Management Accounting Report: Evaluation of TPG Processing System

This report provides a detailed analysis of management accounting principles and their practical application within TPG Processing, a manufacturing company. It begins with an introduction to management accounting, differentiating it from financial accounting and emphasizing its role in internal decision-making. The report then explores the functions of management accounting, including planning, control, cost accounting, and decision-making. It delves into various management accounting systems such as cost accounting, inventory management, job costing, and price optimization, illustrating their use within TPG Processing. Furthermore, the report examines different types of management accounting reports, including budget reports, accounts receivable aging reports, and performance reports. It critically evaluates how management accounting is integrated within the organization and highlights the benefits of these systems, such as improved cost control and better decision-making. The report also covers cost analysis techniques and the advantages and disadvantages of budgetary control planning tools. It explores how management accounting can be used to address financial problems and lead an organization toward sustainable success. The report concludes by summarizing the key findings and emphasizing the importance of management accounting in modern business operations.

MANAGEMENT
ACCOUNTING

Table of Contents
PART A...........................................................................................................................................1
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
P1 Management Accounting Explanation..............................................................................1
Roles Functions of Management accounting.........................................................................2
Management Accounting System...........................................................................................2
P2 Types Of Reports..............................................................................................................4
D1 Critical evaluation of how management accounting is integrated within the organization5
M1 Benefits of the system and their application....................................................................5
CONCLUSION................................................................................................................................6
PART B............................................................................................................................................6
INTRODUCTION...........................................................................................................................6
P3 Calculate cost using appropriate techniques of cost analysis............................................7
P4 Advantage and disadvantage of different types of planning tools of budgetary control.13
M3 Use of different planning tools and their application.....................................................17
P5 Organisation could use management accounting to respond to financial problem.........17
M4 Financial problems, management accounting can lead organisation to sustainable success
..............................................................................................................................................21
D3 Planning tools effectively respond to solving financial problems to lead organisation to
sustainable success...............................................................................................................21
CONCLUSION..............................................................................................................................21
REFERENCES..............................................................................................................................22

PART A
INTRODUCTION
Management accounting is the process of preparing management reports and accounts
that provide authentic and relatable information on time (Saleem Salem Alzoubi, 2016). These
information presented in financial and statical way in front of managers which is helping to make
day to day and short term decisions. It is different from financial accounting because in
management accounting reports and accounts are presented in front of managers on weekly and
monthly basis while in financial accounting reports are presented to investors, creditors, clients
and managers to annually basis. To understand the concept of the report selected company TPG
Processing which is related to manufacturing sector. In the report consist of explanation of
management accounting and their role. Apart from report define elements of different types of
management accounting system and different methods of management accounting reporting.
Further, evaluation the benefits of system and integrated with organisational process.
MAIN BODY
P1 Management Accounting Explanation
As per the IMA (Institute of management accountants): The management accounting may
be defined as a kind of process which is related with the decision making, planning and
performance management system in the aspect of the financial reporting. The aim of doing so, is
to control the assist management in the formulation and implementation of the strategies.
(Cleary, 2015).
From the definition it has been understand that management accounting is continuous
process which can help to manage performance of company in effective manner.
As per the the Chartered Institute of Management Accountants (CIMA): The
management accounting can be defined as the process that involves measurement, accumulation,
preparation and communicating the information and data which is being used by the managers to
make suitable decisions (Suprianto and et.al, 2017).
As per the above definition it has been understand that in management accounting
information include different types information which can help to assess of performance.
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Roles Functions of Management accounting
Planning – It is important function of management accounting which can help to provide
all required information and authentic data. For example – The management Accountant of TPG
has been planning about manufacturing which can help to manager regarding to short term
decision (Golyagina and Valuckas, 2016).
Control – In the management sense, it has been described as the process which is part of
management process. It is helping to managers to ensure about that resources to acquired and
used in effective manner as well as obtain goals of an organisation. For example – For
manufacturing process use by this function by TPG processing to control activities to manage
business in effective manner (Arnaboldi, Busco and Cuganesan, 2017) .
Cost accounting – The function of cost accounting to manage information of
management accounting regarding to cost of production by assessing the input costs of each step
of production. For example – TPG company can predict cost of different products which is
manufacturing in company (Florio and Leoni, 2017).
Decision Making – The main role and function of management accounting to provide all
necessary information to top management. It can help to take day to day and short term decision
in effective manner. For example – for investment purpose management of TPG analysis of all
financial information (Solovida and Latan, 2017).
