Capital Joinery Ltd - Management Accounting Report and Analysis

This report provides a comprehensive overview of management accounting principles, focusing on their practical application within Capital Joinery Ltd. It begins by defining management accounting and exploring various systems, including job costing, inventory management, cost accounting, and price optimization. The report then delves into the methods used for management accounting reports, such as account receivable reports, budget reports, performance reports, and cost managerial accounting reports. It examines the benefits of these systems. The core of the report analyzes costing techniques, including marginal costing, absorption costing, and standard costing, with detailed calculations and reconciliations. Furthermore, it investigates the benefits and drawbacks of planning tools used for budgetary control. Finally, the report discusses the use of management accounting tools in resolving financial problems and leading organizational success. The document provides practical examples and calculations to illustrate each concept, offering valuable insights into the application of management accounting within a real-world business context.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Brief description regarding various types of systems of management accounting................3
P2 Methods used for management accounting reports...............................................................4
M1 Benefits of management accounting system........................................................................5
TASK 2............................................................................................................................................7
P3 Calculation of cost by using management accounting techniques.........................................7
M2 Uses of management accounting techniques for formulate reports....................................11
TASK 3..........................................................................................................................................11
P4 Brief description regarding benefits & drawbacks of planning tools used for budgetary
control.......................................................................................................................................11
M3 Uses of planning tools for forecasting budgets..................................................................13
TASK 4..........................................................................................................................................13
P5 Brief explanation of use of management accounting tools for resolve financial problem. .13
M4 Use of management accounting tools for lead organization success by solving issue
related with financial problem..................................................................................................15
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is essential branch of accounting which apply by manager for
decision making purpose. In order to understand this concept Capital Joinery Ltd has been
taken. This organization is situated in UK, it is medium size business entity which provides best
quality of furniture, doors, window facilitates to their customers. This report includes the
relevance of different types of managerial accounting system as well as use of various
management accounting report for formulation of budget. This report also define how cost
calculate by using different technique and benefits of various planning tools. It is also showcase
use of benchmarking, and other technique of management accounting to solve monetary issue.
TASK 1
P1 Brief description regarding various types of systems of management accounting.
Management accounting: This term is combination of 2 essential word of running
business. One is management and other is accounting. Management is define as art of getting
things done by others. Accounting is procedure in which business transaction are collect,
analysis, record and present in effective manner. Management accounting is part of management
procedure which help in recording transaction in such a way which useful for managers in
decision making procedure (Anand, Balakrishnan and Labro, 2019).
There will be many types of system which used by manager in order to re4cord their
transaction following are define below Job costing system-based: This system is implemented by business entities in order to
calculate or measure cost required for fulfill demand of each business customers. Their
will be different types of cost assign by organizations in order to complete their particular
or specific job. Capital Joinery Ltd used job costing system in order to assign or
calculate job. Inventory management system: Stock is consider as most essential element of
organization. Success of business entity depend on how effective organization manage
their inventory. There various kinds of tools which help in manage, control and evaluate
maximum, minimum number of order required to fulfil demand of customers. Capital
Joinery Ltd use ABC, JIT,EOQ, LIFO and FIFO technique through which they can able

to understand requirement of stock at the time of supplying finished goods for selling
purpose. Cost accounting system: This system is implemented by manager in order to calculated
final cost required for run or operate business cycle. There will be many technique or
tools which useful to determine cost and profit generate by selling business units. Cost
accounting system is implemented by Capital Joinery Ltd in order to systematically
recognize total cost organization bear to make products as well as run their day to day
business activities. They generally use marginal, absorption, standard costing tools
which useful in accurately determine cost of business activities (Anderson, 2017, Baard
and Dumay, 2020).
 Price optimization system:This system is implemented by managers in order to
determine rate of price. As it is consider as factor which useful to generate profit. Thus
manager needs to choose their price rate which help in generate profit by satisfying
demand o0f customers. There will be many methods which manager of Capital Joinery
Ltd use to determine their price rate which includes, price penetration, price skimming,
price premium and discounting price method. Manager on the basis of stage of running
business cycle need to select and choose price method which useful in attain business
profits.
P2 Methods used for management accounting reports
Management Accounting Report
Management Accounting Report determine the financial status of a company. These
reports includes financial information right from records of accounting, transaction details,
profitability of a product, operating cost and regional sales over a period of time. With the help
of of these reports an organisation can plan, take decisions, regulate operations and also measure
the performance.
Types of Management Accounting Reports:
 Account Receivable Report: It is a crucial element for any organisation that provide
credits to its customers. Managers can easily find out the defaulters by knowing there
remaining balance and they can change there credit policies accordingly. Separate
categories are formed for product and services whose payment are 30, 60, and 90 days
delayed. As in UK people are comfortable to purchase on credit basis, due to this Capital

