Management Accounting Report: Techniques, Benefits, and Planning Tools

This report on management accounting provides a comprehensive overview of the subject, covering key concepts, techniques, and their application within an organizational context. It begins with a definition of management accounting, its various types, and reporting methods, emphasizing its role in managerial decision-making, performance measurement, and financial planning. The report then delves into specific techniques such as marginal and absorption costing, illustrating their application through calculations and interpretations. It further explores budgetary control, examining the advantages and disadvantages of different planning tools like zero-based, top-down, and activity-based budgeting. The report concludes by discussing the adoption of management accounting systems to address financial problems and promote organizational growth, highlighting the integration of management accounting reports and systems within Jupiter Plc to achieve its objectives and gain competitive advantages. The report includes financial statements, cost analysis, and planning tools, providing a detailed understanding of how management accounting contributes to effective business operations and sustainable success.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Meaning of management accounting and different types of management accounting systems. 1
different methods of management accounting reporting........................................................3
Benefits of management accounting system with organisational context..............................4
Integration of management accounting system and management accounting report in
organisational process............................................................................................................5
TASK 2............................................................................................................................................6
a.) marginal costing................................................................................................................6
b.) absorption costing.............................................................................................................6
TASK 3............................................................................................................................................9
Advantages and disadvantage of different types of planning tools used in budgetary control9
Use of different planning tools for preparing budget ..........................................................10
TASK 4..........................................................................................................................................11
Adoption of management account systems to responds to financial problems of the
organisation..........................................................................................................................11
Factors which leads to develop organisational growth by use of management accounting 12
Response of planning tool for solving financial problems in achieving sustainable success13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is the term which is used in decision making to managers with
the provision of financial and non-financial accounting. This present report will cover definition
of management accounting with its essentials requirements, its different methods and its benefits.
Further, in this report calculations is to be provided of management accounting techniques.
Different types of planning tools in budgetary controls and also for preparing forecasting budgets
explanations are to be provided in this report. Further, in this report adoption of management
accounting to solve financial problems is to be discussed.
TASK 1
Meaning of management accounting and different types of management accounting systems
Management accounting is the process of recording accounting information which is used
by managers before they take any decision for organisation operations. Management accounting
used to measure performance and functions of day to day activities of business organisation
(Woodruff, 2018). Therefore, it helps management to perform activities like planning,
organising, staffing, directing and controlling.
`different types of management accounting systems
To measure financial information and regular activities of the company, management accounting
is created. Different types are as follows-
 scope
To measure typical financial data of the organisation management accounting used in all the
departments of the organisation. Departments may be finance, IT, marketing, human resources,
operations and also sales.
 Product costing
Management accounting also used to identify actual costs, profits and also cash flow of goods
and services of the organisation. Main motive to create management accounting is for product
costing. For allocating overhead expenses to drive true cost of products this accounting is
developed by managers.
 Cost analysis
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To identify actual cost from results of the operations, executives use this performance report
(Nishimura, 2018). This is also known as variance analysis accounting which used to measure
non-performing areas of the organisation.
 Constraints analysis
Another importance for developing management accounting is to analyse workflow of the
production process and sales process of the organisation. Therefore, to prevent obstacles or
constraints this management accounting is prepared.
 Trend analysis and forecasting
Management accounting is created by organisation to overlook the future of the organisation. For
forecasting future managers will use trend lines in their accounting process which includes
budgets, administrative expenses etc.
different methods of management accounting reporting
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Financial reports- this are considered as most important part of measure overall performance of
the organisation. Under, this reporting process different statements are prepared by company
which include statement of profit or loss, balance sheet etc. therefore, management accounting is
also prepared by company to measure net worth of the company.
Cash flow- under this management accounting measurement is created about amount of money
which comes and out from organisation. Therefore, this managerial accounting used to measure
month by month summary of overall income and fund of the organisation
Sales report- to measure the revenue of the company this sales report is prepared by
organisation (Gartenstein, 2018). This report measure which business activities are created
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Illustration 1: scope of management accounting
(source:Types of Managerial Accounting Reports, 2018)

higher earning in organisation. Basis of this report is to generate activities which are performing
higher and the activities which are not performing less in organisation.
