Unit 5: Management Accounting Report: Connect Catering Services

This report delves into the application of management accounting principles within the context of Connect Catering Services, a UK-based catering business planning to expand by selling homemade pizzas to superstores. The report examines the necessary requirements of various management accounting systems, including cost accounting, price optimization, job costing, and inventory management. It evaluates the benefits of these systems and their application in the business. The report also explores management accounting reporting methods, such as inventory management reports, performance reports, and budget reports, and their role in providing financial insights. Furthermore, it covers cost calculation techniques, including marginal costing and absorption costing, and their use in preparing financial reporting documents. The report analyzes various planning tools for budgetary control, including their advantages and disadvantages, and evaluates their application in preparing and forecasting budgets. Finally, it compares two organizations, analyzes how management accounting systems contribute to an organization's sustainable success in addressing financial problems, and evaluates the effectiveness of planning tools in solving financial challenges. The report concludes with a comprehensive overview of the findings.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Necessary requirements of various types of management accounting systems ...................1
M1. Evaluation of benefits related to management accounting systems with their application in
context to organisation.................................................................................................................2
D1. Critical evaluation regarding how management accounting systems along with
management accounting reporting are incorporated in process of company..............................3
TASK 2...........................................................................................................................................4
P2. Management accounting reporting methods..........................................................................4
TASK 3............................................................................................................................................5
P3. Calculation of costs................................................................................................................5
..........................................................................................................................................................8
..........................................................................................................................................................8
..........................................................................................................................................................9
M2. Implementation of various types of techniques of management accounting accurately and
producing correct financial reporting documents......................................................................10
D2. Interpretation data for a range of business activities and application of accurate financial
reports........................................................................................................................................11
P4. Explanation of advantages and disadvantages for various types of tools of planning that
are utilised for budgetary control...............................................................................................11
M3. Examine the utilisation of various planning tools and their application in preparing and
forecasting of budgets:...............................................................................................................12
TASK 4..........................................................................................................................................13
P5. Comparison of two organisation .........................................................................................13
M4 Analysing how management accounting systems leads to sustainable success of an
organization in response to financial problems:........................................................................14
D3. Evaluating the response of planning tools in solving financial problems for sustainable
success of an organization:........................................................................................................15
CONCLUSION..............................................................................................................................15

REFERENCES..............................................................................................................................16
APPENDICES...............................................................................................................................17

INTRODUCTION
Management accounting are techniques that assist businesses to control, plan, evaluate
and improve their performances (Dalla Via, Perego and Van Rinsum, 2019). It deliver different
paths to managers so that they can manage finances within their entity to achieve their goals and
work on their fouls. Internal controllers form these practices and implement them to enhance the
working of company. For this report we have consider Connect Catering Services which is a
growing company of UK. They run family owed business and run catering service. Now they are
planning to expand their business by selling home made pizzas to superstores for this they should
consider different management accounting systems.
This report emphasis on all necessary requirement of various types of system of
management accounting, methods that are require for reporting of management accounting,
merits and demerits of various plaining tools. Moreover, it also includes cost calculation by the
use of proper techniques of cost analysis for the preparation of income statement with marginal
and absorption cost. Controlling tools of budgeting, their advantages and disadvantages are also
mention in this report.
TASK 1
P1. Necessary requirements of various types of management accounting systems
The concept of management accounting is said to be determine financial information of
the firms and help them to take decisions according to situations. In an organisation, it is a
procedure to identify the certain aspects like measuring, interpreting, implementing, analysing
and communicate with managers within the organization. It is all about making of internal
decision that are used for internal function.
System of Management Accounting
Cost Accounting Systems: This system is said to be that a entity calculate the costs of
their products for profitability analysis and cost activity (Bar-Yosef, D’Augusta and Prencipe,
2019). It aims to getting a entity's total cost of production to measure the variable costs as well as
fixed costs. There are two types of cost accounting such as job order costing and process costing.
In connect catering services, it helps to make a decision making and modify the cost efficiency.
Calculation of cost is very essential for organization because it gives the accurate cost of entity
while determine profits.
1

