Comprehensive Analysis of Management Accounting at JCW Recruitment

This report provides a comprehensive analysis of management accounting practices at JCW Recruitment, a global recruitment services provider. The report begins with an introduction to management accounting and its role in decision-making, focusing on how JCW utilizes accounting information. Task 1 explores the essential requirements of different management accounting systems, including traditional cost accounting, throughput accounting, lean accounting, and transfer pricing, illustrating their application within JCW. Task 2 delves into various methods used in management accounting reporting, such as cost reports, budgets, and performance reports. The report then moves on to Task 3, where it examines cost calculation techniques and prepares income statements using both marginal and absorption costing methods, highlighting the key differences between them. Finally, the report discusses the advantages and disadvantages of different planning tools used in budgetary control and compares how JCW adapts its management accounting system to respond to financial problems, concluding with a summary of the key findings and insights.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
LO 1.................................................................................................................................................1
P1 Management accounting system which demonstrate essential requirement of different
types of management accounting system ...................................................................................1
P2 Different methods used in the management accounting reporting .......................................3
TASK 2............................................................................................................................................4
LO 2.................................................................................................................................................4
P3 Calculation cost with using techniques of cost analysis and prepare income statements of
marginal and absorption costing and differences in it................................................................4
TASK 3............................................................................................................................................7
LO 3.................................................................................................................................................7
P4 Advantages and disadvantage of different planning tools used in budgetary control ..........7
LO 4...............................................................................................................................................13
P5 Compare how enterprise adapt management accounting system to respond towards the
financial problem......................................................................................................................13
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is the process of preparing reports of management and accounts
which assists to gather relevant information towards the aims and objectives. Further, it is also
helps to provide accurate and timely information to managers to determines short and long term
decisions (Melnyk, Bititci and Andersen, 2014). In this context, report based on the JCW which
is provided excellent and world leading recruitment services in different areas of the world. They
determine their services in more than 100 recruitment consultants in UK. For gaining insight
knowledge of the report, it covers management accounting which demonstrate essential
requirement of the accounting system. Furthermore, it includes different methods that are used
for management accounting reporting for the selected business. In addition to this, it includes
advantages and disadvantages of the planning tools for the budgetary control. At last, it
determines comparison of the organisation which adopt management accounting system to
respond financial problem.
TASK 1
LO 1
P1 Management accounting system which demonstrate essential requirement of different types
of management accounting system
In respect to analysis, interpreting and presenting the information, management
accounting play very important to demonstrate effective functioning. With this regard,
information gathered with using costing and accounting information which helps to make
decisions for short term goals. In addition to this, in JCW it determines day to day operations in
systematic way to undertake activities. In the process of management accounting includes
measurement of the business performance, preparation of financial statements, assessment of the
risk, etc. (Bennett, Schaltegger and Zvezdov, 2013). There are three major aspects included such
as management, accounts and finance, etc. With the help of management report, different kinds
of information in relation to business strategies and making financial status of the company in
systematic manner. These helps to the chosen organisation to take corrective decisions that are
needed at workplace.
Further, in respect to take decisions, there are different types of management accounting
system exists that used by the company to collect and present effective financial information at
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workplace. The selected business unit used different system of management accounting which
includes several factors like cost of production, services given by JCW, etc. Management
accounting system in the business determines as follows:
 Traditional cost accounting system: This method is used and carry conventional
methods of accounting. It includes direct and indirect costs that considered in the
traditional accounting system (Pavlatos and Kostakis, 2015). Therefore, it assists to
demonstrate cause and effect relationship. Costs incurred in the production allocated to
assign unit in the production process. In the JCW, basis of accounting system includes
volume of production and overhead that are related to the production and direct labour
overhead. According to the traditional costing, average overhead basis of allocation of
products cost. All the indirect expenses also pooled together and assign equally per the
appropriate cost drive. It includes labour hours, machine hours, etc. The chosen business
use this method to take account cause and effect relationship (Quinn and Jackson, 2014).
Hence, it is beneficial to managers to take appropriate decisions with direct and indirect
cost.
 Throughput accounting: Throughput accounting system assist to determine quantity of
products and raw material that is passed through the process and system. In this kind of
management accounting system includes costing activity which helps to focus on the
determination of constraint that are arises in the manufacturing of units. In the JCW, it
demonstrates relation to labour turnover, raw material, wastage in the capacity of plant,
etc. Basically, it includes focuses on the eliminating such constraints which insist to
ensure that quantity and quality of production will be increases (Fayard, Lee and
Kettinger, 2014). In this way, direct material is only allocated to the cost of inventory that
make effective functioning in the business. In addition to this, selling and distribution
overhead also charged in the period cost under the method. This method also ensure that
costing also minimised for every unit of production. It enables to create effective and
efficient production in order to work in the line with job and process costing. This
method ensures that constraints of the chosen business diminish through each unit
produced (Mitter, Mitter and Hiebl, 2017). Therefore, it assists to make effective and
efficient working system with job and process costing.
