Management Accounting: Techniques and Analysis for Connect Catering

This report provides a comprehensive overview of management accounting principles and their application within Connect Catering Services, a UK-based family-owned catering firm. It defines management accounting, explores different management accounting systems (price optimization, cost accounting, inventory management, and job costing), and examines various reporting methods such as performance reports, budget reports, cost accounting reports, and account receivable aging reports. The report delves into cost analysis techniques, including marginal and absorption costing, and discusses budgetary control planning tools, their advantages, and disadvantages. Furthermore, it analyzes how organizations adapt management accounting systems to address financial challenges, emphasizing the role of accounting in achieving sustainable success. The report integrates theoretical concepts with practical examples related to Connect Catering Services, providing a detailed analysis of financial management and decision-making processes.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Define management accounting and their essential requirements of different types of
management accounting systems. ...............................................................................................1
P2. Different methods used for management accounting reporting. ..........................................2
M1. Benefits of management accounting systems and their application ....................................4
D1. Critically evaluate how management accounting systems and management accounting
reporting is integrated within organisational processes...............................................................5
TASK 2............................................................................................................................................5
P3. Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs. ..........................................................................5
M2. Accurately apply a range of management accounting techniques and produce appropriate
financial reporting documents. ..................................................................................................10
D2. Produce financial reports that accurately apply and interpret data for a range of business
activities.....................................................................................................................................10
TASK 3..........................................................................................................................................11
P4. Advantages and disadvantages of different types of planning tools used for budgetary
control........................................................................................................................................11
M3. Analyse the use of different planning tools and their application for preparing budgets and
forecasts. ...................................................................................................................................12
TASK 4..........................................................................................................................................12
P5. Compare how organisations are adapting management accounting systems to respond to
financial problems......................................................................................................................12
M4. Analyse how in responding to financial problems, management accounting can lead
organisation to sustainable success............................................................................................14

D3. Evaluate how planning tools for accounting respond appropriately to solving financial
problems to lead organisations to sustainable success...............................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management Accounting guide their managers to provide a financial information and
meets day to day transactions in enterprise(Amiruddin, 2016). With relevance of management
accounting, it is mainly used by internal members of organisation and help managers to take a
business decisions efficiently and effectively. The report is based on Pearl chartered accountant
firm in UK and one of main client is Connect Catering Services is a family owned firm over 30
years and they are looking for grow their business to retail sector and sell a wide range of home
made pizzas. Several topics are covered in this report such as various types of management
accounting systems, methods used in management accounting report and to prepare cost analysis
techniques, calculate income statement using marginal costing and absorption costing, various
planning tools used in budgetary control and their benefits and limitations.
TASK 1
P1. Define management accounting and their essential requirements of different types of
management accounting systems.
Management Accounting: The concept of Management Accounting defines procedures
to identify, examine, interpret and communicating to managers and focus those information
related to products and services generated by company (Askarany, 2016). It help managers to
take short term and long term business decisions and it is mandatory to prepare financial
accounts. Within Connect Catering Services, managers used management accounting because it
aims to provide elaborated information related to goods and services and compare actual results
with standard result.
Management Accounting Systems: According to this systems, it is concerned with
internal systems of enterprise and provide a important information related to management that
evaluate decision making in firm. In case of Connect Catering Services, managers used this
accounting system to help and support by assembling and examine information, control
management to evaluate entity plan of action. It also help to recognize cost that firms measure to
reduce or destroy costs. Key essential requirements of all management accounting systems are
defined in context of Connect Catering Services are as mentioned below:
Price Optimization System: This system is said to be determines various price level at
different prices for its goods and services. With Connect Catering Services set prices according
1

to their targeted customers and see what will respond with change in prices. Each and every firm
wants to increase their profit and minimize costs (Bennett and James, 2017). Essential
requirements of price optimization system help managers see their behavior of customers related
to different prices of commodity and service and determine to meet its objectives for how to
maximize their profit.
Cost Accounting System: According to this system, it determine each and every cost of
firm whether it is variable as well as fixed costs. It is used in internal team management and
compare actual cost with standard cost. In case of Connect Catering Services, must know about
which costs is profitable and which cost is not effectively and efficiently. Essential requirements
of cost accounting system is to help managers to take a business decisions internally and identify
those costs where firm is spending how much money and it leads to control cost internally and
efficiently and focus maximizing profit.
Inventory Management System: It is a procedure that defines how much stock are
available in storage and deliver goods from one place to another place (Bento, Mertins and
White, 2018). Inventory management enables a firm such as Connect Catering Services to
maintain a record of each and every stock in enterprise and to check those products like raw
materials, work in progress, finished products and many more related to vendors are ready to
sent or not. It include transport facility, storage facility and goods can be delivered on time from
manufacturer to vendors. Essential requirements affiliated to inventory management system
allow fulfill customer needs and wants as per customer expectations and control cost of
transaction and determine how to manage stock, if stock are delivered to customer or not and
informed how much stock in hand.
Job Costing System: In this system, it determines proper information related to a
particular cost with specific job and identify those job which are profitable or not. In Connect
Catering Services, each and every cost is assigned individually so that they help to find out
whether firm have profit and loss of each job (Bertheussen, 2017). Essential requirements
related to job costing system in the company is to compare actual cost with standard cost
efficiently and effectively to ascertain firms accuracy system which should be able to permit
healthy profit. It creates products and services because of fulfilling customer need and wants.
2

