Management Accounting Report: Bizdaq Business Analysis

This report provides a comprehensive overview of management accounting principles and their practical application within the context of Bizdaq, a company established in 2015 with less than 50 employees. It begins with an introduction to management accounting, its importance, and different types of systems, including cost accounting and inventory management. The report then delves into various management accounting reporting methods such as budget reports, account receivable aging reports, job cost reports, and income statements. Task 2 explores marginal and absorption costing methods, presenting income statements calculated using both approaches and comparing their differences. Furthermore, the report examines the advantages and disadvantages of different planning tools and provides critical analysis of financial problems. The conclusion summarizes the key findings and their implications for Bizdaq's financial management. The report includes references to support the analysis.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and its various kind of management accounting system ..............1
P2 Various methods of management accounting reporting........................................................2
M1: Advantages of management accounting..............................................................................4
D1: Critical evaluation of reporting system................................................................................4
TASK 2............................................................................................................................................4
P3 Marginal and Absorption costing and calculation of Income statement through these
methods.......................................................................................................................................4
M2: Evaluation of accounting techniques...................................................................................6
D2: Critical evaluation of income statements.............................................................................7
TASK 3............................................................................................................................................7
P4 Advantages and disadvantages of various kind of planning tools.........................................7
M3: Evaluation of planning tools................................................................................................9
D3: Critical analysis of financial problems.................................................................................9
TASK 4............................................................................................................................................9
P5 Two organisation are selecting management accounting systems ........................................9
M4: Analysis of financial problems..........................................................................................12
CONCLUSION ............................................................................................................................12
REFERENCES..............................................................................................................................13
.......................................................................................................................................................15

INTRODUCTION
Management accounting is an effective process of recording, presenting, analysing and
identifying financial information or data. So in this business management can use it for the
control, decision making and planning of them. It is also define as an accounts and management
report preparation tool that give correct statistical data needed by an administrators in order to
take short term and day-to-day opinions (Bebbington and Thomson, 2013). It is very essential
aspect for the company because in this they can interpret and prepare all information that help
business manager in particular judgement making within the better framework of achieving
desire goals and objectives of organisation.
This report is based on Bizdaq, it was established in 2015 and have less than 50 workers
in this enterprise. Annual turnover and sales of this company is £100,000. this assignment
discussed about meaning of management accounting and different types of its system. Various
aspects of management accounting reporting also shown in this study. Planning tools and its
advantages and disadvantage are useful for the company to attain desire objective of them, it is
determined in this project. This project also shown about Managerial and absorption costing
method help the company to determine their annual sales and revenue in appropriate way.
TASK 1
P1 Management accounting and its various kind of management accounting system
Management accounting: It is the process of measurement, identification, analysis,
accumulation, communication, interpretation and preparation of information or data that support
employer in particular judgement making within the effective framework of achieving
organisational objectives (Management accounting, 2018).
Importance of management accounting: It is very important and essential for the
company in order to analysis their annual sales or revenues (Caglio and Ditillo, 2012). With the
help of this tool, company gain accurate and timely information in limited time period. All those
significance are describe under this: Qualitative information: It is one of the important part for the company because this
aspect provides accurate information to them. So in this they can do their all activities
and function in a correct way.
1

 Ongoing training and information: Accounting system is very useful and essential for
the administration of Bizdaq in order to achieve desire objective. It is important for the
business manager to give better training to their workers so they can understand regading
innovatuive activities and policies.
Types of management accounting system: There are different types of management accounting
system which are determine under this:
Cost accounting system: It is best and important kind of management accounting which
is used by Bizdaq in their business operation. With the use of this system, company can analysis
their product cost in an accurate manner (Chenhall and Smith, 2011). It support the organisation
in order to evaluate cost of sales and decrease their extra wastage effectively.
Price optimisation system: It is a mathematical tool which is used by organisation in
order to identify how clients will react to various prices for its services and products through
large number of channels. So it is very useful and beneficial aspect to identify the cost that the
business entity can meet their objectives and gaols such as increasing operating profit.
Inventory management: It is essential system of management accounting which deals
with methodology, finished goods and raw material of company. It is required by each and every
organisation to analysis number of orders, evaluate inventory level and sales of a product. It is
mainly needed by manufacturing industry to control or monitor their production process for
acquiring more profit from their specific resources.
Job costing approach: This kind of tool is critically needed by a business entity, because
it assist them in identifying manufacturing prices related to specific job. Who organisation has to
select this method that could evaluate the cost of specific job and maintain practicability of
business information.
P2 Various methods of management accounting reporting
Management accounting report: It is a beneficial and essential techniques that assists
organisation through determine the practicality of functionality of the company. This tool
prepare the business report about external and internal stakeholders (Christ and Burritt, 2013).
This type of report provide accurate and timely financial data to managers in order to make
short-term and day-to-day managerial judgement. There are different kind of management
accounting methods which are determined under this:
2