Cost reports- this is the another reporting method to analysis the areas in which business is most
profitable. It also shows the amount which has spent during conducting business operations in
each categories of business. Items covered under this report is labour, material and also other
expenses of the organisation and their contribution for different types of earnings. This report
will also provide net profit as per category of the item of organisation.
These are the methods of management accounting reports which prepared by organisation
to measure overall performance and profitability of the organisation.
Benefits of management accounting system with organisational context
Management accounting has various benefits as it helps to measure overall performance
of the organisation (Christ and Burritt, 2017). Therefore, different benefits with Jupitor Plc
organisational context are as follows-
It helps in increasing efficiency of the company
Management accounting adopted by organisations because it increases overall efficiency of the
business operations. Management accounting is the process to develop better performance of the
company by comparing and evaluating business operations. Therefore, it also helps to motivate
employees morale by which needs gets fulfilled.
It increases the lines of profitability
Capital budgeting and budgetary controls are the parts of management accounting. These
methods used to eliminate extra expenditure of business operations so that cost get saved.
Therefore, this process helps to increase lines of profits in organisation which helps to reduce
price of products.
It simplifies decision making process
Management accounting helps to develop effective decision by analysing financial statements of
the company. It also creates interpretation of the regular business transactions of the company.
This accounting simplified financial statements by which appropriate decision developed by
managers of the company.
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Cost transparency
Management accounting works closely with IT department of the company because majority of
cost come from that department only (Otley, 2016). Therefore, to develop effective budget in
organisation this accounting provides cost transparency to company.
Flexibility and freedom
Nature of management accounting is flexible as this not require to made with particular period of
time. Therefore, this reports made with enough time which gives accurate performance of the
company.
Helps to achieved goals of organisation
Management accounting provides a detailed information of company's performance which helps
company in developing effective decisions by which organisational objectives get achieved with
the long term success.
Integration of management accounting system and management accounting report in
organisational process
Jupiter Plc has integrated management accounting report and system to achieved business
performance effectively. By doing integration company will able to develop effective decision
which helps them to achieve overall business objectives. Firstly, this management accounting
system helps organisation in increasing overall efficiency of the company. These increase in
efficiency helps them to perform their performance by which they will able to gain competitive
advantages in business market. Management accounting is best known for flexibility accounting
therefore these helps them to prepare accounts with enough process of time.
Jupiter Plc organisation process also gets improved after integrating management
accounting system and management accounting report when by comparing their statements
company's lines of profitability increases (Hieu and Dung, 2018). This comparison is done by
making capital budgeting and also with budgetary control of the organisation. These methods
help Jupiter in reducing their extra expenditures of the company.
This integration also provides cost transparency in products of the company by which
they will able to decide the price of the goods and services of the company. By calibrating with
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IT department company will able in developing effective budget for business operations. Further,
this also helps organisation in simplified decision making process by interpreting financial
statements of the company. Overall impact of this integration between management accounting
system and management accounting report is that Jupiter Plc is able to achieve its organisational
objectives and also will able to develop effective strategies by which future needs and goals of
the organisation achieved from business market.
