Management Accounting Report: Analysis of Apple House Guest House

This report provides a comprehensive analysis of management accounting principles, specifically focusing on their application within the context of Apple House Guest House, a small-scale UK-based guest house aiming for business expansion and enhanced efficiency. The report delves into the ess...Read More

Management
Accounting
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Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1) Management accounting and its systems' essential requirements.........................................3
P2) Several management accounting methods............................................................................5
TASK 2............................................................................................................................................7
P3) Costing methods and Marginal vs. Absorption costing........................................................7
TASK 3..........................................................................................................................................11
P4) Critical evaluation on budgetary control systems...............................................................11
P5) Management accounting systems........................................................................................13
CONCLUSION..............................................................................................................................15
REFERENCE.................................................................................................................................17
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INTRODUCTION
Management accounting is multidisciplinary approach that includes entire business
operations and different systems. It is interrelated with creating effective environment of entity
and sustain its good reputation in market for long term sustainability. The present report is based
on understanding different management accounting tools of Apple house guest house. It is small
scale guest house of UK aims to expand its business organization and increasing efficiency for
long time periodicity. Deep knowledge related to importance of management accounting is to
expressed. In this regard, various components to analyze business performance and decision
making for enhancing quality services are to be expressed through this assignment. Moreover,
various costing methods to prepare income statement can be explained. In addition to this,
significance of budgetary control systems for decision making and further expansion of small
size entity is to presented. However, learners are able to understand various management
accounting systems and their value to achieve effectiveness of entity through this report.
TASK 1
P1) Management accounting and its systems' essential requirements
Management accountant of Apple house guest house analyzes organizational structure
including financial and non-monetary performance of firm. In accordance to this, various factors
are recognized that impacts on effectiveness of company. Under this system, it is considered as
composition of several systems such as costing, budgeting and performance management.
Therefore, several kinds of decisions are made regarding operations of business activities. In
accordance to this, essential requirements are presented to fulfill customer needs and increasing
productivity as well profitability of small size enterprise. However, focusing on different
determinants are understood through management accounting essentials that affects quality
services and market efficiency of firm at high level (Adongo and Jagongo, 2013). In addition to
this, all business operations are analyzed by applying management accounting components such
as costing, budgeting and so on. Thus, large number of ideas are created for enlargement of firm
and enhancing efficiency systematically through recognizing various substances. Including this,
a system planning procedure is presented for efficiency of organization. Along with this,
management accounting approach is beneficial for building up relationship between employee
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and employer of the firm. It impacts on environment of entity to enhance efficiency of
organization at high level. Apart from this, focusing on market position as customer attitude
towards product value is obtained that affects on sustainability of organization. Thus, it is one of
the great tool that manages entire business operations and creates effective atmosphere of firm
efficiently. In this regard, various tools and techniques are utilized for effectiveness of small
business unit as well carrying on organization effectively. In accordance to this, several
management accounting requirements can be expressed as below:- Analyzing financial and accounting information:- Management accounting is sum up of
financial and no-economic management of organization. In this process, accountant of
Apple house guest house recognizes overall information in the terms of finance and non-
monetary are considered. Therefore, various tools and systems are applied for growth of
firm at large scale. Under this system, financial data are identified through profit and loss
account, income statement, balance sheet and other tools as cash flow/fund flow
statement (Al-Dhubaibi and et.al., 2015). Thus, actual economic structure of entity is
presented through these components that are interrelated with enhancing profitability of
firm effectively. In addition to this, various tools and techniques are used for creating
ideas and implementation of firm at high level. However, management accounting is best
appropriate concept for effectiveness of organization as in costing and getting financial
management efficiently. In this process, accounting information including costing and
budgeting that is related to forecasting and decision making for further Presenting performance management:- Business and employees performance are
identified through management accounting system. In this process, management
accountant of Apple house guest house evaluates performance critically as per which
varieties of ideas are created for enhancing working efficiency of workers and better
performance in team work. Hence, productivity and profitability of organization get
increased through this system that impacts on allocation of resources and fund. In this
regard, systematic management of entity and its workers' working styles get implemented
(Arjaliès and Mundy, 2013). However, good relationship among employees of the firm is
achieved that affects customer dealing services and efficiency in market to sustain and
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maintain its position for long term periodicity. It is interlinked with performance of
employees and organization to increase its effectiveness at high level. Cost allocation:- Through costing method, price determination is obtained that is helpful
to prepare income statement for presenting financial position of organization. It is
beneficial to setting price for production and distribution system. However, it is
considered as tool to create balance of production and supplement of goods. In this
process, fund allocation is presented that affects financial management and increasing
profitability of firm at large scale. In accordance to this, cost allocation and managing
financial resources are impacted on productivity and profit earning capacity (Bar-Zeev
and et.al., 2016). Therefore, management accounting as decision making tool is liable for
cost allocation and setting best suitable cost incurred on expenses and investment for
enlargement of small business unit and enhancing its efficiency. Job order costing:- Under this accounting system, costs incurred on expenses for
manufacturing process is obtained. On behalf of which, production and distribution of
goods is generated (Bruhanskyy, 2014). Therefore, pricing is determined to prepare
income statement that presents financial position of small scale enterprise.