Joinery providing there articles on credit. It keeps a record on balancing figure and deal
with customers accordingly. Capital Joinery changes its credit policy according to the
credit worth of the customers
 Budget Report: Theses reports helps to analyse the performance of company by
comparing them with past records. Prior years income and expenditures are considered
while estimating the budget for a period. Capital Joinery has budgeted the expenses in
advance regarding exporting of woods, which helps them to cut exporting cost and make
more profit. Good tools are used as compared to last year at low cost as they have find
new suppliers. Performance Report: It is determine the outcome of an activity and work performance
of every employee or of over all company. This reports helps the manager to form
strategic decisions about future aspects. It maintain the accuracy about the performance
of an organisation. Capital Joinery with help of performance report consistently
performing well. By measuring there performance Capital Joinery has now increase its
net worth and has maintain to utilise the full efficiency of its employees. Performance
report provides them structure for future, on the other hand they have maintain the
quantity of woods. They have introduce different technology in there work with keeping
in mind the needs of there customers (Christensen, Skærbæk and Tryggestad, 2019) . Cost Managerial Accounting Report: This report consider all the cost that are incurred
in manufacturing the articles. Profit margins are determine by taking overhead, labour,
raw material cost and other cost that are taken in deliberation. All these totals are divided
by amount of articles produced. Capital Joinery maintained records of cost of wood,
exporting cost, labour cost and other raw materials such as clocks, iron pipes. This cost
keeping helps it to determine there total expenses and what cost they can set for there
windows, casements etc.
M1 Benefits of management accounting system.
Management accounting system Benefits and essential requirement of theses
system
Job costing system-based: Capital Joinery use this system in order to

assign different kinds of jobs according to
work of departments as well as job costing
system is beneficial for calculate cost required
for calculation of cost of each job. Generally
this type of system is used in o5rder to control
cost of determine and assigning within the job.
Inventory management system: This system is required in order to interpret
time required for compete demand and supply
of customers which will useful in recognize
inflow as well as outflow of stock. Capital
Joinery implement inventory management
system in order to control and manage 5their
stock management cost and took decision
regarding those policies which will beneficial
in order to determine cost require to manage
and store stock (da Silva, Llewellyn and
Anderson-Gough, 2017).
Cost accounting system: Cost accounting system is required for
assigning and determine cost required for
completion of each business task. By using
marginal and standard cost accounting
manager of Capital Joinery able to decide the
reason of arise difference between standard and
actual on the basis of that they formulate
business policies which help in control
additional cost charged against running
operating business activities.
Price optimization system: This system is required in order to determine
rate of product which organization sell their
products. By using strategies of pricing

Capital Joinery able to generate profits by
selling their products at high price. They use
price penetration strategy which is beneficial in
attaining their business goals.
TASK 2
P3 Calculation of cost by using management accounting techniques.
Costing techniques: The procedure which help in analysis cost required for running
business activities is known as costing. Business entities have many options in order to recognize
cost of each business transaction (Durocher, Bujaki and Brouard, 2016).
Marginal costing: This technique is useful in calculate cost by determining relation
between profit and variable cost. This technique is also known as variable costing procedure. In
which only variable cost is consider in order to recognize profit and cost required for run
business activities.
marginal costing
Particulars May June
Sales 25000.. 18750..
Less: Variable costs
Sales commission 500.. 375..
Manufacturing cost 2000... 1500..
Direct material 6000.. 4500..
Direct labour 4000.. 3000..
Total cost 12500. 9375..
Contribution 12500. 9375..
Less: Fixed cost
Fixed selling 1000.. 1000..
Fixed production overhead 2000.. 2000..

Fixed administration 3000.. 3000..
Net profit 6500. 3375..
Advantage
 This is consider as simple and easy procedure of determine profit as well as cost as in this
method adjusted of over or under absorption of stock are not consider during the time of
calculation of cost.
 In this method fixed cost are charged over completion of period of project time which
useful in decision making procedure.
Disadvantage
 Segregation between fixed and variable cost in case of long period of time is difficult.
 It is not essential that using marginal costing method help in provides accurate and
reliable business result (Dutta, Lawson and Marcinko, 2016).
Absorption costing: This is also part of costing technique in which cost are calculated on
the basis of ascertain each and every variable of trading statements. In absorption costing method
manager determine cost by recognize cost of raw materiel, labour and overhead. It is procedure
of charging each business cost.
absorption costing
Particulars May June
Sales 25000 18750
Less: Cost of goods sold..
Variable sales commission.. 500.. 275..
Variable manufacturing cost.. 2000.. 1500..
Direct material.. 6000.. 4500..
Direct labour.. 4000.... 3000..
Fixed production expenses.. 2000.. 2000..

