Management Accounting Report: Financial Analysis of Excite Ltd.

This report provides a comprehensive overview of management accounting, focusing on its application within Excite Entertainment Ltd., a non-governmental company. It begins by differentiating between financial and managerial accounting, exploring cost accounting systems, including standard and direct costing. The report delves into inventory management, job costing methods, and various management accounting reports such as cash, performance, and financial budgets. It further examines absorption and marginal costing, along with income statement preparation using these methods. Finally, the report highlights the use of management accounting methods like break-even analysis and cost-volume-profit analysis to address financial issues within the company. The content is structured to provide insights into financial decision-making, planning, and performance management within the context of a manufacturing business.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
LO1..................................................................................................................................................4
P1 Understanding of management accounting ...........................................................................4
P2 Types of managerial accounting reports...............................................................................9
LO2................................................................................................................................................12
P3 Income statement with the help of absorption and marginal costing...................................12
LO3................................................................................................................................................14
P4 Planning tools of budgetary control.....................................................................................14
LO4................................................................................................................................................15
P5 Adaption of management accounting methods to resolve financial issues..........................15
CONCLUSION .............................................................................................................................18
REFERENCES..............................................................................................................................20

INTRODUCTION
Managerial accounting is the process of evaluating the costing of business operations by
preparing the financial reports and statements according to which they carry out their activities
keeping in the financial condition of the Excite entertainment ltd. which is non governmental
company that deals in manufacturing of luggage bags, saddlery and harness etc. Further, the
report highlights about the difference between financial accounting and managerial accounting
and along with it will frame about the cost accounting system and their types like standard cost
and direct cost (Disney and et.al., 2016). Moreover, the project will outline about the inventory
management system and job costing system.
On the flip side, the report will comment on the types of management accounting reports
namely; cash report, performance report and financial budget and along with it will frame about
the which accurate information is necessary for the organisation. However, the project will
highlight about absorption and marginal costing method and also the income statement of
company with the help of these methods. Eventually, the report will highlight about the
management accounting methods used by the company to manage financial issues like break
even analysis, cost volume profit analysis.
LO1
P1 Understanding of management accounting
Management Accounting
Management Accounting entails projecting and offering well timed monetary and
statistical records to commercial enterprise managers as a way to make routine and short-term
managerial decisions. Further, management accounting additionally known as managerial or cost
accounting differs from financial accounting in that it produces reviews for a business
enterprise’s inner stakeholders instead of external stakeholders (Gallino, Moreno and
Stamatopoulos,2016). Moreover, management accounting reports are normally confidential and
for inner use simplest and also, as opposed to being calculated based totally on normally
established accounting practices, they are calculated primarily based on management's data and
information requirement. Therefore, management accounting is a procedure that involves
partnering in choice making, making plans and performance control systems, and offering
understanding in financial documents of company and control to assist management within the
components and implementation of an agency's method.

Furthermore, Management Accounting help the management of company in preparing as
well as to explicate policies with the aid of making prediction about the manufacturing, the
promoting, the inflow and outflow of cash and many others., i.e., in planning a very huge variety
of tasks of the commercial enterprise.
However, through making ready budgets and evaluating precise cost, management
accounting offers the sources to every centre and allocate the several obligations to make sure
their optimum utilisation. Thus, an inter-relationship develops between different departments of
the organization (Maskell, Baggaley and Grasso,2016).
Further, It facilitates the management of organisation in communicating the monetary
data of company to internal and external parties. Moreover, for taking choices as well as for
analysing commercial enterprise presentation, management requires data and this information is
accessible with the help of statistics and statements which frame an imperative part of
management Accounting.
Even so, management accounting is logical which means it explains the motive behind
why the profit or loss increases or declines in comparison with the beyond periods. Further, it
attempts to have a look at and analyse the impact of various parameters on profit and thus, helps
the management to undertake future courses of action.
Financial Accounting
Financial accounting is a specific department of accounting that maintains the record of
organisations economic transactions. Further, within this method the company make use of
standard program with the help of which the transactions are recorded, sum-up, and presented in
a monetary record or economic announcement consisting of a profits' statement and balance
sheet.
Moreover, the principal goal of financial accounting is to display an accurate and
veracious representation of financial transaction of the business enterprise. However, to
apprehend the basics of financial accounting the company have to start with double entry
technique and debit & credit score, after which they should recognize journal and ledger, trial
balance, and four monetary statements (Hadi, Diantimala and Fahlevi, 2018).
Difference Between Management Accounting and Financial Accounting
Comparison Management Accounting Financial Accounting
Purpose The purpose of management The financial accounting helps

