Management Accounting Techniques and Financial Reporting for Excite

This report examines the application of management accounting within Excite Entertainment Limited, a leisure and entertainment company. It differentiates between management and financial accounting, detailing various management accounting systems like cost accounting, inventory management, and job costing. The report analyzes different accounting reports, including budget reports, aging reports, job cost reports, and inventory reports, highlighting their importance in financial control and decision-making. It also explores the benefits of management accounting systems, such as cost efficiency, inventory control, and improved accuracy. Furthermore, the report covers marginal and absorption costing, financial reporting techniques, and the use of planning tools for budgetary control. The report culminates in an evaluation of how management accounting systems can be adapted to solve financial problems, providing a comprehensive overview of the subject.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION.............................................................................................................................3
LO 1...................................................................................................................................................3
P1 Management accounting and essential requirements of different types of management
accounting systems.......................................................................................................................3
P2 Different methods used for accounting reports.......................................................................3
M1 Benefits of management accounting systems and their application.......................................3
D1 Evaluation of management accounting systems and reporting within organizational process
.......................................................................................................................................................3
LO 2...................................................................................................................................................3
P3 Calculation of Marginal and Absorption costing.....................................................................3
M2 Management accounting techniques and appropriate financial reporting documents...........3
D2 Preparation of financial reports that apply data for various business activities......................3
LO 3...................................................................................................................................................3
P4 Advantages and disadvantages of different types of planning tools for budgetary control.....3
M3 Use of different planning tools and their application for preparing and forecasting budgets 3
D3 Evaluation of planning tools to solve financial problems.......................................................3
LO 4...................................................................................................................................................3
P5 Adaption of management accounting system to solve financial problems..............................3
M4 Importance of management accounting in solving financial problems..................................3
CONCLUSION.................................................................................................................................3
REFERENCES..................................................................................................................................3

INTRODUCTION
Management accounting is the application of skills and knowledge that is applied in
preparing accounting information to assist management of the company and help them in making
decisions regarding formulation of policies, planning and to control operations. It helps the
company in finding out early signs of future problem. It helps the companies in finding out
profitability from the particular product and to analyses new product as well as to value stock and
capital budget analysis. To understand each and every concept of Management accounting, the
report will take Excite entertainment limited which deals in leisure and entertainment industry.
The report will first show the basic difference between management accounting and financial
accounting along with different management accounting systems. The report will further focus on
different accounting reports and how management accounting system and reporting system are
integrated in the company. Further, the report will discuss about management accounting
techniques and appropriate financial reporting documents along with calculation of absorption and
marginal costing. To solve financial problems how company will use different budgetary tools
will also be in the report and at last the report will include adaption of management accounting
system to solve financial problems.
LO 1
P1 Management accounting and essential requirements of different types of management
accounting systems
Management accounting is the implied knowledge and skills of manager that helps the
manager in taking decisions related to formulation of policies, planning and controlling the
operations of the company. It helps the company in providing financial as well as non-financial
information on regular intervals to the management.
The management accounting is different from financial accounting as it is used for internal
purpose whereas financial accounting is used for external purpose. Financial accounting is
regulated by law whereas management accounting is not regulated by law and depends on the
skills of manager. Financial accounting provides information to the external users whereas
management accounting provides information to the internal users (D'Onza, 2016.). Financial
accounting only takes monetary value into consideration whereas management accounting takes
both monetary and non-monetary value into consideration.
The different types of management accounting system are:

Cost accounting system – A cost accounting is a framework used by firms to estimate the
cost of their products for profitability analysis, inventory valuation and cost control. The two main
cost accounting system are job order costing and process costing (Usenko and et.al., 2018). Cost
accounting system includes standard costing which is an integral part of cost accounting system.
This cost is associated with direct cost of the manufacturing company which involves direct labor,
direct material and overheads. The cost accounting system carries all the inventory accounts at
standard cost it is needed in Excite limited to estimate the cost of products that company is selling
and to do their profitability analysis and valuation of inventory.
Inventory management system – This system helps Excite entertainment ltd in tracking
goods through entire supply chain or specific department of the company in which it operates.
This system covers everything from production to retail, warehousing to shipments etc. an
inventory management most likely to perform functions such as bar coding, inventory alerts,
accounting tools, forecasting of inventory etc. It uses two methods to manage the inventory:
LIFO – It refers to last in first out which means the materials that has been received in the
last need to be sold at first.
FIFO - It refers to first in last out which means the materials that has been received in the
first need to be sold at last.
Job costing system – This system helps in assigning and calculating manufacturing cost of
an individual unit of output in Excite entertainment ltd. This system is used when the products
produced by the company are different from each other and has significant cost. It records each
product's direct material and labor that were used along with manufacturing overhead.
 Job Order Costing Method – This method of cost accounting system helps in
determining the cost value which has been incurred by the company for producing a
specific product or group of products.
 Process Costing Method – The process costing method assist Excite Entertainment Ltd
with facility of collecting, gathering and making assignment of cost amount. This cost
amount is assigned to manufacturing processes.
P2 Different methods used for accounting reports
Different methods of accounting reporting used by Excite entertainment ltd are:
Budget report – it is the most important report in management accounting as it helps the
owners of Excite ltd to understand and control the cost of the company and its operations as a

