Management Accounting Activities Report - HND Business (2020/2021)

This report delves into various aspects of management accounting, beginning with an introduction to the field and its significance in organizational decision-making. It explores different management accounting systems, including cost management, price optimization, inventory management, and job order costing. The report then examines management accounting reporting techniques, such as management reports, budget reports, and performance reports. It proceeds to demonstrate the preparation of income statements using marginal and absorption costing methods, as well as a cash flow statement. Furthermore, the report analyzes the advantages and limitations of various planning tools under budgetary control, including the balanced scorecard, variance analysis, responsibility accounting, and zero-base budgeting. Finally, it discusses how organizations utilize management accounting systems to address financial issues, such as benchmarking. The report aims to provide a comprehensive overview of management accounting principles and their practical applications within a business context.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management accounting and essential requirement of various kinds of MA systems..........3
P2 Different techniques used in regard to management accounting reporting...........................4
TASK 2............................................................................................................................................4
P3 Preparation of income statements under cost analysis...........................................................4
TASK 3............................................................................................................................................6
P4 Advantages and limitations of various planning tools under budgetary control...................6
P5 Usage of management accounting systems by various organisations as well as their way of
responding to financial issues.....................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Management accounting is said to be determination, analysis, evaluation of various
management data which actually helps managerial personnel to produce sound financial
decisions for ultimate organisational success. It is considerably significant branch of accounting
which provides assistance in decision-making in regard to an organisation. In this respective
study, various essential management accounting techniques will be discussed in detailed manner.
Significance of different financial reporting techniques will be considered in ultimate
organisational success. As well as correlation between management accounting and its respective
systems has also been analysed in order to identify organisational efficiency in operations. Also
with the use of different cost analysis techniques, income statements will be formulated for
identification of prevailing profits in an organisation.
TASK 1
P1 Management accounting and essential requirement of various kinds of MA systems
Management accounting is a vital technique which make use of scattered data into
systematic manner so that ultimate decisions can be provided. It includes both financial as well
as non financial data in form of quantitative and qualitative in order to help businesses to reach
their respective short term as well as long term goals. This form of accounting takes place by
management team to facilitate managers for better utilization of such data in reference to
organisational success (Krishnan, 2020).
Management accounting being a significant activity, includes various elements and
techniques which ultimately helpful for generation of efficient statements which will assist in
judgement for operations being going on for ultimate profitability. Various management
accounting system relevant features can be discussed as following:
Cost management accounting: In this system different costs occurring in operations of
an organisation are being managed in an appropriate manner so that maximum profits can be
generated through such practices. It also helps in data formulation by management specialist in
order to form adequate strategies which will provide basis of growth, market sustainability and
so on (Jiang, 2020). Therefore, cost management accounting is said to be effective for making
cost based decision through managers of an organisation. In this system maximum emphasis is
given to cost effectiveness which will help an organisation to generate maximum profits through
increased productivity and efficiency in operations of an organisation.
Price-optimization: In this approach various techniques such as market survey, customer
behaviour analysis, demographic information, operating expenditure, etc. has been evaluated in
order balance respective supply and demand of a product in an market. This procedure is adopted
in order to formulate dynamic pricing policies which will assist in reach practical demand of a
respective goods and services. It is said to be beneficial from company's as well as customer's
point of view as it satisfies both of their respective needs in the marketplace. It is used by various
large and medium sized organisations in order to identify respective position or demand of a
product in order to rectify errors if any for long term profitability.
Inventory management system: This is a procedure which helps in creating
transparency within inventory based activities through effective management of such operations.
Through this process stock of an organisation is managed in more effective manner without any
inherent errors or misconceptions in quality, quantity, etc. It benefits an organisation in a way
which reflects optimum system of inventory starting from initial form till its sale (Anshori,
2020). This system is very beneficial for organisations which has production based operations in

