Management Accounting Report: Analyzing Creams Ltd's Financials

This report provides a comprehensive analysis of management accounting principles and their application within Creams Ltd, a medium-sized business specializing in waffles, ice creams, and other products. The report begins with an introduction to management accounting, emphasizing its role in providing financial and non-financial information for decision-making. It then delves into various management accounting systems, including inventory management, cost accounting, price optimization, and job costing systems. The report further explores different management accounting reporting methods, such as budget reports, account receivable aging reports, cost accounting reports, performance reports, and inventory management reports. The core of the report focuses on cost calculation techniques, including marginal costing and absorption costing, with detailed examples and variance analysis. The report also examines planning tools, particularly budgeting and budgetary control, highlighting their advantages and disadvantages. Finally, it addresses how management accounting systems can be adopted to respond to financial problems, comparing the approaches of different organizations. The report concludes with a summary of key findings and recommendations.

Management
Accounting
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Table of Contents
Table of Contents.............................................................................................................................3
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and its essential requirement by explaining type of management
accounting system........................................................................................................................1
P2 Different methods uses in management accounting reporting...............................................3
TASK 2............................................................................................................................................4
P3 Cost calculation by using appropriate techniques of cost analysis.........................................4
TASK 3..........................................................................................................................................10
P4. Planning tools along with advantages and disadvantages...................................................10
TASK 4..........................................................................................................................................12
P5. Comparison between organisation related to the ways management accounting systems
can be adopted for responding financial problems....................................................................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16
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INTRODUCTION
An accounting branch which is a way for presenting administration reports which provide
precise together with opportune budgetary, measureable information to management for making
long haul choices is described to management accounting. It recognises, computes, breaks,
translates and transmits accounting data for empowering an association for seeking attainment of
objectives. Within the accounting, all the financial and non financial related facts and statistics
are presented in systematic format to management (Bragg, 2012). To have deep knowledge about
management accounting, Creams Ltd is considered organisation which is medium sized business
specialised in selling waffles, ice creams and many other products. The present report
demonstrates about management accounting and its various systems that are essential required in
workplace. Further, it comprises methods for reporting of management accounting and various
techniques through which financial reports and other related documents are produced. The report
explains usage of distinct planning tools and adoption of certain management accounting systems
for responding financial problems.
TASK 1
P1 Management accounting and its essential requirement by explaining type of management
accounting system
Management accounting is consider as provision of financial and non financial decision
making information. It is uses by people to manage the working activities and financial
information so they can increase the organisational productivity and profitability. Management
accounting system is a mechanism that entails prompt reporting and documentation of financial
contributions to the statistical details that company executives and senior officials use for
effective forecasting which budgeting, decision-making and also requires assessment of
corporate efficiency. The main purpose of management accounting is to maintain financial
information and providing true image of their own business. Creams Ltd. is manufacturing
company that is making ice creams and other items by keeping records of all item cost and
selling activities. The different types of management accounting systems are as defined:
Inventory management system – This system is uses by organisation in order maintain
and track the inventory that is important to run a business. Every organisation are running
business by providing different types of products that are required to maintain effectively. This
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system is uses to keep tracking of stock which are available in organisation and increase the
profitability. The essential requirement of such system is to tracking and recording the inventory
level of organisation that helps to increase the business performance. In Creams Ltd. inventory
management system are uses by management for the purpose of managing stock and inventory
that helps to maintain the inventory and place the order to further material timely (Lev and Gu,
2016).
Cost accounting system – This system is related to defining the cost of products and
services which are provided by firm in order to run a business and maintaining the profitability.
This is a framework which uses by firms to estimate the cost of their products for controlling
cost, profitability analysis and valuating the cost which helps to maintain the profitability. In
Creams Ltd. it is essential required as to estimating cost of their raw material so they can
maintain the productivity effectively. This increases business performance by estimating correct
cost and making right business decision (Chiwamit, Modell and Yang, 2014).
Price optimisation system – This is a mathematical programme that helps to calculate
how demand varies at different prices which helps to maintain the profits. Every organisation
needs to set the prices of their products and services which helps to improve the profits. This
system allows company to use a pricing method optimally so prices of products can be maintain
effectively. In Creams Ltd, price optimisation system is important which is uses by managers to
set the prices of their products such as ice cream, cake etc. that can help to increase the
organisational productivity and profitability. They analysis the cost and set prices accordingly so
revenues can be increases effectively.
Job costing system - Such accounting system is uses by companies in order to
accumulate the manufacturing cost independently and separately for each job. The method is
primarily used when an company works with various kinds of goods and has a major influence
on costs. In turn, this approach allows manger to maintain a clear record of the amount of
expanses produced on a given commodity by creating a different job expense report for each
commodity or object. This is essential for organisation and Creams Ltd. to engaged in production
of products and special orders. With the help of this system Cream Ltd can separate their cost in
each section that maintain the high productivity and profitability (Modell, 2014).