accounting is to help the
company in making decisions
regarding their business
operations for future.
the company to categorize,
evaluate, and sum-up the
financial transaction of an
organisation.
Nature Management accounting assist
company in framing strategies
which help them to take
effective decisions for business
operations.
Financial accounting is helps
the company to present
accurate and honest view
financial dealings done by
them.
Dependency Management accounting is
completely dependent upon the
financial accounting to make
decisions for future operations.
Financial accounting is not
dependent on management
accounting to present accurate
picture of financial
transactions.
Legal requirement Management accounting does
not follow any legal rules and
regulations.
Financial accounting require
legitimate rules and
regulations to prepare financial
reports (Hernandez,Jonker and
Kosse, 2017).
Audience Management accounting
prepares report that is used by
the members of company that
is managers and personnel.
Financial accounting provides
information that is used by the
external parties like
shareholders, lenders,
customers etc.
Format Management accounting are
extraordinarily elaborated,
specialized, specific, and often
data-based. Further,
corporations are always
searching out a competitive
Financial accounting reports
have a tendency to be
collective, brief, and
unspecialised wherein,
statistics is concurrently more
obvious and much less

gain, so they examine a set of
information that could appear
academic or complicated to
other companies.
informative.
Cost Accounting System
Cost accounting is the categorizing, recording and suitable allotment of expenditure for
the evaluation of the costs of services or products, and for the presentation of certainly organized
records for purposes of manage and guidance of control. Further, it includes the determining the
cost of each order, activity, agreement, system, provider or unit as may be suitable and it deals
with the value of manufacturing, selling and distribution (Issa, 2019). Moreover, it's miles for
that reason the availability of such analysis and classification of expenditure as will enable the
entire value of any particular unit of manufacturing or provider to be observed with affordable
level of accuracy and on the same time to reveal exactly how such overall fee is established that
allows manipulating and decrease its cost.
Therefore, cost accounting of excite entertainment ltd. is the utilization of accounting and
costing conception, methods and skilfulness within the determining of prices and the synthesis of
saving or expenses spends as compared with preceding revel in or with standards. Hence, cost
accounting pertains to the gathering, category, figuring out of cost and its financial and control
regarding the diverse components of cost. Further, this method prepares budgets and standard
cost and real cost of transactions, method, departments or products and the evaluation of
deviation, profitableness and social use of budget.
Direct Cost
Direct cost is a method that are wholly involved to the production of particular items or
offerings. Moreover, a few prices, which includes depreciation or administrative prices, are
greater tough to assign to a selected product, and therefore, are considered to be indirect charges.
Further, direct cost can be undertaken as a variable cost if it's miles contradictory and often
change in sum. Further, the examples of direct charges consist of manufacturing elements and
commissions and rent may additionally handiest be a direct cost if one value object relates to the
ability being rented (Kaplan and Atkinson, 2015).
Standard Cost

Standard costing is the exercise of replacing an expected cost for an actual fee in the
accounting statistics. Ultimately, deviation is recorded to expose the variances among the
anticipated and actual cost. Further, this technique presents a simplified opportunity to cost
structures, which include the FIFO and LIFO techniques, wherein massive amounts of ancient
cost statistics have to be retained for inventory component held in stock.
Moreover, standard costing of excite entertainment ltd. entails the introduction of
envisioned charges for a few or all tasks inside a company. Therefore, the main purpose for the
usage of standard costs is that there are a number of programs which is time consuming to
acquire actual charges, so standard costs are used as a near approximation to real costs. However,
standard costs are slightly exclusive from real charges, the cost controller of company
periodically computes deviations that escape differences resulting from such factors as labour
price changes and the cost of substances. Further, the cost accountant of company may
additionally periodically change the usual prices to bring them into nearer alignment with real
charges.
Inventory Management System
Inventory refers to the goods which are retained by the companies for ultimate sale to
consumers at the time of excess demand of products and services. However, inventories are set
of the product a company is producing for selling them in the market and additives that develops
the product. Hence, inventories are link between the manufacturing and sale of the product.
Moreover, inventory management is the supervising of non-capitalized stock and products.
Further, Inventory management is an element of supply chain management which
manage the flow of products from industry to storage warehouse and from those to location of
selling point (Kumar, Talwar and Basu,2015). However, a fundamental function of inventory is
to keep an elaborate evidence of every new or back product as it gets into or leaves a warehouse
and location of sale. Moreover, inventory management is a complicated procedure, especially for
larger organizations, however the fundamentals are in essence the equal no matter the company's
size or kind. Therefore, in inventory management system, products are brought into the receiving
region of a warehouse inside the form of raw substances or components and are placed into
inventory regions or set back.
Nevertheless, an inventory management system of excite entertainment is one of its
maximum valuable assets. Even so, in retail, production, food sector, and other stock-extensive

