Management Accounting Systems and Reporting Analysis

This report comprehensively examines management accounting principles and their application within Fontain Motors. It begins by defining management accounting and exploring various systems like cost accounting, tax accounting, and financial accounting, highlighting their benefits. The report then delves into different management accounting reports, such as budget reports and job cost reports, emphasizing their importance for business performance analysis. Task 2 focuses on marginal and absorption costing, including the preparation of income statements using both methods and the application of breakeven analysis. Furthermore, the report explores budgetary control, planning tools, and management accounting techniques used to address financial problems, providing practical examples and insights into financial reporting. The report concludes with an assessment of the integration of management accounting systems and reporting within the organization.

Management accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................2
TASK 1............................................................................................................................................2
A. Explain management accounting and different types of management accounting system....2
B. Different types of the management accounting report with their importance........................4
C. Benefits of the management accounting systems...................................................................5
D. Critically evaluate how the management accounting systems and management accounting
reporting are integrated in your organization..............................................................................7
TASK 2............................................................................................................................................7
A. 1) what is marginal costing and absorption costing...............................................................7
2). Prepare the income statement as marginal and absorption costing method..........................7
B. Calculate the following with breakeven analysis...................................................................9
C. Apply the range of management accounting techniques and produce appropriate financial
reporting documents accurately................................................................................................10
D. Produce financial reports that accurately apply and interpret the data for the business
activities shown in the scenarios in Task 2 above.....................................................................11
TASK 3..........................................................................................................................................12
A. Advantages and disadvantages of budgetary control with examples...................................12
B. Applications of Planning Tools:...........................................................................................16
C. Management accounting systems to respond to financial problems....................................17
D. Management Accounting Techniques used in solving financial problems..........................19
E. Planning Tools......................................................................................................................20
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................22
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INTRODUCTION
Management accounting system plays an important role in the organization decision
making. It helps managers to perform process of decision making to attain organizational goals.
Present report will provide detailed meaning of management accounting and its systems. The
report consist of various type of report which are implemented inside Fontain motors which is
the motor dealership company. The assignment will criticize benefits of various types of
accounting system with various types of techniques like marginal costing and absorption costing.
Later, report will provide report suggesting implementing various techniques of management
accounting.
TASK 1
A. Explain management accounting and different types of management accounting system.
Managerial accounting is used by managers in organization. In these managers use
provision of the information of accounting in order to better inform other managers to take better
decision for organization.
It is the process of preparation of management reports and accounts that give close and
on time financial and statistical substance needed by managers to make day to day and short term
decision. It is also called management or cost accounting. It analyzes the business cost and
operation for preparation of internal financial report, accounts to aid managers and records for
purpose of decision-making. In the cost accounting, managers interpret these data and estimates
into knowledge that will finally be uses to escort decision making.
Different types of management accounting system that Fontain motors uses
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There are various types of management accounting system which can be used by the
Fontain Motors. Managers requires to perform an analyses by the professional of venture. The
following managerial information system are discussed under:
Cost accounting: It is an accounting method that focuses to inhibit Fontain motor's cost
of production by evaluating inputs costs of each step of production as well as fixed cost (Van der
Stede, 2016).
In this method, all the cost incurred in carrying out an activity or execute a purpose are
gathered, categorized, and transcribed.
Tax accounting: It is very different throughout the world. It focuses on the return on tax
and payments rather than preparing of public financial statements. It is used in Fontain motors,
as it determine taxable income, preparation of federal and state income tax returns planning of
the operations inside organization.
Financial accounting: Financial accounting helps the Fontain motor's in preparing the
financial statement and also identifying financial health of t business. The use of financial
accounting in Fontain motors is that it accumulate and report on financial information about
performance, financial position, and cash flows of a business.
Management accounting: With the help of these financial statements', management of
Fontain motors helps to take decision to achieve organizational goals.
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Accounting system design: It is a computer based data system which tracks all records
of Fontain motors. It considers single or double entry, account code structure, cash or accrual
basis, Divisional representation, Reports, Procedure, controls etc.
