Detailed Management Accounting Report: Charlotte Hotel Analysis

This report provides a comprehensive analysis of management accounting practices, focusing on the case of Charlotte Hotel. It explores various management accounting systems such as transfer pricing, cost accounting, lean accounting, and budgetary control, highlighting their importance in managing financial problems and measuring performance. The report details different methods for management accounting reporting, including reports of manufacturing, payroll, expenditure, job cost, and sales and revenue. Furthermore, it delves into cost analysis techniques, comparing marginal and absorption costing methods for preparing income statements, and discusses the importance of planning tools and budgetary control, including financial ratio analysis, for effective financial management. The report offers insights into the advantages and disadvantages of these tools, providing a well-rounded understanding of financial management within the hotel industry.

MANAGEMENT
ACCOUNTING

INTRODUCTION
Accounting is the process which help organization company can easily make reports and
different type of statement of financial transaction by using various standard. Further with the
help of management accounting organization can easily measure its performance and find out the
problems in relation to the profit and expenses. Further for analyzing the management
accounting the selected organization is Charlotte hotel which is one of the leading organization.
In the present report description is done on different approached used by the firm for managing
the financial problem.
TASK 1
P1 Explaining management accounting and giving the important requirement of different types
of management accounting system.
There are different type of management accounting system and approaches which is used by the
Charlotte hotel in respect to manage the business successfully. Some of the approaches are
discussed below:
Transfer pricing: A transfer pricing is the price at which parent company transfer its
goods and services to other organisation. Further if organisation sale it product and services
outside the firm then it kept price higher while at the subsidiary company price is lower due to
this reason the cost of finished products can be affected. The price of raw material is higher then
cost of production will also be higher (Håkansson, Kraus and Lind, 2010). On the other side if
transfer price is lower then it lead to decrease the total manufacture expenditure. The
organization need to use those accounting system which assist in making changes in the cost
level through which earnings can be enhances at the end of financial years.
Accounting of cost: Accounting of cost is one of the another costing in which all the cost
are measured and recorded by the accounting department of Charlotte hotel. Further through the
help of this organisation can easily ascertain every cost which incurred at each level of the
operation and production procedure (Burritt and et.al., 2011). Along with this it can be stated that
within the organisation there are higher expenses then it will be unfavorable for the organization
of all the different sectors. the cost accounting is very effective for the Charllote hotel because it

help in identifying the expenses which are incurred in order to provide services. Hence by
finding out cost of each services it become easy to sale goods and services in the market.
Accounting of lean: Charlotte hotel can easily reduce different kind of expenses which
are not supportive in enhancing sale and profit through the help of lean approach. Further lean
approach help in reducing expenses cost which are not helpful for the organization. Through this
wastage of goods can be eliminated and firn can easily make high profit. Therefore it can be
stated that lean approach is very effective in order to make firm sound financially good.
Accounting of output (van der Steen, 2011).. This method is less related to the accounting and
costing and take care about the raw material is called as output. Through the support of this
process of accounting Charlotte hotel can easily manage its raw material and non financial
resources in an systematic manner. By using the same raw material the management of Hotel can
increase the production and grab attention of more customers.
Control over the budgetary: In control over the budgetary the system can easily can
easily control all its expenses and enhance it sales. There are different kind of services which are
delivered by hotel to the customers such as food, accommodation etc. for this purpose the
Charlotte hotel need to manage all its expense related to services so that it can male profit. For
doing this firm can used budgetary control accounting system.
Accounting for inventory: It is one of the important accounting system for the Charlotte
hotel in respect to decrease the stock and manage it which is not appropriate for them. At the
organisation when there are large number of stock then it lead to impact the organization
negatively. Therefore, Charlotte hotel need to have accounting for inventory in order to maintain
level of stock and use of it in systematic manner for enhancing sale and revenue.
P2 Explaining various methods for management accounting reporting
In the organization when finance is manage in appropriate manner and accounting
department make proper accounts for the financial transaction and reflect to entrepreneur is
called as management accounting. Here different short reports which need to made and combine
it in order to set financial statements. Given below are the following important reports:
Reports of manufacturing: In report of manufacturing the organization can make records of all its
detail related to the cost of manufacturing the goods and services. Further this report is mainly
related to the production of products of the hotel.

