Management Accounting Report: Strategies for 4com plc Improvement

This report, prepared for 4com plc's General Manager by a Management Accounting Officer, explores the application of various management accounting tools to improve the company's operations. The introduction highlights the role of management accounting in collecting and utilizing financial and non-financial information for decision-making, emphasizing its importance for sustainable development and competitive advantage. The report delves into specific tools such as cost accounting systems, inventory management, and job costing, detailing their functions and advantages. It also examines different reporting systems, including performance, operational, job cost, inventory management, and accounts receivable reports, highlighting their significance in strategic planning and performance evaluation. The report emphasizes the importance of understanding both the advantages and limitations of these tools for effective implementation, and it concludes by reinforcing the importance of financial data and reporting in achieving organizational goals. The report also presents various costing methods like absorption costing and marginal costing, with a comparison between them.

MANAGEMENT
ACCOUNTING

Table of Contents
From: Management account officer.................................................................................................1
To: General Manager.......................................................................................................................1
Subject: For improving the management operations of the 4com plc. ...........................................1
INTRODUCTION...........................................................................................................................1
P1.................................................................................................................................................1
P2.................................................................................................................................................4
M1...............................................................................................................................................5
D1................................................................................................................................................5
P3.................................................................................................................................................5
M2...............................................................................................................................................7
D2................................................................................................................................................7
P4.................................................................................................................................................8
M3...............................................................................................................................................9
D3................................................................................................................................................9
P5...............................................................................................................................................10
M4.............................................................................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

From: Management account officer
To: General Manager
Subject: For improving the management operations of the 4com plc.
INTRODUCTION
Management accounting used by the managers of company to collect accounting
information and decisions are taken by them according to that. This helps the management of
company to improve the performance of company and control different functions. Management
accounting is the provision used by company for financial and non-financial decision making.
Management accounting is the main tool which is used by the firm in order to get sustainable
development. with the help of management accounting tools, 4com plc can processed their input
in an effective manner. Under this report, diverse management accounting tools, and their reports
are used in order gain the competitive advantages over the rivals (Management Accounting,
2017). Various budgetary tools are used under this and their uses for gaining firm’s pre-set
objectives. Although, various financial problems are addressed in an effective manner so that the
management can overcome these problems by applying various management accounting tools.
But, before going to implement MA tools, there is a need to know about their advantages and
limitations so that management account officer can take optimum benefits.
P1
Management accounting is the process which is used by each organization in order to
attain its pre-set targets. However, for applying such tools, each company needs to appoint
skilled staff so that they could implement in an organization. This will provides the different
types of data to the mangers of company so, they can manage the different departments and
employees of company according to that. This helps the managers of company to improve the
performance of different departments by use effective methods and strategies which helps in
optimum utilisation of given resources (Jalaludin, Sulaiman and Nazli Nik Ahmad, 2011). This
helps the manger of company to make the budgets for different departments according to their
1

needs and provides the resource as per actual requirement. Management accounting is the
process of measuring, knowing, assessing and communicating finance related information in the
pursuit of the firm’s objectives. This is also known as the cost accounting.
The major difference between the management accounting and financial accounting is
that the information of MA is used in the firm for help managers in a firm so that they could take
decisions in an effective manner. While on the other hand, financial accounting information is
relevant to the diverse stakeholders who are directly or indirectly concerned to the firm’s
performance. The management accounting information helsp the manager and the top level
authority to regulate the expenditures and able to optimize the firm performance. The process of
making management accounting reports are that this offers to the firm accurate and timely
information to the external parties and also satiate the needs of manager. There are so many tools
of management accounting few of them are discussed as follows:
 Cost accounting system: This is the system which is implemented by the firm to know
cost of its goods for stock valuation, profitability evaluation, and cost control. Under cost
accounting system, allocation of cost is executed either on the basis of ABC system or
traditional costing approach. This is the costing system which determines the cost as per
the pre-set costing methods. By using this method, company can lower the costs by
eliminating wastage of costs from the cost of production (Carenzo and Turolla, 2010).
This can be said that the company can attain the pre-set targets in an effective manner by
applying this technique. This system would separately assess and record the costs and
after assessing the costs compare inputs results to the actual outcomes to support
management of the firm. the managers are totally depends such costing data in common
and specific on cost as any task of the firm might be elaborated through its costs. This
2

