FIN301: Management Accounting Report for Ensoft Technologies

This report provides a comprehensive analysis of management accounting practices within Ensoft Technologies, a software company. It explores various types of management accounting, including inventory management, job costing, profit optimization, and cost accounting systems. The report delves into different accounting methods like inventory, accounts receivable, accounts payable, performance, and budget reporting. It further examines the use of marginal and absorption costing, highlighting their differences and applications. The report also assesses the advantages and disadvantages of planning tools for budgetary control and how organizations like Ensoft are adapting management accounting to address financial challenges. The report concludes with an overview of the key findings and recommendations for improved financial decision-making within the company. This report is a valuable resource for students seeking to understand financial reporting and cost analysis.

NEW ORDER 1X
MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Various kind of management accounting and its requirement...............................................3
P2 Different Method that help in accounting report...................................................................4
TASK 2 ...........................................................................................................................................6
P3 Use of marginal and absorption cost......................................................................................6
TASK 3..........................................................................................................................................10
P4 Advantages and Disadvantages of various planning tools for budgetary control................10
TASK 4 .........................................................................................................................................11
P5 How organisation are adopting management accounting system to respond with financial
problem.....................................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

From: Management Accountant
To: General Manager
Subject: Report will help in making better decision in organisation related to finance part
according to market scenario.

INTRODUCTION
In today's world scenario, finance is something which is an essential part of organisation
and help in making a proper decision which does also records different thing like financial and
non financial thing and this is something that aid to have a investment criteria in effective way
(Albelda, 2011). Even technology and innovation with creativity make firm to call up for
effectiveness in their accounting system, although it is also required to maintain their records in
great way and in at one place as well. The report is based on Ensoft technologies which is a
software company and thus try to keep world connected. Assignment will include different thing
like it will use different method of accounting and comparison in between two company which
solve the problem of firm in better manner. Moreover it will also include appropriate technique
which help in producing a income statement of company.
TASK 1
P1 Various kind of management accounting and its requirement.
Management accounting is such which help in collecting information related to raw
material, sales data etc. and such this is being converted and transformed data and it can be used
in organisation for their purposes. This also help in gathering information related to operational
cost and compares with budget expense with the actual criteria. Therefore management
accounting is that which help top executives of company to make proper decision and strategy or
organisation. Different kind of management accounting are as:
Inventory management system: In organisation like ENSOFT has various policies and
procedure which help them to have an control on various thing and although this is continuous
process and also direct to take effective decision related to investment of money. Normally, a
initial form of issues they face like over stock and under stock too (Arroyo, 2012). Moreover,
there are various software which help in solving such problem and some of those are as
(Tracking software, bar code reader and EOQ) these are some methods which provide solution to
over stock and under stock issues in effective way and make company to perform in better
manner as well. Hence, this is that which help to have proper accounting and produces policy
which reduce the consequences of those in company.
Job costing system: In organisation, it is there that in company there are many jobs
which help to earn higher profit and thus also increases various cost in organisation too.

Moreover, for such the firm has to determine the jobs which increase cost and making them to
loose different thing and identifying and working hard over such can help them to attain their
goals and objective. Normally, entity work hard to satisfy their customer with their product and
services but in such case the ENSOFT does provide proper services to customers and make them
existing consumer for long.
Profit Optimization system: Price of services should be kept at reasonable as because
this is such factor which attract and make millions of people to buy their services and if the
prices are made up high then generally people use to ignore the company and their services too
(Becker, Messner and Schäffer, 2010). Price optimization does help to make firm to earn higher
profits and such system is that which does help in financial accounting of company.
Cost accounting system: This is something which help in calculating cost which is
related to in performing every function of firm whether it is profitability, inventory and control
etc. which can be seen in great manner. Moreover, it also help in reduction expenses and this
help in taking right and accurate actions in organisation and although it is being used to minimise
wastage of resources in proper manner. It also reduce the labour and material cost too which is
part of minimising the expenses.
Therefore, these different type of management accounting help organisation to manage
their working in right direction and make firm to earn higher profits in effective way. These
accounting system are required in every enterprise not only in ENSOFT as because finance is
that which is a part of each and every entity.
P2 Different Method that help in accounting report.
Account reporting is that which also need to organisation like ENSOFT technologies Ltd.
Moreover report is that which help in effective decision of firm and also make strategy in entity
which lead to have a earning of higher productivity and profit both at a same time (Bennett,
Schaltegger and Zvezdov, 2013). It also make enterprise to complete their working on time and
in proper manner too. Normally the method for accounting is be like:
Inventory reporting: Inventory reporting in organisation help to have a control and
information about the warehouses and product with services are available or not. This is
something which help in minimising the chance of under and over stock in organisation in great
manner and thus it is required to have improvement in inventory control.