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P2 Different methods uses in management accounting reporting
Management accounting reports are those report which are prepared by management in
order to keep records their day by day transactions and run a business effectively. This is a
written document that involves all information and financial data in order to get accurate cost
and maintain profitability. With the help of management accounting report a business concern
get estimate how much need to invest and get return revenues (Sampaio and Bernardino, 2016).
For preparing management accounting report different methods are used by management of
Cream Ltd. who analysis the performance and prepare reports accordingly. The description of
few management accounting reports are as stated below:
Budget report – This is consider as most fundamental report which is uses by
organisation for the purpose of comparing the budgeted and actual information. This is important
for all organisation get the gap and variance between estimation and actual performance so
decision are made accordingly. All expected expenses and income are compared with actual
revenues by preparing a report that helps to increase the profitability. In Creams Ltd. managers
are preparing budget reports every year by estimating expenses and income which are going to
incurred in organisation while running a business. So actual profits can be get by management by
comparing and using profits appropriately.
Account receivable aging report – This report is useful for organisation as it provides
information about outstanding receivable. As business is depends on credits that is given by
business concern to its customers for the purpose of increasing sales and building relationship.
This report is uses by such business concern to keep records of all unpaid invoices so amount can
be received at right time or due date. The credit period is given for 30, 60 and 90 days that create
obligation on debtors to make payment at fixed period. In Creams Ltd. managers are preparing
account receivable aging report to get the unpaid payment from customers and run a business
effectively (Weetman, 2019) .
Cost accounting reports – Cost computing is important for organisation which helps to
maintain the profits and high performance of organisation. The cost accounting report is related
to cost of products and services which are provided by organisation for the purpose of running
business activities. Cost are delegated in raw material cost, overheads, labours and other
expenses which are recorded by managers of Creams Ltd. for knowing the productivity and
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profitability. This keep records direct and indirect cost also so products can be estimate
accurately (Otley, 2016) (Roslender, 2017).
Performance report – This report depicts the overall performance of their organisation
by focusing and considering all income and expenses. This helps to increase the business
performance by analysing the business activities and reducing the cost. For organisation it is
important that to evaluate future growth and expansion of business by getting opportunities and
managing the business performance. Creams Ltd, is preparing performance management report
in order manage activities and organisational performance in competitive environment. This is
also helpful to detect the errors and organise activities accordingly (Seckler, Gronewold and
Reihlen, 2017).
Inventory management report – This is another method of managing the stock of
organisation that is prepared by management in order to track inventory. In organisation different
types of products and services are collected that all needed to manage properly, so this system is
use4s by management in order to keep record of all items. This is important for organisation to
analysis the stock which are available in company for the purpose of managing inventory and
increase the business performance. In Creams Ltd, different types of products are managed by
management by keeping records and preparing inventory management report that can help to
provide detail of all available items and place the order to those material which are going to
reduce and more demanded (Shumeyko, Sagamonova and Sagamonova, 2018).
TASK 2
P3 Cost calculation by using appropriate techniques of cost analysis
Cost – This refers as value of money that are using by organisation while proving
providing and manufacturing the products and services. At the time of manufacturing and
providing services some amount has to spend that is called cost. This is important for
organisation to analysis cost of their products and services which they are providing (Tregidga,
2017).
Marginal Costing – In this process, the variable coat is assumed to be the cost of the
commodity and the fixed coast is part of the cost of the time. This method is used to fix the
selling price and to select the best product mix. Calculation of net profit for the company Creams
Ltd. is using marginal costing to calculate the profits (Vansant, 2016).
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Absorption costing - Both fixed costs in addition to variable costs are considered to be the
cost of the product in this method. This shows the precise and equal expense of and commodity
and therefore the measurement of other factors, such as cost of production, cost of raw materials,
etc., is seen more clearly (Warren, Jonick and Schneider, 2020). Creams Ltd company is
preparing income statement by using the absorption costing method is shown below for a better
understanding of this method.
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Calculation of variances:
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TASK 3
P4. Planning tools along with advantages and disadvantages
Budget is the estimated financial plan which includes forecasted incomes and expenses
about particular accounting period. Budgets in the entity are complied together with re evaluated
on continuous basis. It includes information about planned sales volume, assets, resource
quantities and cash flows. In business concern, budget is used for expressing strategic planning
of events with transitions in measurable terms (Shumeyko, Sagamonova and Sagamonova,
2018). The essential purpose of budget in Creams Ltd is to provide forecasting about
expenditures and revenues, establishing cost constraints, enabling actual financial operations and
ensuring expenses do not extend than revenues. Through budgets, managers make relevant
decisions for allocating financial resources to distinct categories or departments for ensuring that
all divisions are provided money to carry out activities as per the set schedule.
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