Management Accounting Report: Analysis of Financial Problems

This comprehensive management accounting report, prepared for Pearl Chartered Accountants and focusing on their client Connect Catering Services, delves into several key areas. It begins by defining management accounting and its essential requirements, including price optimization, inventory management, job costing, and cost accounting systems. The report then explores various management accounting methods, such as performance reports, budget reports, job cost reports, and inventory reports, along with their benefits and applications within the catering context. A significant portion of the report focuses on cost analysis, contrasting marginal and absorption costing methods, and includes calculations for income statements using both techniques. The scope of management accountancy is applied with suitable financial reporting documents. The report also examines the benefits and limitations of different planning tools used in budgetary control. Finally, the report compares how firms can adjust management accounting in response to financial problems, analyzing financial problems and evaluating planning tools to address them. The report concludes with a discussion of the findings and provides references for further study.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK1 ............................................................................................................................................1
P1. Define management accounting with their essential requirements of management
accounting systems......................................................................................................................1
P2. Methods that are used in management accounting report.....................................................2
M1. Benefits of management accounting system with their application ...................................3
D1. Evaluating management accounting systems and report is integrated with context to
organisation..................................................................................................................................4
TASK 2............................................................................................................................................5
P3. Calculate cost analysis and prepare an income statement using marginal and absorption
costing .........................................................................................................................................5
M2. Apply a scope of management accountancy with suitable financial reporting documents.
....................................................................................................................................................10
D2.Make a financial reports that are applied and interpret data for a extent of business
activities.....................................................................................................................................10
TASK 3..........................................................................................................................................11
P4. Benefits and limitations of different kinds of planning tools that are used in budgetary
control........................................................................................................................................11
M3. Examine different planning tools with their applications..................................................12
TASK 4..........................................................................................................................................12

P5. Comparison how firms can adjust management accounting in respond to financial
problems ...................................................................................................................................12
M4. Analyse financial problems can lead organisations to sustainable occurrence..................14
D3. Evaluate planning tool in respond to solve financial problems that lead to organisations. 14
CONCLUSION.............................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
Management Accounting is a procedures that defines and give financial information to
provide valuable information for managers in which they would make a business decisions in
effectively and efficiently manner (Anand, Balakrishnan and Labro, 2019). The aim of this is to
assist their operations of business in an efficiently performing its functions. This report is based
on Pearl Chartered Accountants is one of best UK firms and its main client is Connect Catering
Services is a family owned catering services based in Oxfordshire that delivered best quality
products and services. Several topics are covered in this report which are named as essential
requirements of management accounting, different methods are used in management accounting
report, calculate cost analysis techniques using marginal and absorption costing, benefits and
limitations of different types of planning tools and comparing any two organisations that are
respond in financial problems.
TASK1
P1. Define management accounting with their essential requirements of management accounting
systems
Management Accounting: It is said to be determine internal operations of enterprise and
control various activities to provide accounting information in a systematic way (Baños Sánchez-
Matamoros, 2020). Within Connect Catering Services, firms used this accounting because it
helps to provide information of management and helps to complete day to day operations in
enterprise.
Management Accounting System: According to this system, it helps to provide internal
system of management that used in internal decision making. The report said that identify
various ways to run their firm's operations. For Connect Catering Services, it helps mangers to
used financial data and business action for internal direction of enterprise. Key essential
requirements that are used in management accounting schemes with context to Connect Catering
Services are as mentioned below:
Price Optimization System: This system is determine changes in price level with the
changes in demand and combined data with information on expenditure or stock to improve their
profits. Essential requirements of price optimization system is a practice that used in how target
customers and market find out most effective price that will impact of maximize sales and
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profitability. In case of Connect Catering Services, mangers used this system to identify the
effective price for target customers that will determine increased profit margins, consumer
growth and customer can meet its objectives.
Inventory Management System: This type of system defines procedure to flow of
inventory from one place to another place. It determine and identify each and every stock are
placed to right person at right place and at a right price. Within Connect Catering Services, it is
important for organisation to identify how much stock are left and how much inventory need to
improve their sales. Essential requirement of inventory management system is to improve order
accuracy because are placed on a timely basis and helps to maintain a proper of warehouse that
makes easier to pull right customers with greater quality.
Job Costing System: It is a process to collect those information related to specific cost
for a specific job to meet the customer expectations. It involves those required information in
order to submit particular cost to a customer and estimate the cost for a upcoming years based
on a specific project (Brierley, 2017). With relation to Connect Catering Services, it helps to
managers for comparing actual cost with standard costs. It leads to better profitability,
management decisions and provide timely reporting. Essential requirement of job costing system
deliver as service or job so that firms can charge their price for customer to achieve target of
gross margin.