 Report of payroll: The report of payroll is of expense which is related to the workers
and managers. The keeping the record of short people is known as the payroll report.
Further in this there different cost and disposals are included such as labor rate, working
hour, salary and allowances etc (Weißenberger and Angelkort, 2011).. This kind of
expenditure take place within the human resources management. All the function which
take care is related to the people and personnel who are working for the Charlotte hotel.
In the income statement the total total profit and expenses is recorded at the expenses
side. Further it can be stated that if there is higher the summation of payroll report then it
impact the net profit of the organization which can noted in balance sheet at the end of
financial year.
 Report of expenditure: from the above mentioned report one of the another system
which is related top the particular function. In the account enter of expenditure should be
shown in expenses side which is similar to as another type of cost or miscellaneous
expenditure (Tanis and Özyapici, 2012).. Here different cost are incurred which become
expenses and later on it decrease net yield and increase the level of total expenditure at
the end of financial year.
 Report of job cost: In the business different stages need to used in order to produce or
make goods and services (Gelinas, Dull and Wheeler, 2011). There are different types of
cost which are associate with Charlotte hotel and they are known as the expenses. With
this use of report of job cost it become easy for the Charlotte hotel to able to find out cost
of every process and measure there cost. These all are the cost which is related to the
personnel, information etc. this all resources at every stage can be taken into account for
making report.
 Report of sale and revenue: According to this report of sale and revenue Charlotte
hotel can easily identify the profit which is generated by them. Further hotel cannot make
different kind of financial statement without using sale or profit which is generated by
selling goods and services (Adams and Drtina, 2010).. Therefore report is very effective
in order to finding out revenue of the organization.
 Report of incomes: In report of incomes there are different kind of revenue or inflow
which is recorded. Here those area where different area are covered from where

organization can collect the cash. Higher the total incomes is profitable for an
organization and help hotel in making it financially strong which lead to enhance the
growth and development.
TASK 2
P3 Calculating cost using suitable techniques of cost analysis for preparing income statement.
Ever organization calculates it profit and different expenses at the end of the financial
year. The ability of the organization is known as the way to see how much organization generate
its profit and expenses take place. Along with this in income statement if it show that profit of an
organization is higher then it can easily manage all its expenses and grab the attention of its
customers (Gelinas, Dull and Wheeler, 2011). There are different kind of method which
organization can use in order to manage its profit and expenses. In all of them there are only two
that is marginal costing and absorption costing. This both have two different level of costs on the
basis of which income statement is prepared by Charlotte hotel. This are as follows:
According to the marginal or variable costing the given profit and loss statement
According to the absorption costing given below the profit and loss statement:

From the both table which are show above can be pictured that there are various type of
statement of profit and loss statement which show net profit at the end of financial year.
Therefore above both marginal and absorption approach have different kind of the expenditure
which occur at the time of production activity of Charlotte hotel (Skærbæk and Tryggestad,
2010).. Further in the marginal method there are only direct expenses which is used and variable
overheat cost of production is used. On the other hand there are another statement that is
absorption costing which shows that indirect direct fixed and other expenses are covered which
help in determining the net profit. Therefore from the above both statement it show that net
income is different when using different approaches and systems. Here above given net yield of
the firm is £12600 in marginal costing and in absorption costing it is £9300. Further Charlotte
hotel is using absorption costing in order to get profit it is so because it show that all expenses
which covered at the time of generating sales. Hiebl, 2014). In absorption costing net profit is
lower and expenses is higher which lead to impact the organization profit.

