Management Accounting Report: Financial Analysis of EECL Operations

This report provides a comprehensive analysis of management accounting principles and their application within Eastern Engineering Co. Ltd (EECL), a medium-sized manufacturing venture. The report begins by defining management accounting and exploring various systems such as cost accounting, inventory management, price optimization, and job costing, highlighting their benefits for EECL. It then examines different management accounting reports, including performance reports, inventory reports, account receivable aging reports, and cost accounting reports, detailing their purpose and how they support EECL's operations. The report further delves into cost analysis techniques, including marginal and absorption costing, with calculations to produce income statements for EECL. Advantages and disadvantages of planning tools used for budgetary control are explained, and the report concludes by analyzing how financial managers effectively use management accounting systems to address financial problems, contributing to sustainable success.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management Accounting Systems:........................................................................................1
P2 Management Accounting Reports:.........................................................................................3
M1 Evaluating benefits of discussed MA systems:.....................................................................4
TASK 2............................................................................................................................................5
P3. Computation of certain costs with the help of applying suitable methods related with cost-
analysis to formulate important financial statements:.................................................................5
M2. Accurately application of various of management accounting techniques along with
producing essential types of financial report...............................................................................7
D2. Produce financial report by apply along with interpret activities of business activities.......7
TASK 3............................................................................................................................................8
P4. Explaining major advantages addition to disadvantages of different types of planning tools
which are used for the purpose of budgetary control:.................................................................8
M3: Analyses about certain uses of planning tools/methods addition to their application in
reference to preparing and forecasting of budgets in the company:............................................9
TASK 4..........................................................................................................................................10
P5 Comparing about multiple ways that shows how financial managers are effectively
working with MA systems so to respond towards multiple financial problems in real world. .10
M4 Analysing the ways in which companies respond on financial problems in which
management accounting will be effectively leading towards sustainable successes:................11
D3 Evaluating about the ways through which various planning tools can help in responding
effectively for resolving financial problems that takes the venture to sustainable success:......12
CONCLUSION..............................................................................................................................12
REFRENCES.................................................................................................................................13

INTRODUCTION
Management accounting refers to an aspect of finance in which is there to identify,
analyse, evaluate, interpretation with expressing information to the managers in order to achieve
goals and objectives. This is there to refer over the cost that is there to make accounting of
information which has been helping over making decision more effective. It is referred to as cost
accounting and information which has been helping to make decision making mechanism
provide effectiveness. Managing of firm work related to accounting is different from various
other method. It assists managers to frame rational decisions to attain strategic objectives
promptly. This assignment is based over Eastern Engineering Co. Ltd that is popular as medium
sized venture in the field of manufacturing.
Things to be covered in this report is based over various kinds of managerial accounting
system. Further various approaches is being used in order to handle reporting has to be
explained. Along with benefits and drawbacks that is planning mechanism which is being used
to maintain budgetary control. Final cost is there to make determination for using correct method
in reading income statement through marginal and absorption method.
TASK 1
P1 Management Accounting Systems:
Management accounting system is there to provide accounting information for
development over strategies which has been implementing managers for supporting day-to-day
operations. In simple words, this allows management for conducting all tasks, with plaining,
scheduling, hiring and regulating with managing. Management is there to include process of
making a task happen through plaining, scheduling, hiring, managing and regulating. Managing
of accounting has to be focused over particular kind of accounting method which is there to play
significant role through various kinds of business establishment possible. Various accounting
system that can be used by Eastern Engineering Co. Ltd are explained as follows:
 Cost accounting system: Under this kind of managing system it is reference is majorly
focused over costing system of production. This method is being used by the organization
for improving efficiency of multiple costs and maintaining them, lighting on profitable as
well as non-profitable practices, setting up product prices, guiding employees for
reducing prices and generating information about proper planning of using available
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resources.. The cost accounting method helps to measure the cost of goods that are
essential to the organization of sustainable operations. This is helpful in monitoring of
manufacturing cost related activities. Eastern Engineering Co. Ltd is required to be
incorporated through method that has been practising to help tracking of expense for
manufacturing of operations.
