Comprehensive Management Accounting Report: Systems and Analysis

This report provides a comprehensive overview of management accounting, focusing on its functions, systems, and practical applications within an organization, using Katie Walker Furniture as a case study. It defines management accounting, highlighting its role in decision-making, planning, and performance management, and contrasts it with financial accounting. The report details various management accounting tools, including margin analysis, inventory valuation, and cost accounting systems, and discusses the importance of accurate data for effective decision-making. It further explores different budgeting systems, measuring tools, and the characteristics of a management accountant. The report also examines the integration of management accounting systems and reports, along with an analysis of absorption and marginal costing, offering insights into their impact on profitability. Finally, it concludes with a discussion on how organizations can adopt and integrate these systems to improve performance.

MANAGEMENT
ACCOUNTING
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TABLE OF CONTENTS
INTRODUCTION...............................................................................................................3
Different function of management accounting...............................................................3
Difference between Financial and management Accounting........................................4
Requirement of Management Accounting.....................................................................5
Importance of having reliable and accurate data in organization..................................6
Way through which MA system and reports can be integrate in the organization........9
Different type of Budgeting system and its pros and cons of using the same in the
organization………………………………………………………………………………….10
Different type of measuring tool...................................................................................12
Different characteristic need to show by Management accountant............................ 13
Way different organization adopt different MA system in organization.......................13
CONCLUSION.................................................................................................................14
REFERENCES................................................................................................................15
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INTRODUCTION
Management accounting is the process in the organization which looks at improving
the performance of the business in by making different management decision with the
help of different information. Katie walker furniture is retail furniture selling company.
This report highlights the definition of management accounting and requirement of
same. After that the report highlights the different type of management accounting tool
in the organization and looks at different type of the report which is used by the
organization to collect information. After that report highlight budgetary report in the
organization and different type of measuring tool used by the organization. In the end
the report highlights how different organization uses the accounting system in the
organization.
As per Institute of Management accounting (IMA): Management accounting is
defining as a profession which used to partner the manager in the organization to take
different management decision in the organization (Malina ed., 2018). This decision is
generally regarding planning, performance management and providing expertise in
financial reporting.
As per ICAI, management accounting is defining as Management accounting relates to
the provision of appropriate information for decision-making, planning, cost control
and performance evaluation (Maskell and et.al., 2016). In simple terms, it refers to
gathering relevant information according to which decisions are made which will be
used in planning and controlling process for implementing business strategies.
Different function of management accounting
Margin Analysis: Management accounting used to perform the activity of margin
analysis in an organization. As Management accounting helps organization in
ascertaining cash flow from a specific product and region.
Inventory Valuation: Management accounting used to perform activity of Inventory
valuation in an organization as it helps the organization in forecasting future and
amount of inventory require in the organization.
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Planning: Management accounting performs a supportive function in the
planning activity of the organization. As it used to provide good information about the
different strategy and policy of the business.
Supervising: Management accounting also perform the function of supervising
in the organization, as with the help of management accounting manager in the
organization used to control many different activities (Messner, 2016). As it helps
manager in finding out the variance in the organization.
Organizing: Management accounting also perform the function of organizing in
the organization. As with the help of the management accounting manager used to
coordinate and regulate different activity in an organization.
Price setting: Management accounting also help the organization in setting
different prices in the organization. As management accounting help the organization in
forecasting the future and ascertaining different cost that may be there in the future.
Difference between Financial and management Accounting
Basis Management Accounting Financial Accounting
Accumulation Management Accounting in
general used to have a in
depth impact as they look at
to enhancing different
performance i.e. profit,
product line, customer and
geographic region.
Financial Accounting at the same
time looks at the end goal of
enhancing the overall business
performance.
Compliance Management accounting is
the internal report, so they
do not have to compile with
any of the standard.
Financial report at the same time
must compile with many different
standards in real before showing
the result.
Time Span Management accounting
used to be prepared in the
organization on short span
Financial accounting at the same
time is generally prepare on annual
basis or twice the year.
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of time or can be said as on
frequent basis (Otley,
2016).
Requirement of Management Accounting
Strategy Development: Management accounting is required in the organization for the
purpose of making and implementing variety of the different strategy in an organization.
As management accounting help the organization in providing the different option which
can be selected by the organization.
Decisions making: Management accounting is also requiring in the organization
to improve the level of the decision making. As management accounting provides a very
good basis for different manager to make different decision.
Future Forecasting: Management accounting also help the organization in
forecasting the different future cash flow of the company beforehand itself. This
eventually help the organization in building good information regarding the different
resources require in the organization (Cooper, Ezzamel and Qu, 2017).
Integration: Management accounting is also requiring in the organization for the
purpose of integrating different activity of an organization. As management accounting
used to consider variety of different information to make decision in the organization.
Different type of Management Accounting system and benefit of MA System
Cost accounting system: It is the management accounting system of the
organization which used to consider variety of the different aspect of different cost of the
company. Generally, this system in adopted in the organization for the purpose of
ascertaining inventory cost, product cost and provide different activity to control the
same. The essential of this system is to manage the cost structure of the business
which will result in greater profits.
Benefit
 This system used to help organization in optimum utilization of different
resources in the organization. As this cost system used determine variety of
different fixed and variable cost of the company.
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 Cost system also help the organization in offering the product at good price to
maximize the profit of the business, as cost accounting system help the
organization in reducing cost of the company by eliminating different
unnecessary item.
