Financial and Management Accounting Report: Concepts and Techniques

This report provides a comprehensive overview of financial and management accounting. Section A delves into financial accounting, covering journal entries, trial balances, and the creation of income statements, owner's equity statements, and balance sheets as of April 30, 2019. It also highlights the distinctions between financial and management accounting, along with the characteristics of high-quality financial information. Section B focuses on management accounting techniques, including total cost per unit calculations under traditional costing, under/over absorption analysis, and profit comparisons under marginal and absorption costing methods. The report concludes with recommendations and references, offering a complete analysis of both accounting disciplines.

ACCOUNTING

ABSTRACT
The present report will reveal about the different accounting that are financial accounting and the
management accounting. The will report will give understanding of the financial accounting
concepts in Section A and of management accounting techniques in Section B. It will also give
characteristics of quality financial statements to management.

TABLE OF CONTENTS
ABSTRACT.....................................................................................................................................2
INTRODUCTION...........................................................................................................................1
SECTION A1...................................................................................................................................1
1. Journal Entries.........................................................................................................................1
2. Unadjusted Trial Balance.........................................................................................................5
3. Income Statement, owner's equity and balance sheet as at April 30, 2019.............................5
SECTION A2...................................................................................................................................7
Difference between management accounting and financial accounting......................................7
Characteristic of high quality financial information to management of both companies............9
Statement describing each of the financial statements..............................................................10
SECTION B...................................................................................................................................10
Total Cost per unit under traditional costing system.................................................................10
Under or Over absorption for Product B and Product C............................................................11
Profits under Marginal and Absorption costing.........................................................................11
CONCLUSION and RECOMMENDATIONS.............................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Financial accounting refers to the recording of the transactions and events occurring in
the organisation where the management accounting deals with preparing reports that will
enhance the profitability of the company. Both management and financial accounting have
separate importance for the company. The present report is about the financial accounting
methods and the management accounting techniques for recording the separate transactions
(Barron, Chung and Yong, 2016). It will be providing better understanding about both the
accounting methods through solutions.
SECTION A1
1. Journal Entries
Journal Entries
Date Particulars Debit Credit
1st April Cash a/c Dr. 20000
Computer Equipment a/c Dr. 40000
To capital a/c 60000
Depreciation A/c Dr. 600
To computer Equipment 600
2nd April Rent expense A/c Dr. 1700
To cash A/c 1700
3rd April Office supplies A/c Dr. 1100
To cash A/c 1100
Office supplies expense A/c Dr 400
To Office supplies 400
10th April Prepaid insurance 3600
To cash 3600
Insurance A/c Dr. 200
To prepaid Insurance 200
24th April Cash a/c Dr. 7900
Accrued commission A/c Dr. 1650
To commission received 9550
28th April Salaries expense A/c Dr. 2120
To cash A/c 1800
To outstanding salary 320
29th April Repair expense 250

To cash 250
30th April Telephone bill expense A/c Dr. 650
To cash 650
30th April Drawing A/c Dr. 1500
To cash A/c 1500
81670 81670
Ledger Accounts
Dr.
Cash a/c
Cr.
Date Particulars Amount Date Particulars Amount
1st April To capital 20000 2nd April
By rent
expense 1700
24th April
To commission
received 7900 3rd April
By office
supplies 1100
10th April
By prepaid
insurance 3600
28th April By salaries 1800
29th April
By repair
expense 250
30th April
By telephone
bill expense 650
30th April By Drawings 1500
30th April By balance c/d 17300
27900 27900
Dr.
Computer equipment A/c
Cr.
Date Particulars Amount Date Particulars Amount
1st April To capital 40000 30th April
By
depreciation 600
30th April By balance c/d 39400
40000 40000
Dr.
Capital A/c
Cr.
Date Particulars Amount Date Particulars Amount
30th April To balance c/d 60000 1st April By cash A/c 20000
By computer 40000
2

equipment
60000 60000
Dr.
Depreciation A/c
Cr.
Date Particulars Amount Date Particulars Amount
30th April
To computer
Equipment 600 30th April By balance c/d 600
600 600
Dr.
Rent expense A/c
Cr.
Date Particulars Amount Date Particulars Amount
2nd April To cash 1700 30th April By balance c/d 1700
1700 1700
Dr.
Office supplies A/c
Cr.
Date Particulars Amount Date Particulars Amount
3rd April To cash 1100
By office
supplies
expense 400
30th April By balance c/d 700
1100 1100
Dr.
Office supplies expense A/c
Cr.
Date Particulars Amount Date Particulars Amount
To Office
supplies 400 30th April By balance c/d 400
400 400
Dr.
Prepaid Insurance A/c
Cr.
Date Particulars Amount Date Particulars Amount
10th April To cash 3600 By insurance 200
30th April By balance c/d 3400
3600 3600
Dr. Insurance A/c Cr.
3

