Comprehensive Analysis of Management Accounting and Reporting

This report examines management accounting practices, focusing on Sollatek (UK) and its financial operations. It begins with an introduction to management accounting, its importance, and the essential requirements for effective financial data management. The report details various accounting reporting methods, including performance reports, inventory management reports, account receivable reports, and job cost reports. It explores different types of costing methods, such as cost accounting and inventory management, along with their benefits. The report also analyzes planning tools used in budgetary control, comparing them with other organizations to address financial issues. The analysis covers the integration of accounting systems and reporting methods, emphasizing their role in providing valuable insights into Sollatek's financial position. The report provides a detailed analysis of management accounting systems and reporting methods, offering a comprehensive understanding of financial management within an organization, and how they can be used for decision-making and strategic planning.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Discussion about management accounting and its essential requirement........................1
P2: Different types of accounting reporting methods.............................................................3
M1: Various crucial benefits of using management accounting system................................5
D1: Critical evaluation of various reporting method and accounting system integration......5
TASK 2............................................................................................................................................6
P3: Different types of costing methods used for calculating net profit..................................6
M2: Different types of accounting tools and techniques........................................................8
D2: Analysis of data collected from income statement..........................................................8
TASK 3............................................................................................................................................8
P4: Merits and demerit of using planning tools used in budgetary control............................8
M3: Analysis of various planning tool and its application for forecasting..........................10
D3: Evaluation of planning tools for responding to financial issues....................................10
TASK 4..........................................................................................................................................10
P5: Comparison with other organisation to overcome financial issues................................10
M4: Analysis of planning tools to deal with financial issues...............................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
In present scenario, it has been determining that most of the organisation are looking for
suitable accounting system that can provided valuable ways to record necessary financial
transactions. One of the major aspect of using management accounting is to record, summarise
and communicate various data into their respective format. It will assist “Sollatek (UK)
company” to manage their overall business transaction in effective manner. The primary
objective of using appropriate accounting system is to attain future aims and objectives that are
set by the company. This project module aims to provide specific information about various
types of management accounting system as well as reporting method useful for an organisation.
Apart from this, different types of costing methods those are taken into account for the
calculation of net profit. Use of merit and demerit of planning tools used in budgetary control
process. Comparison with other organisation is done to examine, how management accounting
system helpful for resolving financial problems (Ward, 2012).
TASK 1
P1: Discussion about management accounting and its essential requirement
Nowadays, it has been analysing that manager of “Sollatek (UK)” is always in search of
collecting essential data that are helpful them to organise their resources effectively.
Management accounting is one of the effective presentation of financial data in such as manner
as to provide company necessary direction to operate their business. Management use these
systems form effective policy that is taken into account for organising everyday function and
operation those are undertaken by the company. It consists of various accounting methods,
system and tools that coupled with particular knowledge and ability, assessment of management
activity. This will help them to increase maximum profit by proper utilisation of resources. The
statistical analysis of all statements must be done in a manner that will be crucial assistance to
administration in future planning and operations (Granlund, 2011). Accounting is valuable
information system that is concern with some kind of process that identify, measure and evaluate
the economic data of an organisation to their managers that needed data for effective decision
making. It deals with proper analysis of all transactions that are done within an organisation is
having specific outcomes that can leads to attain maximum outcomes in coming period of time.
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Definition: Management accounting is considered as one of the effective branch of
accounting that deals with providing specific information about to upper level in systematic
manner. It will be helpful for the administration to perform their operation functions of planning,
organising and decision making in a proper manner.
Importance of using MA:
 Assist in preparation of plan: Planning is considered as one of the most crucial age in
present time. It used to accomplish all the aims those are set by “Sollatek UK company”
in coming period of time.
 Easy to make decision: The management used to make valuable decision in positive
manner in order to get best alternative that are present to an organisation.
 Determination of future aim: It is termed as one of the crucial basis of data which is
available examine their goals and assist to determine valuable route through that it can be
attain.
