Management Accounting Report: Techniques, Analysis, and Systems

This report delves into the core concepts of management accounting, emphasizing its importance in internal decision-making within organizations, using Excite Entertainment Ltd as a case study. It explores various management accounting systems, including cost accounting, job costing, inventory management, and price optimization, highlighting their advantages and applications. The report also examines different management accounting reports, such as performance reports, budget reports, and cost managerial accounting reports, and their roles in evaluating performance, formulating strategies, and controlling costs. Furthermore, it covers cost analysis techniques like absorption costing and marginal costing, essential for preparing income statements. The report provides a comprehensive overview of the benefits of these systems and techniques, offering insights into how organizations can effectively manage their finances, improve decision-making, and enhance overall performance.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
P1 Management accounting and different types of system.........................................................1
P2 Explain different methods of management accounting report...............................................4
M1. Evaluation of benefits of various management accounting systems...................................5
TASK 2 ...........................................................................................................................................6
P3 Suitable techniques of cost analysis to formulate income statement ....................................6
M2 Management accounting techniques and financial reporting documents.............................7
TASK 3 ..........................................................................................................................................8
P4. Advantages and disadvantages of different types of planning tools used for budgetary
control.........................................................................................................................................8
TASK 4..........................................................................................................................................11
P5. Organisations adapt management accounting systems.......................................................11
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................17

INTRODUCTION
Management accounting is also termed as a managerial accounting system. There are
different types of Management accounts and reports that are required by a manager in order to
make their day to take decisions best effective way and formulate short term and long term goals
(Adler, 2013). This form of accounting system is mainly useful to make decisions internally in a
business organisation that mainly includes financial and non financial form of information’s.
There mainly is no particular time to formulate and use which forms of managerial report
business organisations can utilise this as per their requirement. This accounting system is
somehow different from a financial accounting system as it aid in internal aspect of entity. In
order to effectively understand practices and concepts of Management Accounting Excite
Entertainment Ltd is being used in the report. This project covers formation relating to concept
of management accounting along with its benefits. In addition with their different forms of
managerial techniques reports covered in this report. Advantages and disadvantages are covered
in this report which describes the manner in which organisations can effectively resolve their
financial issue and stimulate their performance.
TASK 1
P1 Management accounting and different types of system
Management Accounting:
Management accounting is a formative accumulation of two words that are management
and accounting. It is an accounting system that is mainly related to business management internal
part. Management accounting is mainly aid in formulating managerial reports that are required
by an organisation in order to formulate plans and policies for the future purpose. Organisations
are not bound to maintain a accounting system as it is wholly depend on their actual requirement.
Moreover, accounting system hold its own importance within business organisation and some of
the major effectiveness are mentioned below:
Cost Accounting System: This system of accounting is mainly a form of system which
effectively aid in evaluating cost of products within all the form of cost are included such as
variable, fixed etc. It is essential for organisations to have proper and appropriate estimation of
their products and services cost as this estimation of cost will effectively help them to check their
overall ratio of profit and loss of a products and services. Excite Entertainment Ltd take effective
1

advantage of accounting system in order to properly check their different types of cost of
financial products and services. It will directly help them to focus on their services and products
section that hold more beneficiaries to company.
Direct Cost: These types of cost can effectively be traced to a particular cost centre such
as, department, product, process etc.
Standard Costing: It is a type of costing system which is mainly related to evaluation of
variance in between estimated and actual cost. This mode helps an organisation to effectively
aware about cost difference.
Price Optimisation System: This form of accounting system effectively provides a
formative framework which helps to determine price of a service and a product which is more
suitable for organisation and consumers. This will automatically aid in effective evaluation and
review of consumer perceptions at a different price range. The major purpose of price
optimisation accounting system is to effectively offer various factors that will help to set price.
Excite Entertainment Ltd is taking effective advantage of this accounting system to set their
price which is both beneficial for customers as well as organisation.
Job Costing System: This accounting system includes formative calculation of total cost
that occurs within the process of providing services and product and distribution of cost to each
and every individual unit relating to products and services (Tucker and Lowe, 2014). Job costing
method is mainly effective in that form of organisations that provide different types of multiple
services and products. Excite Entertainment Ltd offer different types of financial products and
services. Thus, it is essential for entity to make proper estimation of each and every individual
unit cost. Within this situation, job costing system effectively aid in evaluating cost of numerous
form of financial services and products.
Inventory Management System: It is one of the most important forms of accounting
system which is mainly relating to tracking products and services. This system will effectively
aid organisations to check and evaluate their availability of products and services. Inventory
management system majorly works in the supply chain management. Further it helps in
analysing financial products and services status. For instance, if an organisation is required to
track their mortgage loan's clarification thus with the help of inventory management system they
can effectively check status of that service. Formative concept of cost can effectively be
understand with the help of FIFO( first in first out) and LIFO( Last in first out). In this, LIFO
2