Gross profit.. 10500.. 7475..
Less: Selling and distribution costs..
Fixed selling.. 1000.. 1000..
Fixed administration.. 3000.. 3000..
Net profit.. 6500.. 3475..
reconciliation statement
Particulars May June
Profit/ loss under marginal costing.. 6500. 3375..
Less: Profit under absorption costing.. 6500.. 3475..
Add: closing stock.. 8000. 6400..
Over absorpiton.. 8000.. 6300..
material variances..
Particulars.. Amount
Material cost variance..
Standard cost.. 24000.
Actual cost.. 22400...
Result.. 1600.
Material price variance..

Standard price.. 12.
Actual price.. 9.3. .
Actual quantity.. 1000..
Result.. 2700..
Material usage variance..
Standard quantity.. 2000..
Actual quantity.. 2400..
Standard price.. 12..
Result.. -4800
Advantage
 This method is useful in control cost by identifying and adjusting over and under
absorption of stock.
 For small and medium size of organization this method is beneficial for assign job cost
and estimate business profits (Habib and Hasan, 2019).
Disadvantage
 This method is fail to analysis the relation between variable cost and profit as compare
with marginal costing.
 Profit of organization affected by increment and determine of the volume of production.
Standard costing method: This method is useful in formulate business policies. On the
basis of recognize difference between actual and standard cost required for completion of
business activities. For calculate gap arises between cost various variances are calculated which
helpful in decision making procedure ( Harper Dunn, 2018).
Managerial accounting technique of controlling and managing stock are define below
 LIFO: This is part of managing inventory technique in which manager use to select cost
of which product which purchased at very recent time.
 FIFO: In this method manager priorities those products or material which purchase for
very first time.
 Average cost method: Cost are calculated on the basis of averaging rate of each item.

LIFO
Date Receipts Issue Balance
Quantity
Unit
cost Amount Quantity
Unit
cost Amount Quantity Unit cost
Amoun
t
01/06/20 Balance 10.. 35.. 350..
01/06/09 15.. 38.. 570.. 15.. 38... 570..
01/06/15 12... 38.. 456.. 3.. 38.. 114..
10.. 35.. 350..
01/06/20 10... 32.. 320.. 3.. 38.. 114..
10.. 35.. 350..
10.. 32.. 320..
01/06/23 10.. 32.. 320 3.. 38.. 114..
10.. 35.. 350..
01/06/27 3.. 35.. 105... 3.. 38.. 114..
7. 35.. 245..
01/06/30 2.. 35 70... 3.. 38.. 114..
5.. 35.. 175..
Closing balance 27.. 951. 8.. 289..
AVERA
GE
COST
METHO
D

Date Receipts Issue Balance
Quantity
Unit
cost Amount Quantity
Unit
cost
Amoun
t Quantity Unit cost Amount
01/06/20 Balance 10.. 35... 350..
01/06/09 15.. 38.. 570.. 25.. 36.5.. 912.5..
01/06/15 12.. 36.5.. 438.. 13.. 36.5.. 474.5..
01/06/20 10.. 32.. 320.. 23.. 34.25.. 787.75..
01/06/23 10..
34.25
.. 342.5.. 13.. 34.25.. 445.25..
01/06/27 3..
34.25
.. 102.75.. 10.. 34.25.. 342.5..
01/06/30 Closing balance 2..
34.25
.. 68.5.. 8.. 34.25.. 274..
AVERA
GE
COST
METHO
D
Date Receipts Issue Balance
Quantity
Unit
cost Amount Quantity
Unit
cost Amount Quantity Unit cost Amount
01/06/20 Balance 10.. 35.. 350..
01/06/09 15... 38.. 570.. 25.. 36.5.. 912.5..
01/06/15 12.. 36.5.. 438.. 13.. 36.5.. 474.5..
01/06/20 10.. 32.. 320.. 23.. 34.25.. 787.75..