Types of management accounting system:
 Cost accounting system: This seems to be one of the process of recording,
categorising, evaluating and allocating different alternative course of actions. It will be
helpful for the department to control their additional costs that are made within the
production process. The Sollatek (UK) company need to take into consideration of this
system as they are associated with the production of tubes, valves etc (Wickramasinghe
and Alawattage, 2012). On the basis of cost efficiency and capability of the production
department specific advices is to be made to top management. There are various types
of costing methods those are helpful for an organisation such as normal, standard and
actual costing.
 Inventory management system: It is considered as one of the effective supervision of
all non-capitalised stock products. It is said to be one of the effective element of supply
chain that used to analyse flow of products from producer to warehouse. It is the process
that oversees the maintenance of inventory products, whether those goods are crucial or
assets of Sollatek (UK). It is mainly related with production sectors in order to create
effective work order, bill of goods and other manufacturing related invoices. There is
various method those are needed to be taken into account such as FIFO, LIFO and
AVCO.
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 Price optimisation system: It has been found that optimisation is mainly used in the
area of pricing that used to provide valuable applications related with prices. It is
considered as appropriate numerical evaluation done by the company to evaluate
responses of customer after using the prices of products and services. it is also taken into
account to examine best suitable aims which is to increase profitability of “Sollatek
(UK)”. They are mainly related with all possible prices selection that used to predict
total earning and gains from the total sale of products (JOSHI and et. al., 2011).
 Job costing system: It is mostly considered as one of the effective process which is
taken into account for assigning cost that are incur to a particular job as an individual or
Sollatek is associated with. This seems to be wide term which is globally used in
construction sector. There are various types of costing method which will be taken into
account while production process. Some of them are batch costing, products, standard
and process costing.
P2: Different types of accounting reporting methods
In every business organisation, it has been analysing that all those companies which are
not using valuable accounting system they are going into some kind of loss. To face all the
implication, they are looking to make analysis of their production process of reporting system
from starting terms. It will provide great opportunity to all department those are held responsible
for providing specific information about internal or external factors. Reporting is one of the
essential document that consists of necessary information about various financial and non-
financial detail in systematic manner (Klychova, Faskhutdinova and Sadrieva, 2014). The
shareholder or investors used to make their valuable decision making on the basis of all the data
collected by the accountant and finance manager about Sollatek (UK). In the effective
preparation of report, role of management accounting is more important as they are responsible
for tracking overall performance information during that period.
It is crucial for the manager to collect essential data in proper manner so that future
decision making can be done in effective manner. Positive use of accounting reports consists of
various roles and responsibility to manager various critical situations that are determine under a
reporting system. The primary motive of accounting reporting is to track, evaluate and report to
account manager about overall earning and expenses incurred by Sollatek (UK). It will assist
accountant and investors to make decision regarding how to manage various activities of a
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business. It used to play an eminent role in present business environment. It used to provide a
clear picture to top management about current financial position of an organisation that doesn’t
considered much information which used to assist them at operational level.
There are various types of accounting reporting method which will be helpful the
department to record necessary information about the company’s overall data. Some of them are
mentioned underneath:
 Performance report: It is one of the significant activity that is related with project
communication management. It consists of collecting and disseminating various scheme,
data, proper utilisation resources and estimate future growth and ongoing project plan
(Zainun, Tuanmat and Smith, 2011). A yearly performance report used might be delivery
for each employee of Sollatek (UK) to evaluate their work performance. It will assist
them to determine, whether they are working effectively in the given project or in right
direction. A work performance report used to compilation of work ability for the purpose
of consumption about various objectives such as future decision making.
 Inventory management report: This seems to be related with overall supervision of
non-capitalised stock products. It is related with crucial element which is needed to be
taken into account by the manager to manage and control their stocks that are kept by
Sollatek (UK). The opening and closing stock detail are summarising or recorded into
this report. This seems to provide a comprehensive account of inventory or supply of
different items. It is more simple or clear to understand so that investors would easily be
able to make future decision. There are various techniques which will be taken into
account for the stock valuation such as, ABC costing, Inventory turnover ratios and EOQ.