 Inventory management accounting:- Through this process, inventories are get managed
that impacts on production and supplement of goods. However, different tools and
techniques are applied for management accounting related to inventory management. It is
useful for increasing demand for products that affects on profitability of firm.
P2) Several management accounting methods
Various methods are used for management of overall business operations as well
increasing efficiency of enterprise to sustain market value for long term sustainability. It includes
costing, ratio analysis, budgeting and different tools to improve financial position of entity.
Therefore, several kinds of tools and techniques are applied to expand Apple house guest house
that affects business environment of enterprise (Bruhanskyy, 2014). Under this system, at first,
management accountant of entity recognizes entire business operations and further prepares
strategy to improve quality services of products provided by company. Hence, various methods
of management accounting approach can be understood as follows briefly:-
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 Management accounting system (MIS):- It is system process for transacting information
from one medium to another. In this process, data are get exchanged in systematic
manner therefore on the basis of collected information further decisions are made in
future time. Including this, management accounting system is interlinked with
effectiveness of Apple house and guest house as well remains able to increase its
efficiency for implementing action plans to operate further operations. Moreover,
different tools and techniques are presented to increase efficiency of firm and getting
effectiveness at high level. Including this, different systems used to transacting
accounting information for example transaction processing system, decision support
system, marketing and accounting information system and so on. In this process,
transaction of data is created and further decisions are made through exchanging
information that present organization's performance (D. Parker and Guthrie, 2014).
However, management accounting implements this technique to support business
organization by implementing action plans in future time. Statistical techniques:- Management accounting is related to reducing problems occur at
workplace in monetary and non-economic terms. Under this system process, statistical
data is presented and further interpretation that creates various ideas for preparing
strategies and implementing action plan to be followed on. However, several tools and
techniques including mean, mode, median, variances are determined that represents
monetary position of small scale enterprise. However, it is useful for decision making
regarding further business plan and applying different techniques for production and
distribution system (Gibassier and Schaltegger, 2015). Apart from this, statistical
information is also prepared to present performance of entity that is useful for making
decisions related to increasing efficiency of firm at high level. Hence, management
accounting tool as statistical data is one of the benefited element for preparing strategy
and decision making for expansion of Apple house ltd as well enhancing efficiency at
high level. Standard costing:- It is useful to analyze compare between expected and actual
performance of business enterprise. On the basis of this comparison, different strategies
can be implemented to create balance between foretasted and actual business
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performance. However, standard costing is helpful for forecasting related to price
determination as well remains effective to bridge the gap of current and standard pricing.
In addition to this, standard costing as management accounting method is significant for
determining price and presenting financial position of Apple house guest house
(Hampson, Best and Kavanagh, 2014). Including this, standard costing is valuable for
costing and preparing strategies for price determination as well affects financial position
of small scale enterprise. In this regard, it has been evaluated that standard costing is
interlinked with preparing plans at standard level that affects profitability of firm.
 Revaluation accounting:- According to this accounting system, it is believed that fixed
assets can be revalued as per which capital of firm is represented as asset value. It is
useful to evaluate return on capital employed. Therefore, revaluation accounting is one of
the benefited system that is helpful for utilizing fixed assets of organization efficiently. It
impacts on productivity and profitability of small scale enterprise that creates varieties of
ideas for decision making as well forecasting for further business operations.