Financial Management – The management accountant can arrange all data and
information which is related to financial condition. The management use financial information to
take decision without any difficulty. For example – The accountant of TPG prepare report in
statistical way and present in front of to management.
Auditing – Management accounting play role to analysis books of company and rectify in
appropriate manner. For example – On monthly basis TPG can appoint internal auditor to cross
verify their books (Bernon, Cullen and Gorst, 2016) .
Management Accounting System
Cost Accounting System – It is a accounting system that can that determine that a
company is doing and helps manager make decisions based on the costs of doing business. Cost
accounting system mainly used by manufactures to record production activities after applying
perceptual inventory system. The particular system coordinate with other department because
they are providing all appropriate information to evaluate cost. On the basis of these information
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set cost of different products and maintain purchase system and storage system. Through the
system recognise management problems and try to sort out it. For example – TPG Processing
follow the system to know flexibility and simplicity in products as well as cooperation with
several departments to gather all appropriate information.
Inventory Management System – It is considering as type of management accounting
system to manage inventory at each level of manufacturing process. There are supervising of
management of stock and non capitalized asset of business. It is depending on the company that
which method apply by company to manage their inventories, thee methods are LIFO (Last in
first out) , FIFO (First in first out) and AVOC. The TPG processing has been applied FIFO
method to manufacture products in order to use in sufficient manner. There are focusing on every
aspects like production to retail, warehousing to shipping and movements of the stock. For
example TPG company apply first in first out inventory system in order to manage stocks in
storage. The requirement of this system treat inventory as money, aware for regular stock to
understand how much inventory utilise for production process.
Job Costing System – In this system tracking record of manufacturing process while
prepare report of job costing. With the help of this system monitor of each activity and included
direct material, direct labour and overhead. In TPG has been applied particular system to identify
problem regarding to manufacturing process. They can take all detailed information to manage
all thing and produce products to know management things. For example – Through this report
TPG can determine cost of different aspects (Agrawal, 2018) . The requirement of this system
that It is categorised into different cost like direct material, direct labour and overhead expenses.
There are fixed cost and variable cost are identified and use to calculate of cost.
Price Optimisation System – The system has been used to control price of different
products and develop a effective structure which can set prices of their products. With the help of
this system analysis of market trends and know perception of people regarding to their products.
The manufacturing company TPG has been produced different types of products ans there is
need to set prices of their products. So company set price structure and analysis demand of their
product after that decide price of various products. For example – TPG has been produce
different types of products and for this need to set price structure so this system has been applied.
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P2 Types Of Reports
 Budget Reports – Budget managerial accounting reports plays significant role to
measure performance of the company. It is prepare by every organisation such as small
business, department wise and large organization. It is prepared by TPG processing to
predict their future income and expenses and analysis business activities of each
departments. TPG can try to achieve their goals and objectives. It can help to manager to
guide regarding to prepare plans and manage incomes and expenses to achieve goals and
objectives.
 Account Receivable Agin Report – It is a critical report which can use to manage cash
flow in order to extend credit of customers for their business. There are most of the report
keep separate column for invoice and its presented as 30 days, 60 days and 90 days. With
the help of particular report identify problems regarding to collection process. In the
context to TPG processing identify those people who can not pay on time so for collect
payment on time prepare effective strategy (Commerford and et.al, 2016).
 Cost Material Accounting Report – With the help of particular report compute the cost
of articles which is manufacturing. There are including raw material, labour and
overhead. These amounts has been categorised in produced products to realise cost of
various items versus their selling prices. In order to TPG identify cost of their material
after that analyse of market trends to its products and services.
 Performance Report – The particular report has been developed to get review regarding
to individual employee and organizational performance in reference to specific
accounting period. These types of report mainly develop by large organization because
there is need to know about their employees skills. To evaluate the performance of
employees applied various indicator in order to provide rewards to their employees.
 Job costing Report - In this report present expenses for specific project which has been
finance by companies. With the help of this report predict about revenues then match
with actual revenues after then analysis to know differences. The job costing report can
help to recognise higher earning process and focus on additional efforts rather than
wasting time and money. The particular report used by TPG to know correct areas an
track to progress of report.
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 Project Report – In the report defined all appropriate information regarding to project
which can handle by company. In the report record all detailed information regarding to
project. It will help to understand requirement and according to that prepare strategies.