01/06/23 10..
34.25
.. 342.5.. 13.. 34.25.. 445.25..
01/06/27 3..
34.25
.. 102.75.. 10.. 34.25.. 342.5..
01/06/30 Closing balance 2..
34.25
.. 68.5.. 8.. 34.25.. 274..
M2 Uses of management accounting techniques for formulate reports.
Manager of Capital Joinery use absorption costing technique in order to determine their
cost of running business activities as well as find value of profit arise within given time period.
They also use LIFO method for managing and valued their stock.
TASK 3
P4 Brief description regarding benefits & drawbacks of planning tools used for budgetary
control.
Planning tools: Methods and technique which help in formulate future business plan are
known as planning tools. These are essential part of management accounting following are the
tools which Capital Joinery Ltd used:
Budget: It is numerical financial statement which help in determine future profit & loss
as well as cost required for running business entities. There are various way through which
manager can formulate budget these are definer below
Techniques of budgeting
Activity based budgeting: In this method manage able to formulate their budget on the
basis of data collected by allocation of business resource ( Kokina, Mancha and Pachamanova,
2017).
Zero based budget: In this method budget are formulated by collection of data from
initial level. In zero based budgeting manager not use past data.
Rolling budget: In this method budget are formulated for short time period generally less
then of one year. Short budget are prepared when completion of time of previous budget, the
process of formation of budget is continuously run until they attain their final goal.

Benefits
 Formulation of budget by using zero based budgeting method is time consuming an
complex procedure.
 It is not essential that information given under budget is accurate & reliable due to the
complexities dynamic nature of financial as well as business environment.
Drawbacks
 By preparation of budget manage able to determine cost required for each activity. Which
help in formulation of plan regarding controlling of cost.
 Budget useful in take decision regarding expansion of business.
Cash budget: This budget is prepared for the purpose of analysing cash inflow &
outflow of cash activities for specific period of time. It is only concern with cash related
activities.
Benefits
 Cash budget help in determine deficits which will useful in recognized requirement of
cash and meet obligations.
 Cash budget useful in determine rate of risk return by providing base to determine
payback period (Safari Gerayli and Dehghan, 2017).
Drawbacks
 During the time of preparation of cash budget manager does not consider non financial
factor which directly impact on the result of cash budget..
 Cash budget is based on estimation which and these estimation fluctuated with the
changes of time scenario.
Master budget: It is combination of all the budget which individual prepared by
manager for recognize amount and activity of each department. Master budget contains all the
summery which include all the document of financial panning.
Benefits
 Master budget is useful in measure performance of organization for specific time period.
 This budget helpful in determine coordination between various departments of
organization.
Drawbacks

 It is rigid budget,employee needs to work to achieve target of these budget even facing
difficulties.
 It is complex procedure to modify this budget.
Production budget: This statement is prepared in order to determine number of units
produce within specific period of time as well as cost required to completion of each business
activity during the time of completion of budget.
Benefits
 Production budget help in recognize cost which related with sales and product activities.
 It provide base for future production planning.
Drawbacks
Production budget is lengthy and time consuming procedure.
Strategic planning tools: It includes those tools which help in analysis business
environment and on the basis of that manage tool decision. It include tools if internal as well as
external analysis.
Benefits
 SWOT and PESTLE analysis useful in determine and evaluate market condition which
help in take decision regarding business investment policies.
 Strategic planning tool useful for finding out future business threat (Ströbele and
Wentges, 2018).
Drawbacks
Data used for this analysis are not accurate due to happening of unexpected events.
pricing strategies: It is also consider as planning tool. Selection of pricing strategy help
in determine rate of product. There will be many method which useful in calculate price of each
products. Which includes price penetration, price skimming and discounting strategy.
Benefits
 Pricing strategies are useful in determine price rate at which product sell which beneficial
for generate business profits.
Drawbacks
 Value of money is fluctuated thus the rate of price is not contestant for longer period of
time and it require hiring of expertises who have knowledge regarding market.

M3 Uses of planning tools for forecasting budgets.
Manager of Capital Joinery in order to formulate their financial statements, use activity
based budgeting method which will help in allocate cash and other resource in effective manner.
On the basis of data collecting from various budge, and account receivable report manager
pre4pared budget which help in forecasting future profit as well as issue which may arise during
the time of run organization.
TASK 4
P5 Brief explanation of use of management accounting tools for resolve financial problem
Financial problem- This is situation in which business organization face many issue
during the time of running business activities due to lack of financial resources. Capital Joinery
Ltd is currently suffers from financial problem due to lack of mismanagement of their stock as
well as decrement in selling rate. By using tools of management accounting they can able to
overcome this problem. Following are tools of managerial accounting
Key performance indicators:This tool is useful in measure performance of business
entities by setting target for fixed period of time. On the basis of that manager formulate policies
to cont4rl derivation arise between budget and measured target. In this case manager of Capital
Joinery Ltd set target of selling production for their department for specific period of time and on
the basis of that manager set incentive when employee exceed their selling target. This will
directly impact on increase volume of selling which help in overcome cash problem ( Susilowati,
Utomo and Setiawanta, 2017).
Benchmarking: In this method benchmark is set on the basis for prior set target.
Manager also decide their benchmark of their competitors or standard benchmark of companies.
In Capital Joinery Ltd, their manager set benchmark for managing their stock by controlling
cost these benchmark help excess of supply and manage stock which useful in reduction in cost
of capital require for managing inventory.
Financial governance: This tool is useful for work in ethical manner by fulfilling norms
of standard of accounting.
Comparison between organizations
Basis Tesco Sainsbury