Difference between marginal and absorption approach of costing
Basis Marginal Approach Absorption Approach
Definition Marginal approach in which
calculation takes places on the
basis of fixed and variable
cost.
Adsorption costing involve the
calculation of complete cost of
any product.
Profitability In marginal approach
profitability can be measured
using Profit Volume Ratio.
In absorption approach
profitability gets affected by
inclusion of fixed cost.
Cost data In marginal approach coat data
is presented to the outline total
contribution of per item
(Cullen and et.al., 2013)..
In absorption approach cost
data is presented using the
conventional ways.
Classification of Over heads In marginal approach
classification takes place on
the basis of fixed and variable
over heads.
In absorption approach
classification takes place on
the basis of production,
Administration & selling and
distribution of item.
Highlights In marginal approach the
highlight is contribution per
unit.
In absorption approach the
highlight is net profit per unit.
Cost Recognition In marginal approach product
cost is always variable and
period cost is always fixed.
In adsorption approach fixed
as well as variable both fall
under the product cost.
Magnitude difference In marginal approach
difference in magnitude of
opening and closing stock
affect the cost of unit
production.
In absorption approach
difference in magnitude of
opening and closing stock
affect the cost of unit
production (Kulesza, Weaver
and Friedman, 2011).
TASK 3
P4 Importance of planning tool which is used by Charlotte hotel for budgetary control with
advantage and disadvantage
There are different way through which organization can easily reduce its different cost of
production by increasing level of revenue with the help of budgetary control. Further it is one of
the beneficial program which help organization in making it more profitable over the period of

time (Wynn, Low and Nauta, 2013).. For this purpose there are different tools and techniques
which can be used by Charlotte hotel which is as follows:
Financial ratio analysis: It is tool through which financial statement can be measured
and interpreted. Here different type of ratio which can be used and find out the how much
organizations generating sales and revenue (Islam and Hu, 2012). . Information can be gather
from the financial account such as balance sheet, profit and loss statement and cash flow
statement. Ratio of solvency help in determine the debt and equity. Here debt is required to be
lower in comparison to the equity. Further it there is lower solvency then it show that
management is not performing good. Here give below is the example of the profitability ratio.
Advantage and disadvantage of financial ratio
Advantage: One of the major advantage of financial ratio is that it simplifies the financial
statement of any organization through this one can easily conclude that the amount of revenue
generation of any group and also compare it with other organization. Through this any
organization can easily calculate and analysis the financial transaction that is made by by
organization and through this they can easily compare it with other groups also What is
Management Accounting ?, 2017). Through this any organization can easily find out the assess
and liquidity positions of any organization that means they can calculate the current availability
of assets. Through this the organization is able to estimate the amount that they can provide to

their stockholders. Through this financial ratio tool one can compare the companies irrespective
of their size. During the analysis period only one company is considered at a time.
Disadvantages:
One of the major disadvantage of financial ratio is that all the financial information are
generated on the basis of financial statement. Therefore, it is not always necessary that result is
always correct because the data is not clear always and accounting is also not proper therefore
the may generate conflict (Ajibolade, Arowomole and Ojikutu, 2010).. To operate this
department the employee should hold high level of mathematical and accounting skills who
charge huge amount of salary.
Investment appraisal tools
Investment appraisal techniques is the tool of planning which assist in making decision in
relation to the make any investment in projects. An organization want that in any project they
make investment must generate higher profit. For determine which investment can generate
higher profit Charlotte hotel can use different investment appraisal tools. Some of the techniques
such as net present value and average rate of return etc is very effective. Further given below are
the example of different tools and techniques which organization can used in order to find out
profitability from particular project and period of recover initial amount with the help of
hypothetical example.
Project A
Pv @
10% Present value Project B PV @ 60%
Present
value
Initial
investment 60000 50000
1 24000 0.909 21818 29000 0.909 26363.64
2 29000 0.826 23967 36000 0.826 29752.07
3 36000 0.751 27047 42000 0.751 31555.22
4 42000 0.683 28687 46000 0.683 31418.62
5 46000 0.621 28562 52000 0.621 32287.91
6 49000 0.564 27659 62000 0.564 34997.38
Total 157741 186375
NPV 97741 136374.84
162.90% 272.75%