P2. Different methods used for management accounting reporting.
Management Accounting Report: It is a tool to present financial condition of enterprise
over a particular time period and provide internal information received direct financial
accounting. It include financial transactions, sales, operating cost, measure performance and
decision making procedures (Guinea, 2016). These reports are made for managers so that they
can familiar with business decisions. Within Connect Catering Services, it help to gather
information for managers so they can guide enterprise and meeting towards goals and
objectives. They provide mangers to get precise and realistic information about financial
decisions. With context of Connect Catering Services, Various methods are used in management
accounting report are as under:
Performance Reports: It is a document which formulated for purpose of measuring
performance of employee for each and every department in enterprise. The purpose to this report
is employee gives a true and clear image of management and can comparing the actual
performances with standard performances (Mitter and Hiebl, M 2017). It includes performance
levels of employee and analyse business performance whether firm can meets their customer
expectations or not. In case of Connect Catering Services, managers used these reports because
they check employee performance and to take upcoming decision in enterprise. However, these
report are generally prepared at monthly or yearly basis. If employee performance is good in
enterprise then they can easily identify employee morale and enhance employee profitability and
productivity in an efficient manner.
Budget Report: The concept of these report defines firm's planned expenses and
estimate current performance with previous years. Firms budget report can be shown to mange
its funds and each firm can made overall budget at a given time (Ostaev and Khosiev, 2018).
Many small firms are generated to measure firms performances and it shows only for inflow and
outflow of cash in enterprise. With context of Connect Catering Services, managers used these
report to check firm performance and provide incentives to employee. These reports are prepared
daily, monthly, weekly and fortnightly also. Managers used cash budget to identify how much
amount of cash in enterprise are being created in a specific period of time. It is also helpful to
check performance of employee of each and every department.
Cost Accounting Report: The concept of cost managerial accounting report determines
to identify specific cost and it includes all raw materials, labor, overheads and many more. Many
3

small firms shows expenditure for a particular project and evaluate job profitability. In cost
accounting, it include firm's goods and services, any organisation activities related to cost
accounting. It can measure business activities of firm and formulate to take decision making like
how much cost are incurred in enterprise. In case of Connect Catering Services, managers offers
these report to recognize cost of value versus selling prices. It is also identify variable and fixed
cost related to industry procedure and used by internal members of management team.
Account Receivable Aging Report: According to this report, it is a technique that shows
outstanding balances and determine overdue payment. It consider financial health of enterprise
and recognize how much money is payable for every customer and how long invoice has
progressive. Most of reports are maintained their overdue invoices are 30 days, 90 days late and
more. Within Connect Catering Services, it is helpful because it offers owners to get a top level
of income, unpaid debts, and support overall customer to firm's aggregation process. If a number
of customers are not paying their debts on time then owners can change their credit policies.
Account receivables aging report develop when entity provide goods and services on a credit
basis to its customers.
M1. Benefits of management accounting systems and their application
Systems Benefits Application
Price Optimisation System In context of Connect Catering
Services, (Prowle and Lucas,
2016) to making a better and
promptly decisions that
depends on customer buying
behaviour pattern and their
choice.
With reference of Connect
Catering Services, Managers
used price optimisation to
analyse behaviour of customer
that determine how to increase
their profit.
Cost Accounting System Cost accounting system in
reference to Connect Catering
Services, it helps to identify
increase or decrease in cost
and how to modify its
efficiency.
In case of Connect Catering
Services, it realise to take a
decision making procedures
whether they expand their cost
or not.
4

Inventory Management
System
Within Connect Catering
Services, it helps in cost
savings which include
transportation cost, storage
management, salaries of
employees and many more.
Inventory management system
with context to Connect
Catering Services, managers
used to tracking goods from
one place to another place.
Job Costing System Job Costing System in
reference to Connect Catering
Services, administration can
calculate each and every cost
on basis of previous records.
This system is implement in
Connect Catering Services is
to placing of each order and
fulfilling their customer
expectations.
D1. Critically evaluate how management accounting systems and management accounting
reporting is integrated within organisational processes.
It is critically evaluated that management accounting provide the financial information
for upcoming period and take effective business decisions (Renz, 2016).With the help of
management accounting system, it help in collection of essential accounting information which
provide base for formulation of accounting managerial accounting reports. Managers of connect
catering use cost accounting system for measuring their actual performance with standard
performance which provides support while preparing of performance evaluation report.
Reporting methods like budget report and performance report are also integrated.
TASK 2
P3. Calculate costs using appropriate techniques of cost analysis to prepare an income statement
using marginal and absorption costs.
Cost: It is an expenses that firm required to produce a product or spend money for
regular use (Steccolini, 2019). In case of Connect Catering Services, , managers used cost to
evaluate how much expenses are incurred in enterprise or how much spend money to produce
something. Various cost analysis techniques are used in Connect Catering Services as mentioned
below:
5

Marginal Costing: It is a method that determines extra cost are involved to producing
each and every unit of output. Within Connect Catering Services, managers used this costing to
take business decision making and determine product profitability.
Absorption Costing: It is a technique to capture all costs that are associated to a specific
product and it includes direct costs and indirect cost. In case of Connect Catering Services, it
helps manger to increase income in a particular period and can view all cost that are captured in
different ways.
Calculation of income statements wit the help of marginal and absorption costing techniques
of Connect Catering Services:
6

7

8

9