Financial problem This organization suffers from
financial problem due to
reduction in selling sales units.
Sainsbury face financial issue
due to no availability of
collection of funds from
debtors.
Use of Management
accounting system
Management department of
Tesco need to use effective
pricing strategy method which
help in setting correct rate of
selling products.
In order to collect cash from
debtors they need to use stage-
management system for
controlling cost of collection
of funds from default debtors.
Application of the system Manager use key performance
indicator, this will help in
setting target for selling units.
On the basis of that Tesco
sales department able to
achieve their target in order to
earn incentive which will
beneficial for increase rate of
selling units and increase cash
inflow activities.
Sainsbury by using
benchmarking able to find out
number of debtors which will
be get default and by
providing them attractive offer
they collect debt amount from
debtors by setting target
benchmark of number of
debtors for collecting funds.
M4 Use of management accounting tools for lead organization success by solving issue related
with financial problem.
Manager of Capital Joinery use activity based budget and formulate cash budget in order
to determine target. They analysis market condition by using strategic tool of management and
on the basis of that they set pricing strategy by using price penetration method. Which will help
in motivate debtor toward cash purchase and useful in attract them for purchase more products
from Capital Joinery. Which help in overcome issue related with financial problem.
CONCLUSION
From the above analysis it has been concluded that managers in order to run their
organization in effective manner need to use tools of management accounting. Various system of

managerial accounting help in recording collecting and analysing business information. Account
receivable, inventory management reports useful in price for formulate budget which useful in
future planning. Various strategic tools and cost accounting technique useful in determine cost.
Manager use benchmark, financial governance and key performance indicator in order to
overcome their financial problem.

REFERENCES
Books and journals
Anand, V. V., Balakrishnan, R. and Labro, E., 2019. A framework for conducting numerical
experiments on cost system design. Journal of Management Accounting Research. 31(1).
pp.41-61.
Anderson, M., 2017. Accounting history publications 2016. Accounting History Review. 27(3).
pp.279-286.
Baard, V. C. and Dumay, J., 2020. Interventionist research in accounting: reflections on the
good, the bad and the ugly. Accounting & Finance. 60(3). pp.1979-2006.
Christensen, M., Skærbæk, P. and Tryggestad, K., 2019. Contested organizational change and
accounting in trials of incompatibility. Management Accounting Research. 45. p.100641.
da Silva, J. B., Llewellyn, N. and Anderson-Gough, F., 2017. Oral-aural accounting and the
management of the Jesuit corpus. Accounting, Organizations and Society. 59. pp.44-57.
Durocher, S., Bujaki, M. and Brouard, F., 2016. Attracting millennials: Legitimacy management
and bottom-up socialization processes within accounting firms. Critical Perspectives on
Accounting. 39. pp.1-24.
Dutta, S. K., Lawson, R. A. and Marcinko, D. J., 2016. A management control system to support
corporate sustainability strategies. Advances in accounting. 32. pp.10-17.
Habib, A. and Hasan, M. M., 2019. Corporate life cycle research in accounting, finance and
corporate governance: A survey, and directions for future research. International Review
of Financial Analysis. 61. pp.188-201.
Harper, C. and Dunn, C., 2018. Building better accounting curricula. Strategic Finance. 100(2).
pp.46-54
Kokina, J., Mancha, R. and Pachamanova, D., 2017. Blockchain: Emergent industry adoption
and implications for accounting. Journal of Emerging Technologies in Accounting. 14(2).
pp.91-100.
Safari Gerayli, M. and Dehghan, F., 2017. Audit quality and Market value of corporate cash
holdings. Management Accounting. 10(32). pp.59-70.
Ströbele, A. and Wentges, P., 2018. The role of organizational social capital in the design of
management control systems. Journal of Management Accounting Research. 30(2).
pp.187-205.
Susilowati, E., Utomo, S. D. and Setiawanta, Y., 2017. Blue Ocean Strategy: An Investigation of
the Effect of Business Strategy, Information Accounting Management System, Mental
Model Implementation on Managerial Performance. Advanced Science Letters. 23(8).
pp.7239-7242.