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 Lean accounting: It is new and other concept which include in the field of management
accounting that differs from the other accounting system. In the conventional method of
costing, allocation of cost is needed that incurred in the process. Lean accounting also
focuses on diminish the cost through maintain control on wastage which is caused in the
production process (Chan, 2015). There are several tactical methods combined under the
technique which is also emphasizes on eliminating of non value added activities. Further,
it also assists to JCW to recruit qualitative and skilled employees in the business. It also
includes value streaming assessment, measurement of the profits to take decisions at
workplace. Excess costs also cut down with ascertain information that are mentioned in
categories. Main advantages of this is increasing revenue through sales due to reduction
of waste material (Endenich, Hoffjan and Trapp, 2016). Therefore, capacity will be
increasing of the organisation to utilise proper resources at workplace. Further, it
generates effective results at workplace to demonstrate money saving. Main benefits
includes in the lean accounting is increasing revenue that generate high sales due to
reduction of the waste material. It also helps to increase capacity of plant that reduce
capacity utilisation in the generation of waste material. It assists to save the cost and
money that develop at workplace (Klemstine and Maher, 2014).
 Transfer pricing: Transfer pricing is the effective element that assists to generate
effective results at workplace from the department. In this process, recruitment will be
ascertain through shifting one place to another. Hence, it leads to generation with some
extra costs due to transfer. It includes pricing of shifting and opportunities price which
involve amount that is outsourcing of goods and services in the business (Rosli, Said and
Mohd, 2014).
P2 Different methods used in the management accounting reporting
Management accounting is the process of preparing management reports and accounts. It
helps to provide accurate and timely information regarding financial status of the company. It
includes different strategies of the company that helps to manage decisions on time in JCW.
There are several methods has been implemented in the management accounting reporting that
determines in the following manner:
 Cost report: In respect to provide the useful information, cost to the manager is related
and enable to management in respect to control future cost (Stergiou, Ashraf and Uddin,
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2013). It is known as the accounting system in which cost is computed on the basis of
raw material, labour, overhead and other additional cost. In the cost of per unit, total cost
is incurred in the production which is divided by the number of unit produced. Cost
report also summarised information that assists to ascertain manufactured products in the
internal report system.
 Budget: Budget are also prepared as the internal part which assists to managers to
compare actual results of the business with estimated one (Nørreklit, 2017). It assists to
measure the business performances in the specific period of time.
 Performance report: Further, performance report assists to concluded the differences
projected in budget which helps to managers to prepare new program and budget at
workplace.
Management accounting system and report assists to determine link closely which
depend on each other. In order to prepare the management reports, JCW need to concentrate on
the possible outcomes with system and utilise time to considered accurate information. It helps to
make decision in systematic aspect (Zaleha Abdul Rasid, Ruhana Isa and Khairuzzaman Wan
Ismail, 2014). Preparation of the management report is not useful without integrated
management accounting system. Hence, the organisation need to concentrate on accomplishment
of the goals and objectives.
TASK 2
LO 2
P3 Calculation cost with using techniques of cost analysis and prepare income statements of
marginal and absorption costing and differences in it
In order to prepare the income statement for marginal costing, following information will
be used:
Particulars Amount Amount
Sales (600*35)
Less: Variable cost of the sales
Opening stock
Production (700 units price 13 per unit)
COGS
Nil
9100
2100
4

Closing stock (100*13)
COGS
Contribution
less: Fixed cost
Fixed manufacturing expenses
Admn. Exp.
Selling cost
Sales overheads
Net profit/ loss
(1300)
2000
700
600
600
(7800)
13200
10800
(3900)
9300
Working note: 1
Direct material £6.00
Direct labour £5.00
Variable cost £2.00
Total £13.00
Income statement for absorption costing
Particulars Amount Amount
Sales (600*35) 21000
Less: Cost of sales
Opening stock
production (16*700)
Closing stock (16*100)
Less: over absorbed of fixed production overhead (2000-2100)
COGS
Gross profit:
Less: Other expenses
Admn exp.
