Management Accounting Report for Excite Entertainment Ltd

This report delves into the realm of management accounting, focusing on its application within Excite Entertainment Ltd. It begins by differentiating management accounting from financial accounting, exploring various management accounting systems such as cost accounting, direct costing, and inventory management. The report highlights the benefits of these systems and discusses different types of management accounting reports, including budget reports and performance reports. It then examines the presentation of information in these reports and their integration within operational processes. Furthermore, the report analyzes profitability using both absorption costing and marginal costing methods, comparing their advantages and disadvantages. Finally, it explores planning tools used in management accounting, such as scenario tools and forecasting tools, providing insights into their application in dealing with financial problems and preventing them within an organization. The report concludes with a summary of the key findings and references to support the analysis.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Difference between management accounting and financial accounting ...............................1
Different types of management accounting system................................................................2
Benefits of management accounting system..........................................................................3
Types of management accounting reports..............................................................................3
Presentation of information in reports....................................................................................4
Management accounting system and management accounting reports integrated within
operational process.................................................................................................................4
TASK 2............................................................................................................................................4
TASK 3............................................................................................................................................6
Planning tools used in management accounting ....................................................................6
Compare ways to dealing with financial problems and preventing in an organisation..........8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting is the process of analysing business costs and operations to
prepare internal financial report, records and account to aid managers' decision making process
in achieving business goals (Management Accounting, 2019). It is also known as cost accounting
and managerial accounting. It is considering as act of sense to record financial and costing data
in order to provide management. To understand the concept of report selected organisation
Excite Entertainment Ltd which operates in leisure and entertainment industry in the UK. In the
report consist of management accounting system, methods of management accounting reports.
Apart from the report calculate profitability through absorption costing and marginal costing.
Compare of planning tools in management accounting and use information to dealing with
financial problem.
TASK 1
Difference between management accounting and financial accounting
Basis Management Accounting Financial Accounting
Information mainly
produced for
In management accounting reports
and accounts mainly prepare for
internal use like managers and
employees
In financial accounting reports
mainly prepare for external use
such as banks, government,
creditors and shareholders.
Legal Requirements To prepare report there is no need to
legal requirements.
The final accounts produced by
limited companies.
Nature of
information
Through reports provided financial
and non financial information
In these types reports mainly
provided financial information.
Focus on There are focused on specific areas
of the business (Difference between
management accounting and
financial accounting. 2012)
Mostly reports focused on the
whole business
Formats Management has been decided on
the information they need and the
Format and content of financial
accounts intending to provide true
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most useful way of presenting it. and fair picture which is following
standards and company law.
Different types of management accounting system
Cost accounting System – It is a framework which is used by an organisation in order to
predict the cost of their products to analysis profitability, valuation of stocks and cost control.
There are determining the accurate cost of products is critical for profitable operations. The
particular system mainly used to record production activities through perceptual inventory
system. The particular system used by Excite Entertainment Ltd in order to know which products
are profitable for company and which is not (Uyar and Kuzey, 2016) . It can provide closing
value of the products as well as finished goods inventory for the purpose of preparation financial
statement. Direct Cost – A direct cost is expenses which is directly track to recognise specific cost
and cost object in reference to products, process and departments. There are mainly
consider of direct material, direct labour and fuel.
 Standard Costing – It is consider as planning tool which can use to planning about the
budgets, managing and controlling cost then analysis of cost management performance.
In standard costing to determine need to cost of production process.
Inventory Management System
It is a type of management accounting system which is used to monitor and track of
goods in effective manner. Through supply chain track material then operate according to
business requirement. In Excite Entertainment Ltd, manager can be adopted particular system in
order to manage and supervise material. The enterprise focus on everything in reference to stock
like production to retail and warehousing to shipping.
Job Costing System
The particular system mainly used by manufacturers but many times it will be used by
other companies in order to record business activities. The particular system related to jobs and
in the entertainment industry need to different types people who have skill of their job. In Excite
Entertainment Ltd, the system used by manager in order to serving delivery and help to manage
cost for every job (Brierley and Gwilliam, 2017).
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Benefits of management accounting system
Inventory management system – It is beneficial for Excite Entertainment Ltd because it
will provide all detailed information regarding top inventories. In entertainment industry need to
different types of inventory to attract customer. On the basis of stock they can provide effective
services to their customers and achieve cost efficiency.
Cost accounting system – Through this system measure the effectiveness of products
and estimate profitability. The system can help to know cost of products and as per the
requirement deduction in cost. In Excite Entertainment Ltd follow particular system in order to
evaluate risk and planning to achieve their objectives.
Job costing system – It is beneficial for every company to predict cost of various types
of products and it will consider as continuous process. The Excite Entertainment Ltd through this
system recognise each unit of several cost item and review to components to analysis quality
regarding to work (Van der Stede, 2016) .
Types of management accounting reports
In every business prepare different types of reports in order to know detailed information
of their company. These reports are related to different departments and provide all data after
evaluation. There are mentioned different types of management accounting reports -
Budget Report – Budget report developed by every organisation to estimate and evaluate
plans for future. These report related to each department and after analysis predict future income
and expenses. With the help of this report know potential risk and their impact so as a result it
can reduce in effective manner. In reference to Excite Entertainment Ltd, uses these types report
to manage and control business activities and prepare plans for future.
Performance Report – The particular report developed to analysis performance of
individual as well as organization in specific financial year. Performance report mostly prepare
by large organisation to keep data up to date and provide rewards as per their performance. To
survive in entertainment industry need to skills which is utilise in effective manner. So on the
basis f this report recognise skills and ability to each employee and provide reward (Pedro-
Monzonís and et.al, 2016).
Accounts Receivable agin Report – This report can help to manage flow of cash in an
organization. The report has been used to identify problems regarding to collection period
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process. With the help of this report analysis financial health of Excite Entertainment Ltd and
provide good idea regarding to receivable policies.
Presentation of information in reports
In these reports information has been presented in accurate, relevant to the user, reliable
up to date and timely. The particular reports related to different departments so there is need top
present in effective manner and present all appropriate information. It is understand by
management which can help in decision making process (O'Dwyer and Unerman, 2016) .
Management accounting system and management accounting reports integrated within
operational process
To conduct operational process of Excite Entertainment Ltd, there is required to
management accounting system and reports. Because these reports provide all appropriate
information and through system manage all business activities. So both are important part of this
process.
TASK 2
Absorption Costing Method
The particular method has been used to analysis the cost which is related to
manufacturing process and apportioning them for individual products.
Advantage – The particular account for all the cost of production because it not only indicate as
direct cost and variable costing.
Disadvantage – It will not help to increase operational efficiency.
Marginal Costing Method
It is a costing method where in marginal cost defined as variable cost has been charged
through unit of cost and fixed cost for particular period of time against the contribution.
Advantage – It makes easier to evaluate and control cost of manufacturing. And there are
avoiding the discretion allocation of fixed overhead.
Disadvantage – There are categorised cost in various forms which is difficult to understand and
can not easily apply (Harrison and Lock, 2017) .
Marginal Costing
Profit and Loss Statement of Excite
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Entertainment Ltd. for the month ended May,
2019
Particulars £
Sales 120000
Less: Prime Cost -32000
Less: Variable Production Costs -16000
Contribution 72000
Less: Budgeted Fixed Production
Overheads 40000
Profit for the year 32000
Absorption Costing
Profit and Loss Statement of Excite
Entertainment Ltd. for the month ended May,
2019
Particulars £
Sales 120000
Less: Prime Cost -32000
Less: Variable Production Costs -16000
Under/Over Absorption 8000
Less: Budgeted Fixed Production
Overheads -40000
Profit for the year 40000
Under/Over Absorption
Per Month 10000
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standard
production
Fixed production
cost 40000
Fixed prod. Cost
per unit 4
Actual cost 80000
Absorption 8000
As per the above calculation it has been getting that absorption costing is good method to
generate profit. Through marginal costing gain profit 32000 and absorption costing through gain
profit about 40000.
TASK 3
Planning tools used in management accounting
In management accounting to manage business activities need to applied different
planning tools which can plan for potential activities and control in effective manner. As a
planning tool in every organisation mostly applied budget which is prepare as financial plan. It is
related to specific financial year where consist of revenues, sales volumes, costs and expenses,
cash flow and assets & liabilities. There are defined three planning tool regarding to management
accounting -
Scenario Tool – It is a management tool that will develop to allow a company to determine the
effectiveness of strategies, tactics, policies and plans to acquire potential environment. With the
help of scenario planning tool can use to planning regarding to problems and reduce uncertainties
in effective manner. Most of the future things will be depended on the confidence and greater
speed. When company has been faced critical situation that time used this budget and provide
suitable solution. To provide solution use spreadsheet and it is mainly prepared with the help of
different software to provide future results for investment purpose. In the reference to Excite
Entertainment Ltd, evaluation of information then provide specific idea to provide help in
investment decision (Guthrie and Parker, 2016).
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 Advantages – The scenario tool beneficial because it makes easier to develop budget as
per the requirement and for preparation gather information from different resources. On
the preparation time company has faced different problems like cost, time and resources
and it will be solved then record transaction. It is set as per the time and tool taking
around to 6 to 12 months. Disadvantages – As a theoretical way it is consider as practical point of view so it is not
easier to apply in an organisation. To prepare of budget need to several types of plan
which is not easier to make ion short time period. It may take much more time to get
accurate results so it is connected to complex formulas.
Forecasting Tool – The particular tool can help to face of different types of uncertainties
and issues in following year. Through this tool analysis of past and present data to after then
prepare another budget on the assumption basis. There are including management's experience,
knowledge and judgement. It will help to make future predication to analysis of success and
growth. In reference to Excite Entertainment Ltd manager can estimate about future expenses
and income in order to maintain data of clients (Campanale and Cinquini, 2016) . Advantages – With the help of this planning tool get assurance about outcomes for
following years. It can provide necessary financial information in order to carry out
effectiveness in resources to know bright future of an organisation. In the context to
Excite Entertainment Ltd has been developed effective planning tools and forecast about
financial data for future (Trigo, Belfo and Estébanez, 2016) . Disadvantages – It is based on the assumption base so always it can not provide right
data and external factors always affect to business policies. Many times predication will
be gone wrong of financial data and information. As a result in Excite Entertainment Ltd
create problem to interpret data.
Zero based budget - It presents as a planning tool which is prepared for any organisation
to record future income and expenses to new accounting period. To prepare for this budget can
not take past and present budget rather than prepare from zero. So as a result analysis all
department and act as a strategic plan for the potential time. It will heal Excite Entertainment Ltd
to develop effective strategies and take decision for long period of time. It is considering as
summary of all other budgets.
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 Advantages – When company prepare budget from zero so it will start to analysis of each
department so it will help in financial planning, preparation of budgeted profit & loss
account as well as balance sheet.
 Disadvantages – It is complex procedure because it is not easily implement and zero
based budget consist of several budget in it. It will take much more time to preparation
because there is started from Zero.
Compare ways to dealing with financial problems and preventing in an organisation
Financial Problem – There is defined as situation because there is money become reason
of stress. Due to these problems organisation can survive difficult time so as a result influence to
mental health. It can also affect to effectiveness and efficiency of the Excite Entertainment Ltd.
These problem also affect to strategies which is implement on company. To solve these financial
problem apply management accounting approaches -
KPI – It is considering as performance management tool which can use to attain
organisational objectives. Key performance indicator can measure performance of an
organisation in financial and non financial way. The manager of Excite Entertainment Ltd impact
on the success of the business. The particular tool has been used by enterprise to identify
financial problem (Azudin and Mansor, 2018) .
Benchmarking – The particular tool use to compare operation and performances of a
company with another company. Through the tool improve performance in a company and apply
effective strategies to overcome from financial problem. In the context to Excite Entertainment
Ltd can apply this to know actual performance of a company.
Absorption
Sales 120000
Less: Cost of goods sold
Opening stock 5000
Production 100000
(-) Closing stock -20000 -85000
Profit 35000
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Marginal
Sales 120000
Less variable cost
Opening stock 3000
Production 60000
(-) Closing stock -12000 -51000
Contribution 69000
Calculation of contribution per unit
Selling price per unit 15
Less: variable cost per unit -4
Contribution per unit 11
For 4000 units
BEP in units Fixed cost 120000
Contribution per unit 30
For 6000 Units
BEP to attain desired profit
Fixed cost + desired profit 180000
Contribution per unit 30
Profit at sales of 4000 units
Sales (4000*40) 160000
(-) Varible cost (4000*10) -40000
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Contribution 120000
(-) fixed cost -120000
Profit/loss 0
Profit at
sales of
6000 units
Sales (6000*40) 240000
(-)
Variable
cost (6000*10) -60000
Contributio
n 180000
(-) fixed
cost -120000
Profit/loss 60000
To gain 60000 profit need to sold about 6000 units then gain sufficient profit.
CONCLUSION
As per the above report it has been concluded that management accounting important part
of every organisation. There are applied management accounting system which can arrange
business operation in effective manner and through management report get detailed information
about various departments. To calculate and analysis performance of the company apply
absorption and marginal costing method then analysis and know which costing method is best.
To manage management accounting follow several planning tool which can help to manage
activities and smoothly run organisational process. There are identify financial issues and find
out appropriate solution and know units.
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REFERENCES
Books and Journals
Uyar, A. and Kuzey, C., 2016. Does management accounting mediate the relationship between
cost system design and performance?. Advances in accounting. 35. pp.170-176.
Brierley, J.A. and Gwilliam, D., 2017. Human Resource Management Issues in Accounting and
Auditing Firms: A Research Perspective: A Research Perspective. Routledge.
Van der Stede, W. A., 2016. Management accounting in context: Industry, regulation and
informatics. Management Accounting Research. 31. pp.100-102.
O'Dwyer, B. and Unerman, J., 2016. Fostering rigour in accounting for social
sustainability. Accounting, Organizations and Society. 49. pp.32-40.
Harrison, F. and Lock, D., 2017. Advanced project management: a structured approach.
Routledge.
Guthrie, J. and Parker, L. D., 2016. Whither the accounting profession, accountants and
accounting researchers? Commentary and projections. Accounting, Auditing &
Accountability Journal. 29(1). pp.2-10.
Trigo, A., Belfo, F. and Estébanez, R. P., 2016. Accounting Information Systems: evolving
towards a business process oriented accounting. Procedia Computer Science. 100.
pp.987-994.
Azudin, A. and Mansor, N., 2018. Management accounting practices of SMEs: The impact of
organizational DNA, business potential and operational technology. Asia Pacific
Management Review. 23(3). pp.222-226.
Campanale, C. and Cinquini, L., 2016. Emerging pathways of colonization in healthcare from
participative approaches to management accounting. Critical Perspectives on
Accounting. 39. pp.59-74.
Pedro-Monzonís, M. and et.al, 2016. Water accounting for stressed river basins based on water
resources management models. Science of the Total Environment. 565. pp.181-190.
Online
Management Accounting. 2019. [Online]. Available through:
<https://cleartax.in/s/management-accounting>
Difference between management accounting and financial accounting. 2012. [Online]. Available
through: <http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Management
%20Accounting.aspx>
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