Inventory management System: Inventory management in the organization
used to tracking and managing different inventory of an organization. Implementation of
this system is very essential for the organizations for effectively and efficiently managing
the inventory of the product and materials.
Benefit
 This generally help the organization in reducing the amount of wastage of
product in the organization and help organization in satisfying consumer need
more statistically in the nation. As inventory management system help the
organization in ascertaining the future need of the product and help them in
planning the same in the organization.
 Inventory management also help organization in organization warehouse of
organization.
Job costing system: Job costing system is the system in the organization which
looks at ascertaining the different cost which is paid by the organization for the specific
job and product in the organization. It is essential because it provides cost and profit
information of each process under which a product goes through.
Benefit
 This system helps the organization in understanding the different type of the job
which can be performed in the organization in coming future (Maas, Schaltegger
and Crutzen, 2016).
 This is also performed in the organization to identify different pros and cons of
different job in the organization.
Importance of having reliable and accurate data in organization
It is very important for different authority in the Katie walker furniture to provide the
accurate and reliable data to the manager in the organization. Reason behind the same
is identified that with the help of relevant and accurate data manager can make an
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effective decision in the organization. Otherwise it may impact the decision making of
the organization in long run of the business.
Profitability statement as per marginal and absorption costing system is enumerated below:
Absorption costing
Calculation of cost per unit (CPU)
Year Overall cost
Add: indirect production
cost Total cost of production
1 30 25 55
2 30 23 53
3 30 24 54
Income statement
Year
Sales
(1)
COGS
(2)
GP
3 = (1 -2)
S&D
overhead
(4)
Adm.
overhead
(5)
Int.
expenditure
(6)
Total
expenses 7
=(4 + 5
+6)
NP
(3 – 7)
1 252000 152865 99135 5600 10100 1100 16800 82335
2 333000 242650 90350 7400 10100 1350 18850 71500
3 306000 199605 106395 7000 10100 1600 18700 87695
COGS calculation
Year Prod. Closing stock
1 3700 2800 900
2 4000 3700 300
3 3800 3400 400
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Year
Stock
at the
beginni
ng of
period
CP
U
Amou
nt (in
£)
purchas
es
CP
U
Amou
nt (in
£)
Endin
g
stock
CP
U
Amou
nt (in
£)
COGS
(opening
stock +
purchas
es –
closing
stock)
1 0 55 0 3700 55 202000 900 55 49135 152865
2 900 53 47475 4000 53 211000 300 53 15825 242650
3 300 54
16184.
2 3800 54 205000 400 54 21579 199605
Fixed indirect production cost
Year Production Total cost CPU
1 3700 91000 25
2 4000 91000 23
3 3800 91000 24
Marginal costing
Calculation of cost per unit
Particulars Amount (in £)
Direct material 10
Labor 16
Variable production expenses 4
Total CPU 30
Profitability statement
year
Sales
(1)
COGS
(2)
Contribution
3 = (1 – 2)
S&D
overhead
(4)
Adm.
Overhead
(5)
Interest
expenses
(6)
fixed
indirect
prod.
cost
(7)
Total
expenses
8 = (4 + 5
+ 6 +7)
NP
9 = (3
– 8)
1 252000 84000 168000 5600 10100 1100 91000 107800 60200
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2 333000 138000 195000 7400 10100 1350 91000 109850 85150
3 306000 111000 195000 7000 10100 1600 91000 109700 85300
year
Openin
g stock
per
unit
Figure
s (in £)
Add:
purchas
es
per
unit
Figure
s (in £)
Less:
closin
g
stock
per
unit
Figure
s (in £) COGS
1 0 30 0 3700 30
11100
0 900 30 27000 84000
2 900 30 27000 4000 30
12000
0 300 30 9000 138000
3 300 30 9000 3800 30
11400
0 400 30 12000 111000
Interpretation: After going through the different data collected it has been interpreted
that absorption costing sytem is better option for the organization as compare to the
marginal costing system. As absorption costing has given the net profit for three year
are 82335, 71500 and 87695. Wheras profit derived with the help of marginal costing
shows that organization will have a profit of 60200, 85150 and 85300, which is slightly
lesser as compare to absorption costing for an organization.
Different type of inventory report and its benefit
Inventory report: Inventory report is the report in the Katie walker furniture which used
to note down and track all type of the inventory in the organization. Organization
generally used to record the inventory on periodic basic. This helps the organization in
maintaining good amount of the inventory in the organization to carry out different
operation of the business (Hopper and Bui, 2016).
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Account Receivable Aging report: Account Aging report is the report in the
organization which used to highlight the different debtor of the organization with the
amount of the due from them and the date on which organization is liable to ask for the
money. This help the organization in managing the different debt of the company very
efficiently. This eventually help the organization in building good financial position of the
business.
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Budget report: Budget report is the report which used to show the estimated cash flow
and expenditure of the business. This report used to help the organization in estimating
the future condition of the company and on the basis of the same organization used to
plan different activity of the future. Generally, all the organization used to estimate
different expenses and revenue in the organization with regards to set goal and
objective in the organization.
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Cost report: Cost report is the report which used to demonstrate different element of
the cost in the organization. Organization generally used to take different decision in the
organization to element different unexpected cost in the organization. This help the
organization in improving the efficiency of the business in long run of the business (Ax
and Greve, 2017).
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