Management Accounting: Principles, Tools, and Financial Analysis

This report provides a comprehensive overview of management accounting principles and techniques, using Connect catering service as a case study. It explores the essential requirements of a management accounting system, including cost accounting, job order costing, price optimization, and inventory management. The report details various management accounting techniques, such as budget reports, accounts receivable reports, performance management reports, and cost managerial accounting reports. It includes calculations of costs using different techniques to prepare income statements, and the application of accounting techniques to produce financial reporting documents. Furthermore, the report examines the advantages and disadvantages of planning tools used in budgetary control, and evaluates these tools for organizational success. Finally, it compares organizations using management accounting systems to address financial problems and achieve success. The report offers valuable insights into the practical application of management accounting in a real-world business context.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Explanation for management accounting with essential requirement of management
accounting system........................................................................................................................1
P2. Different Methods of Management Accounting Techniques................................................4
M1. Benefits of Management accounting system with their application in organisation............6
D1. Evaluation of management accounting system and management accounting reports..........6
TASK 2............................................................................................................................................6
P3. Calculation of cost using different techniques to prepared income statements ....................6
M2. application of range of different accounting techniques to produce financial reporting
documents....................................................................................................................................8
D2. Preparing financial reports that apply and interpret data to business activity......................9
TASK 3............................................................................................................................................9
P4. Advantage and disadvantage of planning tools used in budgetary control...........................9
M3. analysation of different planning tool and their application in budget forecast ................11
D3. Evaluation of planning tool that helps in solving problem for organisational success.......11
TASK 4..........................................................................................................................................12
P5. Comparison between organisation using management accounting system.........................12
M4. Analysation of financial problem that can lead to organisation success ...........................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting refers to a process which include analysation, interpretation and
communication of accounting information to manger to attain business goals of organisation
(Hiebl and Mayrleitner, 2019). This data provides information to management team about
operation of business, cost of their product and service. Management accounting include
different system which helps management of decision making. All such things allow
management to make strategy to conduct business operation within budget of company.
This project report include study of Connect catering service is is UK based company
focused on fresh food for their customer. The company is one of best catering company in UK
which is funded by John Herring and has get second place in The Sunday Times. Company is
providing fresh food by using fresh ingredients and cook food to according to taste of their
customer in order to satisfying them. The company is also passionate for their employees and
invest foe their benefits. Company provide training to motivate employees and increase their
loyalty level which make them more responsible while serving to customer company.
This project report includes understanding of management accounting system and
different management accounting techniques. It also includes use of different planning tool in
management accounting along with comparison between companies adopting management
accounting system to face financial problems.
TASK 1
P1. Explanation for management accounting with essential requirement of management
accounting system
Management accounting refers to a practice which include identification, analysation and
commination of financial information to managers of organisation for completion of business
goals (Rieckhof, Bergmann and Guenther, 2015). Main goal of management accounting is to
provide information to internal user of company in order to take business decision. There are
various principles of management accounting which are as follows:
Designing and Compiling: Accounting information, reports, deviance and statement of
past, present and future should be designed in order to meet needs of business or particular
problem. So, it should be designed in a way tat it present relevant data which helps in solving
particular problem of business. It is also important to make correction in this as to meet
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requirements. Managers of Connect catering services should design accounting reports in a way
which is understandable by all member of organisation.
Management by Exception: Principle of management by exception should be followed
when information is presented to management which include standard costing technique and
budgetary control system to be followed in management accounting system (Li, 2018). This
helps to compare actual performance with budgeted standards in order to find deviations.
Deviation helps to know about failure in strategy ad area of improvement. This will help
management to understand information in less time to take more action. Manager of Connect
catering service should follow this principle as it helps them in effectively manager performance
of enterprise.
Control at source accounting: Cost of operation in organisation can be controlled at
time when they are bringing on oneself. To control these costs, information should be prepared
in form of performance of workers, material issues, utilisation of service like power, machine,
repair and maintenance. All these things help organisation to ensure control over cost by
controlling employees, tools and materials. Managers of connect catering service should ensure
control over cost at time when cost incurred in company.