Thus, above mentioned management accounting methods are useful for managing overall
business activities and enhancing its productivity and profitability at high level (Kaushik and
Sahi, 2015). However, implementation of small scale enterprise and increasing its efficiency can
be obtained for sustainability of firm for long time period. Therefore, management accounting
tools and techniques are useful for systematic management and enlargement of entity in
systematic manner.
TASK 2
P3) Costing methods and Marginal vs. Absorption costing
Costing is a method to determine price of product for production and supplement of
goods. It is to prepare income statement that presents financial position of Apple house guest
house. In this regard, decision making process is implemented to create balance of income and
expenditure. However, ideas are generated for increasing profitability and productivity of small
business enterprise. Including this, costing is to determine price as per manufacturing and
processing systems that affects economic structure of organization (Langevin and Mendoza,
2013). Therefore, management accountant of organization uses different costing methods can be
described as below:-
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Marginal costing:- Under this costing method, for evaluating net profit, gross profit is
deducted with cost incurred on variable expenditures only. However, it is useful for decision
making for short time period only. In is believed through this tool that pricing for production and
distribution of goods is determined effectively that is able to reduce uncertain changes occur at
workplace (Lima and et.al., 2015). In this regard, management accountant of organization
interpreters following information that presents expenditure incurred and gained revenue of the
entity such as:-
Interpretation:- It is analyzed that Apple house guest house gained effective profit that is
useful for making decision regarding regarding profitability of firm. Therefore, it is evaluated
that company has incurred 6600 on production of goods as well earned income on this
production is 21000. Therefore, gross profit is calculated as 14400. It presents that organization
has quite effective financial position that is valuable to increase its profit earning capability.
Including this, for determining net profit, under marginal costing method, gross profit is to
deducted with variable expenditures as 1800. Thus, net profit is obtained as 12600. Hence, it can
be foretasted for further years that organization can enhance its profitability at high level that
affects its earning position to make place in market. However, marginal costing is related to
preparing income statement that represents balance of incurred expenditure and gained revenue
as per which further business business operations are implemented. In this regard, entity can
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enhance its profitability in future time to reduce risks occur at workplace. However, various
planning strategies are prepared for implementing action plans as well investing for further
business operations.
Absorption costing:- This costing method is useful for long term decision making
related to preparing action plans for expansion of Apple house guest house. Therefore, under
absorption costing method, for calculating net profit, gross profit is deducted with expenditure
incurred on variable and fixed expenses. Therefore, on the basis of this costing, several ideas are
generated for long term sustainability of organization (Liu and et.al., 2013). Including this,
several ideas are generated for increasing profitability of firm and attracting customers towards
goods and services provided by company. However, business and marketing strategies are
implemented at large scale. Including this, management accountant of organization applies this
costing method for preparing strategies related to competitive advantages and making place in
market for long term sustainability. In this process, company's accountant analyzes following
information for making decisions for long time periodicity:-
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Interpretation:- In this process, gross profit is determined same as in marginal costing on
the basis of which further net profit is evaluated. Therefore, gross profit is deducted with total
cost incurred on fixed and variable expenditures. Thus, variable cost is obtained as 1800 as well
fixed expenditures incurred as 3300. Hence, total cost is measured as 5100. Further, for
calculating net profit gross profit as 14400 is deducted with total expenses therefore net profit is
determined as 9300. On the analysis of this factor, it can be foretasted that in future time
organization can increase its profitability that is useful for decision making for long time
periodicity. It is helpful to increase strength for competitive advantages and making place in
market for long time periodicity. In this regard, decisions can be taken for high level of
investment as well forecasting for long term efficiency. It is interrelated with business and
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competitive strategies that is valuable for surviving in competitive market and preparing
planning procedures related to maintain and sustain its good reputation in market.