whole and even in particular departments (Usenko and et.al., 2018.). It helps the company in
evaluating expenses of previous years and then estimates the project for particular year and helps
the company in cutting (Ting, 2017).
Company's budget helps it in listing all the expenses and income sources of the company and tries
to achieve its goals and objectives while staying in the budget.
Account receivable aging reports – As Excite ltd relies on extending credit to its
customers therefore it is important for the company to manage account receivable aging reports.
These reports allow manager of the company to identify the defaulters as well as to find the issues
of the Company. In case if the company have too many defaulters then it needs to tighten its
policies to make sure that company has adequate amount of cash flow. This report provides
overview of credit balances according to the time period into separate categories that are 30, 60
and 90 days late. This helps the company in adjust the credit policies to align them with
repayment capabilities of customers.
Job cost report – Job cost report provide a side by side view of the single project by
comparing its estimated revenue to the total cost of that project. This report helps the manager of
excite limited to evaluate the profitability of the company gained by different departments. It also
helps them in finding out most profitable department of the company and manager optimize their
operations by focusing on that particular project. This report helps management in focusing on
department that are profitable and put additional efforts there rather than wasting time and money
on jobs or projects with low margins of profit (Caskey, 2016). These reports analyze expenses
while project is in progress so that manger can correct area of waste before cost gets out of control
. In Excite limited the company use job cost report to find out which department of the company is
profitable. It helps the company in finding out cost and revenue of the project.
Inventory and manufacturing report – Company that produce physical products or
provide services especially those in manufacturing with low fault tolerance find these reports very
valuable. These reports help the company in centralize data on cost of inventory, labor and other
forms of overhead cost involved in the process of production, providing raw materials to optimize
machining. As excite limited is a growing company therefore using inventory and manufacturing
reports makes its processes more efficient. These reports mostly include items such as inventory
waste, hourly labor costs or per unit cost of overhead. After getting the reports, the excite limited
can compare different assembly lines within the business to highlight the areas of improvement

for the company or to reduce cost of specific department or to provide bonuses and incentives to
the best performing departments.
The information stating in these reports need to be accurate as this information is used by
management to make decisions related to policies and procedures of the company. The
information need to be reliable as well as based on that manager of the company make decisions
and if the base of the decision will not be reliable then decisions will not be efficient as well. The
information need to be up to date in a fixed proper format which makes it easy for the company to
take decisions and need to be provided in timely manner so that the company does not suffer.
M1 & D1 Benefits of management accounting systems and their application in the
organisation
Management accounting system Benefits
Cost accounting system  Cost accounting system in excite limited
allows it to measure the efficiency of
the company in relation with time, cost
expense etc.
 This system helps the company in
identifying its profitable and non
profitable activities of the company
which helps the company in minimizing
the waste (Chouhan, 2017).
 This system helps the company to
control over its materials and help it in
calculating ideal and economic re order
and quantity.
 This system helps the company in
evaluating the reasons for losses and
also help the company to overcome with
the problem and in case the company is
not sure about how to eliminate the
losses at least excite limited can

minimize its losses.
 As every company is open to
uncertainties so is Excite limited but the
cost accounting system helps the
company in future planning by
providing detailed data about machines,
labor capacity, level of output etc. to
avoid future uncertainties.
Inventory management system  Inventory management system helps
Excite entertainment limited in
achieving productivity in its operation.
The company needs to keep different
props and products to provide service to
its customers and therefore this system
increases efficiency of the work.
 It helps in saving time and money of the
company. Although the installation
charges are high but once it is installed
it saves time and cost. It keeps the track
of products that are ordered which
makes the work easy for the
management of the company (Muller,
2019).
 This system helps the company in
retaining its customers by meeting the
demands of the customers quickly so
that they have right product on hand
whenever their customer needs it.
 It helps the company in improving
accuracy of inventor orders as this

system helps the company in knowing
that how much inventory will it need in
hand to meet the need of the customers
(Prahlad and et.al., 2018.). This helps
the company in preventing product
shortage and allow the company to keep
enough inventory without having
burden of warehouse.
Job costing system  This system helps the company in
estimating the cost of each job that can
be determined individually to get a clear
and better picture.
 It helps in providing basis for estimating
the cost of similar jobs which can be
done by the company in the future.
 This helps Excite entertainment limited
in deciding whether it can launch new
product or service or not and it will be
profitable or not by providing the
company with detail information on cost
of material, labor and overheads.
 It benefits the company by identifying
spoilage and defective work related to
specific project and responsibility for
the same on different individuals.
 It also helps the company in budgetary
control by adopting pre-determined
overhead rates.