system is observed that the management accounting offers the analytical tools such as
budgetary control, marginal costing, operational related costing, standard costing,
inventory control and others which are implemented by the management for discharging
their operations in an effective manner.
 Inventory management: This is the inventory management tool which is used by the
firm specially by the manufacturing firms for controlling and overseeing the ordering, use
and storage of stocks which are going to be implemented for making the final outcome by
the firm. this system is used by the firm for effective application of inventory (Gates, and
Germain, 2010). Although, this can be said that the company needs to apply this so
effective within the firm so that the working capital can be used by the firm so
effectively. By implementing this, management of the cited firm could have effective
tracking of quantities throughout the stocking location, manager would have detailed and
be capable of forming effective inventory inventory decisions. As, this is rightly stated
that inventory is one of the crucial assets in the firm.
 Job Costing system: This is one of the management accounting system which is used by
the firm for allocating production costs to the individual costs for the individual product
or batch of the goods. This is implemented if the products processed are diverse from
each other. This contains the practice of gathering data on the costs connected to a
specific product. The information could be required to be submit cost data to a consumer
within the costs could be refunded. In addition to this, these information are crucial for
assessing the adequacy of forecasting system of the company which must be capable of
quoting prices which enables for a reasonable income. Such information might likewise
be implemented to assigning inventorial costs to processed goods. This approach of
3

management accounting needs gathering of labour, direct materials and overheads
(Carenzo and Turolla, 2010).
P2
There are so many ways or methods which are used by the firm for enhancing the
profitability. However, this can be observed that the company needs a sound reporting system
that could records its each at every transaction done by the firm at that time. This is formed by
getting support direction from financial statements. With the help of this, company could use
effective available resources in an effective manner so that the business can get the maximum
advantages in an effective manner. The management of the 4com plc needs to make certain
decisions so that the management of the cited firm can effectively utilise their resources. With
the help of management accounting reports, firm can make strategies regarding to the
performance appraisal. The data gathered for the aim of making reports are collected from the
financial and the non-financial resources. After gathering the data, they are firstly assessed by
implementing adequate tools prior posting it to the books of accounts. This is essentially
required to do so as this overcomes the mistakes and frauds. Data is required to gathered from
diverse department which are working for the similar objectives (Nielsen, Mitchell and Nørreklit,
2015). For getting the more information, then the company's manager is required to have more
reports so that sustainable development can be done. The future investment is relied upon these
reporting system under which brand vale of the firm is totally relied. There are so many reporting
system which could be implemented by the firm. Few of them are as follow:
 Performance reporting system: as per this reporting, this is essential
information about firm past and existing year performances are recorded. This can
be seen that by implementing diverse statements. This is crucial report as future
investment decisions are interpreted if performance of firm is sound enough in a
past few years.
 Operational reporting: This is the kind of report which is used by the firm in the
manufacturing process (Bagautdinova, Kundakchyan and Malakhov, 2013).
However, this can be said that the company needs to identify actual costs occurred
by the firm at the time of period. This is mostly connected with inner reporting.
4

 Job cost reporting: Such reporting system covers of those costs that are charged
over the material, labour, and other manufacturing overheads. This is an efficient
tools which are used by the firm to track actual costs incurred on a particular jobs
and assess to critically, if these costs could be managed in a job activity.
 Inventory management reporting: This is required to be known as an efficient
elements of supply chain which indicates flow of goods from producer to ultimate
consumer. With the help of inventory management system, company's manager
implement its resources in an effective manner so that the business can get its pre-
set objectives. This is concerned to the tracking of products, billing records,
supplier information and delivering data.
 Account receivable report: This is known as list of non-paying consumers
invoice. With the help of this, manager could track their debtors and effectively
used their resources. This is the main tool which is used for gathering of due
amount.
M1
Management accounting tools have various advantages which are going to be applied by
the firm in order to assess the performance of the firm. This assist the firm's managers to gain the
positive outcomes by using the available resources (Jalaludin, Sulaiman and Nazli Nik Ahmad,
2011). For such aim, they are required to implement diverse management accounting tools which
would assist them to meet out their long term objectives. As these management accounting tools
helps the firm to maximise their profits in an effective manner.
D1
An effective outcome is achieved by implementing adequate financial data which could
assist the firm to plan their future targets. For such purpose, reporting is said to be the useful
tools under which firm's decisions is based. Financial reports are made by implementing
essential information which are based on the existing and previous year performance. This is
implemented by investors for making effective capital investment plans.
P3
Costing is the term use to evaluate aggregate sum of capital contributed on the generation
of merchandise and ventures. It is straightforwardly related with material, work and overheads
5