Comparison between marginal and absorption costing:- The main difference between
marginal and absorption costing is profit variation. However, it has been compared that marginal
costing is suitable for short term decision making process while absorption costing is appropriate
for long term decisions. However, comparison between costing methods can be expressed as
follows:-
Profit variation:- For evaluating net profit, under marginal costing process, gross profit is
deducted with expenses incurred on variable expenditures only. While, on the other side, for
absorption costing, gross profit is deducted by total cost incurred on variable as well fixed
expenses (Lu, Sridharan and Michael, 2016). However, philosophy of both costing methods are
different that impacts on decision making process. Therefore, profit variation is obtained
between both costing techniques to present financial position of organization that is useful to
implement further action plans.
Time periodicity:- As per evaluation, it is determined that marginal costing is appropriate
for decision making regarding short term period. However, absorption costing is suitable for
increasing competitive strategies to make place for long time period that is interrelated with long
term sustainability in market (Marginson, 2013). It affects productivity and profit earning
capacity. Moreover, decisions are made related to organization's effectiveness.
TASK 3
P4) Critical evaluation on budgetary control systems
Budgeting is forecasting and decision tool for analyzing actual business performance and
preparing planning procedure for operating business activities in future time. It is useful for
expansion of small business unit and enhancing its efficiency through proper management of all
activities. Including this, it is best tool for optimum utilization of resources and fund that impacts
on effective productivity and profitability of firm adequately (McLean and McGovern, 2016).
However, a proper planning strategy is prepared for implementation and systematic management
of business organization. As per critical evaluation, both positive and negative aspects are
achieved that is interrelated with effectiveness of organization efficiently. In this process,
budgetary control system's critical evaluation can be described as below:-
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Advantages of budgetary control system:- There are several kinds of budgetary control
systems are obtained that are useful for adequate allocation of resources. Including this,
budgetary control system is beneficial for increasing productivity and profitability of firm at high
level (Palia, 2014). In this regard, controlling over excess of production and raw material can be
reduced that affects supplement of goods and market position of services to face competition and
sustaining its product value at large scale. However, positive aspects of budgetary control system
are to be described as follows:-
 Analyzing actual business performance including financial and non-monetary tools.
 Optimum utilization of resources and fund that affects productivity and profitability of
firm
 Helpful for increasing profit earning capacity of small business enterprise
 Useful to manage all business operations adequately
 Valuable to create balance between incurred expenses and gained revenue.
 Strategic and risk management to manage all business activities efficiently
 Useful for enhancing quality services to increase strength for competitive advantage for
long term periodicity.
 Preparing planning and schedules to following on all steps related to enlargement of
enterprise and increasing efficiency at high level.
 Monitoring over excess of production and raw materials for resources and fund
allocation.
Thus, budgetary control system is helpful for effective management of overall business
operations as per which varieties of ideas are created for operating further business activities.
Including this, it is beneficial to expand Apple house guest house efficiency with proper planning
procedure. Moreover, through budgetary control system, several tools are utilized for
enlargement of entity and enhancing its quality services at adequately (Rice, 2013). Therefore,
appropriate forecasting and decision making is obtained through this process approach that is
valuable for increasing its market value.
Drawbacks of budgetary control system:- it is difficult to focusing on entire business
operations. Therefore, unsystematic predictions are created that affects on entity's effectiveness.
In this regard, wrong interpretation of current business performance is not possible to prepare
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strategic plans and decision making for further operations. However, lack of coordination among
organizational departments and employees of the firm disturbs environment of Apple house
guest house. In this regard, occurring uncertain changes are risky for organization to operating
business activities effectively. Thus, budgeting and budgetary control system is not so
appropriate for forecasting and decision making regarding business organization's performance.
Hence, it is necessary for management accountant of organization to recognize all
business operations and formulating various strategies to increase efficiency and effectiveness of
firm efficiently (Zhang and et.al., 2014). In addition to this, it is needed to prepare both short
term as well long term decision making processes that impacts on effectiveness of small scale
enterprise. However, expansion of organization and increasing its efficiency can be gained
systematically. It is interrelated with several strategies to implement action plans as well making
decisions for further business operations. Thus, budgetary control system is valuable for best use
of resources and fund adequately. In this process, proper forecasting and decision making
process is implemented to increase market value for long time period at high level.
