Management Accounting Report: Financial Analysis of Ever Joy

This report provides a comprehensive overview of management accounting principles and their application within Ever Joy Enterprise, a UK-based leisure and entertainment company. The report begins with an introduction to management accounting, highlighting its role in providing financial information for managerial decision-making. It then delves into different types of management accounting systems, including financial accounting, cost accounting (direct and standard costing), inventory management systems (FIFO, LIFO, JIT), and job costing systems. The report also examines various types of management accounting reports, such as budget reports and job cost reports, and their significance in assessing a company's financial performance. The report further explores the application of budgeting as a planning and problem-solving tool, financial governance, and the use of planning tools for preparing and forecasting budgets. The analysis extends to how management accounting helps solve financial problems and contributes to organizational growth. The report concludes by emphasizing the role of planning tools in achieving sustainable success for organizations like Ever Joy Enterprise.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
A) Different types of Management Accounting System........................................................1
b) Cost accounting system......................................................................................................3
c) Inventory Management systems.........................................................................................4
d) Job Costing systems...........................................................................................................5
e) Distinct types of management accounting reports.............................................................5
f) Need of sound accounting system and importance of department producing timely.........6
LO 2.................................................................................................................................................7
A) Number of tickets sold to break even................................................................................7
b) How many tickets sold for making profit..........................................................................7
c) What profit would result if 8000 tickets were sold............................................................8
M2 Management Accounting Techniques..............................................................................8
D2. Financial reports that accurately apply and interpret data for a range of business activities
................................................................................................................................................8
LO3 & 4...........................................................................................................................................9
a) Use of budgeting as a planning and problem solving tool to deal with financial problem 9
b) Evaluation of how strong financial governance help to pre-empt or prevent financial
problems for Ever Joy Enterprises.......................................................................................11
M3. Use of different planning tools and their application for preparing and forecasting
budgets:.................................................................................................................................13
M4. Management accounting helps to solve financial problems for organisational growth:13
D3. Planning tools of accounting lead organisations to sustainable success:......................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is the process, that helps for preparing the management reports
and accounts, that provide managers efficient and effective financial information to make the
decisions for the business. It helps the organisations to identify, measures, evaluate and interprets
the information to enable an organisations to pursue its goals. The Ever Joy Enterprise UK, is
being selected for the present report, which operate in leisure and entertainment industry. This
Ever Joy Enterprise is the client of a financial advisory firm KPMG, UK. KPMG is a financial
advisory firm in UK, look after the financial statements of the enterprise. The report talks about
the different types of management accounting systems and their importance for the company to
make the better decision in the company. Beside this, various types of management accounting
reports and allocation of costing according to its nature are also going to explained. Further, the
report will help in understanding of various kinds of budgets and the planning tools which used
in budgetary control by the organisations. The report also show the how management accounting
respond the financial problems of organisations and how planning tools are helpful for the
sustainable success of organisations.
LO1
A) Different types of Management Accounting System
Management accounting is the process of identifying, measuring, analysing, interpreting
and communicating information to the managers for the achieving the organisation goals.
Management Accounting can be important for the company Ever Joy enterprise for increasing
their revenues, this process helps management to reduce the irrelevant expenses. This process
helps in preparing charts, trends and budgets for the organisation, so with the help of these charts
and budgets, Ever Joy Enterprise can allocate the expenses accordingly for smooth functioning
of an organisation. The management have different plans and policies before them, this process
can help Ever Joy's management to select the plan which occurs minimum cost with maximum
returns (Parker and L. D., 2012).
Financial Accounting System
Financial accounting is special branch of accounting that keeps the track of a company's
financial transactions. The transactions are recorded, summarized and presented in financial
statements such as balance sheet, Profit and loss statement and income statement. Management
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Accounting System is process which helps the managers to identify and evaluating the
information to take the short term and long term decision for the organisation. It is an important
process which provides authentic and timely information, which helps the managers to pursue
the organisation goal with efficiently. There are various types of management systems, which
can be followed by the companies to make the efficient working in the organisations.
