Management Accounting: Costing Methods and Financial Analysis Report

This report delves into the core concepts of management accounting, emphasizing its significance for businesses of all sizes. It explores various types of management accounting, including cost accounting, price optimization, and inventory management systems, along with their practical applications. The report also examines different accounting system reporting methods, such as performance reports, account receivable reports, and job costing reports. Furthermore, it assesses the benefits of management accounting, focusing on cost reduction, improved cash flow, and enhanced decision-making. The analysis includes a critical evaluation of reporting systems and costing methods, particularly those used to evaluate net profit. The report also covers planning tools in budgetary control, evaluates financial problems, and suggests effective measures to overcome them. The report provides valuable insights into financial analysis and reporting, making it a comprehensive resource for understanding management accounting principles and their practical implications for business operations.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Concept of various types of management accounting and their application....................1
P2: Various types of accounting system reporting.................................................................3
M1: Benefits of management accounting...............................................................................5
D1: Critical evaluation of reporting system...........................................................................5
TASK 2............................................................................................................................................5
P3: Some critical costing methods in accordance with evaluating net profit.........................5
M2: Evaluating of accounting tools and techniques...............................................................7
D2: Critical evaluation of income statements........................................................................8
TASK 3............................................................................................................................................8
P4: Advantage and disadvantage of using planning tools in budgetary control.....................8
M3: Evaluation of planning tools...........................................................................................9
D3: Crtiical evaluation of financial problems......................................................................10
TASK 4..........................................................................................................................................10
P5: Various financial issue and effective measure to overcome those problems.................10
M4: Analysis of financial problem.......................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Nowadays, management accounting is an essential aspect for every business organisation
whether operating as small or large. It has been observed that they need a system which can
easily record and control all crucial financial transactions of the company. The primary objective
of using accounting systems is to summaries, analyse and communicate vital information that
can provide more reliable outcomes in near future. The purpose of doing so is to attain short and
long term objectives of an organisation. This project report is providing more essential
information about various aspects related with accounting system and reporting (Soin and
Collier, 2013).
Few costing methods are also use for evaluating net profit for the “Rawlinson Knitwear”.
Understanding of various planning tools those are useful in budgetary control process. Analyses
of financial problems those are exist in an organisation and their valuable measure to resolve
every issue in more effective manner. The overall project is delivering crucial solution to
numerous aspects those are presented in an organisation.
TASK 1
P1: Concept of various types of management accounting and their application
In every manufacturing business, it has been necessary to make use of accounting systems
in order to manage and control various financial transactions those are done in financial year.
The primary motive behind doing this is to analyse all those aspects which will be essential for
analysing overall production process during the time.
Meaning: Accounting is systematic detail information to summarise, record and evaluate
various financial transactions that are being in one accounting time. Whereas management is
responsible for making proper planning, organising, directing and controlling overall operations
of the company to get more effective results. It has been observed that managers are always
looking at the events that would assists in timely completing essential requirements of any
business enterprises. In simple term, it is said to be overall analysis and recording of business
transaction for internal department to make use of resources in respect to enhance efficiency and
productivity of the company. As a account manager to make use of all necessary provision of
financial data in accordance to generate more positive outcomes within an organisation
(Giovannoni, Maraghini and Riccaboni, 2011).
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Definition: It is said to be the process of preparing different financial reports and
accounting information that would provide reliable and correct statistical information for making
future decision making. It would be essential for the managers to achieve its short and medium
term aims and objectives in quicker span of time. This happens to be utmost crucial to analyse
various forms of accounting tools and techniques which can enable Rawlinson knitwear to
manage their business more effectively. It will deliver more crucial accounting data to an
organisation about the financial position of the cited company. It includes vital information
regarding various entries, ledger and budgets (Herbert and Seal, 2012). All of them are taken into
account for the purpose of formulating financial statements for the company. It is could guide
managers to take necessary information about companies total sales capacity, account receivable
and payables. It is the responsibility of accountant and finance officers to generate proper
evaluation about current performance of an organisation. There are various types of accounting
system that are being used by managers in their everyday business operations. Some of them are
discuss underneath:
Cost accounting system: It is utmost important aspect of every department to manage and
control their cost of production. There are certain costs which are either directly or indirectly
related with the company. It would consider all costs such as normal, standards and actual costs.