Project A Project B
Initial investment 60000 70000
1 24000 29000
2 29000 36000
3 36000 42000
4 42000 46000
5 46000 52000
49000 62000
Total 177000 267000
Average 29500 44500
ARR 49.17% 63.57%
Aforementioned table show that Charlotte hotel has two choice of machine and it can make
purchase of that machine which give it higher profit as compare to other one. In net present value
and Average rate of return the second machine is giving high return and in A it is giving low
return.
There are some benefits of investment appraisal tool which is as follow:
 This investment appraisal techniques help in making effective decision and help in
deciding which project is beneficial for an organization (Weißenberger and Angelkort,
2011)..
 Helps to the firm in identifying which machine which give high profit and from which
project they get lower profit.
 In all the investment appraisal tools such as Net present value and average rate of return
have some values that is cash flow accounting, discounting factor and time value.
Through the help of this the organization can make appropriate decision for investment
Disadvantage of tools an techniques are as follows:
In the market there are changes take place in inflation rate and interest rate but calculating the
investment tools cost capital remains same every year. While because of this reason the Charlotte
hotel cannot make right decision (Ajibolade, Arowomole and Ojikutu, 2010)..

Budget
Like other financial tools such as financial ratio, investment etc budge is also one of the
tools which help organization in planning its profit and expenses. By using this tool firm can
easily measure its past year performance and budget accordingly in order to generate profit.
Further for making a budget statement there are different techniques which organisation
can use such as Zero based training and incremental tradition. Etc. there are different kind of
budget which can made which help in managing finance.
Febr
uary
Mar
ch
Apri
l May June July
Aug
ust
Sept
emb
er
Octob
er
Nove
mber
Dec
emb
er
Janu
ary
Opening balance
210
00
220
00
235
27.2
258
06.
284
58.
368
54.
457
69.
547
84.3
1
64368
.
74572
.
934
94.
112
528.
Sales
147
60
152
88.
160
41.
164
14.
221
59.
226
80.
227
80.
233
51.
23971
.
32691
.
328
04.
492
06.
Total
357
60
372
88.
395
68.
422
21.
506
18.
595
34.
685
50.
781
35.
88340
.
10726
3.
126
298.
161
735.
Expense
Marketing expenses 80 80 80 80 80 80 80 80 80 80 80 80
Administration
expenses 400 400 400 400 400 400 400 400 400 400 400 400
Finance cost 200 200 200 200 200 200 200 200 200 200 200 200
Insurance 160 160 160 160 160 160 160 160 160 160 160 160
Rent 120 120 120 120 120 120 120 120 120 120 120 120
Salary and wages
100
00
100
01
100
02
100
03
100
04
100
05
100
06
100
07 10008 10009
100
10
100
11
Depreciation 666. 666. 666. 666. 666. 666. 666. 666. 666. 666. 666. 666.
Premilinary
expenses written off
133
3.
133
3.
133
3.
133
3.
133
3.
133
3.
133
3.
133
3. 1333. 1333.
133
3.
133
3.
Other operaitng
expenses 800 800 800 800 800 800 800 800 800 800 800 800

Sum of expenses
137
60
137
61
137
62
137
63
137
64
137
65
137
66
137
67 13768 13769
137
70
137
71
Net balance
220
00
235
27
258
06.
284
58.
368
54.
457
69.
547
84.
643
68.
74572
.
93494
.
112
528.
147
964.
Advantages and Disadvantages of budget.
Advantages: Budgeting is considered as the management tool for planning the future activity and
evaluation of the current work. It is generally focused on the estimation and projection of the
financial goal of any organization, it can be considered as the risk manager, through budgeting
financial optimization can be achieved that can is discussed below. Financial goals of an organization: Through budgeting any organization can set
different plans on the basis of their duration (Hammad, Jusoh and Yen Nee Oon, 2010). It
can be short-term in which money is spend for short period of time or it can be of long-
term in which money is spend for long period of time. Accurate financial estimation can
lead to a achieve a greater financial goal. Risk Management: During budgeting we always consider all the expected and
unexpected conditions and factors that may affect in future and an organization prepares
backups for that therefore the budgeting be considered as the risk management factor in
any organization (Kulesza, Weaver and Friedman, 2011). Optimization of financial efficiency: Usually an individual invest money into the
necessary things only due to this the clear image is created of all the items that are
important for an individual (Baldvinsdottir, Mitchell and Nørreklit, 2010). Which help an
individual to identify the items that are important.
Disadvantages: For some people it can be considered as a burden because it require a
regular and disciplinary investment. Budgeting does not provide any certainty for the future of
an individual. As the budgets always changes time to time therefore it require more
administration work. Frequently changing budget may break the trust of employee on the
organization. Budgeting can generate an effective result for small business organization but it is
not much effective for large organization because frequently changing policies may destroy the
stability of the organization . For making and implementing budget specialist and professional
team is required that may increase the overhead cost of an organization. Due to this internal

