Unit 5 Management Accounting Report: Capital Joinery Ltd Analysis

This report provides a comprehensive analysis of management accounting principles and practices, focusing on their application within the context of Capital Joinery Ltd. It begins with an introduction to management accounting, differentiating it from financial accounting, and explores various management accounting systems such as cost accounting, job costing, and inventory management. The report then delves into methods used for management accounting, including inventory reports, accounts receivable aging reports, cost accounting reports, and performance reports. Furthermore, it evaluates the merits of different management accounting systems and their application in organizations. The report also examines planning tools used for budgetary control, including cost analysis techniques like absorption costing and marginal costing, along with their advantages and disadvantages. Through comparative analysis, the report describes how companies adapt management accounting systems to address financial problems and analyzes how these adaptations can lead to sustainable success. The report includes marginal and absorption costing calculations, material variance analysis, and a reconciliation statement. The report provides a clear understanding of the management accounting concepts and their practical implications in a business setting.

Management
Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................4
TASK1.............................................................................................................................................4
P.1. Give explanation of management accounting & give the essential requirement of
different management accounting system types.........................................................................4
P.2. Provide explanation of methods that were used for management accounting purpose? ....7
M.1.Merits of management accounting system and their application in context of organisation
are evaluate?................................................................................................................................7
TASK 2............................................................................................................................................8
P.3. Explain different type of planning tools and their advantage and disadvantage used for
budgetory control?......................................................................................................................8
M.2. Use of suitable technique to produce financial reporting document ?.............................11
TASK 3..........................................................................................................................................11
P.4 Explain advantage and disadvantage of different types of planning tools used for
budgetary control? ....................................................................................................................11
M.3. Use of different planning tools and their applications for preparing & forecasting
budgets are analyse?..................................................................................................................13
TASK 4..........................................................................................................................................13
P.5 By making comparision describe how company adapt management accounting system to
respond financial problems?.....................................................................................................13
M.4. Analyse how responding to management accounting, financial problems, can lead
organisation to sustainable success.?........................................................................................14
CONCLUSION..............................................................................................................................14
........................................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is the type of process where reports, projects and assignments
are prepare for operations of business. It supports management team at the time of taking short as
well as long term decisions. Management accounting helps the business to pursue its goals
through measuring, identifying, interpreting and by communicating important informations to
smart managers. The organisation that was choosen in this project are Capital Joinery Ltd. It
deals in windows, doors, stairs in West central and South London. It provides huge variety and
designs in the respective industry. It is the small sized organisation that is established in United
Kingdom. In the report various topics are discuss as these are explanation of management
accounting and their essential needs of various management accounting system. Explanation of
different methods for the purpose of reporting of management accounting. Calculation of cost is
to be perform by using cost analysis techniques to prepare an income statement with marginal &
absorption costing in the report. To budgetary control various advantage & advantage of
various types of planning tool are explain in the assignment. By making comparison it is to be
describe that how the organisation are adapting management accounting system to respond to
financial issues (Ajili, 2018)
TASK1
P.1. Give explanation of management accounting & give the essential requirement of different
management accounting system types.
Management Accounting is the branch of accounting that make attention on many terms
related to identification, measurement , analysis etc. and it also interpret important information
related to accounting as the above mentioned activities help the management team to take
decision for the company so that business operation can be control in efficient & effective
manner.
Management accounting system covers an internal system that the organisation use to do
measurement and evaluation of process for purpose of management of company. Various
important information related to finance are given to outside people like agents, creditors,
investors, debenture holder, guarantor, shareholders, merchant bankers, etc. by internal
management of organisation. It can also be define as internal confidential reports which supports
managers at decision making time (Jeong, 2018)

Difference between finance and management accounting.
In financial accounting various standards must confirm in organisation for example
Generally accepted accounting principles.
Certain standards must confirm in financial accounting like Generally Accepted
Accounting Principles ( GAAP ). In public companies financial statements are prepare on the
basis of GAAP.
On the other hand Managerial accounting is not to use for externals persons like merchant
banker, shareholders, guarantor. According to internal users requirement the changes can be
made in respective accounting at regular interval of time. As manager of Capital Joinery Ltd.
Evaluate and analyse all the relevant financial information and HR department manager observe
the salaries graph over a period of time.
Examples of various types of management accounting system are describe in the below
mentioned paragraphs as these are mentioned as follows.
Cost accounting system: In this information related to costing is used at the time of
production. It is generally adopted by industry who manufactures the product. For every business
it is necessary to estimate cost especially when profit ascertainment is perform in the
organisation. It is beneficial at the time when we estimate value of raw material, Work in
progress, value of semi finished product and to calculate finished value as these information help
in financial statement preparation of the company (Kaufinger, 2020)
Benefits:
 Efficiency can easily be measure and improved:
 Provide information for proper planning:
 helps to take decisions regarding labour and machines:
 Help to detect reasons for looses:
Job costing system: It is differ for every items as it is the method of costing used to
determine particular costing of the job as these specific work is done by workers as per
requirement and specification given by customers. In this costing based information is collected.
It is necessarily be require to give detailed information of cost to customers where the
reimbursement of costing is done (Kimmel, 2018)
Benefits:
 Profit earned for every job is separately known in this method of costing.

