Management Accounting Report: Financial Strategies for Business Growth

This management accounting report examines Connect Catering Services, a family-owned catering business in Oxfordshire, planning to expand by selling homemade pizzas to superstores. The report covers various management accounting systems, including price optimization, inventory management, cost accounting, and job costing, highlighting their essential requirements. It explores different management accounting reporting methods such as budget reports, performance reports, and inventory reports. The report also delves into cost calculation methods, comparing marginal and absorption costing, and provides an income statement example. Furthermore, it discusses the advantages and disadvantages of planning tools used for budgetary control, including cash budgets, operating budgets, and capital budgets. Finally, the report analyzes how businesses adopt management accounting systems to address financial problems, providing a comprehensive overview of financial strategies for business growth.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Management accounting and essential requirements of various types of management
accounting system........................................................................................................................3
TASK 2...........................................................................................................................................5
P2. Various methods of management accounting reporting........................................................5
TASK 3............................................................................................................................................6
P3. Calculation of costs................................................................................................................6
TASK 4............................................................................................................................................1
P4 Explanation of advantages and disadvantages for various types of planning tools which is
utilised for budgetary control:......................................................................................................1
TASK 5............................................................................................................................................2
P5 Comparing how businesses are adopting systems of management accounting for
responding to financial problems:................................................................................................2
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................1

INTRODUCTION
Management accounting are techniques which supports business plan, control and
examine performances of concern entities. It provides various ways by which managers can
manage finances within an entity in order to enhance their business performance (Anderson,
2017). Its practices are are made by internal controllers and for the internal controllers to achieve
desired goals. In this report we are going to discuss about Connect Catering Services, which is a
run catering service and family owed business. They are from Oxfordshire and planning to
enlarge their business by selling home made pizzas to superstores in this regard they should use
various management accounting systems to do so.
This report covers essential requirements of various types management accounting
systems, various methods that are used in management accounting reporting, advantages and
disadvantages of different tools of planning. Further this includes estimation of cost with the use
of proper techniques of cost analysis in order to prepare income statement by using absorption
and marginal cost. Tools of budgetary control, their advantages and disadvantage are also
discussed in this report.
TASK 1
P1. Management accounting and essential requirements of various types of management
accounting system
Management accounting refers to utilisation of accounting informations in order to solve
organisational problems and to take scientific decisions on their basis. They derive their solutions
from budgeting, variance analysis, BEP, and cost-volume-profit(Christ and Burritt, 2017).
Management accounting systems comprises of all those internal systems that an entity uses to
estimate and evaluate its procedures to manage organisation. Connect Catering Services with
these system can manage their internal affairs without any disruption. For this they should go for
following systems-
Price Optimisation- Organisations get actual cost of each transaction of every goods
they sale with the help of this system (Fleischman and Parker, 2017). They get full knowledge of
market conditions such what customer want?, how much they are ready to pay?, and how will
customers react to any change in price of goods. Connect Catering services can generate full
knowledge about customers purchasing power and their taste which will help them in expansion.

Essential Requirements:
 This system helps companies to find and maintain their loyal customers and motivate
them to attract others to grow market share. Company with help of this system can
determine its potential buyers that will lead to in knowing accurate demand level.
 Entities can change prices of their goods and services according to the current trends of
market and help them to sustain for long period of time. In this connection Connect
Catering services can switch to different rates according to competition and customers
willingness to pay. This will create boom for their pizza's in market.
Inventory Management- In this system managers of enterprises find out the actual
amount of stock that they hold or have any shortfall in it (Georg and Justesen, 2017). This
system provides proper planning for future in order to meet upcoming requirements of
customers. Connect Catering Services can easily figure out its stock level and can keep sufficient
inventory in their warehouses.
Essential Requirements:
 Enterprises can easily keep a track on their goods and services. Connect Catering
Services in this regard can keep an eye on correct amount of stock that they require to
make their pizzas in meeting their demand.
 Stock management is done with the help of technology and software which leads to less
error and save time. Company can create clarity in their working and work accordingly to
maintain stock.
Cost Accounting System- With this system organisations can incur actual cost of
production so that they can earn more profit. This cost generation method can make thinks easy
in order to improve quality and quantityn (Tucker, 2019). Connect Catering Services can easily
figure out the actual cost they have derive in making their pizzas.
Essential Requirements:
 This system provides accuracy in order to generate correct value of product. Connect
Catering Services can get actual cost and make profit margin accordingly.
 It helps in finding competition level in market and strategies to beat competition level in
market. Company can consider competitors cost and than can make their strategies
accordingly in order to generate profit by selling more and more pizzas.