Price optimisation system: According to this particular accounting system every aspect
related to customer perception regarding various costs prices that are set by company about their
products and services. By this, actual cost of their operational expenses can be determined in
more easily by the company.
Inventory management system: This particular accounting system is more helpful in
examine total stock level and durability of actual time of those stocks which are kept for longer
period of time. All crucial information related with all activities which are related with
production and last with sales of the company (P. Tucker and Lowe, 2014).
Job costing system: This happens to be the primary system that is use to track all detail
information related with cost of production. The overhead costs incur during the time in a
particular period of time for particular period of time. Mainly, the order costs are an effective
situation which is responsible for evaluation of costs generated from each units of production.
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P2: Various types of accounting system reporting
In accordance to different operational departments of an organisation, it has been found
that they need to make use of effective reporting system that can assist in overall development of
business. It is necessary to make use of various financial and non-financial records of Rowlinson
knitwear that are done in one accounting year. Management reporting is an effective part of
control department system which can provide adequate business information at various levels of
an organisation. It is consider as one of the formal system which is being frame to ensure timely
supply of crucial financial data to the owner of cited company. Accounting reports are said to be
primary process of vital information collected from internal as well as external sources of the
company.
On the basis of these data which represent financial stability of Rowlinson knitwear
during the time. The most investors and external stakeholder use to analyse information about
company to examine current financial position before making any critical capital investments
decision. It is utmost important aspect for taking valuable actions that are require for betterment
of an organisation. Formulating best accounting practice is necessary for future development of
business resources. It has been found that accounting practices are quite different from financial
systems of Rowlinson Knitwear. In every manufacturing organisation, it is require for them to
work for achieving position results in near future. Valuable growth and sustainability is primary
aspect of any account officers. For this purpose, they need to make use of a well planned
reporting system that can assist in recording and summering of everyday business financial
transaction in their respective statements (Advanced Management Accounting, 2017). It would be
essential for accountant to make vital decision in respect to increase reputation of the mentioned
company (Bouten and Hoozée, 2013).
Any crucial data collected by managers are gathering from various departments such as
HR, marketing, operations and finance departments. The entire information is transfer into
financial records so the upcoming strategies can be implemented more effectively. The investors
of Knitwear can use to analyse reports and financial statements in respect to make vital decision
for future. The future growth and stability is being based on these statements in order to prepare
by using data for every departments. It seems to be perfect information which is being collected
for reporting of various transactions. It is significance for managers to evaluate every accounting
data in order to get more reliable data in an accounting duration. It has been analyse that every
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financial records to examine upcoming growth and performance of the company. They used to
see different statements such as incomes statements, balance sheet and cash flows statements.
The main motive is to get valuable return from their total investments from their ongoing
projects. Reports are essential for maximising future earning in order to create chance by keeping
records in more reliable manner so that profitability can be enhanced (Herzig and et. Al., 2012).
There are certain important types of reporting systems that are essential for recording of
transactions in their respective format. Some of them are discuss underneath:
Types of reporting system:
Performance report: As per this system, financial statements as well as important
activity in project evaluation management. It consists of collecting and disseminating crucial
aspects of project information, consulting ongoing process of project and proper utilisation of
resources. This can be prepared by managers to compare actual performance of individual or
company with the standard outcomes. Such kind of reports might assist management assess the
success of a project.
Account receivable report: This is said to be one of the effective report that would
provide complete information about total list of unpaid customer invoices and credit memos.
This happens to be primary tools and techniques which are being used by company to collection
to personnel to evaluate which invoices are overdue for payment. It is known as periodic reports
that are divide a company account receivable as per the total size of time an invoice is being
outstanding (Kotas, 2014).
Job costing report: It is associated with total costs that are incur over the production of
total units produce during the time. It includes data which are related with materiality, labour and
overhead expenses those are being already in used. The primary purpose of using such kind of
reporting is to determine total cost incur by company during each lot size of a products.
Inventory management report: It is utmost important reporting system which is more
helpful for the managing and controlling stocks of an organisation. There are certain tools that
can be assessing accounting manager to make analysis of all records those are stock as per their
opening and closing data. There are certain techniques of analysing inventories such as ABC
costing, maintaining a perpetual stock system and inventory turnover ratios and setting up of
optimised purchasing process (Merchant, 2012).
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Operating budget report: It is mostly related with operations level of department. A
budget report is said to be utmost important aspects for internal departments which is being used
by management to make comparison about total estimated costs and expenses those are going to
being incur during the time.