 Inventory management system: This has been forming accounting framework that is
related over creating effectiveness within management of an organization's stocks like
raw materials, finished products and within an organization. Also it helps in assisting of
inventory within the management system and decisions should be taken regarding
procuring of raw materials with the capacity of production. Since it helps to recognize
the quality of inventory in stores. The correct accounting system will assist the company
in determining the supply of raw materials, finished products and other inventories
decisions. As in Eastern Engineering Co. Ltd company, inventory accounting system is
essentially required to determine the quality of materials and also finished products
within the organization (Johnstone, 2018).
 Price optimisation system: In this kind of system accounting mechanism has been
helping for assessing price of good and services to be provided. Price management is that
method which is helpful in assessing of customers response over various price rates. As
there is no price management program within Eastern Engineering Co. Ltd it becomes
hard for determining of correct prices of its products. In correspondence accounting it is
very much essential for an organization to have correct price of product and services.
Thus, Eastern Engineering Co. Ltd 's requires price optimization system to allocate
effective products' prices within the corporation.
 Job costing system: As per this MA system it has been helping over assessing separate
job costs over various operations. Job costing is that kind of framework which is used in
providing of accurate details within the job costs and within the capacity of business
organizations for making sensible decision. Generally accounting system has an very
important role for controlling job costs. In other words method through which labour
costing uses within the business sector this is used for evaluating production of cost to be
surpassed the prices of materials which increases profit within an organization. In Eastern
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Engineering Co. Ltd, the system is essentially required for the purpose to determine costs
that is job assigning through various operations.
P2 Management Accounting Reports:
Various approaches are there that is being used for preparing of management accounting
report within an organization. This can be done for monitoring of financial and non-financial
results. Eastern Engineering Co. Ltd is there to prepare an management accounting report for
supporting of distinct accounting system. The various reports and its summary is been explained
as follows:
 Performance report – These report is there for depiction and actual performance for
covering of various aspects that is there within an organization that is being used to carry
out research by the employee. In this report certain effects is there for an outcome that
has been resulting to make comparison possible through budget. Performance report is
used for addressing results of practices as well as the work done in the entity. Along with
this, performance report also helps in comparing actual outcomes with set criteria so that
variance are analysed and working are done on that. Eastern Engineering Co. Ltd is an
organization that manufactures furniture. It is an manufacturing organization and the
report is being used for monitoring of performance of employees and assuring quality
within the product. Over all benefit is the study which is seen in a manner that enabling
of employee is done to make effective use of terms to contribute with better products
(Khosiev and et. al., 2019).
 Inventory report – This method is there for collecting information that is there to
provide information through quantities of raw materials and finished products that is
located in Eastern Engineering Co. Ltd warehouse. Respective organization is there
which makes preparing of report of inventory raw materials and product. Implementation
of report is provided over making data assistance which lead over data obtaining and type
through procedure of storage. This same as in Eastern Engineering Co. Ltd have chances
to compile a report about ways to manage raw materials together with ready furniture so
that stock are properly monitored (Kostyukova and et. al., 2018).
 Account receivable ageing report – In this kind of managing accounting that is being
related wit provisions that has been organizing data with debts through including of
debtors. Most of the business is being provided through information over dates that is
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related to payments. Main purpose of such kind of study helps in assisting of organization
to be recovered from debtors. With this, a record is kept by the organisation about unpaid
invoice balances together with time on which the are outstanding so to identify invoices
which are open as well as permits for keeping them at priority to slowly paying clients.
 Cost accounting report – This is there to make covering of cost and all activities that
has been carried through production of particular product. As per the scenario of Eastern
Engineering Co. Ltd managing of team with such corporation is there for utilizing
accounting report which is required to capture production of items. Such study has been
assisting over enterprise over evaluating both cost and profit. Accounting report has been
formed applying of two methods of cost processing.
In relation to this costs specific job has been ordering of charged that has been
performing job which is regarded to be cost specific. This can understood as Management
personnel in Eastern Engineering Co. Ltd utilization of such report in order to make recording
costs to be acquired which has made conducting of job to be specified through manufacturing of
furniture with specific kind of customer. In this process Eastern Engineering Co. Ltd is there to
make transfer of costs incurred performing process which can be manufacture within specific
portion within furniture. The main objective behind developing of report in assisting
organization with recognition of overall cost which is being monitored and assists further
(Messner, 2016).