Difference between Management Accounting and Financial Accounting
Point of Difference Financial Accounting Management Accounting
Aim This is mainly focus on
assisting investors in making
informed decisions.
This aims at providing the
accurate information to the
internal management for better
decisions.
Regulatory Requirements Regulation is mandatory for
every public organisation.
They are governed by
Accounting Standard Boards,
companies, laws and
government.
There is no mandatory
requirement but there are
some framework provided by
the CIMA which needs to be
follows.
Governing Principal These statements are
prepared on the basis of
Generally accepted
Accounting Principles. The
GAAP is different for
different countries.
There is no standard basis for
preparing management
accounting statements. They
are customised.
Time Horizon For financial accounting is
past. Generally it is one
accounting year.
It has no specific time focus
but mainly focuses on future.
Beneficiaries Basically prepared for the
outsiders like Govt., suppliers
and shareholders etc.
Reports prepare for the
internal parties like, CEO,
directors and managers.
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Outcome These reports consist of
Profit and loss statements,
Balance Sheet and Cash Flow
Statements.
These are the monthly or
yearly analysis of product,
geographies and functions etc.
b) Cost accounting system
Cost Accounting System
Cost is the amount of money that a company spends on the manufacturing of any
products or services. Cost accounting system is a methods that aims to capture the company's
cost of production by evaluating the input cost of each step of the production.. There are two
types of cost which are as follows:
Direct Costing
Direct costing which is directly linked with the any project or event. It can be easily
linked with the specific cost like raw materials of the business. As for an example, Ever Joy
Enterprise organised an event, the labour cost incurred 5000 pound, so the 5000 pound
considered as direct costing for the Ever Joy Enterprise.
Standard Costing
Standard Costing, is used to make a measure with the actual costing of the project. It is
helpful to calculate the deviation which occurs between the actual costing and standard costing.
For an example, Ever Joy Enterprise is going to organise dancing event, so for that their manager
has set the standard cost of 30000 pound, but the real cost of project occurs that 15000 pound so
it helps them to know the deviation which is 15000 pound. As an example, company
manufacture the shoes, and the standard cost is 50000 pound but the actual cost incurred 60000
pound, so with the help of this standard costing company come to know about the deviation of
10000 pound. (Burritt and R. L., 2011).
Cost is defined as valuation of money that is placed on the use of resources. The concept
of cost acts as central to business decision making. Moreover, cost of production is defined as the
aggregate of total expenditure that is incurred by the producer in the process of production. There
are two types of cost namely fixed cost and variable cost. Fixed cost are those cost that remain
constant and fixed, irrespective to the changes in the output like equipment, building while
variable cost are those cost that varies with the output, they are not fixed like electricity, fuels
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and raw materials. Cost analysis allows to measure cost input and output relationship which
includes cost invested in hiring the inputs and how productivity is increased by using this inputs.
Cost volume profit analysis is concerned with three variables that includes cost, volume and
profit. This analysis mainly emphasis on relationship between existing costs, revenue, activities
and final output. It focus on measuring variation of cost along with profit. There is need of cost
variances and flexible costing as it allows to adjust the cost if any changes occurs in activities.
Flexible budget act as tool for comparing actual and budgeted performances. This are prepared at
each selected level and accordingly determination of cost behavior is done at selected activity
level.
Absorption costing:
Absorption costing is costing system which treat all manufacturing costs including both
fixed and variable costs as product costs. Absorption costing is a accounting method in which
there is sharing of overheads between different services and products on fair basis. Absorption
costing involves three step procedure which includes allocation, apportionment and absorption.
In allocation step, there is collection of costs by type and many allocation of costs are directly
done to cost centers. Apportionment involves apportioning the costs of each service cost center
to produce cost centers. At last absorption involves identification of absorption base along with
the absorption of overheads into cost units. Absorption costing is approach in which before
allocation of all manufacturing costs to products are regardless of whether they are variable or
fixed (Kulesza and Weaver, 2011).
