Management Accounting Report: Excite Entertainment Analysis

This report provides a comprehensive analysis of management accounting systems and their practical application within Excite Entertainment, a UK-based leisure and entertainment company. The report begins by defining management accounting and its differences from financial accounting, followed by a discussion of various essential accounting systems, including cost accounting (direct and standard costing), inventory management, and job costing. It then delves into different types of management reporting, such as performance reports, budget reports, and accounts receivable reports. The report further explores the benefits of these systems and techniques. The second part of the report applies marginal and absorption costing techniques to income statements, and critically analyzes the data collected. Finally, the report evaluates planning tools used in budgets, discussing their merits and demerits. The report aims to provide a detailed understanding of how management accounting principles can be applied to improve the financial performance and decision-making processes within the company. This assignment is contributed by a student to be published on the website Desklib. Desklib is a platform which provides all the necessary AI based study tools for students.

Management Accounting

INTRODUCTION
In today's world, every company either big or small needs a systematic management
approaches and theories which help them to perform work in most profitable manner improving
the total productivity. The process related with the examining, managing, controlling, reporting
of essential financial data into accurate accounts that assess in day to operation to increase entire
profit of company (Burritt and Tingey-Holyoak, 2012). This gathering of information is help full
for internal supervisor to take valuable decision for increasing productivity and performance of
company. In this report, Excite Entertainment is selected that is located in UK. Company use to
deal in leisure and entertainment industry and have major activities to promote upcoming festival
at different location in entire United Kingdom.
The following reports, holds a detail description of various types of essential accounting
system and their benefits for company, several kind of management accounting reports are
discussed in this report. By applying various kind of costing techniques manufacturing cost per
unit, net profit during an accounting year. In addition, different kind of planning tool and
management accounting tool are discussed with their advantages and disadvantage also support
to resolve the problems of company.
TASK 1
P1 Several types of management accounting system and their requirements.
The concept of financial accounting is defined as the processes that is related with
determining, recording, grouping, summarising and reporting of useful data that is collected for
various financial dealing within an organisation. There is a little difference between the concept
of management and financial accounting such as, management accounting is defined as a
ongoing development procedure that assess in planning, developing, evaluating and managing all
financial and non financial information of companies during an accounting period. Whereas on
the other side, the financial accounting is special branch of accounting that is related with
maintaining a valid and authentic record of entire financial transaction by following specific
guidelines. The collected information is presented in financial reports or statements that is cash
flow, balance sheet and income statements (Cazier and et.al., 2015). As Excite entertainment Ltd
use to provide different types of valuable services and good to large number of customer thus
they apply different kind of useful management accounting system that are discussed below:

Cost accounting systems: This is one of the most valuable system as it asses to figure
out the total cost of production or expenses incurred by companies on developing and providing
a service. It usually involve in estimating the cost of their products for profitability, cost control
and inventory valuation. This system is essential to carry out in the Excite Company as it assists
to formulate strategic decisions for the growth of the business in the global market. This plays a
significant role in the firm as it improve organization's cost efficiency and overall profitability.
Due to which desired objectives are achieved on due time. Cost accounting is conducted in the
business working as it investigates possible inefficiencies and design tactics for improvement to
control cost. There are are two types of costing that are used in Excite entertainment Ltd that are
defined below:
Direct costing: This costing method is useful for company as it support to identify the
cost of services offered to customer with potential cost of labour, material and overhead that are
based on pre-determine production rate.
Standard Costing: This practice is related with substituting an additional costs that are
involved in production process or developing ways of promoting events.
Inventory Management Systems: This is adopted or carried out in the administration as
it aid to track inventory levels, deliveries, sales and orders (Hoque, Covaleski, Gooneratne,
2013). It is basically used in manufacturing industry to make bill of material, create a work order
and other production related documents. It plays a significant role in the Excite Company as it
assist to maintain right balance of stock so that emerging needs of the customers can be fulfilled.
Inventory is the most important part of the ongoing business operations in the cut throat
competitive world. Inventory management system helps business associates to eliminate
overstocking and tock obsolescence so that smooth functioning of the business can be carried out
easily in the market place.
FIFO: This is the best appropriate methods which is related with distribution of goods
that are brought first.
LIFO: It is an assets management and valuation techniques that assumes to produce or
acquire previous stock are need to be used first.
Job Costing Systems: It is a system adopted for collecting and assigning manufacturing
costs of an single person unit of output. This is widely used in the organization when
distinguished goods are produced and has significant cost. It aid the business associates to