Budget Report: It is very useful and beneficial for the organisation in regards to
determine actual performance of business. It is also identify as a collection of internal
information and data which is utilised by administration. It is important for company to compare
their real performance with accurate figures in an effective manner. It is applied by Bizdaq's in
their financial operation to identify the changes in actual and estimate calculation of organisation
(Davies and Crawford, 2011). For example: budget sale of the company is 450 units and accurate
production is 600 units, it will identify that business is not able to utilise perfect tools of
budgeting as well as hence its performance outputs in situation of budget.
Account Receivable Aging report: It is identify as a periodic report which is use by the
companies in order to determine their customers financial position in the company. This report
identifying the amount which is permitted for give recompense on doubtful debts. Company
count made this technique through categorising sales invoices. It is mainly based on clients and
ledger time period.
Job cost report: It is identify as a process of clarifying cost reports which are mainly
related to specific work of organisation. It is used by commercial enterprise in order to assign
costs of particular projects of business organisation. Bizdaq could create this aspect through
developing various parts of activities of capital utilisation. In this they can could sort out all
those activities and plans which consumes maximum funds or capital. Best example of this
reports are selling, production and distribution costs of business entity.
Manufacturing and inventory reports: At three level of production, management
reporting includes inventories values which are whole-selling, retailing and manufacturing. It is
highly needed by business entity because it includes total sales at three level of production. This
kind of report is valuable and essential for manager to do track inventory management in
business entity (Fullerton and et. al., 2014). Company apply this approach in determining
available resources for production activities.
Income statement report: It is essential methods which is follow by the financial
department to evaluate net profit, it is earned in the financial year such as December. It support
business entity in determining its actual execution through comparing previous and current year
statement of income. With the use of this aspect company can identify their financial
performance and profits in a year.
3

M1: Advantages of management accounting
Management accounting is very essential and beneficial for the company in order to
maintain their income and expanses in regular basis. With the use of this, company can maximise
their profitability and productivity in effectively (Herbert and Seal, 2012). It is useful for the
manager to regarding their regular basis transaction in particular and organised way. Due to this,
better opportunities which also acquiring more output in a systematic manner.
D1: Critical evaluation of reporting system
As per the Jansen, (2011) reporting system is very important and essential part of the
company success and development. Different kind of reporting technique are useful for the
business to maintain their daily basis transaction and record.
On the other hand Herzig, (2012) income statement also helpful and beneficial for the
company to keep their income and expanses. Manufacturing report also important for the
organisation to maintain record of inventory effectively.
TASK 2
P3 Marginal and Absorption costing and calculation of Income statement through these methods
Income statement: It is essential and valuable for the business entity in order to analysing
income level. This approach which assist in making loss and profit account of the company in a
proper manner. Main aim and objective of management accounting is to make correct reports in
an essential manner.
Marginal costing: It is a approach of management accounting which is valuable for
organisation in order to take fixed income on the regular basis. It is beneficial in decreasing
production cost and maximising additional unit of cost in an effective manner. It is valuable
approach where the variable and fixed cost is imposed for specific time.
Absorption costing: It is identify as a traditional method which is useful for the company
in order to measure net income and product cost in a perfect manner (Herzig and et. al., 2012).
Main advantage of applying this tool is to show their real income and expanses effectively. In
this technique different points are considers such as direct material, wages, labour etc. All this
aspects are includes in the production manufacturing process.
Difference between Absorption and Marginal costing
Basis of comparison Marginal costing Absorption costing
4

