Management Accounting Report: INWIDO Case Study and Analysis

This report provides a comprehensive overview of management accounting, encompassing its principles, various accounting systems (including cost-accounting, inventory management, and job-costing systems), and the functions of a management accountant. It explores the role of management accounting systems in compiling and designing financial information, and the different types of reports such as performance, inventory management, and accounts receivable reports. The report delves into various costing techniques, including cost-volume-profit analysis, flexible budgeting, cost variances, absorption costing, and marginal costing. It includes income statements prepared using both marginal and absorption costing methods, along with a case study of INWIDO, a window and door supplier. Furthermore, the report presents financial statements (income statement and balance sheet) and concludes with a ratio analysis focusing on gross profit and liquidity ratios for the years 2016, 2017, and 2018. The analysis is presented in a PowerPoint format for easy understanding.

Management Accounting

Introduction
Management accounting principle
Types of accounting system
Function of management accounting
Role of management accounting system
Types of report
Various types of costing techniques
Financial statement
Income statement
Conclusion
Reference
Table of Content

Introduction
Management accounting principle
Types of accounting system
Function of management accounting
Role of management accounting system
Types of report
Various types of costing techniques
Financial statement
Income statement
Conclusion
Reference
Table of Content

Introduction
 Management accounting is defined as the process of forecasting and
decision making that support to run business in effective manner.
 It is the method of preparing annual reports and statements that help to
give accurate and timely financial information to internal manager of
company
 Meaningful decision are taken for the improvement of company
performance.

Management accounting Principle.
 Principle of management accounting:
 Principle of exception
 Principle of Inflation
 Principle of utility
 Principle of integration

Types of management accounting system
Cost-accounting systems
Inventory management systems
Job-costing systems
Price-optimizing systems

Function of management accountant
 Compiling financial statements
 Performance financial calculation
 Assisting with the preparation of budgets
 Giving Financial Advise

Role of management accounting system
 Designing and compiling: It is described as accounting substance,
evidence and other information of foregone time that should be planned
and merged to meet the necessitate of specific business concern and
fiscal problem.
 Control at sources accounting: Expenditure are termed as additional
cost that is essential controlled that have been appeared during an
accounting year.

Types of Report
 Performance report: It is the part of communications management
plan. Basically its related to work performance, analyzing it.
Inventory Management Report: It is essential to manage inventory stock
as accurately and optimally. it helps to allow the discover trends,
identify weaknesses and strengths, fill the gaps and efficiencies.
Account Receivable Report: An accounts receivable report includes lists
of unpaid customer invoices and unused credit memos by date range.
The aging report is the primary tool used by collections personnel to

Various types of costing techniques
 Following are the major costing techniques commonly used to
determine cost and efficiency of production for the company as follows:
 Cost volume profit (CVP):
 Flexible budgeting:

Continue…
Cost variances:
Absorption costing:
Marginal costing:

Income statement (Marginal costing method)
About Company: INWIDO is the largest supplier company that is dealing in windows and
designer doors in Europe. It focuses on customer's demands and expectation and provide
that kind of products which customers wants. This owns and develops companies that
helps to improve people's indoor lives by providing huge number of designer products and
services. Manager of INWIDO company focuses on improvement in people life at home
and increase profit margins by providing products at reasonable prices.
 Working 1: Calculate variable production cost £
 Direct material cost 8
 Direct labour cost 5
 Variable production O/h 2
 Variable production cost 15


 Working 2: Calculate value of inventory and production
 Opening inventory Production Closing inventory

Continue…
Net profit using marginal costing ￡ Amount £Amount
Sales value
Less: Variable costs
Stock at the beginning
Cost of production
Stock at the closing
Variable sales overheads
Contribution
Less: Fixed costs:
Fixed Production overheads
Fixed Selling overheads
NIL
30000
(7500)
15000
10000
52500
(22500)
(7875)
22125
(25000)
Net loss -2875

Income statement (Absorption costing method)
 Absorption costing working notes
 Working Note 1: Calculate full production cost
 Direct material ￡ 8
 Direct labour ￡ 5
 Variable cost ￡ 2
 Fixed cost ￡ 5
 Total ￡ 20
 Working Note 2: calculate value of inventory and production
 Opening inventory Production Closing inventory
 0 2,000*20 = £40,000 500*20 = £10,000
 Working Note 3: under/ over absorbed fixed production overhead
 Actual fixed production: ￡ 15000
 Fixed overhead: ￡ 10000

Continue…
Net profit using absorption costings 2017-18
£Amount 2017-18
£Amount
Sales value
Less: Cost of Sales:
Opening stock
Cost of production
Closing stock
(Under)/Over absorbed fixed prod. O/h
Gross Profit
Less: Selling Expenses
Variable sales expenditure
Fixed selling expenditure
NIL
40000
(10000)
7875
10000
52500
(30000)
(5000)
17500
17875

Financial Statement (Income statement )

Financial Statement (Balance sheet)

Continue…

Ratio Analysis
Gross profit ratio Gross profit/ sales *100
Gross profit ratio
(2016)
Gross profit/ sales *100 454,300/798,600*100 56.887
Gross profit ratio
(2017)
Gross profit/ sales *100 525,100/911,700*100 57.595
Gross profit ratio
(2018)
Gross profit/ sales *100 608800/1,019,900 59.692

Ratio Analysis
LIQUIDITY
RATIO
Cash+ marketable security+ accountable
security/ current liability
QUICK
RATIO (2016)
Cash+ marketable security+ accountable
security/ current liability
259,100+145,800
/294,900
1.37
3
QUICK
RATIO (2017)
Cash+ marketable security+ accountable
security/ current liability
308,200+148,200
/323,200
1.41
2
QUICK
RATIO2(018)
Cash+ marketable security+ accountable
security/ current liability
369,300+174,000
/362,800
1.49
7

Conclusion
From the above power point presentation it has been concluded that,
management accounting is a process of that involves partnering in
management decision making and controlling business in effective manner
so that performance, profitability and productivity of company can be
improved.

References
 Hopper, T. and Bui, B., 2016. Has management accounting research
been critical?. Management Accounting Research. 31. pp.10-30.
 Lavia López, O. and Hiebl, M.R., 2014. Management accounting in
small and medium-sized enterprises: current knowledge and avenues
for further research. Journal of Management Accounting Research.
27(1). pp.81-119
 Leitner, S., 2013. Information Quality and Management Accounting: A
Simulation Analysis of Biases in Costing Systems (Vol. 664). Springer