achieve the set goals on time time duration in the competitive world. Excite Company effectively
carry out job costing system in the working premises then it leads to better profitability, timely
financial reporting, management decisions and project estimating which is positive sign for the
business enterprise in the market place. However, this is able to monitor team's performance in
context of cost control. Due to which work efficiency has raised at a rapid scale.
P2 Different types of management reporting
Management accounting reports are the crucial part of reports that help to make sure
about business performing activities within organisation. Management accounting Reporting is a
report which is being prepare for information related to financial and statistical by the business
manager to make short term decision on daily basis for internal stakeholders of a company .
Accounting reports should be prepare every quarter that gives a holistic views of business
finance. A manager of the excite entertainment Ltd prepares accounting reports with the help of
accounting transaction. It is useful in business industry such as it supply more dependable and
faithful data for organization during definite time period. This aid decision maker to take
obligation of managing and looking into every aspect of business so that impressive system are
made for upcoming improvement and dominating extra cost.
Performance report
It is related to a elaborate evidence which help to evaluate and calculate the outcome
from a particular business activity in respect of success within actual time frame. For instance
Yearly performance report that hold a detail information about actual performance of every
employee and their contribution within company so that improvement can be done. Excite
entertainment Ltd is an architectural practice that experience in the design the project across
London that follow this performance report to enhance the part of the worker. This study aid to
measure the occurrence of a task that are completed by worker in real time.
Budget Report
Budget report is interim management accounting tools that derives the variances form
estimated prediction with actual performance gained by organisation (Jacobs, 2012). This report
is specify the gap between budgeted output and actual output and how to handle it or how to
come close or redeem their gap during the financial accounting period. Excite entertainment Ltd
uses this budget report to maximize the actual performance by using budgeted performance.
With the help of this budget report company can evaluate the pragmatic and accurate output.

Account receivable report:
Account receivable report shows that list of customer's credit invoice which need to be
recover in accounting period when their credit period is over. This is the primary tools of
reporting that specifies the amount of collection from customer required to recover. This is report
to determine the invoices are due for payment. Excite entertainment Ltd makes this report for get
to know the overdue payment from its customers or how much collection need to recover from
debtors of the company. This report concludes all the debtors list whose payment collection are
overdue needs to be recover in upcoming time period.
M1 Benefits of management accounting systems
Different kind of management accounting systems have multi-pal benefits which are mentioned
below:
Cost accounting system- This accounting system is beneficial in providing detailed
information about different kind of cost which occurs in various activities. In the Excite limited
company this accounting system can be useful in managing the cost.
Inventory management system- It is beneficial in proper management of raw material
and finished goods that is stored in warehouses. In the Excite limited company, it can be useful
in taking decision regarding to the purchasing of raw material.
Job costing system- For Excite limited company this accounting system is beneficial in
determining the cost separately which is assigned to different jobs.
D1 Evaluation of Management accounting systems and Accounting Reporting
Management accounting systems and accounting reporting plays a vital role in the growth
and development of the business globally. Accounting reports provides financial information
which are acquired from accounting records of the business (Marr and Gray, 2012). It includes
income statements, balance sheet, cash flow statements etc. Whereas, management accounting is
a provision to use financial data for the betterment of their businesses in the market.
TASK 2
P3 Range of management accounting techniques
Marginal costing:
Particulars May
Sales (8000*15 per unit) 120000

Less: Variable costs
Prime cost (8000*4) 32000
Variable cost (8000*2) 16000
Contribution 72000
Less: fixed cost 40000
Net profit 32000
Absorption costing:
Particulars May
Sales (8000*15) 120000
Less:Expenses
Prime cost (8000*4) 32000
Variable overheads (8000*2) 16000
Fixed cost 40000
Less: opening inventory (500*15) 7500
Gross Profits 24500
Less: Selling and distribution expenses 0
Net profits 24500
M2: Various types of management accounting techniques
Marginal Costing: It refers to a costing tool or technique in which variable cost related
to manufacturing and production is charged to cost of units whereas fixed cost are considered as
period cost and completely written off against amount of contribution. Marginal costing simply
refers to additional or extra cost associated with production of additional unit of output, that can
be recognised by sum of variable cost allocated to one unit. Formula of marginal costing:
Marginal Cost = Direct Expenses + Direct Lab or + Direct Material + Variable Overheads
Absorption costing: This kind of managerial accounting cost method in which all costs
and expenses are concerned with manufacturing of products and in accordance with generally
accepted accounting principles (GAAP) (Absorption costing, 2019).