conflict may arise into an organization each team leader wants more resources but due to
budgeting they are provided with limited resources therefore in case of any failure they start
proving wrong each other.
TASK 4
P5 Explaining the way Charlotte hotel is using management accounting system for overcome the
financial process
There are different kind of financial problem that is financial accounting cost, inventory,
inventory, performance management accounting etc. further there are some indicators for this
solution of this financial problems that are bench marking, key, performance, indicators in
respect to carry out business effectively. Here given below are some significance of management
accounting that are as follows:
Key performance indicators: This key performance indicator is effective in respect to analyses
the performance of employees. This assist in creating better quality and services which help in
improving financial problems. Along with this there are different performance indicators which
are used in respect to include cost management and financial for reducing issues which occur at
organization.
Benchmarking: It is one of the effective tool which assist in measuring the performance of
organization and compare it to other competitor. Along with this Bench marking is effective for
recognizing competitive strength of entity and further for preparing plan which need to follow
for reducing its weakness.
Financial problem of Charlotte hotel can be manages with the help of accounting system
principle so that high quality services can be deliver to customers.
In the process of an organisation there are different constraints which taken place in financial
and non financial. Charlotte hotel need to overcome this issues by using different kind of
approaches. There are some management approaches which organization is using and are given
below:
Name of accounting systems Description

ERP software ERP software is known as the computerized system and can be
used by those employees who posses technical skill. Further it is
very effective tool for the hotel. It is so because with the help of
this tool organisation can easily keep the records of its finaical
and non financial activity which taken place within the
organization (Weißenberger and Angelkort, 2011).. Through
proper planning organization can easily control its expenditure
and make records of all its revenue and expenses taken place
within an organization. When the past record is kept by an
organization then it can easily take review of its income and
expenses. Therefore on the basis of give evaluation organisation
can easily make financial plan which lead to increase
productivity and profitability.
Lean accounting From the above discussion it can be stated that lean accounting
is very effective in order to reduce the wastage of products and
services. Along with this it also help in reducing the cost of
production so that sum of money can be controlled by the firm.
This help in avoiding the obstacles leas to increase the expenses.
And help organization to become financially storng
Transfer pricing As from the above discussion it is stated that it is a price which
parent enterprise sell its goods and services to its other
organisation. There are different kind of problem which take
place related to cost at the time of selling goods and services to
other organisation (Ajibolade, Arowomole and Ojikutu, 2010)..
Further production cost can be higher it price of raw material is
higher. Further company make purchase of those material from
the parent company then it but them in lower price which help in
solving the problem related to cost.

Process costing It is a kind of approach for managing the accounts at Charlotte
hotel so that cost which incurr and expenses can be find out at
the time of carrying out operational activities. Along with this
organization can easily came to know at which stage of
production expenses increases and what precaution can be taken
for avoiding such expenses (Wynn, Low and Nauta, 2013)..

CONCLUSION
From the above report it can be concluded that management accounting is the process in
which organization prepared some financial statement and reports in order to identifying the
expense and income. There are different kind of approaches which organization can used such as
transfer pricing, accounting of cost etc. further there are various report which need to make in
order to manage the employees and finance of an organization. There different reports need to
made so that company can manage all its function effectively. Further it can be concluded that
budget is very important for an organization so that it can easily manage all its finance for
enhancing profit and reducing expenses. Through the help of investment appraisal techniques
organization can easily make selection of project for investment which is beneficial for their
organization. There are different type of investment appraisal techniques such as net present
value, average rate of return etc are very effective for an organization.