order to maintain effectiveness and efficiency in over all structure. This way more profits and
less wastages can be promoted for longer period.
Job order Costing: In this system, different costs are assembled in a specific batch or
order. This system is used when there are different kinds of goods being produced. Management
is required to keep separate record for each job cost including respective direct and indirect
costing. This is widely used by manufacturing units which are producing various products having
distinctions and similarities. Products having similarities will be kept under one job head so that
it would become easier to assign cost to each unit without any lower profit-margins in the long
term. Job costing is important task to be adopted by organisations in term of profitability and
sustainability by managing their costs in effective manner in the respective industry
(Suranatthakul and et. al., 2020).
P2 Different techniques used in regard to management accounting reporting
Management report: These reports are mainly used to make appropriate decisions,
identify progress as well as adhering to respective business goals in effective manner. The
adequate manner of management report preparation starts from setting particular goal or target
and also develop understanding of relevant results which are desirable. After target is being set,
it is required to identify key performance indicators which are perfect suitable for analysing
organisational performance in the long term. Also make valid comparisons of past and present
data for analysing relevant progress in company's overall performance. Through the use of charts
and graphs such data is being visualized to assist managers for appropriate decision-making.
Budget report: It is said to be respective cost and revenue of an organisation for a
relevant period. A budget report measures organisational objectives and also baseline for
measuring actual results from projected data. It also helps an organisation to keep up with the
changing circumstances in order to keep any sort of contingencies at future date (Tatake, 2020).
This technique is very beneficial for organisational growth by increasing productivity and profit-
margins over the period. It is presentation of expected expenditure in order to eliminate any kind
of unnecessary expenses from company's hand to increase overall profitability of an
organisation.
Performance report: This approach is used to identify actual performance of an
organisation with the use of appropriate strategies and policies. It is useful in various aspects like
to increase profit earning capacity of a company, to eliminate extra costing, to increase sales
volume and so on. Therefore, performance is a key factor which is responsible for growth of a
company by increasing performance levels for a long term performing organisations.
Performance is mainly analysed through comparisons of actual data from budgeted report so that
a conclusion can be formed in regard to rectification which are required to be made. Performance
is a basic requirement an organisation looks up to in order to increase its profit-margins and
sustainability in intense competition.
TASK 2
P3 Preparation of income statements under cost analysis
 Income statement under marginal costing
Particulars Amount(£)
Total sales 2000000

Less: marginal cost of sales
Opening Inventory 270000
Variable cost of production 400000
Other variable cost 45000
Less: closing inventory 125000
Contribution 1160000
Fixed Cost 85000
Fixed overhead 70000
Balance before adjustment of over absorption 1005000
Add: over absorption of fixed overhead 20000
Gross Profit 985000
Less: Non- production expenses
Sales department 65000
Administration department 85000
Net Profit 835000
 Income statement under absorption Costing:
Particulars Amount(£)
Total Sales 2000000
Less: cost of goods sold
Opening inventory 270000
Variable cost of production 400000
Other variable cost 45000
Fixed cost 85000

Fixed overhead 70000
Less: Closing inventory 125000
Balance after cost of production 1005000
Add: under absorption of fixed overhead 20000
Gross Profit 985000
Less: Non production expenditure
Administration department 85000
Sales department 65000
Net profit 835000
 Cash Flow statement:
Cash Flow Statement for Tennis England Ltd.
A. Cash from operating activities
Cash generated from operations 245000
Less: Tax paid -21000
Net cash from operating activities 224000
B. Cash from Investing activities
Purchase of a Property -55000
Cash from investing activities -55000
C. Cash from financing activities
Dividend paid -45000
Decrease in long term borrowings -35000
Cash from financing activities -80000
Net increase in cash and cash equivalents 89000