Marginal costing:
Marginal costing is costing system which treats only variables manufacturing costs as
product cost. Marginal costing differentiates the fixed and variable costs. The main features of
marginal costing involves semi-variable costs, variable costs and prices that are based on
variable and marginal contribution. Marginal cost are those amount at any given volume of
output by which aggregate costs are changed due to decrease and increase of volume of output
by one unit.
c) Inventory Management systems
Inventory management System
Inventory is the term for the stock available for sale and raw material which is used to
produce the goods available for sale. It is an essential task to manage the inventory in regular
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course of business. The managing inventory is important because if the stock in and stock outs
are not maintained properly then one would not be able to know about the quantity of inventory
is lying with company. It can generate the extra revenue for business, if a business manage it
efficiently and effectively. The system should be adopt by the Ever Joy Enterprise for smoothly
management of inventory. There are various inventory management systems, FIFO, LIFO and
JIT for the efficient management of inventories.
d) Job Costing systems
Job Costing System
Job costing systems determine the manufacturing cost by dividing the Overhead, direct
material and direct labour cost and estimate their actual value. Job costing is a system that
monitor the expense and assigned a manufacturing cost to each product similarly, For an
example, Ever Joy Enterprise perform various kinds of job in an event, manager of Ever joy can
assign the cost to each job which is performed in an event. And as an outcome they come to
know which job is most profitable for the company.
e) Distinct types of management accounting reports
Management accounting reports are the important part of any business, as these reports
shows the real position of the business. These reports are prepared by the company at the end of
every quarter. So it will be helpful for the ever Joy also to know the actual position of the firm by
preparing these reports. There are various kinds of reports which are as follows:
Budget Report:
This is the most helpful report for the any organisation to know the actual expenses of the
enterprise. By analysing the past year expenditure it becomes easy to estimate the budget for the
forthcoming years and it helps in cutting the unnecessary cost also. Ever Joy Enterprise can
prepare this report by analysing the previous expenses incurred in the events, according to that
they can prepare the budget for upcoming events and can cut the cost where needed. This will
help them to increase the revenues also (Gullkvist and B. M., 2013).
Job Cost Report
It provides the total cost incurred in a single project in comparison of revenue earned by
the project. This report provides the important information about the current status of the job. For
an example the company Ever Joy Enterprise organised a concert, during that concert different
kinds of job is going to performed, so it can help the managers to know the which job incurred
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the highest expenses and which generate the most revenue for the company. With the help of job
costing report managers can better analyse progress and efficiency of the upcoming jobs by
analysing previous jobs.
Inventory and Manufacturing Report
These are the reports useful for those who produce the products, as it helps them to know
the overall cost of production of a product. The inventory valuation report is important for the
company as it show the cost associated with obtaining, holding, transporting and ensuring
inventory is in proper condition to sell. This allows the enterprises to properly measure the cost
of inventory on financial statements.
Account receivable reports:
Ever Joy Enterprises is concerned with their account receivables reports as this reports
helps them to know about the sales of products in credit. Account receivable reports allows
establishing and communicating credit policies and setting credit lines. Account receivables
reports can be achieved by making efforts to collect the account receivable and proper collection
policy should be implemented from time to time for better accuracy and flexibility.
Operating Reports:
Operating records are prepared by Ever Joy Enterprises allows to focus on their inputs
and outputs. This reports also helps to improve supply chain management and deliver finished
products to customer. Operating reports helps in calculating break-even point both for product
quantity and sales.
f) Need of sound accounting system and importance of department producing timely
There are certain benefits of using different types of management system which can be
availed by the Ever Joy Enterprise. These are as follows:
Costing Accounting System:
This system is useful for the estimation of income and expenditure for the future by
evaluating previous budgets. This helps in cutting the excess cost, which effect the profitability
of the company.
Inventory management system:
This system helps the companies to maintain the optimum level of inventory at the time it
requires. The profitability of a firm can be also increased by maintaining the inventory with
effectively and efficiently.