 Account receivable report: It is known as periodic report that is categorised under a
company’s overall account report as per the length of outstanding invoices. It is taken
into account as one of the most valuable report that used to determine the overall
financial position and health of Sollatek (UK) in future decision making. This happens to
be the primary tools which is being used for the collection of unpaid invoices from the
debtors (Mistry, Sharma and Low, 2014).
 Job cost report: As per this accounting that is taken into account for tracking the costs
and earning done by job and enable them as standardised reporting to gain profitability
from an individual job. It is basically considered as profitability report which is likely
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related with income statement for the firm arises from an individual job. By using this
particular report, manager of Sollatek (UK) can easily be able to determine production
data and total cost they are investment on them.
M1: Various crucial benefits of using management accounting system
There is various important advantage of using different types of accounting system that can
assist in future attainment of organisation goals and objective. They all are equally beneficial for
Sollatek (UK) company in order to manage and organiser various resources at the same time.
Types of accounting system Benefits
Cost accounting system This will ascertain the costs in various different condition
through using certain tools and system of costing.
To determine selling prices in various circumstance.
Inventory management system It will assist and improve accuracy of stock orders.
It used to create more organise warehouses.
Price optimisation It is also used to analyse overall perception of customers.
Provide more affordable prices to various people as per the
demand.
Job costing system Accessibility assist customer or other investors to know more
about company financial position.
D1: Critical evaluation of various reporting method and accounting system integration
It has been determining that accounting system and reporting used to provide valuable
information about the current position of Sollatek (UK). It is crucial for the accountant to make
proper information about both of them or its integration. The phenomena of link among these
two important aspects within an organisational process is said to be integrated accounting
system. It used to provide standardised process for recording various transaction and use of
finance is effective manner. There are various types of reporting method such as performance
report which is related with present and last year performance of Sollatek (UK). While, with the
use of account receivable report they can easily be able to determine analyse total amount
outstanding and timing of recovery. Inventory management report used to give valuable
information about total position of stock kept by the company with them.
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TASK 2
P3: Different types of costing methods used for calculating net profit
Cost is the value of amount which is being paid by the person in order to get something.
Such as in case of production, manager use to collected necessary amount of raw material or
other crucial need from several parties. These are all taken into consideration for produce
specific products within an accounting period of time. It is playing one of the vital role in
effective functioning of business operation. In Sollatek (UK), the cost that is to be taken into
account as the proper acquisition in which total amount of value will be needed for expanding in
order to attain more valuable outcomes in near future time (Amidu, Effah and Abor, 2011).
There are various types of costing methods that can be taken into account for the purpose of
calculating net profit for the company. some of them are mentioned underneath:
 Absorption costing: It is related with all kind of costs those are incurred on the
production of product and services of Sollatek (UK). It consists of various cost such as
variable and fixed. because of this particular nature it is known as full costing method. In
accordance with marginal cost, this seems to be effective costing method that is used to
absorb during each cost those are either related with fixed or variable. This seems to be
one of the vital method that can provide valuable outcomes in future decision making.
 Marginal costing: It happens to be determine as one of the reliable costing techniques
that will be taken into account during the time of manufacturing one extra unit. It
includes only variable cost in order to overall sales that used to calculate net profit for the
company. The fixed cost is taken into account, while evaluating net income of an
organisation (Carlsson-Wall, Kraus and Lind, 2015). It has been determining that variable
cost used to include necessary part of marginal cost that are related with direct labour,
material and overhead expenses. This seems to be more effective method to make better
decision in coming future.
Calculation of net profit by using marginal costing method:
Particulars Amount
Sales revenue = (selling price * no. of goods sold = 55 * 600) 33000
Marginal Cost of goods sold: 9600
Production = (units produced * marginal cost per unit = 800 * 16) 12800
closing stock = (closing stock units * marginal cost per unit = 200 *
16) 3200
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Contribution 23400
Fixed cost ( 3200+1200+1500 ) 5900
Net profit 17500
Computation of net income by using absorption costing method:
Particulars Amount
Sales = (selling price * no. of units sold = 55 * 600) 33000
Cost of goods sold = (total expenses per unit * actual sales = 23.375 * 600) 14025
Gross profit 18975
Selling & Administrative expenses = (variable sales overhead * actual sales +
selling and administrative cost = 1 * 600 + 2700) 3300
Net profit/ operating income 15675
Break even analysis: It is said to be one of the crucial point at which every cost and
expenses needed to provide equal outcomes for Sollatek (UK). It is known as effective point in
which company neither get profit or nor goes into any kind of loss.