Application: Therefore, Inventory reporting system is quite required scenario in organisation a
this can help ENSOFT technologies to have information about the availability of product and
services and to satisfy their customer with timely available of items and services.
Account receivable Reporting: This kind of reporting in company is such which help to
collect information as from whom the amount has to be received and how much, such system
provide every information as when the money was taken and when to receive every data is being
there on that system, this is something which help to ignore the consequences in organisation
related to money (Bodie, 2013).
Application: It is required to have this reporting method as this help company to receive
information related to there creditor and it can be save data on basis of weekly, monthly,
quarterly as well. Although better policy and procedure in organisation should have a better
working scenario.
Account payable reporting: It is being considered as opposite of account receivable
reporting and thus it include the information related to whom the money has to be paid and this is
something which help in effective relation and it is quite in between the firm (Parker, 2012).
Application: The company ENSOFT is such firm in which information related to supplier has to
be kept and thus if payment is made on time then the goodwill of company can be there in
market and this is something which also make to have a healthy relation in most important ways.
Performance reporting: It is such which is not only used by large companies even this
is also used by small company like ENSOFT technology Ltd. This reporting is such which help
to identify the performance and productivity of employees and thus it is required to make
corrective action in organisation, goal and objective is such which has to be attained. Although it
is required to help business to determine the pitfalls and consequences as well.
Application: Performance reporting is that which should be there in organisation as thus it help
them to have an effective working by motivating employees and also making them to improve
the performances as well.
Budget Reporting: This is very much useful concept in organisation as because with this
a company can come to know that which department is taking maximum fund and money.
Budget is such which help in dividing the fund and money in proper manner (Boyns and
Edwards, 2013). It is required to use money in right context as this help in reducing the expenses
in organisation.

Application: ENSOFT technology Ltd is company who is working at small level and thus in such
situation too it is required to divide the funds available with them so that they can make a better
income statement in the end of their accounting session. Moreover, this also help in making a
effective decision too.
TASK 2
P3 Use of marginal and absorption cost.
Cost:- It is that which generally occur when a amount of investment is made in
manufacturing or producing product and services in effective manner. Cost is a kind of expense
which made by firms to raise their profit in proper way.
Absorption Cost: Absorption Costing is method which also include expenses with al
cost related with manufacturing product and services and it is something that generally accept
accounting principle (GAAP). Moreover, it also include the direct cost which is somewhere
associated with producing a services with wages for workers. Although cost is such which
include the direct costing in producing at cost base (DRURY, 2013). Hence, in this all the fixed
and variable cost to have cost centres, where such also account to absorption cost rates.
Moreover, thus method which check that every incurred costs are also being recovered with
selling price of product and service.
Marginal Cost: Marginal cost is such which is a additional cost in manufacturing of any
one more unit in effective way of product and services. This is something which is being derived
from the cost of production and thus fixed cost does not changes with output, although no
additional cost is required to have fixed cost which is being incurred and thus it is be like
producing another unit of goods and services while once the production scenario is being started
too (Harris and Durden, 2012). Moreover, purpose is something which also analyse the marginal
economies of scale which determine the different thing in organisation which also have
economies of scale.
Basis of difference Marginal Cost Absorption Cost
Meaning Although the decision making
concept is such which help
firm to identify the total cost in
This is something which does
include the total cost which
also somewhere allocate the