Price Optimising System: The concept of this system is to understand the firms
strategies like how much company acquire their profitability levels when they change their prices
for existing customers (Cai, Li and Tang, 2020). It can decide the prices of many other products
at a particular time, price optimisation is very essential requirement for entity because it
determine overall price at different levels which is decisive to profitability. With context of
Connect Catering Services, before deciding the products of firm it consider several factors such
as product life cycle, rivals strategies and goals of the entity. It will determining initial pricing in
this firms work but for stable base of products, promotional pricing means when new product are
launched in the market their promotions is there, many competitors set their prices at a low cost.
Job Costing System: This system is used to ascertain the special cost to a specific job
and that costs are performed by the customers evaluation (Dewua and Barghatht, 2019). With
relevance of job costing, basically, they assign their cost to each and every individual so that they
find out the profit and loss of a entity on each and every job. According to the Connect Catering
Services, it is helpful to check the firm's quality in which should be capable to allow sensible
profit. They compare actual costs with the help of handle and controlling costs. To helps in
identifying the unsuccessful jobs and various essential involvement in context of connect
catering services are wind-up of job, production process is listed, whether order is received or
not etc.
Inventory Management System: The concept of this system is a tool that determine the
tracking of goods from one place to another place (Hýblová ,2019).. It is a collection of software
to maintain product and procedures of firm whether it is a raw materials, finished goods, assets
of the company are willing to send their seller and consumers. With context of Connect Catering
Services, this type of system is very efficient and effectively to be achieved within the structure.
Most of the entities are to decrease their product and overstocking of inventories. It helps the
firm in early management and cost command of the entity. Managing of inventory consists of
various benefits which includes reduction of cost, suitable stock is achieved in this.
M1. Evaluation of benefits related to management accounting systems with their application in
context to organisation
Application and benefits of certain systems of management accounting inside Connect
Catering Services are as underneath:
System Benefits and application
2

Cost-accounting  This system will benefits Connect Catering
Services to see show cost they have generated from
pizza making operations and how much will it take
them to transport them to superstores.
 Application of cost accounting system in Connect
Catering Services will help to know how much
expenses they should do in relation to earn profit
and if they are increased how they should control
them.
Job-costing  In Connect Catering Services, job costing system
will provide then knowledge about cost of each job
and path about what should be done.
 Within the enterprise, application of job costing
system will help them to cut their extra expenses.
Inventory management  Connect Catering Services experiences benefits
with inventory system as they can save time and
they can also check their stock level.
 Application of inventory management system help
to keep an eye on inventory to fit customers
demand.
Price-optimising system  Price optimising system benefits Connect Catering
Services to determine market trends and customers
taste.
 Application of this system in business venture will
provide information about customers willingness
and their reaction to different cost.
3

D1. Critical evaluation regarding how management accounting systems along with management
accounting reporting are incorporated in process of company
It can be said that all management accounting systems are incorporated to different
accounting reporting to ensure proper functioning and management of activities. In reference to
Connect Catering Services, inventory management system are incorporated to find out how
much material is required for their pizza making process and it save time. Accounting systems
such as price optimising system, cost accounting, job costing and management of stock helps
businesses concerns in attaining their goals. Apart from these reporting methods, like,
performance, budget and inventory are also integrated with other system in order to manage
staff and make strategy to survive in market competitions.
TASK 2
P2. Management accounting reporting methods
Management accounting reporting displays financial conditions of entities for current and
upcoming years. Accounting records information like profit margin, transactions, sales and cost
of operating are displayed in these reports. In relation to Connect Catering Services, these
reports will provide them idea of how much profit they are generating and their expenditures in
making home made pizzas. They can witness how much profitable this expansion is for them and
how they can attract customers. For this they should prepare following reports to get full
information about their financial position
Reports of inventory management- These reports provide information regarding stock
level of companies (Nishimura, 2019 . These reports contain data's relating to stock such as, its
performance, quantity and its position. Due to advancement in technology, computerised data
provide correct movement of inventory and accurate accounts of stock which helps in decision
making. In context to Connect Catering Services, these reports will act as a measuring tool of
their stock. With these reports they can actual analyse weather they have sufficient stock to meet
their pizzas demand. Use of software's will provide them full information materials that are
require for pizzas and they can modify there changing requirements. Company can also get an
idea about its warehouse area and its location. Warehouse location can save their cost of
transportation and time while importing or exporting their inventory.
4

