Comprehensive Analysis of Management Accounting Reports and Systems

This report provides a comprehensive overview of management accounting (MA) principles and their practical application. It begins by defining MA and its role in providing financial data for internal decision-making, focusing on Grant Thornton and its client, Creams Limited. Task 1 explores various MA systems, including inventory management, cost accounting, price optimization, and job-order costing, highlighting their benefits and applications. It also examines different types of MA reports, such as cost reports, stock reports, and accounts receivable reports, and their correlation with MA systems. Task 2 delves into the preparation of income statements using marginal and absorption costing methods, including their advantages and disadvantages. Task 3 discusses the benefits and drawbacks of planning tools used for budgetary control. Finally, Task 4 emphasizes the importance of MA in solving financial issues, including the role of planning tools and the use of MA to respond to financial problems. The report concludes by summarizing the key findings and insights gained throughout the analysis.

MANAGEMENT
ACCOUNTING

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1 MAS and their application..................................................................................................................3
P2 Different ways of MA reports.............................................................................................................5
D1 Correlation between MAS and MA reports.......................................................................................6
TASK 2..........................................................................................................................................................7
P3 Preparation of income statements.......................................................................................................7
M2 Techniques to prepare income statements.......................................................................................11
D2 Interpretation of produced income statement...................................................................................11
TASK 3........................................................................................................................................................11
P4. Benefits and drawbacks of different types of planning tools used for budgetary control.............11
M3 Role of planning tools.....................................................................................................................13
TASK 4........................................................................................................................................................13
P5 Importance of MAS to solve issues..................................................................................................13
M4 MA to respond financial problems..................................................................................................15
D3 Role of planning tools to solve financial issues...............................................................................15
CONCLUSION.............................................................................................................................................16
REFERENCES..............................................................................................................................................17

INTRODUCTION
MA is described as an accounting system that allows a business to operate more effectively.
This can be defined as the implementation of accounting methods to find out need of monetary
data for better management. It concentrates on aspects of accounting (Bromwichand Scapens,
2016). Under this accounting both financial and non financial information is used in order to
produce internal reports that lead to better decisions. The collected information is used by
managers to determine systematically. MA is a system mechanism that offers the details
necessary for various levels of management. The report is based on company that is Grant
Thornton, headquartered in United Kingdom. This company is one of the main accounting firms
which provide its services to its clients. Creams limited are a client company of above
accounting firm. This company sells ice cream, doughnuts. The project report covers detailed
information about various accounting systems and reports as well as different range of planning
tools are also mentioned. The further part of report demonstrates about role of MA in solving
financial issues.
TASK 1
P1 MAS and their application
MA is also considered as managerial accounting and is characterized as a judgment creating
process for providing monetary data to administrators. MA is generally utilized for the
accounting department of the company, since that is mainly the different from financial
accounting concepts (McLaren, Appleyard,and Mitchell, 2016). Through this process financial
information and tax forms are shared through a financial division with the management
personnel of the company. This background knowledge is used to take better as well as for more
accurate decisions, track the organization performance, business trends etc. It includes various
kinds of accounting systems like:
 Inventory Management System- The system for stock management is a tool for better
stock regulation through the organization’s supply chain. In Creams limited the whole
distribution cycle from placing orders to suppliers is constrained by this method and it
enables the whole path of in a systematic manner (Aria and Rahadjeng, 2018). Through
using the inventory control method, sales firms, retailers, manufacturers and vendors can

make their stores effective by taking correct decisions for stock purchasing. The system
involves vital range of methods such as LIFO, FIFO and Average Costs. It is essential for
companies to take corrective actions for management of stored inventories. Below
description of these methods is done:
LIFO (Last in first out) - It is a type of method in which stock that comes last is used
first for production.
FIFO (First in first out) - This method is different from previous method, as under it
stock that comes first in store is used for production.
 Cost accounting system- It is a form of management accounting method that
encompasses a large wide range of operations as well as financial factors. In order to
hold cost under estimate, it is important for companies (Fleischman and Parker, 2017).
This accounting is used, as in the aspect of the above company, to maintain production
expenses below the expected cost. The main objective of this is to focus on keeping cost
of various operations lower as much as possible. Without it, this can possible to keep
their cost lower from estimated value of cost. It is not associated to specific company as
it can be applied in any business whether it is financial and non financial.
 Price optimization system- It is a method which includes a particular way of setting
pricing and service requirements for the customer. This accounting method helps
businesses to gain useful market patterns and data on consumer requests. Basically, this
collected information is used by businesses to take suitable actions for setting of prices
of their products. In the sense of the abovementioned chosen company their selling
department changes price strategies in accordance with consumer needs and they do so
by help of this accounting system.
 Job-order Costing- The job ordering system monitors the expense of each work inside
the organization. The management can closely track each task's costs and determine if
the actual costs generated is relatively close and expected costs is higher. Substantial
shortfalls in costs will force management to analyze and implement corrective steps to
address the cost increase cause. This approach collects and accumulates costs for
specific workers, work orders or assignments. The cost of each task is calculated
appropriately and each work described separately. Under above business they implement
it in order to manage cost of each job in an effective manner.