Meaning It is identify as an activity of
decision-making and technique
for insuring entire production
cost (Jansen, 2011).
Meaning of absorption costing
is define as an entire
production cost, it is calculate
in a correct way.
Cost recognition In calculation of marginal
costing, variable cost is mainly
considered while fixed cost is
included as period of time.
In this tool, both cost are
included such as variable and
fixed as a type of product cost.
Classification of overheads. In measurement of marginal
costing overheads are divided
into variable and fixed cost.
In calculation of absorption
costing, overheads are
classified into selling,
administration, distribution
and production cost.
Profitability Difference in the closing &|
opening stock never effected
the cost of per unit output.
Difference in the closing and
opening stock influences the
cost per unit (Li and et. al.,
2012).
Highlights In calculation of the marginal
costing contribution per unit is
mainly highlights.
In measurement of absorption
costing, net per unit is mainly
highlights in an effective
manner.
Cost data Presented to outline net
contribution of all product and
services.
In calculation of absorption,
cost data is presented in a
conventional way.
Net profit calculation on the basis of marginal costing
Per unit
price(£) No. of units Amount(£) Amount(£)
5

Sales revenue 35 600 21000
Less: Marginal cost
Direct materials -6 600 -3600
Direct labour -5 600 -3000
Variable production Overhead -2 600 -1200
Variable sales overhead -1 600 -600
-8400
Contribution 12600
Less: Fixed overhead
Production overhead -2000
Administration cost -700
Selling cost -600
-3300
Net Profit 9300
Net profit on the basis of Absorption costing
Per unit price(£) No. of units Amount(£)
Amount
(£)
Sales revenue 35 600 21000
Less: Cost of Production
Opening Stock Nil
Cost of goods Produced(700*16) -16 700 -11200
Less: Closing Stock(100*16) -16 100 -1600
-9600
Gross Profit 11400
Less: Selling and Administration
cost
Selling and Administration cost per
unit(1300/600) -2 600 -1200
6

Sales Overhead -1 600 -600
-1800
Net Profit 9600
Interpretation: Above this information there are basic two kind of cost calculation such as
absorption and marginal cost. Overheads and fixed cost are does not reasoned while measuring
the product cost according to absorption costing. Outputted that the net profit by calculation of
marginal costing is £9300 and absorption cost is £9600. In this fixed cost are administration,
selling and production are impacted the profit ratio of company.
M2: Evaluation of accounting techniques
According tool help the company in order to evaluate as well as achieve desire objectives
and targets with perfect strategies and planning (Nixon and Burns, 2012). For achievement of
effective aim, need of business is to utilise correct tools which can assist them in achieving those
objectives. In the company, there are large number of issues which are face by the manger, so in
order to overcome all problem they use better tool. Both technique's such as absorption and
marginal costing help company to identify their net profit and income on regular basis.
D2: Critical evaluation of income statements
As per the Herzig, (2012) income statement is valuable and essential for the company to
make their regular basis transaction in an appropriate manner. This statement show the
calculation of net profit by using absorption costing is £9600. It is good for them in achieving
desire objectives and goals in limited time period.
On the other hand Otley, (2016) marginal costing also help them in identifying total sales
and revenue of business entity in certain time period. In measurement of net profit, this type of
methods help in quickly calculating profit which is £9300.
TASK 3
P4 Advantages and disadvantages of various kind of planning tools
Budget: It is a part of product cost and value which is allotted in certain ways of Bizdaq
development and success after measuring future revenue or expenditure which is important in
order to receiving desire goals and objectives effectively (Otley, 2016). Budget is forces manager
7