Non for profit accounting: This type of accounting techniques do not have any
commercial owner. In this system funds are generated in accounts and get utilized for welfare of
the society (Tucker and Schaltegger, 2016). It will be used for social care and health service,
technical development, donation etc.
Auditing: Auditing is systematic analysis of financial data of Fontain motors. It is a
systematic and independent examination of books, accounts, statutory records, documents and
vouchers of an organization.
Budgetary accounting: It is a procedure of account in which sum of money that Fontain
motors formed to consume and amount that really have been consumed are included in accounts
so that you can witness how much of budget is left.
Inventory and manufacturing report: Organization that produce the physical products,
particularly those in manufacturing with low responsibility endurance, find these reports
precious. They help centralization of information on inventory reimbursement, labor, and other
forms of expenses involved in the process of production.
B. Different types of the management accounting report with their importance.
Management accounting reports are important part of t business which make sure that the
organization have a complete picture about performance of business. A systematic detailed
report should be made in every four month to provide the financial position of the business
finances. This is particularly captious for small business owners, who can derive important
insights from these important representation (Senftlechner, and Hiebl, 2015).
There are various types of reports that are valuable for protecting a business and
managerial accounting report. Reports that helps in analyzing performance of business are
discussed under.
Budget report
This report is most fundamental report in managerial accounting. It helps the owner of
organization to understand and control cost of firm, whether it is a small organization or has
many departments (Shields, 2015). With help of evaluation of expenses in prior years, it became
possible to make estimation of budget for year and how to overcome cost.
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Accounts receivables aging report
Many business offers credit to customers, this type of report is crucial in this case. It
renders overview of credit balances according to age, include many categories for items that are
30, 60, and 90 days late (Renz, 2016). This can aid to set the credit policies to line up them with
customers' defrayal capabilities.
Job cost report
This report provides slight view of total cost accumulated from one single project
comparing to anticipated revenue obtained by that project (Nielsen, Mitchell, and Nørreklit,
2015). This type of reports helps manager to evaluate profit of specific types of jobs and
optimization of operation by focusing on jobs that are profitable.
Inventory and manufacturing report
Organization that produce physical products, particularly those in manufacturing with
low responsibility endurance, find these reports precious. They help centralize information on
inventory reimbursement, labor, and other forms of expense involved in process of production.
C. Benefits of the management accounting systems
Following are the benefits of the management accounting system.
Management accounting
system
Benefits
Cost accounting  It measures the efficiency than to maintain and
improve it.
 It provides information about profitable and non-
profitable activities (Messner, 2016).
 The good cost accounting system destruct wastes,
losses and inefficiencies by mending t standard for
everything.
Management accounting  The actual performance in comparison with budget is
done by management accounting
 With application of both budgeting and planning
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business activities are managed
Financial accounting  It helps in maintain the business records.
 It acts as a legal evidence as proper books of accounts
are maintained in well-defined structure and act as a
legal evidence in case of disputes (McLean,McGovern.
and Davie, 2015).
Tax accounting  It provides valuable sources of information.
 It helps in minimization of the cost.
Budgetary accounting  This helps managers in integration of personal efforts
within organization towards common goal.
 It helps in measuring the performance
Auditing  It helps to detect and prevents errors from the frauds.
 It helps in maintain account regularly
Non for profit accounting  It permits soliciting funds (in the form of gifts,
donations, bequests, etc.).
 An additive source of financial support for nonprofits
is through government grants.
Accounting system design  It is an automation system, it saves the time and
eliminates many time consuming process.
 It is very accurate, so it lessen the chances of errors.
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D. Critically evaluate how the management accounting systems and management accounting
reporting are integrated in your organization
An integrated financial reports, quantify the effect and ramifications of the stakeholders'
information and the financial performance. It very important for the Fontain motors to translate
the effect of operations into financial information to accomplish in a systematic manner.
Delaying of content will not obtain and management would get absolute data on time.