 Comparison can easily done between previous job and present job.
 With the help of this overhead recovery rate can easily be predetermined.
Inventory management system: To track and analyse the records of inventory this
system is used which is totally based on computer. It is beneficial when work order,bills of
material and document related to production is to be prepare. With the help of this system the
problems of under stocking and overstocking is easily eliminate by the organisation.
Benefits:
 Reducing inaccuracies
 Cost saving
 Enhanced productivity in operations
Price optimisation system: To determine price this system is used by company for the
purpose of evaluation as it will meet their aim of earning maximum operating profit.
Benefits:
 Immediate financial benefits
 Easy to take quick & better decisions
Various different management accounting is to be perform at the time of working in
organisation as these principles are describe in below mentioned bullet points:
Designing as well as compiling: company compile all documents, reports, statements,
records and all informational data of accounting thus the important information are available at
the same place. To satisfy the need of the firm compiling is necessarily be done as capital joinery
Ltd with the help of this analyse the financial performance and can easily understand as well as
solve the issue that are related to corporate (Kimmel, 2018)
Integration: As all the important information is integrate so that maximum information
can be easily collected at the same time. With the help of this capital joinery Ltd can provide the
accounting related services at minimum cost.
Utilization of return on investment:Return on capital employed is their another name.
Through rate of return efficiency and profitability is to be analyse. To determine real value of
money capital employed can be calculate in Capital joinery Ltd.
Utilization of resources: The resources are the precious element for any business so in
proper manner these are use in the organisation because many resources are limited and not
available easily and some resources are large in number, therefore it can available easily. Thus

by using appropriate management accounting system the company Capital Joinery Ltd operate
their business successfully because the resources are utilise in effectively and efficiently. As
business success if totally make dependence on resources availability (Myers, 2019)
P.2. Provide explanation of methods that were used for management accounting purpose?
Management accounting reporting methods are as follows:
1. Inventory report: In this assignment different inventory details are describe. The
information of ordering cost, economic order quantity, and carrying cost are mentioned in
details in this report. By using different methods like ( HIFO, LIFO, Weighted average,
FIFO) the stock can given to audience. The record of stock can easily maintained by
Capital Joinery Ltd with the help of inventory report. The report covers the details of
sales, quantity, value, purchase etc that provide support to managers to make control over
the inventory so that the business can run effectively.
 Accounts receivable aging report: If the company mostly deals in credit than it is
necessary to maintain reports for debtors and average collection period is also calculated
in this report For example if so many defaulters are present in Capital Joinery Ltd than
tight credit policies must be created by the company. Cash sales and credit sales can
easily be analyse in the organisation with the help of reports of debtors.
 cost accounting report: Manufacturing cost can compute easily with the help of
management accounting. For this cost of raw material, overheads cost and labour cost are
consider. All the details of product costing are included in this report . This report support
managers to realise cost price. Profit margin estimation can easily be done with the help
of this report. Through considering and preparing these reports, profit margin can easily
be estimate and capital joinery Ltd can clearly view the picture of applicable cost that
was incur when windows and doors are to be manufacture.
 Performance report: Capital Joinery Ltd with the help of this report can easily analyse
employees performance and if any difference is present than reason for such variation is
notice and how to solve the issue are also done with this (Ruz , 2020)
M.1.Merits of management accounting system and their application in context of organisation
are evaluate?

Types of Management accounting system Their benefits
Job costing system It is beneficial to make recording of the cost in
acceptable manner.
Cost accounting system Deep or thorough information regarding cost is
to be find out with the help of this.
Price optimisation By using this system audience behaviour can
easily be recognise at different levels.
TASK 2
P.3. Explain different type of planning tools and their advantage and disadvantage used for
budgetory control?
Cost: It is the amount that was invest to produce and sale various products & services to
the end customers. Analysing total cost supports the Capital Joinery Ltd management in fixing
up the prices for the product they offer in the market to their customers after adding profit
margin on the cost.
Absorption costing: In is another method to calculate cost in this both variable and fixed
cost is consider due this actual amount of profitability can be reflected under financial statement.
It is beneficial for such companies who try to retain their shareholders by showing them the
current financial position in the market (Van Rinsum, 2019)
Marginal costing: It is also known as effective method to calculate cost. It is also known
as variable costing method because it includes only variable cost and avoid fixed cost. It is
beneficial for those companies that find problem in getting attentions from investors. With the
help of this higher profit amount can easily be reflected. As this is beneficial for Capital Joinery
Ltd because they are operate their business in medium scale market.
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
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
Overabsorpiton 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
AVERAGE COST METHOD
Date
Receipts Issue Balance
Quantity
Unit
cost Amount Quantity
Unit
cost Amount Quantity
Unit
cost Am
####### Balance 10 35
####### 15 38 570 25 36.5
####### 12 36.5 438 13 36.5
####### 10 32 320 23 34.25 7
####### 10 34.3 342.5 13 34.25 4
####### 3 34.3 102.75 10 34.25
####### Closing balance 2 34.3 68.5 8 34.25