Date Particulars Amount Date Particulars Amount
To prepaid
Insurance 200 30th April By balance c/d 200
200 200
Dr.
Accrued Commission A/c
Cr.
Date Particulars Amount Date Particulars Amount
24th April
To commission
received 1650 30th April By balance c/d 1650
1650 1650
Dr.
Commission received A/c
Cr.
Date Particulars Amount Date Particulars Amount
30th April To balance c/d 9550 24th April By cash 7900
By accrued
commission 1650
9550 9550
Dr.
Salaries Expense A/c
Cr.
Date Particulars Amount Date Particulars Amount
28th April To cash 1800 30th April By balance c/d 2120
To outstanding
salary 320
2120 2120
Dr.
Outstanding salary A/c
Cr.
Date Particulars Amount Date Particulars Amount
30th April To balance c/d 320
By salaries
expense 320
320 320
Dr.
Repair expense A/c
Cr.
Date Particulars Amount Date Particulars Amount
29th April To cash 250 30th April By balance c/d 250
250 250
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Dr.
Telephone bill expense A/c
Cr.
Date Particulars Amount Date Particulars Amount
30th April To cash 650 30th April By balance c/d 650
650 650
Dr.
Drawings A/c
Cr.
Date Particulars Amount Date Particulars Amount
30th April To cash 1500 30th April By balance c/d 1500
1500 1500
2. Unadjusted Trial Balance
Trial balance
Particulars Debit Credit
Cash 17300
Capital 60000
Computer equipment 39400
Depreciation 600
Rent 1700
Office supplies 700
Office supplies expense 400
Prepaid insurance 3400
Insurance 200
Accrued commission 1650
Commission received 9550
Salaries expense 2120
Outstanding salary 320
Repair expense 250
Telephone bill 650
Drawings 1500
Total 69870 69870
3. Income Statement, owner's equity and balance sheet as at April 30, 2019.
Income statement
5

Particulars Amount Total
Other income :
Commission received 9550
Expenses :
Depreciation 600
Rent 1700
Office supplies expense 400
Insurance 200
Salaries expense 2120
Repair expense 250
Telephone bill 650 5920
Net profit 3630
Balance Sheet as at April 30, 2019
Particulars Amount Total
Fixed assets :
Computer equipment 39400 39400
Office supplies 700 700
Total non-current assets 40100
Current assets :
Cash 17300
Prepaid insurance 3400
Accrued commission 1650
Total current assets 22350
Total assets 62450
Equities and liabilities :
Owner's Equity 60000
add: profits 3630
Less : Drawings 1500 62130
Current liabilities:
Outstanding salary 320 320
Total liabilities 62450
6

SECTION A2
Difference between management accounting and financial accounting
Financial Accounting
It is concerned with preparing financial statements for outside users like shareholders,
creditors, suppliers, investors, customers and many more. It is an accounting form where proper
records keeping and the financial reporting is done, for providing material and relevant
information to the users (Lento, 2016). FA are based on number of principles, assumptions and
conventions such as materiality, going concern, realisation, conservatism, accrual , historical
costs, consistency etc. Financial statements include Income statements, statements of financial
position and the Cash flow statements that are prepared using guidelines given by statues
(Financial Accounting, 2019).
Management Accounting
It is accounting for managers that helps management of company in formulating policies,
forecasting, and planning & controlling the daily business operations of company. Management
accounting analyses and captures both qualitative and quantitative informations (Collis and
Hussey, 2017). It is not limited with providing the cost and financial accounting information but
also helps management by assisting management in setting goals, budgeting, decision making fir
the business. This accounting do not have specific time frames for preparation it could be
prepared monthly, quarterly or even weekly as per the requirement of management (Thomas,
2016).
It is important to understand the differences between management and financial
accounting as both the accounting are having different path. Financial accounting deals with
aggregating accounting information into the financial statements where the management
accounting deals with the internal process used for accounting of business transactions. There are
differences between management and financial accounting.
Aggregation
Reports for results of entire business is given under financial accounting. Management
accounting have to report in detailed levels like profit per product, product line, customers and
the geographic region.
Efficiency
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Management accounting reports about the issues that are causing variations and solutions
for fixing them where the financial accounting report only over the profitability.
Proven Information
Records of financial accounting requires considerable precision for proving that financial
statements are accurate. Management accounting deals frequently with estimates than verifiable
and proven facts.
Reporting Focus
Management accounting is focused over operational reports, and are only for the internal
information of the company. Financial accounting is concerned with preparation of financial
statements that are useful for both internal and outside users (Thomas, 2016).
Standards
Management accounting is not required to comply with standards as the information is
for internal purposes where financial accounting is required to comply with number of
standards.
Time Periods
Financial accounting are concerned with financial results that the business has achieved
already, therefore it has historical orientation. Management accounting generally address
forecasts and budgets that are future oriented.
Systems
Management accounting is concerned with every bottleneck operations and different ways of
enhancing profits by resolution of bottleneck issues. Financial accounting does not give any
attention over the systems of company for generating profits but with only its outcomes.
Timings
Under financial accounting financial statements are prepared at the end of accounting
period. In management accounting reports are prepared more frequently because information
provided is important and relevant for managers.
Valuation
Financial accounting provides proper valuation of the assets & liabilities, including
revaluations , impairments and so forth where management accounting is only concerned with
their productivity and not their valuation.
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