Reports about performance- Performance reports provide information relating to
individual working or practices (Rachmawati, 2019). They are tools of measurement through
which entities can measure actual results with set standards. Any variation in this comparison
will generate scope of improvement in their activities. Connect Catering Services with these
reports can analyse if their practices are going in right direction. They can see how much
workforce they require, current employees working skills and weather they maintain enough
supply to customers demand. These reports will help them to motivate and beat their
competitors. With these reports company can detect how much time they require to make their
pizzas and complete their manufacturing process on time.
Budget reports- Budget reports always discuss about the comparison of existent
performance with pre budgeted ones (Cai, Li and Tang, 2020). These reports provide road map
to enterprises so that they can find out areas in which they are lacking. After analysing these
areas they can strategies how they will deal with difficult situations and work without affecting
there pre set desire goals. Connect Catering Services can discover factors in which they are
inadequate and work accordingly. Planning in advance will provide them full route about how
they will capture market, customers demand and strategy to beat competition. Company with this
report can rely on actual calculations and actual results. Reports of budgets provide information
about what techniques they should introduce to meet customers taste and preferences.
TASK 3
P3. Calculation of costs
The concept of cost is a money that firm used to spend in order to make something. Also
that quantity of money required for the business to a specific job.
Marginal Costing: According to this technique, it determine the consequence on profits
to the changes in the output and distinguish between fixed costs and changeable costs
(Schmidthuber, Hilgers and Hofmann, 2020). With Context of Connect Catering Services,
marginal cost is helpful to decision making of the firm. It helps the management to fixed prices,
methods of production and choose a wide range products.
Absorption Costing: The concept of absorption costing determines the activity of billing
all costs, it involve both fixed costs and variable transaction (Nishimura, 2019). In case of
5

Connect Catering Services, it is used to ascertain the marketing price of product as well as cost
involved in the industry. It is also used for stock appraisal procedures.
6

7

8

9

M2. Implementation of various types of techniques of management accounting accurately and
producing correct financial reporting documents
In relation to Connect Catering Services, financial analysts have consider cost analysis
such as marginal costing and absorption costing for the purpose of estimating profit level in the
month of April and May. With the use these techniques, managers of finance department can
study, record and control various costs included in different activities of making various variants
of Pizza (Wnuk-Pel, 2018). Addition to this, bank reconciliation statement is prepared by the
enterprise and it have been analysed that the business has gone through a loss of 11000 £ in
April and loss of 13000 £ in May. Further, break even point is calculated to analyse that level in
which Connect Catering Services will able to get in situation of no profit and no loss from its
operating activities.
10

D2. Interpretation data for a range of business activities and application of accurate financial
reports
From the financial reports of Connect Catering Services we can see what are the
outcomes of their financial activities and if they are at profitability stage or not. Company
income statement states the entity has suffered from loss of 8000 £ in April as well as loss of
loss of 11000 £ in May.
P4. Explanation of advantages and disadvantages for various types of tools of planning that are
utilised for budgetary control
Budgets refers to estimation of earnings and expenses over a specific period of time
which helps individuals or entities in achieving their objectives (Schmidthuber, Hilgers and
Hofmann, 2020). It deliver a tack to managers about how they should take decisions, make plans
and guide their employees to compete in different market situations and how they should deal
with changing trends in customers requirements. Budgetary control provides road map to
managers about how they are going to control their expenses and increase their incomes for
future betterment. In context to Connect Catering services budgets will cater information about
what they should do to increase sale of their pizzas and how should they do cost cutting in
pizzas preparation, while maintaining their quality and considering customers taste. Certain tools
of planning that are part of Connect Catering Services budgetary control process are mention
below:
Cash budget: Cash budgets are the methods which helps in estimating the flow of cash
(income and expenses) of an entity over a period of time (TIttner and Oyon, 2020) (Kunz, C.,
2019). Connect Catering Services with cash budgets calculate their actual position of cash to run
its operations.
Advantages: Connect Catering Services managers with these budgets can find how much
cash they have and how much is require to meet their expenses. This procedure will help them to
stop their over spendings and this will also develop financial awareness in then .
Disadvantages: In Connect Catering Services case these budgets will limit there
flexibility as it only records transactions that are cash related, company cannot maintain records
of credit transactions in them.
Operating budget: Operating budgets displays all those activities (sale, production and
finished goods) that generate revenue for entities (TIttner and Oyon, 2020). These budgets
11