Cost Accounting System: In this system, it s a framework to estimate cost of product or
services to achieve profitability or productivity and control cost. In case of Connect Catering
Services, it is helpful for organisation and identify where firm can spend its money, how much it
earns in a year. Essential requirements of cost accounting system that leads to improvement in
internal cost control and ratio. Firm incurs in respect to make goods and services and it also
measuring production cost f enterprise.
P2. Methods that are used in management accounting report
Management Accounting Report: This report says this is used for planning, designing
and decision making in enterprise also to measure performance in organisation. It display
financial status of organisation over a very particular period of time (Brierley, 2017). With
context to Connect Catering Services, managers used this report to identify performance of
enterprise and accounting record like transactions, operational cost and profitability. Managers
guide their business to meet its specific goals and objectives and easily gather information about
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various reports. Several methods that are used in management accounting with reference to
Connect Catering Services are as under:
Performance Report: This report determine for collecting information related to
company's operations for making reports and sending them to stakeholders. They identify all
information required to an appropriate detail while planning their report. In case of Connect
Catering Services, managers used this report to check the overall performance of firm and
identify potential growth of customers. They can track their performance in respect to inheritance
effective strategies that will help to growth of enterprise.
Budget Report: According to this report, it shows incoming and outgoing cash flow of
enterprise and determine which expenditure level are so high. This report present the actual
performance with standard during an accounting period and goal of this report is determine how
well departments use their funds to reach and accomplish their businesses. In case of Connect
Catering Services, it is important for enterprise to achieve their goals and objectives, control
expenditure and revenue of firm. Firm prepared this report daily, weekly or monthly.
Job Cost Report: In this report, it is planned for actual report and quantities that are
based on such reports. This is a tool that used and evaluate their business or production
performance for an estimated standard. Within Connect Catering Services, managers used this
cost to determine and accumulate each and every cost at a small unit of level. Employees charge
their cost to a specific time for a specific jobs in which they are assigned to various on the basis
of labour cost.
Inventory and Manufacturing Report: It is an amount of inventory of business that
present a physical or electronic document (Ferramosca and Ghio, 2018). Manufacturing report is
all about supplies and materials in hand for manufacturing their products or services. With
relation to Connect Catering Services, it is used for business help to run their business without
interruption and reduces cost or risk to running out of inventory. It saves money in business and
allow customer to fulfil their customer needs and wants. In business, proper managing of
inventory is very important and easily manageable. It contains all raw materials, finished goods
or services and production goods.
M1. Benefits of management accounting system with their application
Systems Advantages Application
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Price optimization scheme Benefit of price optimisation
in Connect Catering Services
is market transparency because
it can deliver up to date
information related to price
modification.
Managers of Connect Catering
Services uses this system to
check their price level and
identify how to improve their
profits.
Inventory Management
Scheme
With context to Connect
Catering Services, it helps to
cost savings because it lead to
loss of revenue and over
spending of money.
Application of Connect
Catering Services used in this
system that product are placed
on right customer on right
time.
Job Costing System This system used in Connect
Catering Services to determine
the present cost on basis of
previous records.
With context to Connect
Catering Services, manager
uses this system to identify to
deliver their services for a
particular cost in a specific
job.
Cost Accounting System In case of Connect Catering
Services, it helps in decision
making to determine whether
to buy this product or to make
their product.
Managers uses this system to
help internal cost of control
and measure production of
business.
D1. Evaluating management accounting systems and report is integrated with context to
organisation
It is unfavourable to measure that management accounting helps managers to take a
business decision and system determine internal system of organization (Ferramosca and Ghio,
2018). Managers uses price optimization system to check the level of prices with change in
demand. With management accounting report managers uses job cost report that identify each
and every cost at a small unit of level. Several reports are used which are named as performance,
budget, job cost and inventory management report.
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TASK 2
P3. Calculate cost analysis and prepare an income statement using marginal and absorption
costing
Cost: It is the amount that firm spent in day to day expenses to bring forth something or
creation of product and service (Hanif, Rakhman and Nurkholis, 2019). In case of Connect
Catering Services, mangers used this cost to determine profitability and productivity of
organisations. It is important for firms because it helps manger to take business decision whether
it is related to how much cost are available in firm, calculation of production and estimate work
efficiency.