M1 Evaluating benefits of discussed MA systems:
As it has been described above various kinds of accounting system within managing
accounting and there benefits has been discussed as follows:
Type of management
accounting system
Benefits of management accounting system
Cost accounting system This accounting system is used for helping to provide information
over costs through various operations. An organization like Eastern
Engineering Co. Ltd is therefore being managed over costs that
includes various activities through cost accounting system.
Inventory management
system
This kind of framework is having various advantages over the
management of stocks that has helped the organization is taking
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decision regarding purchase and manufacturing of finished goods of
Eastern Engineering Co. Ltd. This makes effective optimization
through inventory costs that makes storing and handling costs
possible.
Price optimisation system In this kind of accounting system Eastern Engineering Co. Ltd is
there for setting of accuracy in price of furniture. Prize optimization
system has been helping in recognising behaviour of customer at
various level offered by Eastern Engineering Co. Ltd.
Job costing system The system is advantageous over the organization because of its
feature of calculation of costs related to jobs. Furthermore, the
category of system helps in recording of costs with more acceptance
that makes actual cost and forecast cost to be analysed.
TASK 2
P3. Computation of certain costs with the help of applying suitable methods related with cost-
analysis to formulate important financial statements:
Marginal costing in this kind method contribution is being made for assessing over the
costs that has been classified separately over the costs and fixed costs.
Absorption Costing: Under absorption of costing product overheads has been fixed
through variable regarding absorption to make derivation of gross profit figure.
Calculations of costs in order to produce income statement of EECL through Absorption
costing:
Absorption costing January
Particulars Units
Price per
unit
Total
Amount
Total
Amount
Sales revenue 9,500 135 1,282,500
Less: COGS
Variable production 10,000 45 450,000
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Fixed production 10,000 32 320,000
Add: Under
absorption 10,000 3 30,000
Less: Closing stock 200 80 16,000 784,000
Gross Profit 498,500
Net Profit 498,500
Absorption costing February
Particulars Units
Price per
unit
Total
Amount
Total
Amount
Sales revenue 11,200 140.00 1,568,000
Less: COGS
Opening stock 200 80.00 16,000
Variable production 11,500 45.00 517,500
Fixed production 11,500 32.00 368,000
Less: Over
absorption 11,500 5.43 62,500
Less: Closing stock 500 71.57 35,785 803,215
Gross Profit 764,785
Net Profit 764,785
Calculations of cost for producing income statement by Marginal costing for EECL
Marginal Costing January
Particulars Units
Price per
unit
Total
Amount
Total
Amount
Sales revenue 9,800 135 1,323,000
Less: COGS
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Variable production 10,000 45 450,000
Less: Closing stock 200 45 9,000 441,000
Contribution 882,000
Less: Periodic cost
Fixed production
cost 350,000
Net Profit 532,000
Marginal Costing February
Particulars Units
Price per
unit
Total
Amount
Total
Amount
Sales revenue 11,200 140 1,568,000
Less: COGS
Opening stock 200 45 9,000
Variable production 11,500 45 517,500
Less: Closing stock 500 45 22,500 495,000
Contribution 1,073,000
Less: Periodic cost
Fixed production
cost 340,000
Net Profit 733,000
Reconciliation statement
January February
Absorption costing Net Profit 498,500 770,217
Add/Less: Difference in Closing
stock 33,500 (31,785)
Marginal costing 532,000 733,000
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M2. Accurately application of various of management accounting techniques along with
producing essential types of financial report
On applying this marginal and absorption costing methods profit of both the organization
is being computed over a period of three year. It is given in that Eastern Engineering Co. Ltd's
net income is using over the marginal costs is around pound 532000 in January and 733000
pound in February.
Also on the other hand, profit of Eastern Engineering Co. Limited is being applied for
absorbing of cost method that is £ 498500 and 764785 for January and February respectively.
Here differences in profit figures are due to over and under absorption of fixed overheads.
D2. Produce financial report by apply along with interpret activities of business activities
This has been constructed over the computation of higher profit for the first year that is
there for Eastern Engineering Co. Limited and for second year as well. On the other hand Eastern
Engineering Co. Limited is based over profit that has increased within the last year. Certain
changes has been made within the profit that is due over operational production costs which
makes difference in profit which has been figuring to both organizations (Phan, Baird and Su,
2017).