D2: Critical analyse of data collected from income statements
The above mentioned income statements are prepared with the help of marginal and
absorption costing method. In the marginal costing method, the total sales is of 120000 and
contribution is of 72000. By these net profit is calculated which is of 32000. While in the
absorption costing method total sales is of 120000 and gross profit is of 24500. Herein, the
absence of selling and distribution expenditures, the gross profit is considered as the net profit.
TASK 3
P4: Merit and demerits of using planning tools use in budgets
Planning tool is the techniques which is used by managers to prepare a budget and
compare with estimates that help to maintain the budget. All the mentioned tool are effectively
responsible for increasing the productivity and profitability. Such as the manager of Excite
entertainment Ltd uses different type of tools that help to make decision by defining the budgets.
Different types of planning tools are described as:
Operating budget: This is primary budget which is used to prepare annual budget of an
activity stated in the terms of budget. It involves estimation of total value of resources which is
require to perform the operation by including income and expenses. The manager of Excite
entertainment Ltd prepares a operating budget by including revenues and expenses of business
industry.
Advantages: It is more reliable for managers of Excite entertainment Ltd as it help to
keep records of all incomes and expenses within entity.
Disadvantages: It may be drawback for Excite managers actual cost of running each
department may not match that may be difficult for organisation.
Cash budget: This is the estimation of cash inflow and outflow of a entire business
under a specify period of time (McVay, Kennedy and Fullerton, 2016). This is used by managers
to know the available funds are sufficient for operating a business or not. The managers of Excite
entertainment Ltd develop cash budget after considering sales, purchase and capital expenditure
that help to know the availability of funds within organisation.
Advantages: The managers of Excite entertainment Ltd can avoid debt that help to
maintain the profit for long period. Moreover, it help to make budget for future by analysing the
cash budget.

Disadvantages: It can be easily theft because it includes number of cash transaction that
creates risk for managers. Additional, it limits the spending power within business entity.
Master budget: This is the aggregation of all small budget which is prepared by
enterprises within organisation. This is an expensive budget strategy that contains future,
production level, future expenses incurred, sales, capital investment etc. The managers of Excite
entertainment Ltd use his budget in order to prepare the financial budget by including income
statement and balance sheet.
Advantages: It help Excite entertainment Ltd manager to identify problems and plan
ahead that help to make business decision accordingly.
Disadvantages: It has drawback also such as lack of specificity that consume more
money in order to prepare a budget.
b) Calculation of cost, volume and profit analysis
Sales = Fixed cost + desire profit / contribution per unit
= 120000 + 600000 / 30
= 6000 Units
working note:
Sale – variable cost = contribution per unit
= 40- 10 = 30 per unit
M3: Analysis of use planning tools
This is stated that effective planning support in organisation helps to overcome various
types of problem. As It aid to assist and attain desired future goal by utilising of available
resources in most effective and efficient way to increase productivity. Planning tools such as
cash, operating and master budgets as they play a vital role in planning for expenses and
increasing overall revenue of organisation (Mook, 2013).
TASK 4
P5: Effective use of accounting system to resolve financial problem.
Financial problems are the situations in which an organization is not able to pay its daily
bills and payments. Financial issues are that makes organization worried about money.
Organizations faces financial problems mostly at the time of recession. Some of the major