M1: Benefits of management accounting
There are various important aspects that are related with management accounting system.
It is primary role of management to make use of accounting system to control their upcoming
mistakes. There is certain benefit such as this will help to reduce expenses that can help
companies to lower their expenses. It would improve cash-flows so that financial results would
be managed accordingly. Further, this accounting system can assist in better decision-making
that can improve future performance of an organisation. With this overall financial return can
also be enhance gradually.
D1: Critical evaluation of reporting system
In every manufacturing or retail sector, it is essential to generate maximum profit by
preparing financial reporting in more systematic manner. Every employee as well as department
is performing their role with having similar objectives. These objectives can imply to take
valuable decision in near future. The profitability and upcoming growth is mainly relies upon the
reporting system as it consists of different information’s which are associated with financial
position of the company. It is use to determine overall performance of an organisation to each
individual those are working for generating future targets.
TASK 2
P3: Some critical costing methods in accordance with evaluating net profit
For every small or large business organisation, cost is considered to be one of the primary
aspects. They are either directly or indirectly make impacts on overall productivity of the
company. Cost is an essential part of every production making company that are engage in
producing effective products and services. It is known as value of money paid for getting
something in return. It is said to be consider in monetary valuation of efforts, material, utility
which is being consumed and risk can be assessed over the production of products (DRURY,
2013).
Costing is process of estimating total cost which is related with a specific project or a
opening a new venture. It includes all those variable costs those are said to be cost that changes
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or modified with some form of any activities. It would be considered as primary part which
consists of indirect or direct costs and other overhead costs. Generally, it is associated with
production related aspect which is considered in financial terms which is being summarised
different resources that are used by managers by evaluating their overall transactions. Such kind
of costs is more reliable at the time of taking vital decision for the purpose of taking valuable
decision in recent time. There are certain types of costing methods which are being used for the
purpose of making evaluation net profitability for the company. Some of them are discuss
underneath:
Absorption costing: It is known as all those costs which are connect with all production
process of any product and services. It includes both variable and fixed cost because of this they
are said to be full costing method. As these particular techniques is use for evaluating total cost
of products by taking into consideration of indirect overhead as well as direct costs (Hiebl,
Feldbauer-Durstmüller and Duller, 2013).
Marginal costing: This happens to be one of the primary costing techniques which are
use during the production of additional units. This types of price charges according to their
higher units costs of margin. It would consider only variable costs instead of fixed costs. It
consists of period costing methods.
Comparison
Absorption costing Marginal costing
In this costing method, total cost would be
incur by company to evaluating total cost that
is being used during production process.
Under this method, only variable costs are
being valued during manufacturing process.
The primary objectives of using these costs are
to analyse per unit cost that can be minimise
with extra units produced.
The contribution per units that cannot have too
many impacts on overall extra units produced
by the company during the time.
It is helpful in longer term planning. It is considered as more effective in short-term
planning for formulating by top management.
This would be essential for sustainability of
external aspects of reporting.
It is related with internal reporting for
upcoming growth and profitability.
Computation of Net profit by using absorption costing
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Income statements
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
Calculation through using Marginal costing Income statements
Particulars Amount
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
M2: Evaluating of accounting tools and techniques
In accordance with making proper analysis about future planning, it has been seen that
financial benefits can be attain in more easily. In respect to generate more reliable outcomes for
the company to make appropriate tools and techniques which are crucial for evaluating positive
outcome for the company. Because of this, profitability for future forecasting and performance
stability of Rowlinson Knitwear. For this, managers need to keep record of all tools that are
responsible for incurring growth chances.
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D2: Critical evaluation of income statements
As per the above mentioned income statements, it has been found that both costing
methods are effectively helpful in generating more positive outcomes in near future. The results
are fluctuating with taking use of both costing techniques. If managers are using absorption
costing they are getting profit of 7800, whereas by using marginal costing they are incurring
profit of 7500. The difference of 300 is being arises because of fixed cost treatment in their
overall profit and loss statements. The point of decision is being taken by using marginal costing
method.