includes all income and expenses that are originated from day today activities of organisations.
Connect Catering services by making these budgets in advance can accomplish its future goals of
business. It contains variable, fixed cost, non operating and non cash expenses. In relation to
company these expenses and cost estimate percentage of profit and income of the company.
Advantages: With operating budgets Connect Catering services can plan for their costs
and control their expenditures in order to reach company long term business responsibilities.
This budget will help them to take investment decisions wisely.
Disadvantages: If company will not change its figures according to time it will lead to
inaccuracy and they will not able to perform their financial responsibilities.
Capital budget: Capital budgets are useful for investment that are of long term. This
budget calculate capital funds and expand the worth of companies to investors (Mbelwa,
Adhikari and Shahadat, 2019). In relation to Connect Catering services these budget will
provide them full information about where to invest and in computing outflow and inflow to
ensure desired results to reach set standards.
Advantages: This budget provides full right to choose best alternative of investment to
get expected results. Connect Catering services can increase its wealth by knowing in which
machinery to invest and how they should invest.
Disadvantages: This budget do not consider non business aspects in organisations while
evaluating investment strategy. Connect Catering services will not be able to get long term
forecast which will be a disadvantage for them.
M3. Examine the utilisation of various planning tools and their application in preparing and
forecasting of budgets:
Budgeting refers to process of calculating expenses and revenue of business through
which they are able to compare actual performance with budgeted ones. This comparison help in
generating information about entities performance and if any variation occur that can pre derive
solution for that(Situngkir and Napitupulu, 2019). There are various types of budget, such as,
cash budget, capital budget and performance budget. It provides direction for future operations
of an entity. Implementation of technique of budgetary control act as supporting tool for the
management team of an organization in order to manage their activities, staff, customers, market
conditions. They can also find a way through which they can beat competition and survive in any
market condition and situation.
12

TASK 4
P5. Comparison of two organisation
Financial problems are the issues which arises in business that lead to problem in paying
debts, errors in financial payments and not able to meet requirement in the organisation. This
create problem in business operations to run and cannot create profit and income in the company.
Lack of cash inflow: Unavailable cash in business lead to financial problem which
create major issues when money is not flowing in the business. Problems in cash shortage is
when customers is not paying their payments on time and overspending which cause low profits
and high overhead expenses in the business. Connect Catering services is facing such financial
problem that reduced the business activities.
Insufficient of capital: In business, when there is no capital available then it impacts the
long term growth of company. Problems in lack of capital lead to attract the buyers, managing
routine activities and expanding business which decreases the business operations in the
company. In context to Connect Catering Services can face financial problems which impacts the
growth of company.
Tools that uses to identify the financial problems
KPI: Key performance indicators determines how company achieve its business goals
(Simunic and Biddle, 2019 ). KPI is used to estimate the targets to reach its objectives. It focus
on indicating company income and revenue in the business. Connect Catering Services can use
this performance indicator to assess their performance and identify the problem of inadequate of
capital.
Benchmarking: It is the process to measure their performance with other company to
achieve competitive edge. It helps in improving their process and system in the business which
allow company to plan to improve their performance as compared to their competitors. Connect
Catering Services can compare their business strategy and performance with their rival company
that can help them to compete easily.
Financial Governance: It gives the information about the transactions, financial policies,
compliances which are followed in the company to develop plans, documents and maintaining
budget in the business.
13

Comparison between organisation
Basis Morrisons Sainsbury's
Financial Problems Morrison is retail supermarket in
United Kingdom. This company
is facing lack of cash inflow in
the business because company is
spending excessive money in
launching new products and
services which impact the
financial growth of the company.
Launch of new products will
increase its uniqueness but create
a burden on company.
Sainsbury's is large organisation
which provides goods and
services to customers.
Sainsbury's is facing lack of
capital in launching new
products which reduce the
competition from the other
company. This situation is
harming its image and it is
loosing its customers.
Identification Manager use benchmarking tool
to identify their performance by
comparing with other company
which help Morrison to create
business plan and budget to run
their business.
KPI tool has used by manager
of this company to identify their
performance which allow them
to bring more funds in the
business activities.
Systems to be used for
solving financial problem
Price optimization system is used
by the organisation to set prices
of their product and services that
can help to increase the inflows
by selling products in high range.
Cost accounting system is used
to solve this financial problem
as to track the unnecessary cost
which help company to grow
their business process.
M4 Analysing how management accounting systems leads to sustainable success of an
organization in response to financial problems:
Different kind of financial problems are featured by an enterprise such as,
mismanagement of resources, inefficient stock level and improper management of cash (Singh
and Kumar, 2019). For solving such financial issues Connect Catering Services might use
14

