Management Accounting Report: Financial Issue Response Strategies

This report provides a comprehensive overview of management accounting principles and their application within an organization, specifically focusing on Cream Limited, a UK-based medium-sized enterprise. The report delves into various management accounting systems, including inventory management, job order costing, price optimization, and cost accounting systems, highlighting their essential requirements and benefits. It also explores different methods for reporting management accounting information, such as account receivable reports, inventory management reports, performance reports, and budget reports. Furthermore, the report examines cost analysis techniques, the formulation of income statements under absorption and marginal costing, and the role of budgetary control and planning tools. Finally, it compares organizations based on their use of management accounting to respond to financial issues, emphasizing the integration of these strategies for effective financial management and decision-making. The report concludes with an analysis of how management accounting can be used to address financial problems and ensure long-term organizational success.

Management
Accounting

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
TASK 1............................................................................................................................................3
P1 Explanation of different types of systems of management accounting along with their
essential requirements..................................................................................................................3
P2 Explanation of various methods that are used for reporting of management accounting......6
M1 Importance of MAS...............................................................................................................7
D1 Integration between MAS and MA reports............................................................................9
TASK 2............................................................................................................................................9
P3 Calculation of costs using cost analysis techniques and formulating of income statement
under absorption and marginal costing........................................................................................9
M2 Techniques to prepare income statements...........................................................................12
TASK 3..........................................................................................................................................13
P4 Explanation of budgetary control along with description of planning tools and advantages
and disadvantages of all of them...............................................................................................13
M3 Role of planning tools.........................................................................................................16
TASK 4..........................................................................................................................................16
P5 Comparison of organisations on the basis of use of management accounting to respond
financial issues...........................................................................................................................16
M4 MA to respond financial problems......................................................................................18
D3 Role of planning tools to solve financial issues...................................................................18
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................20

INTRODUCTION
MA is a broader term that all executives ought to recognize to improve the organization in which
they operate. It is a strategy that allows internal stakeholders to assess whether or not the entity
operates correctly. By help of this, all information on business performance is captured. It is
important for all organizations to make sure they pay importance to it to meet all defined targets
and objectives (Barr-Pulliam, 2019). Basically, this accounting is completely different from
financial accounting but its importance is similar as this accounting. As by help of this
accounting they can take crucial decisions on the grounds of produced internal reports. The key
objective of this report is to explain the principle of management accounting and its application
in the organization. The project is focused on Cream Limited, one of the UK's medium-sized
enterprises. The business markets different nutrition items on the market. Some are waffles, ice
creams, and bagpipes. The assignment covers a number of topics, such as management
accounting, information processes and documentation and the usage of multiple cost control
methods in formulating the organization's income statement. In addition, this report includes
different forms of planning methods utilized in organizational monitoring and evaluation of
entities focused on management accounting.
MAIN BODY
TASK 1
P1 Explanation of different types of systems of management accounting along with their
essential requirements.
Across all the organizations, the administrators use a specific method to evaluate how successful
or negative the attempts they create to boost company results are done. It is called management
accounting that lets all internal shareholders assess the company's results. The Board of Directors
is assisted in Cream Limited management accounting to evaluate the true growth of the
company. With this aid, workers are often deciding if they are rising or not in the future through
the company in which they operate. While planning to achieve all the company's long-term
priorities, managers need great importance in ensuring they utilize them in order to track and
regulate the company's efficiency (Jiambalvo, 2019). In the management accounting there are a
range of accounting systems and each of them play a key role in the context of different