TASK 3
P4. Explaining major advantages addition to disadvantages of different types of planning tools
which are used for the purpose of budgetary control:
The term Budgetary control helps in making of reorganization of methods that is being
used to establish financial targets and comparison is made to generate outcomes. Focusing over
various form has resulted into plaining tools and defining that has been explained below:
Rolling budget: This is been described over managing of financial plan that is made over
comparison scale that has to be used in previous year. This is carried out in previous year's
budget which has been finishing for beginning phase within accounting cycle. The budgetary
control is continual updating about adding new budget duration because of completion of most
recent budget period. It comprises of incrementing extension of current model of budget that is
already applied in business. Budget is there to compass all aspects of finances which has been
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attempting for making estimation possible. In Eastern Engineering Co. Ltd limited utilization of
budget has made efficiency to view effectiveness of economic resources. This budget has certain
benefits and drawbacks, described below:
 Advantages: This has been making benefits for an organization by reducing complexity.
In this scheduling of task preparation is being rolled out in same manner of previous year.
With Rolling budget, managers of Eastern Engineering Co. Ltd will be in advantage as it
helps working related to planning and controlling in more accurately. Furthermore, it
helps in elimination of situations of uncertainty associated to budgeting. It also guides
to plans for near-term future despite of duration of long-term. Through this, management
is aware about where the company is moving that is all associated with sales and
profitability.
 Disadvantages- The main thing of this budget statement is appropriation of corporation is
not there to make crucial decision. By using this budgetary control, there are chances
that business owners of Eastern Engineering Co. Ltd may end up in spending too much of
efforts while preparing fresh forecasts. Moreover, it results in generating resentment
when spended time in forecasting in completing of another critical tasks.
Flexible Budget: this approach is being refereed to as the budgeting. In this title has been
actin as the budget. Under this financial transaction has to be modified through various needs of
user group. In Eastern Engineering Co. Ltd this type of budget is been drawn with those business
activities that is there to make changes possible in future.
 Advantages: Key feature benefit that is gained out of this budget is to create appropriates.
For example in specific financial year error is there over keeping subsequent modification
within accounts.
 Disadvantages: Biggest issue budget statement which has become difficult for comparing
impact of final data. This empowers fraud as staff members us there to create actual
performance (Quattrone, 2016).
Fixed budget: This is being recognized as major form of budgeting most rigid budget
nature which has been allowing modification to be made. In Eastern Engineering Co. Ltd
limited, manager is required to follow budget within segment where ordinary and subsequent
changes is made.
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 Advantages- As no future changes to be made within the fixed budget which is not of
complex over goals employees. Less chances manipulation with additional changes
 Disadvantages- Fixed budget has disadvantage that it do not permit managers to make
modifications in budget about any situation associated to transaction which makes it hard
for organisation to react on unexpected aspects. For Eastern Engineering Co. Ltd,
disadvantage of fixed budget is that operates to one practice level that is the planned
activity as well as it does not define about unpredictable activity. In this, actual always
are captured by the level of activity that significantly difference from the planned ones.
M3: Analyses about certain uses of planning tools/methods addition to their application in
reference to preparing and forecasting of budgets in the company:
Budget preparation is required for plaining tool that is refereed through improving
effectiveness over an business which has been making improvement of working possible.
Plaining of tools has been playing important role that processes budget. This has been involving
master budget, cash budget, flexible and various other kinds of budget in Eastern Engineering
Co. Limited. It helps in using of plaining tools, managing effectiveness with estimation that has
likely been performed decision accordingly. This making effectiveness through strategies and
policies at base level.
TASK 4
P5 Comparing about multiple ways that shows how financial managers are effectively working
with MA systems so to respond towards multiple financial problems in real world
Financial Problems: This is been classified over the issues that has made arising over
formation of an organization. If there is lack of effectiveness within supervision various kinds of
issues has to be faced that includes performance of issues which involves failure fro performing
of various business processes. Mentioned below are several types of issues related to finance
which Eastern Engineering Co. Ltd are facing:
Increasing cost storage for handling inventory costs: Eastern Engineering Co. Ltd has
been facing issues that is regarding costs through inventory and storage. Manager of an
organization is able to make determination of root cause in which problem and due organization
has increased costs of goods that has been sold which has been impacting cost inventories.