various techniques of management accounting like cash flow system, inventory management
system, job costing system etc. and apart from these monitoring tools, such as, key performance
indicator and benchmarking, helps in intensify dominant activities for financial management.
D3. Evaluating the response of planning tools in solving financial problems for sustainable
success of an organization:
Planning tools or techniques refers to those element which enables in formulation of
effective strategies for improvising productivity or efficiency of business (Zhang, 2019). It assist
in solving financial difficulty of an organization by computing activities that are to be incurred in
an enterprise. For instance, managers of Connect Catering Services have adopted planning tools
that are capital budget, cash budget and production budget in order to react towards financial
problems. When indecent cash management difficulty is faced by the entity, then managers uses
cash budget and inventory management system which results in collecting information about
inflows and outflows of cash proceedings and in solving issues that leads to sustainable success
in effective manner.
CONCLUSION
From the above information mention in this report it can be concluded that management
accounting helps managers of to take effective decision and work accordingly to achieve
companies goals. There are various type of cost that are use to estimate accurate price of
product. Businesses with help of various type of management accounting reports can judge their
financial conditions easily. Further it can be said that different tools of budgetary control helps in
estimating current performance by comparing actual with budgeted ones. More over it is derived
that financial problems comes as major hazards in companies failure. Besides this with the
arrival of financial problems in the organisations leaves a negative impact on operations of
entities.
15

REFERENCES
Books and Journals
Bar-Yosef, S., D’Augusta, C. and Prencipe, A., 2019. Accounting research on private firms:
State of the art and future directions. The International Journal of Accounting. 54(02).
p.1950007.
Cai, G., Li, W. and Tang, Z., 2020. Religion and the method of earnings management: Evidence
from China. Journal of Business Ethics. 161(1). pp.71-90.
Dalla Via, N., Perego, P. and Van Rinsum, M., 2019. How accountability type influences
information search processes and decision quality. Accounting, Organizations and
Society, 75, pp.79-91.
Dewua, K. and Barghathť, Y., 2019. The accounting curriculum and the emergence of Big
Data. Accounting and Management Information Systems. 18(3). pp.417-442.
Hemmer, T. and Labro, E., 2019. Management by the numbers: A formal approach to deriving
informational and distributional properties of “unmanaged” earnings. Journal of
Accounting Research. 57(1). pp.5-51.
Hýblová, E., 2019. The current problems of harmonization of accounting for small and medium-
sized enterprises. Economic research-Ekonomska istraživanja. 32(1). pp.604-621.
Ittner, C. D. and Oyon, D. F., 2020. Risk Ownership, ERM Practices, and the Role of the
Finance Function. Journal of Management Accounting Research. 32(2). pp.159-182.
Kunz, C., 2019. Erfassung des Wertschöpfungshandelns im Management Accounting mit Hilfe
der qualitativen empirischen Forschung. In Wertschöpfung in der
Betriebswirtschaftslehre (pp. 487-506). Springer Gabler, Wiesbaden.
Mbelwa, L. H., Adhikari, P. and Shahadat, K., 2019. Investigation of the institutional and
decision-usefulness factors in the implementation of accrual accounting reforms in the
public sector of Tanzania. Journal of Accounting in Emerging Economies.
Nishimura, A., 2019. Synthesis of Environment, Risk, Function, and Cost in Profit Design.
In Management, Uncertainty, and Accounting (pp. 243-253). Palgrave Macmillan,
Singapore.
Rachmawati, R., 2019. Relationship between accounting information systems implementation
and corporate governance of rural banks in Indonesia. Diponegoro International Journal
of Business. 2(1). pp.10-17.
Schmidthuber, L., Hilgers, D. and Hofmann, S., 2020. International Public Sector Accounting
Standards (IPSASs): A systematic literature review and future research agenda. Financial
Accountability & Management.
Simunic, D. A. and Biddle, G. C., 2019. The big four: The curious past and perilous future of the
global accounting monopoly.
Singh, J. and Kumar, A., 2019. A study of Accounting Technologies. Journal of the Gujarat
Research Society. 21(1). pp.425-428.
Zhang, X., 2019, May. Construction of Financial Accounting Transformation Strategy in the Era
of Big Data. In 1st International Conference on Business, Economics, Management
Science (BEMS 2019) (pp. 257-260). Atlantis Press.
16

APPENDICES
17

18

19