Accounting for inflation: Profit of organisation cannot be assessed without getting real
values of capital to be invested in organisation. So it is important for manager to assess actual
value of business capital to get real value of through accounting. To assess these value
organisations, use inflation rate to make judgement on success of organisation. Managers of
connect catering service consider effect of inflation in managing accounts in business.
Appropriate means: Reason behind conducting accounting information is to
accumulating, presenting and recording information of accounting. That means, proper
techniques of accounts should be used in every type of business. In other way, computer is use in
business of small size whereas advance software with latest technology is used in organisation of
large size and in multinational business. Manager of Connect catering service are using common
technique of management accounting which make their financial reports valuable.
There are different types of management accounting system which include cost
accounting system, job order costing system, price optimisation system and inventory
management system (Laguecir, Kern and Kharoubi, 2020). All these systems are used in
business of Connect catering service for different purpose which are as follows:
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Cost accounting system: Cost accounting system refers to a tool which helps an
organisation in estimating cost of their product and service to analyse profit, valuation of
inventory and cost control measure (Kumarasinghe and Haleem, 2020). Estimation of exact cost
for product and service is difficult for managers of Connect Catering Service. It is important for
an enterprise to know production of which product is profitable for them and this task can be
done by estimating accurate cost of goods and service. Product cost system is system used by
managers to estimate close value for inventory of material, work in progress and finished good
for preparation of financial statements. In this system, cost is calculated on basis of two systems
which include traditional costing system or activity-based costing system.
Requirement of Cost Accounting System: Cost accounting system is most practical and
simple system which is capable to fulfil business requirement. It helps managers to estimate cost
for analysation of profit, cost and inventory. It helps managers of Connect Catering Service to
assess whether prospective project is profitable for organisation or not and assess each stage of
raw material production.
Job order costing system: Job order costing refers to a system for identifying cost of
manufacturing a single unit (Patten and Shin, 2019). This system is used by Connect Catering
Service when they need to manufacture different type of units and each of them is incurred
significant cost. As all item has different cost, job order costing system helps to identify cost of
each item produced by organisation. This job cost report considers each item like direct material,
labour which were used in producing product and service.
Requirement of Job order cost system: Job order cost system helps to identify
profitability of each unit produced by organisation. It also helps to assess performance of each
employee which helps to identify which employee productive for company and which are not.
This system is flexible as it easy to make changes in this type of system. Job cost system provide
accuracy in operation of Connect catering service and provide scalable solution to enterprise.
Price optimisation system: Price optimisation system refers to mathematical system
which helps an organisation in calculating demand fluctuation at different price level and
combine whole information of cost and inventory to provide prices that improve profit of
organisation (Nitzl, 2018). This system includes three type of elements including strategy of
price, product value for buyer and seller, strategy to manage different elements which impact
profitability. These three elements help organisation to identify best suitable price for their
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product and service. This system helps manager of Connect catering service to set best price for
their offering which create appropriate level of demand in business.
Requirement of Price Optimisation System: This system helps an organisation to get
immediate financial benefit for their product and service. It allows manager of Connect catering
service to set initial price which helps them to cover market share for their product and also to
face competition in market. This system also helps an organisation to set promotional price and
markdown price for their product and service.
Inventory management system: Inventory management system refers to a process which
helps an organisation to track goods through complete supply chain (Dobie, 2015). This supply
chain include time from purchasing to final sale of product and service. This system control way
of inventory management of organisation. This system helps an organisation to control inventory
in order to reduce wastage at workplace. Inventory management system is beneficial for
managers of Connect catering service to manage inventory at work place to reduce wastage as by
tracking inventory manager know about which type of inventory should be used first.
Requirement of Inventory Management System: This system helps an organisation to
track inventory of organisation. It helps to control cost by providing reports of stock to analyse
inventory. It helps an organisation to meet customer requirement on time as it allow them to
manage inventory effectively. It allows manager of Connect catering service to plan and forecast
inventory requirement in future which can be done through analysation of trend. It also helps to
reduce time of managing inventory to keep records within organisation.