states that inventory that comes last are required to be sold first. While, FIFO termed inventory
those who first come are sold first. Along with this, weighted average method also proves to very
effective in order to manage inventory. In this method cost of goods that are available for sale are
divided by total number of units available.
Financial accounting system- The financial accounting system may be defined as a kind of
accounting system which is related with the preparation of the financial statements that provides
the financial information to the organisations (Edwards, 2013). Eventually, this accounting
system is compulsory to implement in all kind of the companies.
(B)Advantage of timely production of accounting information to both internal and external
stakeholders.
The accounting informations are very important for both to the internal and external
holders (Comyns, Figge, Hahn, Barkemeyer, 2013). Herein, the importance of accounting
information is mentioned below:
For internal users- The accounting informations are beneficial for the internal users
because on the basis of it, they can make the important decisions. As well as it can help the
internal users like managers in effective management by making policies, plans and strategies on
the basis of relevant accounting information. Herein, the Excite entertainment limited company it
is beneficial for their managers to manage different activities by accounting information.
For external users- Same as the internal users, the accounting informations are useful
for the external parties such as shareholders, suppliers etc. This is why because due to the
accounting information they evaluate the financial condition of the company and make invest
accordingly.
Comparison in between management accounting and financial accounting system:
Basis Management accounting system Financial accounting system
Legal requirement It is not compulsory to prepare
management accounting system. In
this there are no legal requirement.
This form of system include
legal requirement which is
required by an organisation to
perform.
Format of presentation This system does not include any While, in financial accounting
3

specified type of format. system it is important to follow
appropriate format.
Types of data used This form of accounting system
include both type of data such as non-
financial and financial.
This system of accounting
cover data only in financial
form.
Area of coverage of
within the organisation
This system of accounting include
organisation internal management
area.
Financial accounting system
include both internal and
external area.
P2 Explain different methods of management accounting report
There are different forms of accounting report which is required by an organisation.
Management Accounting play essential role within a company. These types of accounting
reports are important within an organisation in order to perform their internal management
business in best effective way. With the help of this report managers can formulate their
decisions and strategies. These types of report cover monetary and non-monetary aspects of
information. Excite Entertainment Ltd formulates different types of reports which are mentioned
below:
Performance report: Performance report effectively measure of performance. In relation
with Management Accounting performance report, it helps in evaluation of performance of an
organisation and its employees. It further helps in reducing complexity in decision with the help
of the manager of Excite Entertainment Ltd can easily able to decide eligible employees for
reward. In addition with their performance report helps company to maintain a regular check on
performance of their employees in order to increase their efficiency.
Budget report: This report is an internal Organisation in report which helps management
to compare their performances with actual performance along with this it also helps in
formulating policies and strategies both for present and future purpose. It effectively makes
estimations of expenses income which is related to a particular period of time with the help of
the support organisations can effectively compare their performances and fulfil their actual
objectives. Excite Entertainment Ltd by using battery powered can make proper and appropriate
comparison. In between their actual finance performance with budgeted goals. It further benefits
4

them to make appropriate and best effective Strategies for future purpose and increase their
performances by maintaining an appropriate and cost-effective budget.
Account receivable aging report: This form of report contains information related to
credit transactions. Account aging report is suitable for those organisations those who perform
their day-to-day transactions. It mainly included benefit for Finance Department to effectively
analyse the amount of money in a market by customers. Along with this report also cover date of
a transaction made that automatically helps in removing the complexities in credit calculation.
Excite Entertainment Ltd appropriately prepare account receivable aging reports which help
them to take their total collections from sellers in customers in bringing transparency within
credit collection from a Marketplace.
Cost managerial accounting report: Effectively provides appropriate framework in
which an organisation can check the profit and loss made from different types of activities. It
calculate all their expenses before selling and after which helps in further making competition of
the total expense against money earned from selling. Company by using cost managerial
accounting report can determine the expenses in profit if the expenses are more than selling then
it considered in a loss statement why selling money is higher than expenses then it is profit.
Excite Entertainment can take advantage of this report in order to analyse profit and loss which
help them to for the make their business decisions and plans (Hartmann and Young, 2013).
M1. Evaluation of benefits of various management accounting systems.
Advantage of cost accounting system:
 It is supportive in building evaluation of products and services cost that offered by
an organisation.
 Cooperative in discovering causes linked to towering cost taking place in the
practice of offering products and service.
Advantage of inventory management system-
 Inventory management system is advantageous to track products and services
status.
 It helps in saving time and cost.
Advantages of price optimisation system-
 This system benefits and organisation to determine price level that is helpful for
organisation and consumers.
5

 It provides a framework in order to evaluate consumer reaction at various level of
pricing.
Advantage of job costing system-
 Benefits in effective assignment and calculation of each and every segment cost in an
individual way.
 It benefits in measuring and tracking overall activities of an organisation specially within
cost occurring activities.
TASK 2
P3 Suitable techniques of cost analysis to formulate income statement Marginal costing
method- The marginal costing method is a kind of costing method in which fixed cost is
considered as the period cost and variable cost as the unit cost (Talley, 2017). This costing
system is also known by the variable costing method.
Absorption costing method- The absorption costing method is a type of costing method
which considers both the cost (fixed and variable) as the unit cost (Fisher and Krumwiede,
2012).
Income statements of Excite entertainment company for month of may(Marginal costing
method)
Particular Amount(in £ )
Sales
Less- Variable cost
Contribution
Less- Selling and manufacturing expenditures
Net profit
120000
51000
69000
-
69000
Working note*
1. Calculation of sales- 8000*15= 120000
2. Calculation of variable cost- (Opening stock+ production overhead- closing stock
: 500*6+ 10000*6- 2000*6= 51000)
6