 Competitors Analysis Report – In competitive market need to analysis their competitors
so there is need to prepare report regarding to their strategies. When company want to get
competitive advantage that time track all information to their rivals and record in report.
It can help to prepare strategy in effective manner (van Helden, 2016).
 Inventory & manufacturing Management report – In the report mentioned
information regarding to direct material, direct labour and variable overhead. These are
used in manufacturing to product as well as provide information of inventories. The
report defined that in the stage of manufacturing process how much material has been
used for product. In TPG track all record and provide to management to evaluate actual
cost and budgeted cost.
D1 Critical evaluation of how management accounting is integrated within the organization
Management accounting important part of every organisation and it can adopted by TPG
to manage business operations in effective manner. Management accounting systems and reports
are play significant role in organisational process due to smoothly running business activities.
These are related to various departments and show business activities to manage all result to
control process system. These reports present all required information which is related to internal
system of TPG and system manage issues which is origin in business during to manufacturing
process (Yang and Liu, 2017) .
M1 Benefits of the system and their application
The management accounting system has been applied by different organization in
appropriate manner and it can provide befits to TPG processing these are -
Cost Accounting System – The particular system has been applied by TPG processing in
order to know effectiveness of processes then use for appropriate modification. In the company
of TPG use cost accounting system to set and deduct the prices. The system can help to gather all
required information of different system and set purchase system, order system.
Inventory Management System – Through the system track all records of invention at
the time of manufacturing process. The company TPG processing apply particular system
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because in manufacturing process need to different types material at different stage. So for this
need to evaluate detailed information regarding to inventory.
Job Costing System – It is beneficial for company to predict cost of various types
products which is manufactured by company. TPG Processing has been adopted job costing
system to know about processing system and cost of assorted products. After then evaluate the
quality of products (Qian, Hörisch and Schaltegger, 2018) .
Price Optimisation System – The particular system can help to set price structure of their
products which is manufactured by company. TPG manufacturing several types products and
price of these products set on the basis of market analysis and help to generate much more profit.
CONCLUSION
Management accounting is important part of any organisation which can mange all
aspects in effective manner. Through management accounting prepare reports and books to
present financial information of company in front of top management and it can help to take
decision regarding to business. Management accounting consist of different types of system
which can maintain business activities and identify all appropriate information. The reports has
been provide all sufficient information then it will compare with actual information to know
actually differences.
PART B
INTRODUCTION
Management Accounting is the presentation of accounting information in order to
formulate the policies to followed by the management and assist its day to day activities. It will
provide help to management to conduct functions such as planning, organising, staffing,
directing and controlling (Dauth, Pronobis and Schmid, 2017). Through management accounting
analysis of internal business activities then presented information in front of top management
which can help in decision making process. To understand the concept of the report selected
company TPG Processing which is related to manufacturing sector. In the report consist of
different types of planning tools of budgetary control and its advantage and disadvantage. In
addition recognise financial problem through comparison with other company then sort out with
management accounting system and approach.
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P3 Calculate cost using appropriate techniques of cost analysis
Marginal costing method (Year 1)
Item
Number of
units £ P.U. Amount (£) Amount (£)
Sales 37000 70 2590000
Marginal Cost of sales
Opening Stock
Add – Variable production Cost
Direct Material 40100 12 481200
Direct Labour 40100 16 641600
Variable expenses 40100 20 802000
Total Variable Cost A 1924800
Less – Closing stock – end of year 1
B [opening stock units + Units
produced – units sold] 3100 48 148800
Marginal cost of sales (A-B) 1776000
Fixed indirect production cost 64000
Gross profit: (Sales – MCOS –
Fixed production cost ) 750000
Selling and distribution overheads 10000
Admin Overheads 15000 25000
Profit before interest & tax (PBIT) 725000
Interest expenses 1000
Profit before tax [PBIT – Interest] 724000
Tax @ 19% 137560
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Net profit: Profit before tax – tax 586440
Marginal Costing method (Year 2)
Marginal Costing method (Year 3)
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Absorption Costing method (Year 1)
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Absorption Costing Method (Year 2)
Item
Number of
units £ P.U. Amount (£) Amount (£)
Sales 41000 70 2870000
Absorption Cost of sales
Opening Stock 3100 48 148800
Add – Absorption production
Cost
Direct Material 48100 12 577200
Direct Labour 48100 16 769600
Variable expenses 48100 20 962000
Fixed indirect production cost 64000
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