LO 2
P3 Calculation of Marginal and Absorption costing
Absorption costing
Particulars
Amount (in
£)
Per unit cost
(in £)
Net figure (in
£)
Sales 8000 15 120000
Opening stock 500 10 5000
production 10000 10
1000
00
Closing stock 2500 10
2500
0
Cost of goods sold
(Opening stock + purchase – closing
stock) 80000
Gross / Net profit 40000
Marginal costing
Particulars
Amount (in
£)
Per unit cost (in
£)
Net figure (in
£)
Sales 8000 15 120000
Opening stock 500 6 3000
production 10000 6 60000
Closing stock 2500 6 15000
48000
Contribution
(Sales – variable cost) 72000
Less: fixed production
overhead 40000
Net profit 32000

M2 & D2 Management accounting techniques and appropriate financial reporting documents
There are certain management accounting techniques along with financial reporting
documents that are used by Excite limited company to increase their efficiency of work and
overall performance are:
Cost accounting with cost report – Cost accounting present data of cost based on product,
department etc. and helps in comparing current data with estimated data and difference between
the two tells management about the issues facing by the company (Gallino, 2016). Cost
accounting takes cost reports into consideration which helps the company in making decisions
related to minimizing the use of fund in particular activity.
Budgetary control with budget report – This technique helps Excite limited to estimate
future financial needs of the company and to arrange the funds according to the requirement. It is
used to control financial performances of the busies and directs the business in n desired direction.
Budget report of the company helps in budgetary control by estimating the revenues and
expenditures of particular period and helps the company in taking the decisions accordingly.
Ratio analysis with job costing report – Job costing report helps the company in
estimating revenue and cost of each job individually which creates a clear picture in the mind of
the manager that which job is more profitable and which is not. With the help of ratio analysis
technique, the job costing report can be even more subtle and helpful as ratio analysis helps the
company in forecasting, planning, coordinating etc. by taking different attributes like profitability,
liquidity etc. and to align it with job costing report to help company in making better decisions.
LO 3
P4 Advantages and disadvantages of different types of planning tools for budgetary control
Zero based budget- It is the tool in which all the expenses are justified for every new
period. It provides for the budgeting from the scratch or Zero base (O’Grady, Morlidge and
Rouse, 2016). Every function of Excite Entertainment is being assessed for its costs and the needs.
Advantages Disadvantages
 Zero based budgeting prioritize the
profits over the expenses. The units or
the departments which directly or
indirectly generating the profits are
 Zero based budgeting technique
requires detailed analysis and the
attention which results in a complex
and time consuming process for the

given the preference (Pellerin and
Perrier, 2018). It helps the company in
gaining large funds so that more
revenues and the profits can
ascertained.
 This budgeting helps Excite
entertainment in becoming more and
more strategic as it allows for
expanding only that amount which the
business needs for attaining growing
success. By this the organization can
serve its customers at a large base.
 This approach reduces the errors and
enables the business in looking deeply
towards the processes. This leads in
taking utmost care in relation to the
inefficiencies so that effectiveness can
be increased in the business.
managers of the entity.
 This budget does not focus on the cost
centers and provides for short term
thinking rather than the long term
prospects. If the cost centers are not
analyzed efficiently, then it could affect
the business adversely.
Activity based budget- This budget refers to the system in which the cost attached to each of the
activities and the budgeted expenditure are combined on the basis of the expected level of the
activity.
Advantages Disadvantages
 It allows the business in making
effective cost planning and emphasize
on the types and the volume of the
activity that are occurring within Excite
entertainment.
 This tool helps the firm in reducing the
level of the activity that are needed for
 The downside of this budgeting is it
increases the requirement of the
workload on the mangers as they need
to track each activity (Maher, Fakhar
and Karimi, 2018). This leads to
lengthy and difficult task.
 If the company is producing only a

generating the revenue. This results in
earning increased profits.
 It facilitates the information regarding
the cost associated with each activity so
that allocation of the funds can be made
effectively.
single product, then this approach is not
suitable.
Rolling budget- It is the continuous budget that is updated for adding the new budget for the
particular period. It is also known as the revised budget as it states the incremental extension of
existing budget. This budget is a perpetual budget which are prepared for next period of
accounting for replacing the previous budget.
Advantages Disadvantages
 It facilitates flexibility to the
organization as it helps in adjusting for
the changes so that updated information
can be evaluated for making effective
forecasting.
 This approach results in saving the time
and the cost as timely adjustments are
made relating to the expenses and the
income.
 It helps Excite entertainment in being
more responsive towards the
unexpected changes in the future.
 The major drawback of this budget is it
need to be prepared on a frequent basis.
 It requires robust system of information
and highly skilled staff for extracting
the accurate information.
M3 & D3 Use of different planning tools and their application for preparing and forecasting
budgets
Zero based budget-