to determine business situation in marketplace that change working environment and encourage
to determine4 problem before occurring.
Budgetary-control: It is best and essential tool and technique for the each organisation in
order to control their annual based budget in an effective manner. In this manager of the
company needs to set up better standards for regular basis (Budgetary control, 2016).
Thenceforth, it will be compare the actual and real performance of the company in the
marketplace. It is mainly required by the business administrator in regards to identify their
performance and profitability in comparison to another organisation (Tucker and Lowe, 2014).
With the use of this tool, manger can also analysis their necessary resources in an effective and
systematic manner.
Process of budgetary-control: In order to control annual budget of the company,
manager use to apply budgetary process which is helpful for organisation. In this different phase
are includes which are determine under this:
Consult with business administrator: In regards to attain long term objectives and targets
of company, manager require to enquire with each other as well as decide expenses and cost of
budget which is needed by the business department.
Do great or effective assumption: In this process, manager of various department require
to make effective assumption or premise on the form of gathering feedback and comment to
ignore future losses.
Fixed data of budget to achieve goals and objectives of an organisation: In this stage,
manager of the company can plan in order to make effective plan as per the standard (Quinn,
2014). So in this they needed to gather data or information from various division which support
in attaining long term goals and objectives of company.
Calculation of data and information with budgeted: In this phase, business organisation
compare their real data or information with the standard information. In this Bizdaq manager
evaluate their all performance in minimum time period. So this will support them in acquiring
opportunities of future development with the uses of limited resource.
Review analysis: In this step, manger review all process which is followed in an effective
manner. In this need of the administrator is to implement corrective calculation as possible to
carry positive outcomes.
8

Forecasting technique's: It is identify as a utilisation of foregone data or information to
direct upcoming activities (Renz, 2016). So it is defines as forecasting is complete as per the
knowledge, skills, quality and behaviour of administration which are needed in handling all
activities in future.
Advantages Disadvantage
This technique support the business entity to
determining desired goals and targets. So with
the help of this, employer can predict sales
amount which are attaining in future time.
This tool make exact performance relating to
business expenses which are incurred by
organisation in future period. It will make
negative effect of the business profitability and
effectiveness.
Scheduling planning tool: This is also important technique which is used by the business
manager in an effective manner. It is support the administrator through operational, functional
and planing management to analysis alternative facts as per the business requirement.
Advantages Disadvantage
It support the employer in acquiring innovative
ideas and plan regarding execution,
opportunities and selection which is risky.
This technique consume maximum time period
as well as getting low result which is not good
for the company.
Contingency planning tools: With the use of this technique, manager of the Bizdaq
can face difficult situation to attain long term goals and objectives in an
efficient manner (Richardson, 2012).
Advantages Disadvantage
It is one of the best and beneficial technique
which is apply by the company in saving their
cost.
In complex situation, it is more complicated
for the organisation in order to achieving
desire goals and objectives.
M3: Evaluation of planning tools
All planning tool are useful for the organisation to plan effective strategies and policy in
order to achieving long term goals and objectives in certain time period. Forecasting, Scheduling,
and Contingency planning, all these have advantages and disadvantage which influenced on the
9

business performance in a positive and negative manner (Ter Bogt and van Helden, 2012). With
the use of all tool, company improve their profitability and productivity in certain period.
D3: Critical analysis of financial problems
As per the Christ, (2013) In the company there are large number of the financial issue
which is face by the company and its manager in daily basis. Financial problems like financial
resources, cash inability and short term liabilities, these are effects the
business performance in an effective way.
On the other hand Burritt, (2013) financial issues may be cause a big
problem which decrease effectiveness and efficiency of the organisation in
an negative way.
TASK 4
P5 Two organisation are selecting management accounting systems
There are certain challenges which are being face by an organisation
and among those most essential is financial problems. Bizdaq have certain
aims and objectives which needs to be attained but if there are issues
related to the finance then many difficulties arises and thus resources are
not being optimised as it needs to be (Van der Stede, 2011). Problems like
financial resources, cash inability and short term liabilities. Thus, this is the
major job of managers to determine such issues which are related to the
finance so that their position can enable them to deal with those kind of
situations and that will be done through applying effective crucial plans and
strategies so that long term plans can be attained for long term stability and
profitability. There are certain tools and techniques which are being utilised
for evaluation and upgrading them so that effective and positive result can
be obtained and thus competitive advantage can be gained. Causes behind
occurring of such financial issues should be determined by the managers
and thus corrective steps needs to be taken so that betterment in the
environment of Bizdaq can be seen (Weißenberger and Angelkort, 2011). Reason
behind occurring is that there are some errors which happen while
conducting the financial records and misinterpretation in the details of
10