P2. Different Methods of Management Accounting Techniques
Management accounting reports are those which reflect financial position and status of
organisation. These reports provide financial information from accounting records to manager
which helps them to make decision related management of organisation (Jack, 2015). While
taking decision manager gather information which guide them in formulating strategies for
attainment of nosiness goals. There are various types of management accounting reports which
helps manager of Connect Catering service in managing operation of organisation which are as
follows:
Budget reports: Budget reports are those which helps in measuring performance of
organisation and is generated in all type of business (Tucker and Lawson, 2016). In small
business, managers prepared one report for whole whereas in large organisation it is prepared as
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department wise. It is prepared in organisation to understand strategy and capacity of
organisation. Budget report of Connect catering service is prepared on previous year data that
helps to unforeseen various factors which may affect organisation. Budget of company include
income as well as expenses which helps to attain mission and objectives of business.
Management budget reports helps to guide manager to provide incentive to suitable employees,
reduce cost of operation.
Account Receivable reports: Business which are extending more credit need to prepare
account receivable report which helps to control over account receivable of organisation
(McWatters and Zimmerman, 2015). This report allow manager to breaking amount of customer
and helps to identify defaulters. This reports also allow manager to assess issues in collection
process of business. If there are many defaulters identified by manager, it shows problem in
collection policy of organisation. This allow managers of Connect catering service to make
necessary changes in collection policy of enterprise. It also allows manager to identify bed debts
which need to be written off by managers.
Performance management reports: Performance management reports are those which
helps to monitor and review performance of organisation and its employees (Schaltegger, 2020).
In organisation, performance reports are prepared for different department which is beneficial to
assess performance of each department. These reports are used by managers of Connect catering
service in order to make strategic decision in organisation. It also provides base for organisation
to identify efficient employees as well as those with poor performance. This assessment helps
manager to provide reward to efficient employees and punish those who are not matching
standard of work in organisation. These reports allow managers of company to set specific
standard of their reports.
Cost managerial accounting reports: This accounting reports is used to calculate cost of
items produced by organisation (Rybicka, 2018). This report includes cost of raw material,
labour and overhead which are taking into consideration while calculating total cost of operation
of enterprise. To calculate cost of single unit, it is divided by numbers of unit produced. Cost
reports provide information to managers of Connect catering service about capacity of business
to realise cost against selling price. Managers estimate profitability of business through cost
accounting reports which provide clear detail about cost of company generated from production
process.
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M1. Benefits of Management accounting system with their application in organisation
Management accounting system Benefits to organisation
Cost accounting system Cost accounting system is beneficial for Connect Catering
Services as it helps to estimate cost of business which
helps them to formulate strategy to reduce cost in order to
increase profitability of organisation (Nwogugu, 2015).
Price optimisation system This system of management accounting helps manager to
determine best suitable price for their produce ad service
which create sufficient demand for their product and
service.
Inventory management system This system helps to track inventory at work place of
Connect catering service which helps them to reduce
inventory at work place.
Job order costing system It helps managers of connect catering service to to
estimate cost of every job which helps them to decide
which operation is beneficial for them or which not.
D1. Evaluation of management accounting system and management accounting reports
Management accounting system and management accounting reports is integrated with
organisational process (Alam and Hoque, 2021). It helps managers of Connect catering service in
each process of operation from determining cost of every activity to estimate overall cost of
business. It also helps to formulate strategy for business and helps them to face adverse situation
in business. This system helps in connect catering service in proper planning, organising every
activity. It also helps in every process of organisation like sales, manufacturing, purchase etc. It
starts from purchasing raw material and run till sale of good and service with controlling of
supply chain.
TASK 2
P3. Calculation of cost using different techniques to prepared income statements
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M2. application of range of different accounting techniques to produce financial reporting
documents
Cost accounting techniques are those which helps an organisation to identify cost of
business and its operation. There are two type of techniques including marginal costing and
absorption costing which helps to analyse cost of business. These techniques adopted by connect
catering service are as follows:
Marginal cost techniques: Marginal costing refers to a technique which include variable
and fixed cost to cost of a unit (Le and Dang, 2020). Variable cost is those which varies with
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