Income statements of Excite entertainment company for month of may(Absorption costing
method)
Particular Amount(in £)
Sales
Less- Cost of good sold
Gross profit
Less- Selling and manufacturing expenditures
Net profit
120000
85000
35000
-
35000
Working note*
1. Calculation of sales- 8000*15= 120000
2. Calculation of cost of good sold- (Opening stock+ production overhead- closing stock:
500*10+10000*10-2000*10=85000)
M2 Management accounting techniques and financial reporting documents
Management accounting techniques acts as an one of the most important tool which helps
in creating financial statements and reports. Organisations are require to effectively prepare and
formulate financial documents that include, P&L and balance sheet and more with the help of
accounting tools and techniques. Accounting tools effectively provide appropriate tools and
accounting techniques that are mainly required to frame financial reports (Renz, 2016). Excite
Entertainment Ltd. Appropriately formulate financial statements by taking help of various forms
of accounting methods and techniques as in order to get effective financial data in order to make
financial statements that are available through management accounting tools.
TASK 3
P4. Advantages and disadvantages of different types of planning tools used for budgetary
control.
Budget:
It is a formative plan in a monetary term. It is a pre-determined statement of a particular
period of time. It provide a standard with the help of which organisation can measure their past
7

performance with present. Within Excite Entertainment Ltd. Management effectively designed
budget in order to analyse organisation financial nature for a specified period of time.
Sales budget: It is mainly a plan that include estimated amount of goods and services that are
required to be sell by an organisation in a marketplace within a specified period of time. In
context with Excite, sales budget cover overall income form sales.
Advantage:
 It is important in order to formulate sales programming as to achieve sales objectives.
Disadvantage:
 It is a tome consuming procedure and sometime become hard for organisation individual
to accept.
Production budget: It is a financial plan that include estimated number of units that are required
to be manufactured in a course of time. This budget is framed by managers on order to
effectively monitor the amount of units required to be used for effective accomplishment of
goals.
Advantage:
 Within Excite, it is essential to reduce cost of production in order to maintain proper
balance in inventory section for this production budget proves to very effective in order
to control cost of raw material.
Disadvantage:
 It is complex process and have lack of flexibility as variable in this continuously keeps on
changing.
Cash Flow Budget: Within Excite, this termed as an total estimation of inflow and outflow of
cash for a specific period of time.
Advantage:
 It helps on monitoring cash as to use that in other essential activities.
Disadvantage:
 There is a lack of flexibility in this and it is a time consuming procedure.
Budget Variance:
It is a differentiation among budgeted or baseline amount which is related to expensed
and revenue (Lee, Pujowidianto, Chen, Yap, 2012). It is an effective measure that are formed by
managers to evaluate difference in between actual figures against budgeted.
8

Advantage- On the basis of budget variance, organisations can see the actual level of
performance between the actual and estimated value. As well as due to this companies can
evaluate the difference between the estimated expenses and actual expenses. Herein, the context
of the Excite entertainment limited company, the budget variance helps them in measuring actual
performance by comparing actual data with the estimated data.
The use of different planning tools and their application to prepare and forecast budgets.
Budgetary control is utilized by the directors to screen and control the finance related
activities like expenses subject to a particular accounting duration. It is a strategy, which assist in
figuring the future financial requirement to execute operations by dividing the past budgetary
plans. Such planning tools provide an estimation of earnings and costs with organisation for a
particular budgeting period (Kotas, 2014). Apart from financial position in the business
environment also be more contingent. It encourages the senior level directors to oversee the work
and the execution of activities in such a way in which organisation make more benefits. The
supervisors of Excite Entertainment Ltd think about different elements to set budgetary and non-
financial aim to control and coordinate financial exercises inside different sections. To determine
the effectiveness of planning tools used in budgetary control various type of planning tools with
advantages and disadvantages are defined as follows:
Forecasting tool: It assist in anticipating upcoming events and circumstances by
examining the trend in time duration (Schaltegger and Burritt, 2017). Forecasting tools are
utilized to estimate the results and cautious planning based on past data just as circumstance
within the organisation. This also helps in determining method to help the directors of Excite
Entertainment Ltd to guide and analyse the future need and necessity by breaking down the
fiscal reports. Following are some advantages and disadvantages of forecasting tools as follows:
Advantages: The benefits of estimating apparatuses are as per the following:
• Excite Entertainment Ltd Limited can be beneficiated by keeping its customers
conscious through giving them the evaluated suppositions dependent on their
budgetary reports.
• Forecasting tool can maximise the profit capability of organisation by defining better
management by thinking about the important financial data.
Disadvantage: Various inconveniences related with forecasting tool used as portrayed:
9