Computerized accounting is helpful starring to fast and efficient work (Langfield-Smith,and
et.al). Accounting process is compact in the best possible manner and costs are minimised too.
Integral head of functional tasks are taken in step-by-step way on cost of transaction, operational
job done by labours etc. Hence, management accounting system and reports are integrated to
supply adequate information for decision-making to management.
TASK 2
A. 1) what is marginal costing and absorption costing
It is a technique used to take decision to identify the total cost of production. It is a
technique that differentiate the fixed and variable cost. It is a method of analysing cost
information to provide management which tries to trigger out effect on revenue obtained due to
change in volume of profit. It involves the cost of producing one additional unit. In this the
calculation is done by taking variable cost into consideration (Fullerton, Kennedy and Widener,
2014).
Talking about t absorption costing, it is a technique which determines cost and profit.
Absorption costing is an activity under which both fixed t and variable cost are charged into
operations, process or productions (Hall, 2016). Therefore, it also known as full c and total
costing. In absorption costing, all production cost are unwrapped by unit produced.
2). Prepare the income statement as marginal and absorption costing method.
Particulars Amount Amount
Income 33000 33000
material 5600
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labour 4800
Production expenses (variable) 1600
Sales expenses (variable) 800 12800
Less: closing inventory
Direct material 1400
Direct labour 1200
Production expenses (variable) 400
Sales expenses (variable) 200 3200
Cost Of Production (per unit) 9600
23400
Less: Fixed cost
Overheads (Production) 3200
Fixed administrative expense 1200
Fixed selling expense 1500
5900
Net income 17500
Absorption costing
Particulars Amount Amount
Total revenue 33000 33000
Direct material 5600
Direct labour 4800
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Production expenses (variable) 1600
Sales expenses (variable) 800 12800
Less: Closing inventory
Direct material 1400
Direct labour 1200
Sales expenses (variable) 200
Less: Sales expenses (variable) 600 3400
Less: Absorption of Overheads
(Fixed)
Cost of production 9400
Per unit contribution 23600
Less: fixed cost
Overheads (production) 3200
Fixed administrative expense 1200
Fixed selling expense 1500 5900
Net Income 17700
B. Calculate the following with breakeven analysis.
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C. Apply the range of management accounting techniques and produce appropriate financial
reporting documents accurately.
From- MOA
To- GM
Subject- Rendering information about approving management accounting technique which are
need to be implicated.
Sir,
With context in rendering fruitful information which could be reflector of high fecundity
as well as proper allocation of costs (Dekker, 2016). Marginal cost and absorption costing are
two types of management technique which will help system in discovery of sufficient profit for
Fontain motors. Hence, in this case procedure of absorption will be proper for best result
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because it dwells all cost incurred while doing production of units. Moreover, there are many
methods which are helpful to the management accounting techniques like:
 Cash flow statements, historical checking
 Analyzing the financial accounts
 Financial accounting
 Communicating the information etc.
 Review of the accounts.
By adopting both the methods it is intelligibly seen that in marginal costing profit of a
Fontain motors is relatively low as equivalence with absorption costing. There is a profit
of 17700 absorption costing and 17500 in marginal costing techniques (Cooper,
Ezzamel, and Qu, 2017). Hence, it is confidently said that use of absorption costing is
much more fruitful to organization. It is a full cost method and show the competent net
profit. In marginal costing, all the uncertain expenses are taken into consideration like
direct labor and production overhead direct material. In absorption costing method all
fixed as well as variables expenses are taken into account. There are various reporting
techniques which are to be implemented in the organization are as under
 cash flows
 startup costing
 Balance sheet
 Budget and forecast table.
Thank you
D. Produce financial reports that accurately apply and interpret the data for the business activities
shown in the scenarios in Task 2 above
Interpretation
The calculation of above question is done by applying two techniques named marginal and
absorption costing. By applying this technique, it can be easily seen that profit of absorption
costing is high than marginal costing. The individual interpretation is done below: -
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