sectors, a corporation's inputs and finished products are the fundamental part of every enterprise.
Hence, insufficiency of stock whilst and wherein it's wished can be extremely devastating.
Simultaneously, inventory may be notion of as a liability wherein, a sizeable inventory involves
the hazard of spoilage, robbery, harm, or shifts in demand. Thus, stock ought to be insured, and
if it isn't offered in time it should be disposed of at clearance costs or must be completely wiped
out. Therefore, inventory management is vital for organizations to determine certain things like
restock some products, what quantity to purchase or produce, what costs to pay as well as while
to sell and at what price can effortlessly emerge as complex choices.
Further, there are two major methods of inventory management system namely LIFO and
FIFO wherein, the former means Left in first out in which that goods that are entered last in the
inventory are to be the first to be removed from the inventory and later means first in first out in
which the goods that are assumed to the first products entered in inventory would be the first to
remove from the inventory for sale.
Job Costing Method
Job costing system is a one of a kind method for shaping of precise order costing that is
adoptive to implement the tasks purely according to patron’s requirements. However, the
production procedure depends upon the number of orders received from clients. Further, the cost
is determined one after the other for each process as every work command differs from clients to
clients. Moreover, the motive of job costing is to check the earnings or loss made on each
process. Further, job costing is compared with the expected value to suggest whether estimation
turned into faulty or the real cost spended is extravagant. Therefore, such synthesis facilitates in
taking alternative movement to enhance performance and also facilitate translation of
computation (Maas, Schaltegger and Crutzen, 2016).
Nevertheless, job costing of excite entertainment ltd., is a technique of cost accounting
wherein value is compiled for a particular amount of product, system, repair or other provider
that movements via the manufacturing procedure as a constantly recognizable unit, relevant
material, labour, direct fees and typically a measured portion of the overhead being charged to
task order.

P2 Types of managerial accounting reports.
Managerial accounting provides reports to the stakeholders of the company which helps
in effective decision making and eventually leads to higher operational efficiency, performance
and productivity of the business. Managerial accounting reports helps in formulation plan,
regulating and measuring performance of the company. Managerial accounting reports are
prepared throughout the accounting process.
 Budget report:
Budget report is a report through which management can compare actual results with the
budgeted report. Budget can be created for various department like marketing, operation,
production, sales, finance to evaluate further growth and development of the Excite Limited
company (Herremans and Nazari, 2016). Budget reports helps in comparing actual result with
pre- determined budgeted plan and in case of variation necessary action will be taken by the
management of the organization. Budget report helps in effectively evaluating the expenses and
helps management to control the cost which helps in achieving goals and objectives of the
company.
Advantages of Budget report
Budgeting report helps in controlling the cost of the Excite Limited company. It helps in
effective planning and managing capital of the company for higher productivity and profitability.
Budget report helps in planning orientation, performance evaluation, profitability analysis, cash
allocation, funding planning and bottleneck analysis (Need & Importance of Budget Report |
Advantages, 2019). Budget report helps in finding the deviation and effective remedial action
can be taken to reach common goals and objectives of the company. The budget report is flexible
and can be revised when necessary. Budget report is an effective cost control report which helps
management in taking strategic decision. Cost managerial accounting report:
Cost managerial accounting report is an effective practice to allocate the cost and project
of the company. It helps in accumulating cost to material, labour, overhead too perform specific
activity with higher efficiency, performance and productivity. This report helps in allocating cost
to each department and analyse the profit collected from each unit. Cost managerial accounting