departments of companies. Eventually, each department of company has an integration of MA
systems. Companies who implies below mentioned accounting systems they lead to higher
sustainable success. It becomes possible because each department coordinates their activities in
accordance of different accounting systems.
Most businesses use multiple forms of management control systems to ensure consistent
performance of scheduled operations. It is important for managers to use various types of
programs in order to perform all operations properly. Cream Limited's management gives
attention to different forms of them, such as costs reporting, price optimisation, inventory control
and job procurement. Managers evaluate the overall output of companies using all of their
internal records. In Cream Limited, all of them are listed in detail below:
Inventory management system- Managers of most businesses use it to retain accurate
knowledge on all the materials that they use to make goods marketed to consumers. In creams
limited, they produce all the products that customers need are made by holding all the products
according to their preference (Maalouf and El-Fadel, 2019). This accounting system is too
crucial for those companies who are involved in manufacturing operations. It is so because by
help of this accounting system, they become able to know that how much quantity of material
they have in their stores. Due to this, companies take suitable actions in order to determine
whether they need to purchase new material or not. The process lets managers insure that they
have all the things they need to produce ice-cream, waffles, doughnuts etc. There are several
forms of inventory control schemes that the company can use in the handling of products. Some
of them are listed as follows:
 AVCO (Average Cost Method): All items are used or rendered through this system of
inventory control on the basis of average cost.
 FIFO (First in First Out): All companies use previously taken stocks for operational
tasks during FIFO procedures.
 LIFO (Last in First Out): Newly purchased goods are used for the manufacture of
products according to this inventory control system process.
FIFO is used in Creams Limited by the above-mentioned forms in inventory management
systems so that administrators can efficiently utilize all of their products before they expire.

Essential requirements- For the company it is really necessary as it deals in organized
handling of the products and the correct conduct of all activities. This also implies that all
products are managed by the manufacturer in order to satisfy consumer requirements
Job order costing system: This is one of the key systems used in all businesses that operate on
different forms of operation (Bai, 2019). This is primarily designed to gather information
separately from other activities. Creams Limited uses it to specifically record consumer
expectations so as to satisfy the customers 'desire. The company is enabled to meet its lengthy-
term goals, such as higher consumer loyalty. It guides supervisors to insure that they can carry
out their operations according to customer preferences. In the context of above company, they
determine cost of each produced item by help of this accounting system. It becomes possible
because under this cost of each job involved in various activities is computed. On the basis of
this, it becomes easier for finance departments to determine cost of each item which is produced
under their operations.
Essential requirements -Creams Limited provides an extremely important job order costing
system as it can be used to efficiently fulfil the consumers 'needs. In fact, achieving market goals
such as better income and highly satisfied customers will also gain.
Price optimisation system: The primary objective of this management accounting method is the
determination of the correct price on all products produced by a business. Creams Limited
Managers use it to determine whether they are able to attract a large number of buyers at the
price level on all their goods (Soler Porta, 2019). The company is helpful to identify buyers
'reactions to the rates they want to pay on anything they offer. Eventually, in the absence of this
accounting system it may become difficult for companies’ managers to attract more number of
customers. This is so because if prices of products will be higher than customers will not like to
buy products. Hence, by help of this accounting system, it becomes easier for above company’s
sales department to set price at a level on which they can generate higher revenues.
Essential requirements -Creams Limited requires it so the managers can boost their profits
by providing the correct price on all the products offered by it. This will also allow the
organization to determine whether it can meet all of its goals by finding the best prices on
the products it offers.

Cost accounting system- It is the latest management accounting method used primarily to
measure the expenses of each activity conducted by a company to accomplish any of its
corporate goals (Clemente, 2019). This accounting system is not limited to any particular cost
calculation. Under it, various types of costs are calculated and estimated such as direct material
cost, labour cost and many more. On the basis of it, managers formulate different types of
strategies in order to reduce cost as much as possible. In Creams Limited managers are used to
evaluate all of the expenses needed to meet all the specified goals. By doing this, the
management is aware of all the costs of the implementation.
Essential requirements: Creams Limited uses cost management method as it can enable
administrators assesses the actual costs of all operations. On the basis of it, the finance
department of above company keeps cost of different kinds of activities lower as much as
possible. As well as it is essential for identifying cost of various kinds of operations including
direct cost, indirect cost etc.
P2 Explanation of various methods that are used for reporting of management accounting
For the majority of entities, the internal records and reports known as management
accounting records are generated through a common process. This must be centralized in order to
assess the company is successful or poorly working (Stancheva-Todorova, 2019). Creams
Limited also requires executives into account to insure that they meet their corporate targets.
Herein, this is important to know that these reports are too useful for companies because under it
financial and non financial information. On the grounds of this information, managers take right
decisions which leads to higher sustainable success. There are various approaches for recording
details on administration accounts. They are all listed in the following:
Account receivable report- It relates largely to the processing of consumer records, which
would compensate for and acquired products on debts in the future. Eventually, this report is
widely used by finance department of companies as they can derive key information by help of
this report related to how many debtors are not paying debt amount after the due date. In Creams
Limited, the management uses it to retain detailed information on the sum owing that the
consumers would be collected at a due date. This allows the entity to evaluate the real outcomes
that will be obtained in the future.