A. Total number of product sold
Sales per unit 40
Variable costs VC = DM + DL 28
Contribution 12
Fixed costs 6000
BEP in units 500
b. Calculation of breakeven point in accordance to sales revenue
Sales per unit 40
Variable costs VC = DM + DL 28
Contribution 12
Fixed costs 6000
Profit volume ratio PVR = Contribution / sales * 100 30.00%
BEP in sales 20000
c. Calculation for getting desire profit of 10,000
Profit 10000
Fixed costs 6000
Contribution 16000
Contribution per unit 12
Sales 1333.33
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Margin of safety: It is known as one of the reliable aspects that is related with better
management of various intrinsic value of stock at market cost. It is termed as more reliable ways
to provide effective ways as an end sales volume which would be depend as appropriate business
range to overall break even analysis.
d. The margin of safety, if 800 products are sold
Actual sales in units 800
Break even sales in units 500
Margin of safety 37.5
M2: Different types of accounting tools and techniques
It has been found that there are various types of accounting techniques and tools which
would be taken into consideration as more reliable for effective decision making. Some of them
are mentioned underneath:
 Marginal costing tools: It is said to be one of the best techniques that can assist in
evaluating net profitability of the company. charging cost as variable units can be helpful
for effective decision making.
 Historical cost: It is one of the vital measure of value use to measure price of an assets
on balance sheet on their nominal cost rather than original cost.
D2: Analysis of data collected from income statement
In respect to deal with various issues that are arises in an organisation in coming time
they need to make use of various costing method. It would be make reliable aspects to the
company which will be essential for effective decision making. In respect to use of marginal
costing the company used to make sufficient amount of profit with 17500. While in case they are
using absorption costing they are getting a net profit of 15675. All the variation is being analyse
by using total fixed cost consideration.
TASK 3
P4: Merits and demerit of using planning tools used in budgetary control
Budget is said to be one of the effective system that can provide specific information about
different cost and expenses incurred by Sollatek (UK) company used to incurred during the time.
It is the future estimation of total sales and profit they are going to earn in near future.
Budgetary control process:
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It is said to be one of the effective process which will helpful for an organisation to
evaluate total profit and expenses for future period and activity. Under this process, budgeted and
actual aspects those are used to measure and remove all kind of difference that are arises in an
organisation. There are various useful centres that consists of effective process to cop-up with
various budget needs (Moser, 2012). Planning is one of the essential tools that can be taken into
account for controlling various issues those are arises in an organisation. Some of them are
discussed below:
Forecasting tools: It is known as one of the effective process of preparing estimation of
upcoming past and current data in more common manner for the purpose of analysing trends.
Estimating future cannot have to consists of handing various data those are collected within an
organisation. It is utmost crucial techniques that is considered by business for planning their
future projects.
 Advantage: The main aim of forecasting is to provide business with valuable information
to business which can be used to make decision regarding the future.
 Disadvantage: These are mostly depending upon qualitative estimation which would
relies on subjective inputs and henceforth not being able to taken into account as more
reliable.
Contingency tool: It consist of various sectors which would assist in providing timely
and effective areas of humanitarian that aids to most critical time those are arising in an
organisation. It is a kind of course of action that is designed to assist an organisation to respond
at various types of business risks those are affecting performance of the company. It is
considered as Plan B because it is mainly used in vital situation those are arises in the
department.
 Advantage: An effective designed plan is held responsible for facing all kind of issues
those are affecting the profitability position of the company. It can only be done through
empowered staffs (Windolph and Moeller, 2012).
 Disadvantage: Inadequate literature can lead to make company suffer from any kind of
issues that are arising within an organisation. It is more complex in some kind of situation
because of its qualitative nature.
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