that are utilized while creation. It is for the most part known as monitory esteem that compress
with endeavours and assets use by chiefs so as to convey quality items to its clients ( Gates,
Nicolas and Walker, 2012). It comprises of variable costs that adjust with every unit create.
These are prompted as immediate cost. In monetary bookkeeping there are different costing
techniques are utilized as a part of request to acquire most extreme benefit and manage a
splendid future for the organization.
Absorption costing: Under this the whole the cost which are related to the production of
goods irrespective of fixed or variable costs. All the cost which are related to the manufacturing
of goods are covered under this. And this is presumes to be the most effective tool for calculating
the profits of the firm.
Marginal cost: the marginal cost is the tool which is used by the firm for ascertaining the
profits. However this can be said that under this costing tool, only variable cost is to be
considered for calculating the contribution of the firm. This is the most effective tool for
calculating the profits of the firm. Although, this can be seen that the company can attain the pre-
set targets by maximising the cost of the firm. There is a need to make certain
there are few of the differences. Which are mentioned as under:
Absorption costing Marginal costing
Fixed costs are also covered in the cost of
production of the product.
Assessment of fixed costs are measured via
period costs.
Cost data is reflected by implemented
conventional pattern. Net profit is measured
after reducing fixed costs from variable costs
(Bennett, Schaltegger and Zvezdov, 2011).
As per this method, contribution per units is
determined.
If there is any deviation in opening and closing
of stock which would impact the costs of
production.
If any deviation occurred in opening and
closing of inventory which does not impact the
units of production.
Costing overheads covers at the time of
calculation of absorption costs.
Expenses which are related to selling and
distribution are taken as critical part.
Calculation by using marginal costing
Particulars Amount
6

Sales 35*500 17500
Less:
Production cost 6+5+2 - 7800
Closing stock: 100*13 - 1300 -6500
Contribution 11000
Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
Total Profit / Loss 7500
Computation through Absorption costing
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
Less:
Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
M2
There are so many factors which influence the profitability of the firm. Such kind of tools
are connected with the internal and external factors (Cullen, Tsamenyi, Bernon and Gorst, 2013).
In order to lapse these, managers implements diverse tools in order to attain the pre-set
objectives of the firm. Some of them are: microeconomic tools which are connected with the cost
volume profits, flexible budgeting and cost connected variances. By implementing these tools in
firm operations at each issues could be resolved.
7

D2
From the above-mentioned financial information is taken as on assumption basis. This is
required to identify net profits for the firm by implementing diverse costing tools. The cited firm
is having two major tools. Like- absorption and marginal costing. If they are implementing
absorption costing, then the profits will come to 7800. while on the other hand, by using
marginal costing, company earns 7500. which is less than the profits which is calculated by using
absorption costing.
P4
A budget is forecasting of revenue and expenses over a particular future period of time.
This is made and assessed on a periodic basis. Budgets can be formed for an individual, a family,
a group, a firm, a government, a nation, a multinational firm or just about anything else which
forms and spends amount. In a firm, a budget is the most powerful internal tool which is used by
the management and most probably not needed for reporting by the external parties.
Budget is a planned tool which is used by the firm in order to make certain tools and then
compare with this with the actual figures. The cited company needs to make certain tools which
are used in order to get the certain tools. Although, budgetary plans are made by the firm for a
specified period of time (Hansen, 2011). There are various types of budgets which are used by
the firm. Some of them are as follows:
Static budget: This is also known as the static budget which does not change and the
change in the production unit. This plays a crucial role in assisting firms track their finances,
assess their expenses, and determines manner to optimise the performance of the firm.
Advantages:
This can be likewise be supportable if firm continuously spend beyond the amount what
company earns. This is mandatorily supportable if firm's keep efforts with debt due to the past
financial crisis.
Disadvantage:
the main problem with this budget is that this does not account for life's uncertain events. While
on the other hand, this can be said that fixed bills like- mortgage or car payments are easy to
forecast, but variable costs can not forecasted. As a final outcome, exceeding the budget would
cause the problems for the firm. This is not an exact way to track expenses.
8