financial problems that an organization faces are late payments from clients, unforeseen
expenses, weak fund management system, increasing debt etc.
late payments from clients:
Company mostly deals on credit terms. Sometimes customers or clients don't pay their
debts or bills on time. Due to this, the cash flow plans or budgets made by the management do
not implemented on time. Organization has to face many problems due to late payments.
Unforeseen expenses:
Unforeseen expenses are the expenses which are not planned or unexpected expenses not
included in budget (Myers, 2013). Unforeseen expenses can be a huge problem for the
organization when it is on a tight budget. These expenses may be in form of new technology
purchasing, legal expenses, office expenses, new taxation policy etc.
Weak fund management system:
Weak fund management system is like a hole in the boat. It increases the risk of theft and
misappropriation of the resources. This problem is created by the internal sources of the
organization. There are some management tools or techniques with which help these financial
problems can be controlled or prohibited. Excite entertainment Ltd is currently using these
methods to identify the financial problems within the company. These techniques are:
Key performance indicator (KPI) - The KPI is a detail set of possibility that aid
manager of respective company to examine the effectively that further benefit in attaining the
desired goal for a respective year. Essentially, with the support of KPI management are able to
focus on those action which are performing highest (Sánchez-Matamoros, Araujo Pinzonand and
Alvarez-Dardet Espejo, 2014). Excite entertainment Ltd is using this method to identify that the
management and whole financial system is doing its work properly or not. This tool is useful to
find out the weaknesses of the fund management system.
Benchmarking- This is related to a method that help organisation to compare policies
and structure with different companies dealing within the same industry. This is one of the most
valuable tool as it help company to makes changes in case if there is any requirement. With help
of this method Excite entertainment Ltd is trying to find out weather its credit period strategies
are complying with the market trends or not. This tool is also assisting the organization to find
out that what unforeseen expenses have been incurred by the related companies.
Financial governance:

Financial governance is the process of collecting and managing financial data and
information. It also includes the procedure of controlling data and transactions and maintaining
financial performance of the organization (Schaltegger, 2012).
After identifying the financial problems of the firm with the help of KPI and
benchmarking techniques, Excite entertainment Ltd is applying strong financial governance into
its premises. Company is ensuring that all the standards are being followed in process of
preparing accounts. Company is strictly making and following credit period and payment
policies and also making provisions for unexpected expenses.
Comparison between Excite entertainment and Ever joy entertainment Ltd
Excite entertainment Ever joy entertainment
This is using cost accounting system to solve
the financial problem like lack payment from
clients.
This is using inventory management system to
solve the financial problems such as weak fund
management system.
The manager should focus on cash budget and
accounting system that will help to address the
problems (Stechemesser and Guenther, 2012).
Manager should focus on master budget that
will help to maintain the records of all
transactions and accounts.
M4: Analysis of financial problem
In present business scenario, it is observed that there are numerous financial issues that
are related with variety of goods and services manufacture by company. Some financial
problems are related with preparation of valuable budgets and cost incurred throughout
production process. In order to determine and resolve these issues respective company can uses
different kind of accounting tools such as benchmarking, KPI and Financial governance. The
proper identification and resolving of issues on time helps to increase overall business profit of
company.
D3: Critical evaluation to reduce financial issues
In business scenario, there is a major role of management accounting in helpin companies
to improve the quality of operation and maximise the entire profitability of business (Zhang,
Uchida. and Bu, 2013). Management accounting relates to a process of collecting, analysing and
posting of useful information so that manager can make valuable judgement in order to reduce
the reason of financial issues. There are various planning tool and management accounting

system, that are being continuously applied to operation and circumstance of business so that
maximum results are drawn in the favour of company. These tool are beneficial to plan
effectively for financial problems and develop ways and strategies which ensure to reduce the
impact of financial problem.
CONCLUSION
In conclusion of this report, it is stated that the process of management accounting helps
to provide valuable information to manager of company and also provide effective strength in
decision making process. It is also used to actuate behaviour and support of employees and
create cultural values that are necessary for accomplish pre-determined goals and objective.
Different system and management reports such as cost accounting support company to analyse
and reduce the cost involved in manufacture process, job costing system help to identify the
number of job related with different process and total expenses of company on these jobs.
Costing technique of marginal and absorption costing is used by to determine the overall net
profit during a year. Assorted types of planning tool such as operation, master budget help
company in planning for upcoming situation and develop ways to resolve financial problems. It
is also concluded that management accounting tools are beneficial of Excite entertainment Ltd in
resolving various financial issues that are faced during an accounting year.