)
£350 (10 units *
£35)
£114 (3 units *£38)
Total 13 units £464
Jun-
27 £114 (3*38)
£350 (10 units *
£35)
Jun-
30 £70 (2*35) £280 (8 units * £35)
Inventory ledger record using Average Cost method
Date Goods purchased
Cost of goods
sold Inventory balance Average cost
Jun-
01
£350 (10 units *
£35) £35
Jun-
09
15 units *£38
=£570 25 units £920 £36.8 (920/25)
Jun-
15 £441.6(12*£36.8) 13 units £478.4
Jun-
20
10 unit * £32=
£320 23 units £798.4
£34.7
(798.4/23)
Jun-
23 £347 (10 * £34.7) 13 units £451.4
Jun-
27 £104.1 (3*34.7) 10 units £347.3
Jun-
30 £69.4 (2*34.7) 8 units £277.9
CONCLUSION
This study summarizes that, Management accounting is crucial for the attainment of the
long- term goals and objectives. It is useful in effectively preparing the relevant set of reports to

improve business performance and improved business operations. Cost accounting system is
relevant in controlling the cost of the business. Inventory management system is prominent for
the accurate inventory track. Budget report is prominent in evaluating the planned expenditure of
the company with that of actual. The job cost report helps in showing the expenses for the
specific project. Budgeting is significant in formulating the plan of the company. Activity based
budgeting is relevant in tracking the business activities. benchmarking is significant in drilling
down the performance gaps. Key performance indicators is significant in outlining the key
important aspects for gaining relevant attention within the business.

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Online
6 Advantages and Disadvantages of Flexible Budgeting. 2016. [Online]. Available through:
<https://connectusfund.org/7-advantages-and-disadvantages-of-flexible-budgeting>