manufacturing the product and
service as this is known as
marginal cost.
cost centres and it is also used
to determine the total cost of
production, although it is
known as absorption cost of
companies as well.
Overheads Marginal costing is that which
does include the fixed and
variable cost.
Distribution selling and
administration is such which is
being included in this only too.
Highlights In this the contribution is that
which was done on the basis of
per unit too.
In this, the net profit is that
which is being used on the
basis of per unit too.
Profitability It is related with measurement
to have a profit volume ratio in
concept too.
Moreover, different thing like
fixed cost is also include and it
also gets affected with this
everything can be done.
Cost Data This is something which is
being presented with the
contribution and made on with
every product as well.
Although, it is being used to
have a conventional thing in
perfect as well too.
Cost reduction Variable is that cost in which
product is something and it is
being considered with fixed
cost and to known with period
cost too.
Moreover, this cost is that
which totally different from
marginal and variable cost
with considered as product
cost.
Marginal costing
Quarter 1
Particulars
Amoun
t (in ￡)

Sales 66000
Less: Cost of sales
Opening inventory 0
production cost (78000*0.65) 50700
Less: Closing stock
(12000*0.65) 7800
42900 42900
Contribution 23100
Less:
Fixed overhead 16000
Fixed & selling expenses 5200
21200
Net profit 1900
Quarter- 2
Particulars
Amoun
t (in ￡)
Sales 74000
Less: Cost of sales
Opening inventory
(12000*0.65) 7800
production cost (66000*0.65) 42900
Less: Closing stock
(4000*0.65) 2600
48100
Contribution 25900
Less:

Fixed overhead 16000
Fixed & selling expenses 5200
21200
Net profit 4700
Working note Q1 Q2
Variable costing profit 1900 4700
Opening inventory 0 7800
Closing stock 7800 2600
Absorption costing profit 4300 3100
Opening inventory 0 10200
Closing stock 10200 3400
Absorption costing for Quarter 1:
Particulars
Amount (in
￡)
Sales 66000
Less: Cost of sales
production cost (78000*0.65) 50700 0
Semi-variable (78000*0.20) 15600
Total Variable cost 66300
Less: Closing stock 10200
56100
Gross profit 9900
Less: -400
9500
Selling and distribution as fixed 5200
Net Profit 4300

Absorption costing for Quarter 2:
Particulars
Sales 74000
Less: Cost of sales
Opening stock 10200
COGS (66000*0.20) 13200
production cost (66000*0.65) 42900
Total Variable cost 66300
Less: Closing stock 3400
62900
Gross profit 11100
Less: selling expenses -2800
8300
Fixed expenses 5200
Net profit 3100
Working note
Fixed costs 16000
Budgeted cost of production
80000 per
units
Budgeted fixed cost 0.2
Variable cost per units 0.65

TASK 3
P4 Advantages and Disadvantages of various planning tools for budgetary control.
Budget: Budget should be in a better document and thus which does consider the various
accurate fact and figure of research. This is such which is considered as a broad scenario for the
operational department and thus it is being included in capital investment (Herzig and et. al.
2012). For instance, planned sales and income is something which is engaged in producing and
product and service with cost and expense etc. which is almost involved in producing goods and
services in great manner.
Budget Control: Even this method is such which is very much useful for the
management as this is responsible for carrying out the various things in organisation and some of
those are as (planning, cooperation and having assessment as well), although such criteria is
being linked with various thing and some of those are as:
 Recommendation for managers: Moreover, it was required to have essential head with
having information and thus it is necessary with appropriate manner and either to have
particular data which is making them to handle the cost.
 Implement the effective suggestion: Feedback is like that help company to save
themselves from the losses which will occur in near future and it will make them to take
corrective action as well (Otley and Emmanuel, 2013). Planning tools:- It is required to identify the target of entity and thus future direction can
be there which can help in earning attained goals and objective as well.
◦ Forecasting tool:- Based on practical assumption and it is required to have
encouragement by management skills with learning and to have effective decision
making.
▪ Advantages: Moreover, it is something which require to have identification of
goals, although which is being determining actual amount of cost with sales and
this is something according to time period too.
▪ Disadvantages: Absence of different thing is there which should have different
expense with using used to incurred and also has to have accurate time period. If
expenses is something more then total cost then it can be said that it will affect the
company goals.