TASK 2
a.) marginal costing
Marginal costing
Income statement for Sep 2018: Budgeted
Budgeted
Particulars Per unit
(in £)
Figures (in
£)
Total (in £) Per unit
(in £)
Figures
(in £)
Total (in
£)
Sales revenue 50 800000 50 800000
Cost of
production
DM expenses 10 180000 10 190000
DL expenses 20 360000 20 380000
VOH expenses 5 90000 5 95000
35 630000 35 665000
Opening stock 0 0
Less: Closing
stock
70000 105000
Less: COGS 560000 560000
Contribution 240000 240000
Less: fixed
overhead
100000 100000
Profit in the
month of
September
140000 140000
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b.) absorption costing
Absorption costing
Computation of unit cost
Particulars Figures
(in £) Figures (in £)
Direct labour (DL) 20 18000 * 20 = 360000
Direct material (DM) 10 18000 * 10 = 180000
Variable overhead (VO) 5 18000 * 5 = 90000
Fixed overhead (FOH) 5 18000 * 5 = 90000
Total manufacturing cost per unit 40 18000 * 40 = 720000
Budgeted profitability statement
Particulars Per unit (in £) Figures (in £) Total (in £)
Sales 50 800000
Cost of
production
DM 10 180000
DL 20 360000
VOH 5 90000
FOH 5 90000
720000
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Beginning
inventory
0
Less: Ending
stock
80000
Less: Cost of
goods sold
(COGS)
640000
Gross Budgeted
profit
160000
Less: Under
absorption
10000
Net standard
profit
150000
Actual P&L
Particulars Per unit (in £) Figures (in £) Total (in £)
Revenue 50 800000
Production cost
Material 10 190000
Labour expenses 20 380000
Variable
overhead
5 95000
Fixed overhead
or expenditure
5 95000
40 760000
Stock at the
starting of
month
0
Less: Stock at
the ending of
120000
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September
Less: COGS 640000
Standard profit 160000
Less: Under
absorption
5000
Budgeted profit 155000
Interpretation: from the above table, it is interpreted that as per marginal costing profit for the
month of September is 1,40,000 and as per absorption costing profit net standard profit is
1,50,000 and budgeted profit is 155000. For Jupiter plc company it is profitable for them in
adopting absorption costing method in calculating profits of the firm.
TASK 3
Advantages and disadvantage of different types of planning tools used in budgetary control
Planning tools used by organisation to manage organisational plans, goals and also to
forecast company's overall budgets. This planning tools overall helps in achieving organisational
objectives. Different budgetary tools are zero-based budgeting, top-down budgeting and activity
based budgeting.
Advantages and disadvantage of zero-based budgeting
 Profit centre- which means that it helps in properly allocating resources of the
organisation by which overall profitability increased in the organisation. This results in
generating high amount of revenues by which funding will appropriately generate in
organisation (Chenhall and Moers, 2015).
 Detailed information- it provides information which is in detail therefore business gets
save from reducing errors of the organisation. Therefore, these method helps to look
closely business process and operations in achieving goals.
 It does not focus on cost centres- this method does not generate immediate profits and
also does not encourage for the funding. This effect long term profitability of the
company which is not good for company's health.
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 Too complex- it need detail information for the analysis which make complex for
managers in developing budget for organisation.
Advantages and disadvantage of top down budgeting
 Financial control- it helps managers in providing detailed information of financial needs
of the company. It provides decision regarding factors which provide positive impact of
finance in company. Therefore, it is used by managers in maintaining financial budget of
the organisation.
 Accountability of staff- to develop greater financial accountability and for comparing
more product this method is the best suited to achieve this factors. In this method of
budget certain budget is provided to workers in performing their job role.
 Inaccurate forecasting- this sometimes create an over funding because understanding of
financial needs will only be better when it runs under a flow of management. Employee morale- it decreases employee morale when resentful input is not valued in
budgeting process. Therefore, this method is not suitable for financial issues.
Advantages and disadvantage of activity based costing
 Accurate product cost- this method provides an accuracy and reliability of company's
products. In determining overall cost determination this method is beneficial for
organisations.
 Track activities for cost object- this method helpful in recognising activities which is
within and beyond control of organisation (Novas, Alves, and Sousa, 2017). Therefore,
this method provides an information related to cost activities of the company.
 High implementation cost- to implement activity based costing this method will not
prove to be best because wastage of overheads occur most in this method. Also it
required huge time to develop this method in organisation.
Use of different planning tools for preparing budget
Planning tools as discussed above are activity-based budgeting, zero-based budgeting and
top down budgeting. Jupiter Plc apply this method to develop effective budget for organisation
activities. Their use are as follows-
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