P2 Different ways of MA reports.
These are defined as documented reports consisting of detailed information about the
monetary and anti-monetary components (Maas, Schaltegger and Crutzen, 2016). Such reported
details are frequently used by organizational departments to take effective measures at the right
time. The accountant of Cream limited generates the below reports which are as follows:
 Cost report- This includes details on expenditures for the execution of a variety of
business and operations (Yin and Tian, 2017). Along with under this report, the activities
are classified by their expense level. The aim of the report is to concentrate on certain
elements and factors that are more expensive (Machado, 2016). In relation to the above
company, their finance team uses this report in order to manage overall number of
expenses below standard cost. Under this report, different types of costs are classified as
per its nature like direct cost, indirect cost and many more. Due to which it becomes
easier for managers to take appropriate actions.
 Stock report- This can be known as a report that includes information about stored
volume of products of stores. This report is prepared with the assistance of the stock
management system. The main aim of this report is to assist the production department in
taking the appropriate measures about how many units are needed. The above-mentioned
organization produces different types of food products in accordance of this report’s
information. In this report information about all types of goods is included such as raw
material, WIP and prepared products. Such information helps to managers to take right
action.
 Accounts receivable report- It includes information about the amount of debtors liable for
companies with the actual date of sale. The importance of it is to assist finance
department to devise specific policies and strategies (Darko, Adarkwah, Donkor and
Kyei, 2016). Basically, this report is mainly used in that organization in which credit
transactions are done on higher basis. By help of it managers can determine efficiency of
their debtors. Their financial team in the above organization utilizes crucial details by
help of this report in order to collect debts on time from debtors.
M1 Importance of MAS.
System Name Benefits

Cost accounting system It is associated with making calculation of overall cost
that occurs into various operations and activities
(Gomez-Conde and Lopez-Valeiras, 2018). Under above
company, it is used in order to control real
manufacturing costs and handle operations that are over-
estimated.
Job costing system It contributes to quantifying the cost of each production
number generated. It is being used in that organization in
which huge volume of output is produced. This is due to
above accounting method as managers become able to
know cost of each output. This accounting is used for an
analysis of the costs of each manufactured items by
determining and measuring the costs of jobs in above
company.
Price optimization system This allows businesses to determine the price of goods in
line with the recent market trend. It is based making
analysis of market trends and customer needs. On the
basis of it managers of companies analyze and set pattern
of prices. It is widely used by sales department in
companies. Throughout the region above, their
distribution team sets product rates according to
consumer needs throughout above company.
Inventory management system It accounting efficiently determines the value of the
stock reserved. This is designed to minimize inventory
costs ( Otley, 2016). As above described that it makes
evaluation on the basis of various kinds of techniques
such as LIFO, FIFO and many more. It is introduced at
the above company to reduce their production costs by

making evaluation of stored quantity of stock.
D1 Correlation between MAS and MA reports.
The MA includes a variety of accounting systems and records which comply with
company procedure and enterprises (Rebelo, Santos and Silva, 2016). With regard to the above
business, their separate departments are linked to the accounting system. For example in the
Creams limited in order to of raise profits, the price optimization system is aligned in sales team.
The stock report is related to the production department. For instance in the above mentioned
company, their managers use different reports for corrective measures in the retail field. Apart
from it, rest of reports are also linked to companies departments such as finance department of
above company take decisions regards to credit facility to customers in accordance of accounts
receivable report. This link between process of company and accounting systems leads to higher
success of business entities.
TASK 2
P3 Preparation of income statements.
Marginal costing method: This can be interpreted as a costing method by which the effects
of different activities occur in various ways (Nathwani, 2020). The fix expenses are considered
as time cost while non fix costs are viewed as unit costs.
Advantages- It is of essence continuous. That is because variable expenses differ periodically
but the total cost will not shift over a long period of time.
Disadvantage- One of the key problems of this technique is that the time dimension is not taken
into account.
Absorption costing- This is a system of costing that defines and allocates in common the costs
paid for various tasks and operations (Gersil and Kayal, 2016). The cost of the product is
considered under fixed and non-fixed costs. There are also other limitations and benefits such as:
Advantages- The biggest benefit of this system is that it can efficiently track revenue.