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Declining sales figures: In an organization sales figure has been continuously been
decline the organizations profitability level that has been decreasing. Eastern Engineering Co.
Ltd mangers has been unable to deal with issues. This resulted into declining of sales and
impacting shares price of organization.
With planning tools, organisational managers also uses several significant techniques that
guides Eastern Engineering Co. Ltd to properly handle all financial related issues. Thus,
emphasis and implementation of the techniques is essential for allocate areas that are causing
identified issues. Discussion of each management accounting approach in Eastern Engineering
Co. Ltd is as follows:
Key performance indicators: This has been described over important components that
has been outlined. In simple words emphasizes of various aspects leading to gain impressive
performance. Such factors can be financial addition to non-financial that totally depends on
nature. KPIs involve GP margin, NP margin and different kind of fiscal ratios that is having
non-financial KPI involves client relationship and brand value (Schaltegger, 2018).
Benchmarking: This is regarded as that set of elements that is linked over contrasting of
financial and non-finance elements in an organization. This has resulted into corporation that is
required to gain efficiency.
Financial Governance: The approach is all about collecting, monitoring and controlling
of required financial data or information types. for Eastern Engineering Co. Ltd, it is an efficient
approach as it guides managers to allocate all those components that lead to lower or
reduced performance. It combines all the governing policies which can help to put strict
controlling over organisation's performance.
Regarding this following table has been made in comparison to entities Antique Furniture
UK and Eastern Engineering Co. Ltd.
Eastern Engineering Co. Ltd Antique Engineering Co. Limited
Eastern Engineering Co. Ltd has been facing
issues that has made increasing of storage and
handling costs. This has made declining sales
and profitability.
Antique Engineering Co. Limited is facing
problems which has made increasing
operational costs over issues relating to profit
declining.
Corporation is there for making applicability of In this case of Antique Engineering Co.
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KPI that has made benchmarking over
identifying responsibility related to such
issues.
Limited increasing of financial governance
organization is required to use financial
governance is the main reason to increase
operational costs.
Inventories in management system has been
making optimization to be applied in order to
resolve with seeking problems.
Cost accounting system is required to be
applied in order to catch root cause over the
issues to minimise operational costs.
M4 Analysing the ways in which companies respond on financial problems in which
management accounting will be effectively leading towards sustainable successes:
Issues related to finance in an organization is based over generally facing those kinds of
obstacles that has been impacting corporation success. Every corporation minimizing the issue
and responding over them is time-frame that can be achieved to determine goals with objectives.
By using KPI and Benchmarking, managers of Eastern Engineering Co. Limited solves issues
that are part of finance as these guides in taking effective steps and strategies to achieve suitable
objectives that leads to sustainable success.
D3 Evaluating about the ways through which various planning tools can help in responding
effectively for resolving financial problems that takes the venture to sustainable success:
Planning tools plays key role in responding issues in an organisation. Managing personal
panning tools has to be effectively supporting system that has been responding smoothly over
issues related to finance. This can be understood through example that can be used by Eastern
Engineering Co. Ltd this is made for evaluating of organizational conditions. It makes critical
elements of financial problem to be assessed. Also it makes solution to be provided over
problems to be raised effectively.
CONCLUSION
As per the report, it can be concluded that MA has been using different methods and
system that is leading over making success of an organization possible. In this system key
success of an organization is helping in adapting within an organization. Management should be
applied plaining tools response over financial issues in which plaining tools with protective
framework has to be prepared over financial issues for assuring of sustainability of success.
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Applying of MA system with plaining tools should be optimized and efficiency of issues and
response.
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REFRENCES
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accounting. Research Journal of Pharmaceutical, Biological and Chemical Sciences.
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links to sustainability and planetary boundaries. Social and Environmental
Accountability Journal. 38(1). pp.19-29.
Tan, H. C., 2019. Using a structured collaborative learning approach in a case-based
management accounting course. Journal of Accounting Education. 49. p.100638.
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