Marginal Costing: The term marginal costing is a technique that increased or decreased
of cost per unit of output. It is based on production cost that are variable such as direct labour,
direct materials and direct overheads. In case of Connect Catering Services, it help managers to
take business decision making whether changes in cost per unit of output or provide maximum
return in enterprise to achieve maximum profits.
Absorption Costing: This type of costing determine that cost are associated with
production process and indicate all manufacturing cost have been assigned to units of goods
produced. It include both variable cost with changes per unit of output and fixed cost it remain
constant. In case of Connect Catering Services, it is mainly used in business for external
financial reporting and income tax. This costing helps managers to prepare a financial statements
and display less fluctuation in profits in case of fixed production.
Computation of income statements by help of marginal and absorption costing of Connect
Catering Services:
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M2. Apply a scope of management accountancy with suitable financial reporting documents.
With relation to Connect Catering Services, financial adviser are used in cost techniques
with the help of marginal and absorption costing (Hansen, Mowen and Heitger, 2021).
Managers uses this activity to identify and making various kinds of pizzas like veg and non veg.
There is a bank reconciliation statement are need to be analyses that identify income statement in
month of April and may. With Connect Catering Services, they identify it had a loss of 11000 in
April and 13500 in month of may.
D2.Make a financial reports that are applied and interpret data for a extent of business activities.
Financial document give financial data that has to analyse cash flow in firm which shows
financial prosperity of enterprise (Hayne, 2017). For connect catering services, it have been
understood that financial position determine income statement had a loss of £8000 in April and
£6000 in month of April. There is a loss in bank reconciliation statement in month of April is
£11000 and may month is £13500.
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TASK 3
P4. Benefits and limitations of different kinds of planning tools that are used in budgetary control
Budget refers to a plan that managers use to control activity and use of resources in an
organisation to meet its objectives (Holzer and Schoenfeld, 2019). Budgetary control refers to a
process in which actual result is assess and compared with budgeted illustration to identify
variance and reason of variance. Connect Catering Service can use different types of budgetary
control to ensure proper control over business activities which are as follows:
Zero Based Budget: Zero based budgeting is a planning tool which in which budget is
prepared from zero and not based on previous year. In this technique manager need to justify
cost of every activity before adding it to the main budget. Objective of this budget is to minimise
cost of business by looking at budget. Manager of Connect catering Service can adopt this
budget as it assist them to reduce cost of business.
Advantage of Zero Based Budgeting: Zero based budgeting provide accuracy and
reduce cost of business as it is not based on previous year data. It allow manager of Connect
Catering Service every department to check cash flow and operation cost of business and helps
to reduce cost (Johnstone, 2018). It helps manager to better allocate resources in an organisation
and utilise it effectively and decrease unproductive activity of business.
Disadvantage of Zero Based Budgeting: Zero based budgeting is time consuming
process as managers of Connect Catering Service need to prepare new budget for every period. It
require high efforts with high manpower which make it costly for a business.
Variance Analysis: Variance analysis is a technique which identify fluctuation between
actual performance with planned performance. Variance analysis include variance related to
purchase price, selling price, labour rate, material yield etc. By adopting this technique manager
of Connect Catering service better control on future activity of business.
Advantage of Variance Analysis: This technique helps to manager of Connect catering
service to achieve target of business and provide competitive advantage to business in market by
minimising risk. It helps managers to make changes in the strategy of business to attain business
goals and objectives.
Disadvantage of Variance Analysis: This technique any create problem for manager for
Connect catering Service as it is time consuming and require efforts. This technique fail to
provide reasons for variance in business.
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Operating Budgeting: Operating budget include daily basis cost and revenue cause to
business activities. It include cost of production along with cost of selling goods in market and
also include revenue from business. It helps manager of connect Catering Service as it better
control over activities by including revenues of business, fixed cost, variable cost, non operating
cost etc.
Advantage of Operating Budget: Operating budget helps manager of Connect Catering
Service to better manage current expenses and allow them to project future expenses. This
budget helps to control actual performance and control current expenses to better control future
result.
Disadvantage of Operating Budget: Operating is budget does not support innovation in
organisation. It create problem for manager of Connect Catering Service, as it is difficult to make
any changes in this budget.
M3. Examine different planning tools with their applications
The concept of budgeting is a procedure to create plan for spending its money and allows
to achieve their target ((Kiziukiewicz and Jaworska, 2017). There are several kinds of planning
tools that are used in budgetary control which are named as zero based budget, variance analysis
and operating budget. Managers uses this budget to measure their performance of employees in a
larger organisation and helps to set up their activities to achieve their target objectives.
TASK 4
P5. Comparison how firms can adjust management accounting in respond to financial problems
Financial Problems: The term financial problem means when organisations are unable
to pay liability short term as well as long term and can't meet to day to day expenses. These
problems occur many financial crises due to non payment of debts (Muelle and Trost, 2017).
With relation to Connect Catering Services, in sufficient balance in business firm can't pat their
debts and there is a chance of having trouble in finance. Firm faced many financial problems
with context to Connect Catering Services are as under:
Terrible cash flow management: It is a procedure to tracking goods and services and
determine how much cash if inflow and outflow of business. This helps to identify how much are
available in firm that need to cover debts like cost of suppliers and workers. Within Connect
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Catering Services, it is very critical for business to run their cash for successful enterprise. Most
of vendors are monitor to cash flow daily and determine whether it is inflow or outflow.
Lack of insufficient working capital: Working capital means there is a difference
between current assets and current liability. If there is a insufficient working capital means there
is a shortage of capital to meet their daily expenses. In case of Connect Catering Services,
business have enough capital to cover its expenditure for short term basis. If there is low working
capital in firm then it invest extra cash and generate more cash result in higher rate of return.
Key formulation that are defined financial problems with relation to connect catering services
are as mentioned below:
KPI: Key performance indicator is to measure performance that firm can achieve a
objectives of organisations in an efficiently and effectively manner (Peysakhova and
Anyushenkova, 2018). In case of Connect Catering Services, enterprise used KPI to appraise
their success for achieving targets and focus on strategic improvement in business.
Benchmarking: According to this, it is a procedures to where they can measure their
success against other competitors to improve overall performance of business. It is also identify
whether organisation is similar to other organisations or not. With reference to Connect Catering
Services, firm choose benchmarking to identify how to improve their performance as compare
to other organisations.
Financial Governance: It is a way to collect and manage financial information in which
they include how firms can manger their performance of organisations and control data. Within
Connect Catering Services, it allows firm to identify their information and risk can more faster. it
refers to determine regarding policies and procedures used to mange firm and manager ensure
whether data is correct or not.
Basis Connect Catering Services Eden
Financial Problem Bad cash flow management
problem is faced by Connect
Catering Services which will
impact to successful enterprise
because they can't manage
their cash effectively,
Manager uses financial
problem of insufficient
working capital because they
cant pay their debts on short
term basis.
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Approach In Connect Catering Services,
it uses KPI approach because
firm can achieve their success
based on long term
performance.
Manager of Eden company
uses benchmarking approach
to measure their success as
compare to other competitors.
Methods that are used in
financial problem
Connect Catering Service uses
price optimization system to
check their price level when
varies in demand.
The are using cost accounting
system in Eden company to
determine actual cost with
standard cost and identify how
to improve their profits.
M4. Analyse financial problems can lead organisations to sustainable occurrence
Various financial problem that are used in organisations such as terrible cash flow
management and insufficient working capital (Suhayati and Riandani, 2019). In case of connect
catering services, managers used these financial problem whether firm can pay their for short
term as well as long term. Poor cash flow management is faced a problem of in Connect Catering
Services and overcome this problem to price optimization to changes in price level with varies in
demand which has impact long term profits in an enterprise. With relation to Eden, insufficient
working capital faced a problem and overcome to this problem through cost accountant to
identify each cost and determine how to improve their profitability in enterprise.
D3. Evaluate planning tool in respond to solve financial problems that lead to organisations
Several kinds of planning tool that meets financial problems in a firm (Szychta, 2018).
Within reference to Connect Catering Services, various tools that determine zero based budget,
operating and variance analysis. In zero based budgeting, it is helpful to reduce cost of business
and identify that each and every cost are minimised. In variance analysis, manager adopt this
analysis to betterment of control for upcoming year activities. With operating budget, it is helpful
to control activity of business which include income, sales, fixed and variable cost.
CONCLUSION
As per the above information, it can be concluded that management accounting help
manager to make a decision making and provide accounting information in an efficiently
manner. In an organisation, it can used various kinds of systems which are named as inventory
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management, price optimisation, job costing and cost accounting system all are help to internal
management of enterprise. Various reports that are included in management accounting such as
performance, budget, job cost and manufacturing report to measure performance for a specific
period of time. Different planning tools that are used in budgetary control such as zero based,
variance analysis and operating budget and last key financial problem that impact on business
enterprise.
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REFERENCES
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