Sales budget: this is the budget which forecasts the sales for the forthcoming year of the
firm. With the help of this, the company can try to optimise the sales and also provides the
managers a clue about the sales related strategies. However, the company needs to make certain
tools which are used by the manager for getting the certain sustainable development.
Advantages:
The sales budget helps the firm to make strategies related to the sales expenditures and also
trying to limit these by way of implementing this in an effective manner (Chiwamit, Modell and
Yang, 2014). However, this can be said that the company needs to make certain gain which are
useful for the firm to attain their pre-set targets. The mangers with the help of sales budget, can
find out the variances which occurs in the firm and tries to eliminate them effectively. There are
certain tools which are used by the firm so that the company can get the advantages in an
effective..
Disadvantage:
Sales budget does not always renders an accurate benefits for the firm. However, this can be seen
that the sales budget is rigid and does not change as per the change in the production. This would
make the firm to limit its performance.
Operational budget:
This is the budget which is related to the firm's operations. However, all the expenses and
income which are related to the firm's operations for a particular period of time, are covered into
this. This is the forecasting of firm's operations related expenses and earnings for a certain period
of time (.Setthasakko, 2010).
Advantage:
This is the planning tool which is used by the firm in order to achieve its pre-set targets.
However, this can be observed that the operational budget helps the firm to optimise their
revenues and limits the costs so that the competitive advantage over the firm could get.
Disadvantage:
There are certain tools that can be used by the firm which will not reflects the true image. Hence,
firm cannot get the competitive advantage and also make wrong strategies that could lead to
spoil the performance of the firm.
9

M3
From this report, this has been analysed that the company needs to adopt diverse planning
tools so that it can attain its pre-set objectives. However, this is the most important tool for
gaining the sustainable development. With the help of diverse planning tools, firm’s are assessed
by forecasting budget in an effective manner.
D3
With the help of planning tools, firm could resolve the financial related problems in an
effective manner. This can also be said about these above mentioned planning tools are useable
in order to solve the financial problems so that the 4com plc could get sustainable development.
P5
In a firm, this is observed that profitability could enhanced by implementing an adequate
tools and techniques. There are certain tools which can be used by the firm in order to enhance
the profitability of the firm (Hoque, 2011). Although, earnings could be influenced by financial
issues. There are some of the examples which have been quoted that are: lack of cash availability
in order to meet out the short term debts. The financial distress is required to be resolved by the
management accounting officer before the business operations started so that the firm
performance can-not be affected. This is rightly stated that such kind of issues arises due to not
properly utilizing of available resources which creates a vast impacts over the firm performance
of the firm. Henceforth, this is the great responsibility of both managers and firms to overcome
the financial constraints as soon as possible. There are so many tools which can be used by the
firm in order to assist the firm for maximising the performance. Few of them are as follow:
 Key performance indicators: This is known as the solid tool which is used by the firm
in order to assess the employee and firm performance at the time of past few years. This
can be said that the company can resolve these financial distress by using key
performance indicators and also providers essential indicators by which firm can attain its
pre-set targets. However, this is the business metrics which is applied by the corporate
executives and other managers to know and assess the factors which are most imperative
to the success of the firm (Tucker and Parker, 2014). A sound KPI's is intended on the
firm's processes and functions which top level authorities overviews as the most crucial
for assessing the progress towards attain the strategic targets and performance goals.
10