report helps in effectively determining the cost attached with projects, products and processes. It
helps in analysing the revenues and business expense for informed decision making. It helps in
reducing the cost and focus on optimally utilizing the resources which leads to higher operational
efficiency for Excite Limited company (Brown and et.al., 2016). This can be done by effectively
evaluating job costing, activity costing and direct costing methods to evaluate the cost to carry
out the project.
Advantages of Cost analysis managerial accounting report
Cost managerial accounting report helps in better optimum utilization of the resources in
various departments of the Excite Limited company. It helps in critically understanding the cash
inflows and outflows to determine the activities performed by each activity with higher
operational efficiency, performance and productivity. It helps in management to reduce
inventory wastage by optimally utilizing the finance and capital of the Excite Limited company.
This report is beneficial for the management to take informed decision regarding setting cost
standard, assignment of cost to each activity, pricing, planning, profit, capital investment
decision, cost management decision and marketing decision. It gives detailed information
regarding raw material, inflow and outflow of cash, output levels and labour capacity. Performance report:
Performance report is a detailed statement which helps in measuring and reviewing the
activity carried out to achieve goals and objectives of the Excite Limited company. This report
helps in effectively comparing the actual results with the pre- determined plan. This helps
management in evaluating the actual results with the set target to critically evaluate the
performance of the individual and the company (Weygandt and et.al., 2018). The performance
report focuses on evaluating the flaws and the cause of problem in the project and management
focus on taking necessary action to resolve the issue on a timely manner fort higher results and
outcomes. The performance report of the company helps in effectively measuring the
performance of the employee to complete particular task on a timely and systematic manner.
Advantages of Performance report
Performance report gives in- depth analysis of the performance of the company by taking
strategic decision. It is important and beneficial for the company for accurate evaluation on the

performance of the company and keeping track about the records to reach common goal.
Performance report helps in reducing the conflict by analysing the error, which eventually leads
to higher productivity for Excite Limited company. Performance report is important for the
organization which helps management in communicating the progress of the project. It also helps
in forecasting future progress and effective utilization of the resources. Performance report is
crucial for the organization as it helps in setting benchmark for improving the performance by
enhancing process optimization. It also helps in measuring, complying, controlling and
monitoring the activities (Benefits of Performance Reporting, 2017). It helps in analysing the risk
and past performance for further growth of the company.
Assessment Of Information Presented In Managerial Accounting Reports
Managerial accounting report is an integral reports which helps management and
stakeholders of the organization to take informed decision which leads to higher operational
efficiency and productivity for the business. Information contained in managerial accounting
report must be relevant, ethical, accurate and reliable as it is beneficial for the organization
which helps in evaluating the financial position of the company. These reports influence the
decision making of the Excite Limited company (Kaplan, Pope and Samuels, 2015). It also helps
in effectively analysing the actual performance by comparing it with pre- determined goals.
Information contained must be of high quality, useful and true. The information collected
must be consistent, complete, unique in a timely manner. Managerial accounting report must be
in adherence and compliance with various accounting principles, norms and standards. The
information presented in the managerial accounting report must be comparable which helps in
more informed decision. These accurate and relevant information is very crucial for the
stakeholders of the company to take informed decision (Caplan, 2016). The information
presented in the report must be complete, transparent and free from biases and manipulation of
data which leads to higher results and outcomes for Excite Limited company.
Management accounting system helps in continuous development and growth of the
Excite Limited company. Management accounting reporting must effectively integrated in the
company on a regular basis by complying with all legal standards and laws. This report is
produce which helps stakeholders in taking informed decision to attain higher operational
performance and productivity for Excite Limited company.

P3 Income statement with the help of absorption and marginal costing
Absorption costing
Absorption costing is managerial technique that includes all the cost whether its direct or
direct cost relevant with the production and selling of particular products and services of the
company. However, the absorption costing helps Excite entertainment in presenting the actual
profit earned by the company. On the other hand, the major disadvantage of absorption costing is
that it never concentrate on improving the performance of the organisation.
Income Statement (Absorption Costing)
as on 30th May 2019
Particulars Amount
Sales 8000 units @ £15 120000
Less- Opening Stock -2000
Less- Variable Cost of
Production 10000 units @ £2
-20000
Contribution 98000
Less- Fixed Production
Overhead
-40000
Profit 58000
Marginal costing