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Job Costing System:
Under this system, a cost is assigned to each job to know the overall cost of production.
As with the help of this system it can be analyzed which job is profitable for the company and
which is not.
An effective leader is the person who creates an inspired vision for the future, who builds
the team and motivates the team for achieving the goals. There are different theories of
leadership, like trait theory helps to identify the trait of leader like decision making, integrity and
empathy etc. The other one is behavior of leaders like autocratic leaders, democratic leaders and
laissez-faire leaders. The other theory is contingency theory which shows that how situation
effect the leadership. So the manager or higher authority of the Ever Joy Enterprise can use any
of these theory to make their decisions and apply those decisions in the company by effectively
and efficiently (Nguyen and Mia. L., 2011).
LO 2
A) Number of tickets sold to break even
Ever Joy Enterprises (UK) is reviewing its concert event in Manchester region to
ascertain its viability which are given as under:
Particular Amount
Selling price (U) 20
variable cost (U) 10
Contribution 10
Fixed cost 60000
PVR: Contribution/ sales *100
: 10/20*100= 50%
(a): BEP: Fixed cost / contribution
: 60000/10= 6000
b) How many tickets sold for making profit
(b) Total number of ticket needed to be sold
Particular Amount
Selling price (U) 20
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variable cost (U) 10
Contribution=profit + fixed cost 90000
Fixed cost 60000
Profit 30000
50%= Contribution/ sales
Sales= 90000/50%= 180000
c) What profit would result if 8000 tickets were sold
Particular Amount
Sales 8000*20 =
160000
Less: Variable cost 8000*10 =
80000
Contribution 80000
Fixed cost 60000
Desired profit 20000
M2 Management Accounting Techniques
There are different kinds of management accounting techniques which helps to produce
the accurate financial reports. The financial planning which helps to decide the long term and
short term financial objectives of the company. Standard costing which helps in comparison of
actual with standard to know the variance. Budgetary control is the technique which direct the
company's operations in desired direction. Apart from these, marginal costing, fund flow
statement and cash flow statement are the techniques to produce the accurate financial reports.
D2. Financial reports that accurately apply and interpret data for a range of business activities
Financial reports are essential to convey and store data in the form of facts and figures. In
order to study a problem in organization it is important to maintain records and review it on
certain issues with its advantages and disadvantages. Financial reports are in written statement
and it enable management to take future decision and helps in controlling. Ever Joy Enterprises
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uses different financial reports to deal with the operational activities and invest at profitable
areas.
As with the help of the marginal costing the PVR that calculated is 50% and calculated
BEP 6000 , that is dividing fixed cost by contribution, and then sales is calculated 45000. And at
last company came to know about the profit that they desired for is 80000.
LO3 & 4
a) Use of budgeting as a planning and problem solving tool to deal with financial problem
Budget:
Budget is made for future to know the income and expenses for a specific time period. A
standard budget is made to compare with the actual income and expenses of the company.
Budget helps to minimise the cost. Ever Joy Enterprise makes budget to set its revenue and
expenses in future so financial planning can be done in effective manner.
Different types of budget:
Capital budget:
Capital budget is made for capital investment. Capital investment can be made for
acquiring new plant and machinery. Ever Joy Enterprise can make capital budget to know the
capital expenses in investments.
Operation budget:
It is made for operations of business. Through operation budget a company can set its
expenses and revenues for a particular period of time. Ever Joy Enterprise can know its revenues
and expense of operations for a specific time period.
Pricing strategies:
Pricing strategies are used to grab the market share and increase the profits of the
company. It is required for a business to change its pricing strategies over a period of time. Ever
Joy Enterprise is using this price strategies to increase its profit margin. Cost based pricing
strategies are:
Absorption pricing:
In absorption pricing all variable costs are considered with allocation of fixed costs. Ever
Joy Enterprise can use this to minimise its variable costs.
Break even pricing:
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