Analysis of Management Accounting Systems for Excite Entertainment Ltd

This report analyzes management accounting practices, focusing on Excite Entertainment Ltd., a British media company. It begins by differentiating between management and financial accounting, then details various management accounting systems, including cost accounting, inventory management, and job costing. Section A evaluates the benefits of these systems. Section B describes different types of managerial accounting reports, such as budget, account receivable, cost, and inventory reports, and explains the importance of accurate and reliable information. The report then presents income statements using both absorption and marginal costing systems, followed by a discussion of planning tools and a comparison of management accounting systems for financial problem-solving. The report concludes with an overview of the integration of management accounting systems and reporting aspects.

Management accounting.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
SCENARIO 1...................................................................................................................................3
Section A................................................................................................................................3
A) Difference between management and financial accounting .............................................3
b. Cost accounting system:.....................................................................................................4
c. Inventory management system:..........................................................................................4
d. Job costing system:.............................................................................................................5
E Evaluating the benefits of management accounting systems..............................................5
Section B................................................................................................................................6
B) Describing different types of managerial accounting reports............................................6
b. Explaining why information should be presented in accurate and reliable manner...........7
c. Critically evaluating how management accounting systems are integrated with reporting
aspects.....................................................................................................................................7
SCENARIO 2...................................................................................................................................7
Preparing income statements using absorption and marginal costing system........................7
SCENARIO 3.................................................................................................................................11
Part A) Advantages and disadvantages of three planning tools...........................................11
Part B) Comparing management accounting system with respect to financial problems....13
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management accounting is that branch of accounting which takes into consideration all
financial information gathered through financial accounting in order to take decision for
management of company. For business to be successful it is very necessary for companies to
effectively use the management accounting system in order to manage all operations of business.
Management accounting helps company in analysing all financial information and then after
analysing internal errors and related information assess the financial position of company.
Present study is made on Excite Entertainment Ltd company, which is a British media company
and operates in leisures and entertainment industry in UK. The main objective of report is to
understand system and reports of accounting for management.
Current report will start by outlining the different accounting system of management
accounting along with a discussion over various type of reporting for management accounting
information. In the next part marginal and absorption costing will be illustrated with help of
some calculations. Moreover, further discussion will take place on variety of planning tools used
in budgetary control. In the end comparison of system of management accounting to solve
different kinds of financial problems will be discussed.
SCENARIO 1
Section A
A) Difference between management and financial accounting.
Managerial accounting is a series of steps which needs to be followed in order to analyse
financial information and then critically evaluate it to take some decision for development of
business (Bromwich and Scapens, 2016). In against of this financial accounting is defined as
recording of all transaction which are financial in nature and then are posted in ledger accounts
in order to ascertain financial profit for loss suffered by company. Difference between
management and financial accounting are as follows:
Management accounting Financial accounting
Accounting for management takes into
consideration what are the issues within the
business and analysing the measures for
Monetary or financial accounting report on the
profitability of the business.

overcoming those issues.
This is not covers under the laws and
regulations.
This is governed by standard, laws and
regulations (Difference between financial and
management accounting, 2018).
Major objective of accounting for management
is to help internal management for taking
decisions.
This help creditors and investors take
investment decisions.
Management accounting system:
This system tries to help Excite entertainment in order to properly manage their
production and other decisional areas. The major reason underlying this fact is that management
accounting helps in clearly evaluating all the options available and then selecting the best suited
option.
b. Cost accounting system:
this is a system which enables company in order to estimate the cost of the product which
needs to be charged by consumers after proper analysis of inventory cost, production cost and
other different cost incurred. This turn helps the organization for determine profitability and
revenue of Excite Entertainment company by including such activities like WIP that is work in
progress, and the resulting goods which are to be delivered to ultimate consumer. This system is
mainly use for identify and fix cost for different products and services of production department
(Bui and De Villiers, 2017). This labour cost, different indirect and direct cost expenses of
overhead. This includes two types of costing which explains below: Direct costing: this is the cost which is directly levied on the production og goods and
services. For instance, all the direct material, direct labour, wages, manufacturing
expenses are examples of direct costing
 Standard costing: This is the system which is helpful for manufacturer in order to find
the deviation among actual cost and cost of production.
c. Inventory management system:
inventory management system is a type of system which is used in order to mange the
different types of inventory which is used for production by Excite entertainment. Without