P5) Management accounting systems
There are several management accounting systems are obtained for expansion of Apple
house guest house and also increasing its efficiency at large scale. It includes systems such as
cost, financial, performance and accounting for overall business operations. In this process, some
of the main management accounting systems can be expressed as below:- Cost accounting:- Under this management accounting system, financial position of small
scale enterprise is obtained by analyzing income statement. Therefore, prices are
determined by proper price determination on the basis of manufacturing and production
costing (Zhang, Hoque and Isa, 2015). However, through this system, fund allocation and
effective financial management is obtained by which costing can be incurred efficiently.
In this regard, cost accounting includes cost incurred on business operations such as
labor, overhead and production of goods. Therefore, on the basis of these factors, price
determination is obtained as per which income statement is prepared to create balance of
income and expenditure effectively. Financial accounting:- Different financial statement tools such as income statement,
balance sheet, profit and loss account, cash flow/fund flow are analyzed as per several
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ideas are created for further business operations. It is interlinked with productivity and
profitability of Apple house guest house. Therefore, financial accounting reporting are
also recorded as per which systematic financial management is gained that impacts on
effectiveness of organization at high level (Al-Dhubaibi and et.al., 2015). Including this,
this management accounting tool is best component to reduce monetary problems occur
at workplace. Thereby, for allocating adequate fund, financial accounting plays effective
role in improving business profile of small scale enterprise. In accordance to this, several
tools and techniques are applied for increasing profit earning capability effectively. Performance management:- As management accounting is multidisciplinary approach,
accountant of Apple house guest house analyzes performance of organization and
employees of the firm. In this process, different ideas are generated for improving
working abilities of workers. However, several methods are used to create more effective
organizational structure. Moreover, all business operations get managed effectively
through proper planning procedure and decision making process. Including this,
production and distribution of goods and increasing efficiency of overall business
activities. In accordance to performance evaluation, different tools and techniques are
utilized for implementing action plans as well management of entire business
organization's effectiveness (Bruhanskyy, 2014). It is interlinked with improving quality
services of firm that is helpful for increasing efficiency at high level. However,
performance of all business operations get developed through implementing action plans
related to enhancing performance of organization effectively.
 Inventory management:- Inventories of organization get managed effectively that affects
productivity and profitability of small scale enterprise. In this regard, management
accountant of Apple house guest house analyzes inventories to keep goods safe at
different places such as warehouses, factories, business entities. On the basis of which,
various ideas are created for production and distribution system that influences optimum
utilization of resources. Therefore, systematic inventory management is useful to enhance
financial performance of business organization. Including this, several tools and
techniques can be implemented for expansion of small business unit as well enhancing
quality services of goods efficiently (Kaushik and Sahi, 2015).
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Thus, above mentioned management accounting systems are useful for effective fund allocation
and enhancing profitability of firm at high level. In accordance to this, different ideas are created
for enlargement of entity. Therefore, financial problem is to reduced that affects economic
position of firm. Including this, through inventory management process, all goods of
organization are get managed that impacts on financial performance. Including this, evaluation of
financial statements analysis is helpful to reduce issues occur at workplace (Marginson, 2013). In
accordance to this, it has been determined that management accounting systems are effective for
enlargement of small size enterprise as well enhancing quality services. Thus, efficient fund
allocation can be obtained through this system process. Moreover, management accounting
system as financial accounting and inventory management is useful for enlargement of Apple
house guest house as well able to enhance quality services of firm efficiently. Hence, inadequate
finance can be managed effectively that affects productivity and profit earning capability to
facing competition and carrying on enterprise's market value systematically.
CONCLUSION
The report is concluded that management accounting is essential for effectiveness of
overall business operations. In accordance to this, different management accounting tools and
techniques for expansion of Apple house guest house and increasing its efficiency is determined.
However, significance of management accounting systems for forecasting and decision making
is considered through this assignment. Moreover, different costing methods and comparison
between marginal and absorption costing is presented. Including this, critical evaluation on
budgetary control system as decision making tools for operating further business activities are
described through this study. Including this, deep understanding regarding management
accounting as multidisciplinary approach is gained by studying this report. However, several
management accounting systems are expressed to reduce financial problem of organization is
considered. Thus, various tools and systems of management accounting for overall business
operations is created. Including this, method to improve performance of employees and
organization's performance is obtained effectively. Hence, several management accounting
components are presented to expand small scale enterprise and increasing its efficiency is
described through this report.
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