Inventory management report- It is related to the documentation of all items for all business
operations utilized by a company. Under it, information is gathered by help of stock management
system. In this report information related to quantity of each stored item is included such as how
much quantity of raw material, finished goods they have. It helps in minimizing cost of
inventory. This report is developed by managers in Creams Limited to evaluate whether they
have adequate ingredients to sell specific goods to consumers accordingly. This helps in to order
goods in a timely way, such that unsatisfied consumers may be ignored, is helpful to the
company.
Performance report- It computes overall performance of various aspects. It is helpful for those
companies in which employee turnover is higher (Ahmad and Al-Shbiel, 2019). This is so
because by help of it, manager promotes to employees on the basis of their individual
performance sheet. The Creams Limited Manager also formulated this so that it can assess the
company's success and identify the correct contributions made by workers to lead to business
development. The company has a benefit as it will allow management to encourage all workers
to earn incentives and rewards depending on their performance.
Budget report- This is also linked to the information that organizations, in compliance with
their requirements, allocate resources across all divisions and that the activities will be carried
out. Creams Limited also requires this framework to insure that all planned operations are carried
out in the already agreed budget. This is helpful for the organisation, because the departments
can be given enough resources to meet all their roles. In addition, this report is useful for
companies in order to find out variation between actual and estimated cost as well as income.
Due to this managers take suitable steps for next years’ accounting period.
M1 Importance of MAS.
System Name Benefits
Cost accounting system The estimation of the overall expense of different
projects and activities is consistent with this accounting
system. It enables to managers about analyzing cost of
different operation. In the above-mentioned business
dimension, this accounting technique is used to track the
true cost of output and to handle over-estimated

activities.
Job costing system It is beneficial for companies to measure the cost of
every produced output number (Aureli, Cardoni, Del
Baldo and Lombardi, 2019). It is used in an entity that
produces a large number of products. That is because by
this administration of the company find out cost of
various output individually. Such accounts are used to
measure the expense of each manufacturing commodity
by calculating and evaluating the job costs of the
company mentioned above.
Price optimization system As per market policies, businesses can assess the price of
goods. It analyzes market dynamics and consumer
requirements. Depending on this, business executives
evaluate and assess demand trends and sets prices. The
department of sales of businesses commonly uses this
accounting system. Their distribution team sets product
prices in the above according to market preferences in
Creams limited and according to their rivals' behaviours.
Inventory management system The value of the stock retained is calculated effectively
by this accounting. As mentioned above, this accounting
system evaluates on the basis of specific styles of
procedures, including LIFO, FIFO etc. Due to this,
managers analyse of cost of inventory effectively. The
aim of it is to minimize raising measurement costs. It is
applied at the Creams limited so that production costs
can be reduced.
D1 Integration between MAS and MA reports.
The MA includes a number of accounting systems and reports that follow business
process and companies (Berry, Broadbent and Otley, 2019). Their respective divisions with
Creams limited, involve the accounting systems. The price optimization system is integrated into

the sales department in order to increase business revenues. MA reports are also linked, close
accounting systems, to business cycle. The inventory report affects the department of production.
For example, their managers use specific reports for corrective action in the retail sector in the
above-mentioned business. Other reports often involve departments like the finance department
of above-mentioned companies is compliance with the accounts receivable report to determine
the credit facility for customers. This link between company processes and accounting systems
results in greater market performance.
TASK 2
P3 Calculation of costs using cost analysis techniques and formulating of income statement
under absorption and marginal costing
Marginal costing: This is used to calculate the costs of each individual unit that they produce
along with the pre-determined units produced (Wilkerson and Bassani, 2020). The managers in
Creams Limited calculate the costs of all additional products generated according to the needs of
the customers.
Absorption costing- Such costing system applies specifically to absorbing the expense of the
goods manufactured by supplying them to the company in Creams Limited, to insure that all the
expenses involved in the manufacture of various things and the sale of them are recovered (Zandi
and Lee, 2019). This is the following calculation: