Management Accounting: An Analysis of Excite Entertainment Ltd.

Desklib provides past papers and solved assignments. This report analyzes Excite Entertainment Ltd.'s financial performance.

MANAGEMENT ACCOUNTING
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Contents
Introduction.................................................................................................................................................3
LO 1:...........................................................................................................................................................4
LO 2:.........................................................................................................................................................10
LO 3:.........................................................................................................................................................15
LO 4:.........................................................................................................................................................20
Conclusion:...............................................................................................................................................22
References:................................................................................................................................................23
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Introduction
In the report of Excite Entertainment Ltd. management accounting, it shows the how company it
will help in dealing with the company management accounting for the purpose of managing their
business affairs and staff for working inefficiently and effective manner.There are so many
different types of management accounting principles and methods that company use in order to
get smooth flow management in the company. The company used management accounting for
attaining constant success throughout the period. The Excite Entertainment Ltd. company having
a business of providing consultancy services to their clients and also provide special services at
the time of special occasion. For every company, whether it is engaging in providing service or
manufacturing products (small or large organization), management has an important role that
helps in taking strategies decisions. In this part, a brief discussion is made how both management
accounting and financial accounting differ from each other and how it will help Excite
Entertainment Ltd. company in order to increase their liquidity, profitability and attain overall
success in the near future. For finding income, the Excite Entertainment Ltd. company uses two
methods of costing i.e. marginal and absorption costing and used reconciliation method that
helps the company to find variance why income statement from both companies. The company
made proper plans as per the requirement of the situation and implement them with carefully
helps Company to attain regular success.
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LO1:
Section A
Sometimes the management accounting is named as managerial accounting in different areas of
the country. A company named Excite Entertainment Ltd. uses management accounting in the
business affairs and in management for calculating their cost on each product or in providing
services. From this accounting procedure of the company, the Excite Entertainment Ltd.'s
management enables to make their internal financial reports that will help in future to make and
take their decisions that will make organization successfully in the long term of the period
(Accountingcoach, 2019).
Financial accounting is the field of accounting or it can be said that it is a part that used in
business for evaluating company performance at the financial level. Financial accounting, it can
be said as a tool or method that Excite Entertainment Ltd. company used in their business for the
following purposes.
 Record accounting transaction
 Summarize as per the standards.
 Reporting to the management.
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a)
Basis Financial accounting Management accounting
Data available for The information available in
the financial accounting is for
the purpose of using by the
external users like creditors,
shareholders, bankers, and
others
In this accounting method of
management, all information
is only used by the internal
users for interpreting records.
Such users may be managers
or staff of the company.
Purpose of the accounting The financial accounting is
made by the internal or
external person for presenting
the company financial position
at the ending of the current
year.
The purpose of making this is
that it helps in planning,
controlling parts and even it
also helps in the decision-
making the process.
Nature It consists only that
information which is related to
the financial levels.
It consists of both information
(financial and non-financial of
the company)
Period of time Based on real data (historical
data)
Based on historic and forward-
looking.
When it prepares Generally, this accounting is
prepared by the company at
the last time of the accounting
period in order to evaluatetheir
It can be prepared any time
based on the mind or
requirement of the situation
like prepare on a weekly basis,
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profitability. monthly basis.
b)
Cost accounting, it makes available for the management to estimate their business of the product
in order to evaluate their business performance and helps in estimating profitability in a future
period and able to take control over the company cost valuation. Cost analyzing method aims is
to accelerate the company profit with incurring less amount of cost with maintaining or
improving their quality services (Appelbaum, et. al., 2017). If the company seeing that there is
any inflation in cost then the cost analyzing method providesoutlines how to take control over
the extra cost incurring. Here two costs are discussed below:
Direct cost: Direct cost is that cost whichis directly incurred in the production on in providing
services. This cost is directed allocated and able to know how much cost incurs.
Standard costing: it helps in finding the difference between the actual and estimated cost of
product or service. This costing method is used by the Excite Entertainment Ltd. company in
order to know the estimated cost of the product or service from the actual cost.
c)
Nowadays in the modern world, the company makes a record of the inventory in online mode i.e.
computerized form. The use of computer in business helps the Excite Entertainment Ltd.
company for making proper monitoring tracking over the use of inventory, controlling and also
helps in checking remaining stock available on a quick basis. The use of inventory in
computerized form, over wastage and overloading of stock, can be removed. Using inventory in
any business, it is a primary stage that make generate profit for the company. This tools and
technique are mostly by those organizations who use inventory on bulk and covering large
business area across the country. The use of inventory in online mode is quite expensive and
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costly as per the capital investment required is more due to as the technology change they also
need to adopt new technology for the proper functioning of the online method. This technique of
maintaining online inventory helps the inventory manager in order to make and produce
inventory report quickly as the management needed. It also enables the company to accelerate its
sales, manager their order in an effective way, end to end encryption (Armenian, and Ardeleanu,
2017).
d)
Job Costing
It is a tool used by the cost management team in order to track the cost of the product or service
during the period of production or providing services to their clients. With the use of job costing
method, it assists the management to maintain a record regarding the cost of each product
whether the product is in work in progress or finished goods. This will also help in maintaining
the company financial statement that is related and relevant for the company business affairs of
activities (Barr, and McClellan, 2018).The direct cost used in production or service are labour
cost, material cost and overhead charges come under job costing as these costs are directly made
impact on the goods and services.
In the below table, it shows various advantages regarded with management accounting:
Sources: By Authors, 2019
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Transparency in cost:
There are many different types of cost used in any business like use by Excite Entertainment Ltd.
company for making goods available for selling in the market or providing services. These costs
help the management for making their future plans and accelerate company profitability through
various methods (shev, et. al., 2015). The aim of cost accounting is attained if only plans are
applied as per accordingly the budgets.
Flexibility:
It must be inflexible nature or it can be said non-rigid able. The reports of the Excite
Entertainment Ltd. company are ready to overview at the end of the financial period and the
purpose of accounting at last time is that to provide enough time to accountants to make and
produce their financial reports.
Efficiency increase:
The increase in company efficiency can be able to target only by making comparisons between
two factors i.e. actual with budgeted plans.
Decisions making process:
The Excite Entertainment Ltd. company uses managementaccounting method due to taking the
benefit of it in their business. The management helps simplify the company information that can
be easily understandable to everyone in the business.
Section B
I)
The Excite Entertainment Ltd. organizationused various managerial accounting reports within its
business operations for providing service to their clients (Bull, et. al., 2016). The company used
the below managerial accounting reports for analyzing the company performance throughout the
year.
Following reports are used in Excite Entertainment Ltd. company
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Sources: By Authors, 2019
Job cost:
The job cost is associated with the cost of goods. It helps in showing the real expenses in the
production of cost. the company used this for analyzing and identifying those areas in business
where the profits can be earned higher.
Budgetreports:
This report of Excite Entertainment Ltd. company used in their business in order to make a
comparison for finding the variance between actual and projected plans.
II)
The information presented in the Excite Entertainment Ltd company financial reports must be
accurate as pre the data, relevant with available data and clear as other persons can be used. The
reason behind that the information is just not only used by the company but also used by the
other persons who have an interested in Excite Entertainment Ltd. If the information inserted in
is good and clear then it will help the management for making their future plans (Koochakpour,
and Tarokh, 2017).
In Excite Entertainment Ltd company, both management accounting and management reporting
provide qualitative and quantitative information and both are associated with each other in many
terms. Integration of management system and management report aims to help the company in
order to collect payment timely and also making accuracy in their department of works for
avoiding any mishappening things on the business premises. All reports like job cost, budget
enables the company to make their decisions as per the company plans and policies
(Koochakpour, and Tarokh, 2017).
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LO2:
Marginal costing system
The marginal costing is just studied only that variable cost because it changes frequently and
depends over the variable cost because the fixed cost is not relevant to the marginal costing as it
never changes over the period. Under this costing system, direct labour and direct material are
variable cost and this charged as per the production of goods whilst the fixed expenses like
premium of property and others of the company are charged against the whole of the expenses
throughout the period of production.
Marginal Costing Amount (£)
Sales
(8000*15)
120,000
Variable cost
Cost of sales
(8000*4)
32,000
Selling & distribution
(8000*2)
16,000
Contribution 72,000
Fixed cost 40,000
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Profit 32,000
The above tableshowsa profit under the method of marginal costing. The management of Excite
Entertainment Ltd. clearly is seen that the company doing well in business and able to earn a
profit of £ 32,000 throughout the time of business from its primary business activities. It displays
to the management that overallprofit is based on the company cost incurring policy (Lopez-
Valeiras, et. al., 2015).
Absorption costing
In the method ofabsorption costing, there was no effect on the profit as the cost was same due to
equal production during the period or providing series especially on occasion time (Lopez-
Valeiras, et. al., 2015).
Absorption Costing Amount (£)
Sales
(8000*15) 120,000
Less:
Cost of sales
(8000*4) 32,000
Inventory Change
(1500*4) 6000
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Gross profit 82,000
Production overhead cost (Fixed) 40,000
Expenses of selling and distribution
(8000*2) 16000
Profit 26,000
From the above table of absorption costing, it has been seen that Excite Entertainment Ltd. is
enabled to generate a good profit by providing good services and products in the market that help
the company to make success. The profit under this costing system is £ 26,000 that earn from the
company primary or main business.
Reconciliation Statement between marginal and absorption costing of Excite
Entertainment Ltd:
Reconciliation Statement £ Amount
Net profit (according to the Absorption Costing) 26,000
ADD: Difference amount (invalue of closing inventory) 6000
Net profit (according to the marginal costing) 32,000
The purpose of making a Reconciliation Statement between themarginal and absorption costing
is to find a difference between these two costing methods. The Reconciliation table of Statement
present profit under both methodsis not the same due to the use of inventory. Another reason for
the difference in profits between these two is that both fixed and variable costs are not taken into
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