TASK 3
P4: Advantage and disadvantage of using planning tools in budgetary control
Planning is an essential aspect for every business organisation. This will assists in attaining
overall profitability for the company by making proper utilisation of resource. The primary role
of every account managers is to make use of data in order to determine more effective results in
very less period time. For this purpose they use to prepare budget so that future losses can be
controlled. A budget is an effective tools which is being used by the managers to estimate future
costs and expenses those are helpful them to attain desire profitability. It can be made out of
using various tools and techniques. It is associated with that costs a company is going to be
invested for the purpose of producing one additional unit of products and services. Mainly, it is
prepared for more than one year, but it can be followed if reliable results are not coming in the
favour of the company (Burritt and et. Al., 2011).
Budgetary control; It is known as one of the crucial tools of budgeting process that primary
motive is to carry out their entire operations such as planning, organising, communicating and
evaluating various information collected during the time. These are mainly related with various
aspects of business which are categories into various parts which is known as budget centre. By
the help of this manage use to reach at their valuable outcomes in more quick time.
Planning tools: It is known as management tools which they mainly used to organise their
operations in respect to attain their desire outcomes in more quick time. For this purpose, they
are responsible to get more effective budgetary control tools that are being mentioned
underneath:
Forecasting tools: It is known as one of the finest and important planning techniques that
can help company to estimate their future gains and losses. Initial they are starts with certain
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assumption which are associated with management skills, ability and experiences as well as
effective judgement.
Advantage: It is taken into account as utmost crucial tools for the firm to examine pre-determine
aims and objectives of the company. Through this, managers can easily be able to predict
their total costs and sales that a Rowlinson is going to get in future.
Disadvantage: It does not assist in evaluating proper outcomes for the company about total
expenditure as future are mainly based on estimations. They are generally uncertain to
predict.
Scenario tool: According to these specific tools, managers would easily be able to predict
their desire results for determining best alternative according to any critical situation arises in an
organisation. This would assists in effective planning, operating and function of business
operations of the cited company. This will be varies as per the demand of nature of the company.
Advantage: Through effective implementation of this planning tool a company’s managers can
easily be able to select best idea that are suitable enough to generate more better results for
Rowlinson company.
Disadvantage: It does not be able to consider as more appropriate and correct for the company
future planning. Because, these are mostly time taking in respect to another tools.
Contingency tools: It is said to be one of the main planning tools which is design for the
purpose of formulating a firms to react in an effective manner at the time of any critical
conditions. As most of the company’s are emerging as effective market in nowadays so they are
started to take into account various contingency tools. These are early planning use by
management to control their upcoming risks.
Advantages: This tools is more suitable for small size company because they are operating in
very narrow scale so they need to have maximum look over their upcoming risk that are
arises without giving any hints.
Disadvantage; In few situations, it does not be taken as more effective because of their complex
nature.
M3: Evaluation of planning tools
In respect to increase maximum growth and profitability for the company, managers are
mainly use to consider all those planning tools which are mentioned above. By the help of these
tools manager should be able to manage their resources in more effectively without paying any
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extra costs. There are various forecasting tools that can assist them to predict future sales and
earnings for the cited company. In order to deal with future losses and gains a company can use
forecasting tools to overcome from all those issues.
D3: Crtiical evaluation of financial problems
As it has been found that there are various financial issues those are being arise in
organisation unnecessarily. These are directly or indirectly make huge impacts on the overall
productivity of the company. In order to deal with all those issues company need to make use of
various financial control tools. Some of them are key performance indicators that are responsible
for analysing overall condition of the company as well as every employee. Benchmarking and
financial governance is another few tools that are responsible for facing all kind of issues that are
affecting the profitability of the company.
TASK 4
P5: Various financial issue and effective measure to overcome those problems
In every manufacturing business it is utmost important to make their business operation
more effective by evaluating their functions in more accurate manner. It has been mostly seen
that plenty of issues are arises in an organisation that are mostly make huge influence of
productivity or overall goodwill of the company. To deal with all those issues accountant need to
make use of effective techniques and tools that are control and alarm before occurrence of any
unethical problems. It has been found that financial issues are mostly arises because most of the
companies are using outdated techniques of recording financial transactions. There are various
types of financial tools those are useful in respect to measure all those results those are related
with financial issues. Some of the vital issues found in an organisation are discussing
underneath;
Profit level: It has been found that without having proper flow of funds a company would
generate very low level of gains during the time. This would make huge impacts on the overall
performance of the company (Klychova and et. al., 2015).
Productivity level: This seems to be one of the primary issues which is being arises
because of insufficient amount of finance. The production managers are not able to product that
much amount of production as set by the company.
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