Selling overhead
Nil
11200
(16200)
700
600
(9600)
100
9500
11500
5

Fixed selling costs
Net earnings
600 1900
9600
Working note: 2
Direct material £6.00
Direct labour £5.00
Variable cost £2.00
Fixed cost £3.00
Total £16.00
From the above, it can be interpret that income statement is assists to generate high profit
in the month ending. Net profit as per the method of absorption costing is £9600. However, in
the marginal costing it is £9300. This is differences in the profits ascertain in the RCW. Main
reason is to assess the difference between two elements that are taken as absorption costing
method which is taken in the account of fixed and variable. It is also considered as the variable
cost in marginal method. The chosen company is also used absorption costing method because it
provides appropriate and clear financial performance in the business through includes different
types of cost (Soheilirad and Sofian, 2016).
Differences between marginal and absorption costing method
Absorption costing Marginal costing
In order to compute the net profit, there are
different cost has been implemented such as
fixed and variable.
In this kind of method, there are several
elements not considered. It includes only direct
and variable cost only.
Both fixed and variable costs considered
period cost.
Variable cost is the product cost and other
fixed cost in considered as the period cost.
At the end of the year, stock has been carried
which is valued on the total production.
Stock is not carried forward in the next year
but it is considered as the total experience of
the production cost (Mikes and Morhart,
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2017).
In respect to perform effective functioning, there are several elements exists that need to
be taken as the important sources. With this regard, JCW can use different kinds of financial
statements and cost accounting. It helps to make profitable business and effective results in
systematic manner. Main aim of the organisation is to increases their profits so financial
planning considered in the good manner (Bobryshev, Yakovenko and Glushko, 2015). In
addition to this, cost accounting is the cost accounting is important aspect that provide and carry
cost structure to manage business results and performances. The organisation has responsibilities
to perform effective functions with proper statement. In this regard, different range of account
has been carried which included in the report. Therefore, it can be specify type of account that
grouping in the report. It is major duty and responsibilities of the chosen business to considered
right balance between their results and performance. Hence, their profits and revenue will be
increasing in systematic manner (AbRahman, Omar and Ramli, 2016).
TASK 3
LO 3
P4 Advantages and disadvantage of different planning tools used in budgetary control
In respect to develop effective functioning, JCW has several tools and techniques that
helps to increase their effectiveness in the market. In this regard, the company need to control
disposal in the business environment (Hirsch, Seubert and Sohn, 2015). With this regard,
following are different techniques exists that assists to generate high revenue in the business:
 Capital budgeting technique: It is the important planning tool that assists to make
effective functions and operations with performance development. Investment decisions
are also undertaken that helps to enhance return of JCW in systematic manner. This is
because, manager of the selected business maintain their high position in business
through choose appropriate resources and best alternative from various options. There are
different project exists in which selection needed of the best one to gain high profits and
revenue (Melnyk, Bititci and Andersen, 2014). With this regard, different elements create
effective functioning through implement payback period, NPV, post payback, IRR, etc.
 Calculation of net present value:
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 Calculation of internal rate of return:
With the help of following statement, it can be interpret that JCW need to implement
investment about in project A. This is because, in this project higher rate getting by the business
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as compare to the project B. Furthermore, there are several advantages and disadvantage are
exists with the using the above techniques which defines as follows:
Advantages
 Capital budgeting is the useful aspect to JCW to invest their money in project which
gives several benefits in it. It assists to gain high return with determines potential
investment in the selected business.
 It is the systematic tool that demonstrate several important decisions for the particular
project in systematic manner (Chan, 2015).
 Along with this, profitability at workplace also develop with project and outcomes that
are requires in JCW.
 Calculation is very simple and short so that this technique is very useful and easily
understandable in the selected business environment.
Disadvantage
 Apart from this, in the capital budgeting, there are several tools exists that require more
time to calculate such as payback period, etc. Hence, it is time consuming process.
 For calculation, this tools in JCW needed skilled people.
 Wrong calculation in the chosen business interpret wrong results which could be affect to
its long term profits and outcomes. Therefore, it remains as the high risk that take place in
the business (Melnyk, Bititci and Andersen, 2014).
Budget
Along with this, budget is also important perspectives that demonstrates functions that
are essentially need to be manage financial statements. Accounts are also considered important
perspectives which needed to ascertain financial and accounting system in systematic manner.
Future responses also assists to generate high income and profits at workplace. It helps to
forecast and generate creative results in the business environment. Further, the company can
make sheet of the performances that are helps to operate effective functioning at workplace
(Budgetary control | Meaning | Objectives | Advantages | Disadvantages, 2017). There are
several budget system included that helps to provide useful information such as production
statements, etc. In the report, following budget statement has been carried:
Cash budget
9

Production budget
Sales budget
10