Job Costing- Managers or accountants can easily find cost which they have accrued from
each and every job with this system. Informations provided from these cost help them to do
proper planning and act accordingly (Warren and Farmer, 2020). They get to know which job is
getting them more profit and which job is increasing their expenses. Connect Catering Services
can easily make out which job is costing them more or less in monetary terms.
Essential Requirements:
 Company can easily make out which job is costing them more and provides full strategy
how they can resolve the problem.
 Connect Catering Services can determine contribution of each and every employee in
making pizzas to know individual profitability. This will provide them an idea about their
employees skills.
TASK 2
P2. Various methods of management accounting reporting
Management accounting reporting show the financial status of entities for present and
future period. Information regarding accounting records such as product profitability,
transactions, regional sales and operating cost are provided by these reports(Schmidt and
Günther, 2016). In this context, Connect Catering Services with these reports can see if they are
making profit or not in making pizzas. They should prepare following reports in order to see
their financial position-
Budget reports- These reports helps in making comparisons of actual performance with
the pre budgeted ones. They act as road maps for enterprises to achieve their goals my
monitoring there performance and to control them if there is any deficiency. Budget reports help
companies in coping with difficult situations and provide strategy to deal with such problems
((Russell, Milne and Dey, 2017). Connect Catering Services with these reports can find there
traits and opportunities to make better decisions. Company will be motivated to do its
functioning to its best capacity in order to improve efficiency and to find out its expenditure and
earnings.
Performance reports- Performance reports always provide the outcomes of practices or
work of individuals (Pangaribuan, 2016). They help in making comparisons of actual outcomes
to the standards ones in order to take action against any type of variation between these two. This

variation between standard and planned performance always create a scope of improvement in
entities performances. Connect Catering Services with these reports can make out if they are
working towards the set desires. They can know how many more pizzas are required to be sale
in order to maintain enough supply to superstores. This will motivate them to perform their work
according to their full capacity and keep improving their performance.
Inventory reports- These reports provide summary to all the information relating to
inventory of organisations. Inventory reports keeps stock data such as its quantity, performance
and its status (Jiambalvo, 2019). Correct movement of inventory and accurate stock accounts are
ensured by these reports as computerised data maintain efficiency. They provide details
regarding any deficiency of stock and helps in taking decisions regarding so. In context to
Connect Catering Services these report will provide them full details regarding amount of
material they should stock in order to fulfil level of demand. Usage of software's will save there
time and they can modify there requirements intermediately. With these reports they also make
out how much warehouse area they require to store there merchandise.
TASK 3
P3. Calculation of costs
Organisations always uses different types of costing methods in order to do detailed
assessment of different types of cost . The explanation of the costs which can be used by them is
given as follows-
Marginal costing- Marginal costing can be define as any change (decrease or increase)
in cost of manufacturing one extra units or delivery of goods and services to one more customer
(Kocsis, 2019). Connect Catering Services with this costing can ascertain their real profit and
can effectively control cost as fixed costs are excluded in this costing. This costing will help
company in forecasting each and every element in advance due to flexible budgets. Finding
expenses at every level and any time will help them to control cost in making pizzas.
Absorption costing- It is a managerial method of accounting which acquire all costs
relating to manufacturing a specific product (Kokina, Mancha and Pachamanova, 2017). All
direct and indirect costs like direct rent, materials, rent and insurance, are accounted from this
method and used for external reporting. Connect Catering Services from this costing can assure

carrying out of its overhead in order to separate them. It will provide correct calculation of profit
at the time of festivals or holidays. In this way company can target higher sales and attain
maximum profit level.
Formulation of income statement through absorption and marginal costing of Connect
Catering Services are as follows:

TASK 4
P4 Explanation of advantages and disadvantages for various types of planning tools which is
utilised for budgetary control:
Budget is said to estimate the income and expenditure over a particular period of time to plan
objectives of company (Schmidt and Günther, 2016). It is important to make decisions, planning
and gives them a path to management to guide employees clearly about their budget. Budgetary
control is to manage revenue and expenses of the company, it compares difference between the
budgeted result and actual result of the company. Connect Catering Services use this budget to
control income and expenditure in the business, to coordinate budget with various departments
to accomplish the goals. Mentioned below are certain planning tools that are part of budgetary
control of Connect catering services:
Cash budget: Cash budget is method to evaluate cash receipts and cash expenditure of a
particular period in the company (Kokina, Mancha and Pachamanova, 2017). Connect catering
services use cash budget to estimate whether company has adequate cash position in future.
Advantages: Cash budget helps managers of Connect Catering Services to ascertain
whether company has sufficient cash position to invest in purchasing a raw material and goal of
company to prepare budget is to determine every items to prevent from overspending and to
develop the financial awareness.
Disadvantages: In context to Connect Catering Services, cash budget limits flexibility as
it records only cash related transaction of the company.
Operating budget: Operating budget explains revenue generating activities which
include sale, finished goods and production. Operating budget comprises expenses and revenue
created from routine activities of the organisation (Anderson, 2017). Connect Catering Services
makes this budget in advance to achieve the future goals of the business. This include fixed cost,
variable cost, non-cash expenses and non-operating expenses. In context to company these cost
and expenses calculate the percentage of profit and income of the company.
Advantages: Operating budgeting helps Connect Catering Services to plan its cost and
control company's spending as to reach its long term business responsibility and can make
decisions to invest in business.