Disadvantage- It is not helpful in enhancing market performance. That is because it is difficult
for managers to make a right judgment due to keeping all factors into account.

M2 Techniques to prepare income statements.
There are different types of techniques in order to produce financial statements. It
depends on companies that which method they implement for financial reports (Armitage, Webb
and Glynn, 2016). In the above report, profit and loss accounts are produced on the behalf of two
methods which are marginal and absorption costing. Under both of these techniques value of net
profit is different due to way of taking expenses. Apart from it, various kinds of labor and
material variances are calculated in accordance of particular formula. For instance under labor
variance four types of variances are calculated such as labor price, quantity etc. same as under
material variance too, different types of variances are computed as per given scenario.
D2 Interpretation of produced income statement.
In accordance of produced financial system under different methods this can be find out
that net profit is 50000 and -25000 under marginal costing. As well as under absorption costing
profit is also similar that is of 50000 and -25000 for similar time period. In addition, variances
are also computed including labor and material variances.
TASK 3
P4. Benefits and drawbacks of different types of planning tools used for budgetary control.
Budgetary control- It can be described as a way to manage financial and anti-financial
performance across a number of budgets (Mohamed, Kerosi and Tirimba, 2016). In this
dimension of the budgetary function, the managers of businesses undertake corrective measures
to produce more results by means of such financial plans. In other words, this can be defined as
process of making budgets on the basis of gathered past years’ financial information. Under it, a
vital range of budgets are included which leads to effective decision making. There are a number
of budgets, several of which are:
 Operational budget- It is a form of budget that is related to do the forecast over a certain
amount of time of revenue and expenditures. With the aid of this budget, administrators
can predict the volume of material required to execute different activities more
effectively. Objective of this to manage operations and activities of a company in an
effective manner. It becomes possible by correct prediction of further income and
expenses of a particular time period. In the context of above Creams limited, their

administrators take corrective steps to handle multiple organizational forms. Specific
strategies are used in this budget, for example:
Variance analysis- It is related to differentiating between actual results and estimates.
Standard costing- This is a form of method that is linked to the calculation of incremental
costs and used as a comparison measure.
Benefits- This budget is valuable for businesses to monitor their actual regular spending.
As well as it is useful for companies to ensure proper utilization of resources and capital
into various operations.
Drawbacks- This budget has constraints as well as the benefit. For example, this budget
takes so much time and money which is impossible to achieve for small companies.
 Flexible budget- This is a financial plan that fluctuates in terms of output and quantity
shift (Boyabatlı, Leng and Toktay, 2016). This budget is widely used in those companies
in which activities are expected to change in future. One of the key features of this budget
is that it is user friendly. This is so because it can be updated whenever company needs.
Like the above-mentioned firm, this budget is designed for potential fluctuating
operations by accountants.
Advantages- It is so simple to use, because companies can track their everyday expenses
and revenue. As well as this budget can be applied in any kinds of business. There are no
any specifications to apply this budget, even small companies can also adopt this budget.
Disadvantage- This adds to data theft, because users can conceal real data by modifying it
every day. Along with this budget needs to be updated on daily or monthly basis that
leads to complexity.
 Capital budget- This can be described as a kind of budget that is linked to the output
assessment of lengthy-term investments such as machinery, plants and many more (Dong
and Smith, 2017). The Finance Department takes important long-term investment choices
on the basis of this budget. Basically, this budget is used in those companies which make
large financial investments into various projects. This is so because it guides to finance
managers to take corrective actions before making a higher capital investment.
Throughout the above-mentioned Creams limited, their finance team has used this budget
for disciplinary steps in order to control financial capital properly. As well as they allow