LIFO
Date
Receipts Issue Balance
Quantity
Unit
cost Amount Quantity
Unit
cost Amount Quantity
Unit
cost Amount
####### Balance 10 35 350
####### 15 38 570 15 38 570
####### 12 38 456 3 38 114
10 35 350
####### 10 32 320 3 38 114
10 35 350
10 32 320
####### 10 32 320 3 38 114
10 35 350
####### 3 35 105 3 38 114
7 35 245
####### 2 35 70 3 38 114
5 35 175
Closing balance 27 951 8 289
M.2. Use of suitable technique to produce financial reporting document ?
There are many systems of management accounting force accounting managers to main
financial reports that reflect financial stability of company. Cost accounting system, price
optimisation are some effective accounting system that gives information regarding amount that
are invested in selling and production process. Financial report of capital Joinery Ltd shows
accurate financial position which help shareholder to take decision whether to invest in the
project or company or not (Warren, 2018)
TASK 3
P.4 Explain advantage and disadvantage of different types of planning tools used for budgetary
control?
Budget: In this income and expenses is to be estimate for the specific time period in
future. It is compiled on regular basis also it has to revaluate time to time. Dor individuals,

persons, business and group it is prepare. Different type of budget is prepare to run the business
in effective manner.
Budgetary control: in this process budgets are prepare for future and after that
comparison is done between actual or standard and if there is any variation exist than reason of
such difference are also find and necessary preventive steps is to taken without delaying.
Planning tools is used to control budgetary control with their merits and demerits.
Master budget: It covers various budgets as it is like a summary of all the budgets so it is
also known as combined budget. In the below paragraph all the budgets that are cover in this are
describe:
Sales budget. All the sales related data are recorded in it. Sales budget include all credit
as well as cash sale. After analysing and considering the factors related to market demand,
supply, about industry it is prepare by experts (Weygandt, 2018)
Cash budget: It covers all the cash related information and it also shows the current
position of the cash. It is prepare on the basis of cash flow statement. Receipts & Payment of the
whole year are express in it.
Master Budget advantages Disadvantages
 It give support to achieve the goals of
the company. With the help of this long
term objectives can easily be achieve.
All the resources are control for profit
maximisation purpose.
 As it is complex budget so it is difficult
to update because it covers various
types of budget in it. Therefore is
difficult for Capital Joinery Ltd to make
alteration daily. Because the budget is
interrelated with each other so it take
lot of time to do alteration.
Production budget: It include stock related information. Details of opening and closing
inventory, number of manufacturing units are recorded in this budget. It is divided into three
parts like overhead budget, direct labour budget and direct material budget.
Flexible budget: It is also called variable budget. By making change in the volume this
budget is to be adjusted. Mostly it is used in the form of static budget (Weygandt, 2019)
Advantage Disadvantage

 With the help of this budget Capital
Joinery Ltd easily ascertain the cost ,
sales and profit at different operating
level.
 It is totally depend on production factor
therefore it is very difficult for Capital
Joinery Ltd to handle and control
production and inventory.
M.3. Use of different planning tools and their applications for preparing & forecasting budgets
are analyse?
Budget is prepare in every company so that effectiveness and efficiency of operation of
business is done with improving theme of working. By using different planning tools managers
can make an effective estimation of the performance of organisation. These also provide various
strategies and policies in effective basis (Zhou, 2018).
SWOT Analysis of Capital Joinery Ltd.
Strength Weakness
 Reliable suppliers- The organisation
Capital Joinery Ltd has strong base of
reliable raw material suppliers which
enabling the organisation to overcome
supply chain bottleneck.
 Strong free cashflow- as it make
available resources to the company for
the purpose to expand the business with
introduction of new project.
 In Capital Joinery Ltd Investment in
Research & development is below the
fastest growing players in the industry.
 Need heavy investment to introduce or
adopt new technologies for business
expansion.
Opportunities Threat
 Green drive of Government open an
opportunity to Capital Joinery Ltd for
product procurement.
 New environmental policies gives a
great opportunity to capital joinery Ltd
to drive home its advantage in
innovative technologies and also gain
 Intense competition faced by capital
Joining as it makes negative impact on
Sales as well as on profitability. So
there is always a threat of business
failure by loosing the customers due to
diversify towards rivals products.