inventory production of goods and services cannot take place and for this on time availability of
inventory is very essential. This is properly managed with help of inventory management system
(Collis and Hussey, 2017). This system uses some methods for managing stocks which are
explains below: FIFO: Stands for first in first out, the cost is associated with the inventory which was
purchased first is cost expensed first. LIFO: stand for last in first out, this assumes that the most recent product added within
the company inventory sold first.
 Weighted averages method: under this method the average of cost of goods sold and the
yield is the outcome that is average of both.
d. Job costing system:
this is another costing method which Excite entertainment uses in order to effectively use
management accounting system. Under this system the cost of producing goods is levied for
every individual job separately with intention of tracking their individual expenses. This system
used to accumulate data relating to different types of production of different goods and services
set. The manufacturing cost under this method is ascertained with help of different cost like
labour, actual values, material, overhead and all other expenses. This method is being used by
Excite Entertainment in order to take decision relating to labour hours, cost equipment, raw
material costing and other cost related with production. The company Excite Ltd uses method to
control the raw material, equipment cost and hours of labour.
E Evaluating the benefits of management accounting systems
Management accounting system is beneficial for company to provide clear accounting
management and costing. There are includes various system of management accounting and that
are beneficial which are explained below:
 Inventory management system is help to eliminate shortage, overstocking etc. this also
helps for provide facility managers find the right balance between carrying too much and
too little inventory. (Granlund and Lukka, 2017).
 Job costing system is allowed to managers to calculate profits earned on individual jobs
which are help to better ascertain whether specific jobs are desirable to pursue in the
future.

 Costing accounting system is helps for disclosure the profitable and unprofitable
activities of business. This guidance to company future production policies and to find
out exact cause of decrease or increase in profit of company.
Section B
B) Describing different types of managerial accounting reports
It is actually assist for effective planning, formulating and take decision for the welfare of
a firm. This help to provide applicable data to manager of organization who enabled to make
better decision related to strategies in order to solve an problem. Hence, some of the
management accounting reports are as mention below:
Budget report:
This is the method that assist to evaluate the performance of an organization. This is used
for show the indirect comparison of actual result of company for preparing budget plan for
identify the differences between them. This compare by using the past performance of company
with current one and implement important path and state for gaining high earnings (Hiebl, 2018).
This involves estimation of cost and revenue of Excite Entertainment Ltd and later work for
gaining higher profits. This developed departmental wise help to management of Excite
Entertainment Ltd. For knowing performance of all the department in separate manner.
Account receivable report:
An account receivable report is record of unpaid invoices balances that are along with
duration of outstanding. This report is vital for the business which used to rely heavily on
extending credits of Excite Entertainment Ltd. This also used to break down the payment of
client into the specific time (Joshi and Li, 2016). This help to manager of Excite Entertainment
Ltd for find out the default and issues which are related to the company collection process. This
identification company used to plan the different activities in organization.
Cost report:
It is that structure which examine cost and assertion of various activities which are
happens within the company. This provides the complete information of cost accounting of
company. This will also provide information about all those transactions which are related to the
cost accounting and expenses or revenue. This identify cost of each component and activity of
system which includes merchandise, work, distribution, industry activity and another factor. This

help to manager of Excite Entertainment Ltd to analyse each and every cost of a firm (Latan and
et.al., 2018).
This is very important and effective to have accurate and reliability of information
because of taking best decision for completing work process of company. Real time information
is allowed Excite Entertainment to quickly respond to events. The accurate data is connected and
generated with effective presentation of business and performance. On the other side, integration
of management system is contributed to constant betterment within the administration by
developing and implementing the entire management system With the help of this companies
measures the reimbursement signal and cut down those and also add some values within the
business.
Inventory report:
This report is used by the managers for making manufacturing process more efficient. As,
stock report clearly exhibits wastage, hourly labour and per unit overhead cost etc. Thus, using
stock report manager of Excite Entertainment can do comparison of different assembly lines
effectually and thereby would become able to take corrective measure for improvement.
b. Explaining why information should be presented in accurate and reliable manner
In the context of managerial reporting, it should be presented timely as well as in accurate
manner. Along with this, information presented in report must be reliable to a great extent.
Moreover, decision making of management is highly based on and influenced from managerial
reporting. Management team of an organization develops strategic and policy framework by
taking into account managerial reports.
c. Critically evaluating how management accounting systems are integrated with reporting
aspects
From evaluation, it has assessed that both management accounting system and reporting
highly integrated with each other. Moreover, by applying systems pertaining to cost accounting,
job costing, inventory management etc concerned or suitable reports are prepared for the purpose
of effective decision making. In this way, it can be said that management accounting systems
furnish optimal information for reporting as well as decision making aspects.

SCENARIO 2
Preparing income statements using absorption and marginal costing system
Marginal costing: This refers the different principle of variable costing which are
directly linked with direct units of cost and fixed cost which are applicable time is been written
off wholly against part for the particular period. The primary idea of marginal costing is
supported on behaviours of cost which is varies with the volume of production (Nuhu, Baird and
Appuhamilage, 2017). This is also famous as the variable costing method that is only variable
cost of included and per units cost is attained based on variable cost.
Advantages:
 Marginal costing is constant in nature because this is stable.
 This is divided into fixed and variable cost. As per that management of the company may
also control the marginal cost in effective manner (Advantages and Disadvantages of
Marginal Costing, 2017). This is helpful for determine what is profitable for company to buy or manufacture
products.
Disadvantage:
 In this very difficult to analysis overheads.
 Not helps to explain complete information and the cause to gain manufacture and sales.
 In this method have less effective cost control.
Absorption costing: This is another method of concluding cost attached with the activity
of manufacture and allotment with individual merchandise. This is the type of costing which is
required by a business standard to make rating of stock list mention into the balance sheet. The
product is absorbed broad range of variables or fixed cost. This is further did not accepted as a
disbursal for a month (Otley, 2016). It remains with the inventory as assets unless such time as
an stock list is been unsold at the point of time when COGS is charged.
Advantage:
 This cost take account into the entire manufacture cost which includes direct and indirect
(Malina, 2018). This provides a more faithful information related to profit as compared to variable
costing, only when the products are not sell in the same period.
Disadvantage:

 This costing is neglect to supply a good investigation of outgo and bulk as variable
costing. As per that, it does not help to improve operational efficiency of company.
 This is not helpful for the examination the possible gainfulness of various merchandise
line.
Absorption Costing
Cost per unit assessment
Particulars Price per unit (in £)
Prime cost 4
Variable cost 2
Fixed production cost 4
Total cost per unit 10
Income Statement for January 2020
Particulars Unit Price Figures (in £)
Sales 8000 15 120000
Less: COGS 85000
Gross / Net profit 35000
Workings of COGS
Particulars Units Price Figures (in £)
Opening inventory 500 10 5000
Add: production 10000 10 100000
Less: Inventory at the
end of period
2000 10 20000
COGS 85000
Marginal Costing

Computation of cost per unit
Particulars Price per unit (in £)
Prime cost 4
Variable cost 2
Total cost per unit 6
Income Statement for January 2020
Particulars Unit Price Figures (in £)
Sales 8000 15 120000
Less: COGS 51000
Contribution 69000
Less: fixed cost 40000
Net profit 29000
Computation of COGS
Particulars Units Price Figures (in £)
Opening stock 500 6 3000
Add: purchases 10000 6 60000
Less: closing stock 2000 6 12000
COGS 51000
Reconciliation statement
Particulars Figures Figures (in £)
Net income as per absorption
costing
35000
Less: fixed manufacturing
overhead in closing
(2000* 4) 8000

inventories
Add: fixed manufacturing
overhead in closing
inventories
(500*4) 2000
Net income as per marginal
costing
29000
Interpretation:
From the above evaluation and calculation it has viewed and analysed that, the profits
with a usage of absorption costing as £35000 and marginal costing as £29000. These display that
the absorption costing is the finer tools and techniques as compared to marginal costing as
providing a true picture of profitability by relating to both changeable and fixed cost in effective
manner. Considering overall assessment Excite Entertainment is advised to employ absorption
costing system over marginal. Moreover, absorption costing method presents optimal view of
both cost as well as profitability by taking into account
SCENARIO 3
Part A) Advantages and disadvantages of three planning tools.
Planning tool are mainly the different type of the budgetary control in the organization.
There are many different type of planning tool which is used by the organization to make
different budget in the organization. Main reason which has been identified behind using of
planning tool in the organization is to take effective decision in the organization to achieve the
organizational goal efficiently in the organization. This help to company for take effective and
better decision-making to achieve goals and objectives in the near future. The proper planning
tool is implemented by planning proper budget (Qian, Hörisch and Schaltegger, 2018). Different
type of budget in the organization are generally prepare to analysyze the position of the business
at different situation in the organization. Also budget help the company in forecasting and
planning future activity in the organization. Some of the planning tool for the organization are as
follows.
Cash flow budget:

The cash flow budget is made in order to evlauate the cash available and the expenses
incurred in order to operate the business (Quattrone, 2016). This budget helps the company in
analysing the outflow and inflow of cash and managing its availability at time of usage of cash.
There are some advantages and disadvantages of cash flow budget are as follows:
Advantages: Cash flow budget help company in having better knowledge about the current position, so
that different decision can be taken in the organization.
 It also help organization in building good resources in the organization, as different
procurement decision in the organization are taken on the basis of the same.
Disadvantage:
 Any leakage of information from this report may attract the eye of stranger toward the
organization. Which eventually increase the chance of theft in the organization.
 In case of budget is not properly maintained, in that case no chances of loss money.
Production budget:
Production budget used to show the amount of the product which need to be produced by the
organization in coming certain period of time. This budget is made in the organization on the
basis of sales budget and forecasting the need of the customer in the market.
Advantages:
 This helps in maintaining an effective level of balance between the sales and inventory
production of company. This is highly contributed for coordinating with policies and
plans which are related to products.
 This provides the proper guidance’s and plan for organize as it gives target of production
which is related to the management of company. By setting target being using the production which gives the proper motivation to the
employees of the company to work harder to achieve goals in time and in effective
manner.
Disadvantage:
 The preparation of production budget of company is helpful because that is one time-
consuming processes as it is requires to be lost of time and efforts of management.
 Every person the company have with different mins sets and also have different thinking
to present and complete task in effective manner. As per that, it is possible that all the