TASK 3
P4 Advantages and limitations of various planning tools under budgetary control
Balanced Scorecard: It is significant performance measurement technique which helps
in identification, rectification and controlling of a particular business functions in reference to the
resulting outcomes. This system helps in providing information of an organisational objectives
so that proper strategies can be implemented in order to rectify internal structures in order to
conclude optimum outcomes (Abou Taleb and Al Farooque, 2021).
Advantages: This technique of budgeting control provides adequate structure to policies which
needs to be implemented in an organisation as well as it eases to communicate a particular state
of mind with help of visual format. Also various departments and divisions of an organisations
works in a systematic manner by providing optimum results.
Disadvantages: It is gets complicated some times to make proper understanding of a data and at
times it goes in wrong direction as no focus has been provided to external forces such as
competitors which affects organisation as a whole.
Variance analysis: It is a method where difference between forecasted budgets and
actual figures is being assessed in order to each any kind of deviation in the performance of a
company. It is quantitative technique which reflect scope where corrective actions are taken in
reference to actual results in order to modify outcomes (Malik and et. al., 2021).
Advantages: It is considered as essential element of budgetary control which helps in
identification of deviations between actual and forecasted statements so that ultimate outcomes
can be achieved by the company.
Disadvantages: Respective disadvantage of such theory is that is requires lots of time to find out
any differences in such statements as it is complex process which needs to be followed in order
to identify such deviations.
Responsibility accounting: It includes preparation of budgets for ultimate responsible
centre. This system also considers preparation of various budgets in this regard. It also considers
relevant cost as well as revenue of an organisation. It maintains monthly, quarterly, weekly or
yearly reports which are used by superiors in order provide adequate report of further decisions.
Advantages: This is approach encourages organisational staff to reflect costs to their specified
responsibility centre so that actual accountable person will be held responsible for such act. Also
it is cost effective technique of an organisation where cost has been given ultimate preference
above other factors (Soriya and Rastogi, 2021).
Disadvantages: This systems requires adhering to the essentials of a successful responsibility
system which makes it difficult to comply with whole system by turning it into inaccurate
outcome.
Zero base Budgeting: It is a system where budget needs to be prepared from scratch in
order to promote more accuracy and reliability in forecasted expenditure. Proper justification
needs to be given for every expenditure being presented in the respective budget on the expenses
of an organisational activities. This method is said to be very important in modern terms. It is
now used by mostly of the companies in order produce more specific and accurate budgets.
Advantages: This system is developed over cost benefit analysis which is estimated through
formulation of accurate formulas. This method mostly prioritize allocation efficiency of certain
resources in order to generate maximum return over investments.

Disadvantages: It is considerably much expensive system with lots of complexities which makes
it less approachable technique by the companies in order to advance their profit-margins in the
long term (Bhaskar and Flower, 2021).
TASK 4
P5 Usage of management accounting systems by various organisations as well as their way of
responding to financial issues
There are situations when organisation face extreme financial issues which needs to be
sorted out through use of effective management accounting techniques. Such methods are helpful
in utilisation of companies resources in much effective manner by reflecting adequate
profitability in the long term. These problem solving techniques can be discussed as follows:
Benchmarking: This is a technique used by organisation in order to use standard to
promote systematic follow of operations in an organisation. Through this approach more
adequate and effective results can be drawn. Tennis England Ltd. Has been using such approach
in order to modify its operations in respect to prevailing competitions in the relevant industry. It
is one of the most effective tool which is less time consuming, more cost effective and promotes
reliability of activities which will ultimately increase organisational productivity (Balios, 2021).
KPIs: Also known as Key performance indicators is a technique used to identify the
performance of an organisation in regard to its operations. This technique is widely used by
companies in order to improvise performance by applying such method in order to determine
organisational growth and efficiency in the long term (Asiri, Khan and Kend, 2020). This
method helps measure an organisational success in respect of its current operations. It is
considered as most reliable approach which shows whether an organisation can achieve ultimate
or forecasted success or need to make more improvisations.
Balanced Scorecard: It is said to be performance measurement tool which is mainly
used by managerial team in order to keep track of its respective operations being executed by
management within their controlling scope as well as monitor various consequences coming up
from such actions. It is widely used by organisation in order to facilitate managers in decision-
making which will help it in future for long term sustainability. This strategy is aimed at
managing operating activities on an organisation which needs to be performed in balanced
manner so that maximum profits can be drawn (Kajüter and Schröder, 2017).
Basis of Comparison Tennis England Ltd. Northern Vision
Financial Problem The company has been lacking
in cash inflows which could be
a problem for such
organisation to survive in the
long term.
Here financial issue is relevant
to mismanagement of cost
which is making difficult for
the company to advance its
profit-margins.
Approach adopted The above company is focused
over benchmarking system in
order to promote maximum
level of stability in its
operations which will be
beneficial in long term aspects.
Northern vision is emphasising
over Key performance
indicators(KPIs) which helps
to increase efficiency of an
organisation which will
ultimately results in
modification in profitability.

Methods that are used in
financial problem
Here, the company is making
efforts in order to advance its
operational efficiency through
adoption of appropriate cost
management accounting so
that more efficient and
effective results can be
produced.
Various financial problems are
being handled in most
effective manner by the
company through adoption of
price-optimization technique
which will help in maintaining
appropriate strategical policies
for the growth of company.
CONCLUSION
Therefore, from the evaluation of above data it has been concluded that management
accounting and its various systems are truly important for success of an organisation in the long
run. They are mostly used for decision-making which is developed by management staff for
guiding respective managers for producing effective decisions. Various cost analysis techniques
such as marginal costing and absorption costing are also used in order to identify financial
position of company as well as their respective ratio of profits in market. There are long lasting
benefits of management systems which helps in moving to right direction as well as facing
challenging situations in an organisation. This is important to develop certain planning and
strategic tools in order to manage operations of an organisation in a systematic manner. Tennis
England Ltd has evaluated its performance with the use of various management accounting
techniques such as income statements under marginal and absorption costing and cash flow
statements in order to determine any errors or deviations from forecasted statements in order to
rectify them for company's future prospects.

REFERENCES
Books and journals
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and Sociology-Based Research in Management Accounting. Journal of Management
Accounting Research.
Jiang, Y., 2020. The Application of Blockchain Technology in Management
Accounting. International Journal of Social Science and Education Research, 3(8),
pp.311-318.
Anshori, M., 2020. The Effect of Top Management Commitment and Environmental Strategy on
Environmental Management Accounting Health Institutions in Indonesia. Indian
Journal of Public Health Research & Development, 11(4).
Suranatthakul, K. and et. al., 2020. Modern Management Accounting Practices for Large
Manufacturing Enterprise in Lower Northern Provinces Group I Thailand. Journal of
Accounting, Business and Finance Research, 8(3), pp.120-124.
Tatake, V.V., 2020. Natural Resource Accounting: The Way Ahead. The Management
Accountant Journal, 55(7), pp.89-92.
Abou Taleb, M. and Al Farooque, O., 2021. Towards a circular economy for sustainable
development: an application of full cost accounting to municipal waste
recyclables. Journal of Cleaner Production, 280, p.124047.
Soriya, S. and Rastogi, P., 2021. A systematic literature review on integrated reporting from
2011 to 2020. Journal of Financial Reporting and Accounting.
Bhaskar, K. and Flower, J., 2021. Disruption in Financial Reporting: A Post-pandemic View of
the Future of Corporate Reporting (Vol. 3). Routledge.
Balios, D., 2021. The impact of Big Data on accounting and auditing. International Journal of
Corporate Finance and Accounting (IJCFA), 8(1), pp.1-14.
Malik, A. and et. al., 2021. Managing sustainability using financial accounting data: the value of
input-output analysis. Journal of Cleaner Production, p.126128.
Kajüter, P. and Schröder, M., 2017. Cross-national differences in cost accounting of MNEs:
empirical evidence from anglophone subsidiaries in Germany. Journal of International
Accounting Research, 16(2), pp.71-100.
Asiri, N., Khan, T. and Kend, M., 2020. Environmental management accounting in the middle
east and North Africa region: Significance of resource slack and coercive
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