Management Accounting Report: Milton Sandford Wines Limited Analysis

This report provides a detailed analysis of management accounting, focusing on its application within Milton Sandford Wines Limited. It begins with an executive summary outlining the importance of management accounting in financial reporting and organizational growth, followed by a table of contents. The introduction explains the core functions of management accounting, differentiating it from financial accounting and highlighting its role in managerial decision-making. Task 1 delves into the demonstration of the management accounting system, explaining different systems like lean, traditional, throughput, and transfer accounting, with a recommendation for Milton Sandford Wines. The report further explores the various methods of management accounting, emphasizing their importance in financial decision-making, enhancing financial returns, improving cash flow, and analyzing organizational performance. The report also covers financial planning, communication of information, and decision-making processes within management accounting. The report utilizes examples relevant to Milton Sandford Wines Limited, providing a comprehensive understanding of management accounting principles and their practical application.

MANAGEMENT ACCOUNTING
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Executive summary
In any organisation, the management accounting plays a huge role in terms of getting the proper
information regarding the financial statements in a year. In addition to that, the whole financial
record is gathered with the help of management accounting. There are various ways in terms of
adoption of the management accounting system. There are various methods as well as those
plays for gaining of profits for the organisation. For Milton Sandford Wines Limited there are
certain techniques and methods which are helpful for the growth of their financial statements. In
addition to that, the proper use of management accounting is much needed for keeping a record
of the growth of management accounting. The proper flow of communication is much needed
regarding the financial statements is an important aspect of management accounting. There is a
change of accounting technique for the growth of an organisation.
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Table of Contents
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
LO1 Demonstrating the management accounting system...............................................................3
P1 Explain the management accounting and explain various management accounting system.....3
P2 Explain the various methods for management accounting.........................................................6
Task 2.............................................................................................................................................10
LO2 Application of management accounting technique...............................................................10
P3 Calculation of cost with the help of various techniques and explain the difference................10
Task 3.............................................................................................................................................14
LO3 Explaining the use of planning tools.....................................................................................14
P4 Explain the advantage and disadvantage of various planning tools.........................................14
LO4 Comparing the ways for using management accounting.......................................................14
P5 Comparison of how organisation an adopt management accounting system...........................14
Conclusion.....................................................................................................................................15
Reference list.................................................................................................................................16
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Introduction
In an organization, management accounting mainly deals with the preparation of accounts as
well as reports which are helpful for providing the correct information taken by the manager for
betterment. In addition to that, the management accounting is mainly looking towards the
financial needs of a business. Moreover, the management accounting is not as same that of
financial accounting. The main aim of management accounting is aiding the manager within the
same organisation in terms of decision making. In order to use the appropriate tools of
management account, there is a selection of company Milton Sandford Wines Limited. In
addition to that, there is a brief discussion regarding the management accounting system with the
use of various costing techniques. In this report, it also showcases the various planning tools
which are immensely used for the relevant result of management accounting. In the last, there is
a comparison regarding the adoption of management accounting system.
Task 1
LO1 Demonstrating the management accounting system
P1 Explain the management accounting and explain various management
accounting system
From: Management Account Officer
To: General Manager
Milton Sandford Wines Limited
Sub: Management activity Report
Introduction
In an organisation in terms of management accounting there requires a management accounting
system which is helpful for making a position in the competitive market. In this section, there is
an explanation of management accounting system along with that their system in management
accounting system.
Management accounting explanation
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Management accounting is generally a tool which is used by an organisation in terms of
obtaining several accounting activities as well as for the financial task at the time of accounting
year. Moreover, the management accounting provides various information regarding
organisational information to manager along with that the accountant of the respected firm. In
the opinion of Ax and Greve (2017, p.70), management accounting also showcases various
methods which can be used by an organisation in terms of getting the appropriate financial
records. In an organisation, their management department has a close observation of the
loopholes, if there occurs any kind of financial issues and marketing drawbacks. Moreover, the
management accounting observed as well as analysed on nonfinancial as well as financial
information of an organisation. The management accounting is mainly denoted as value creators
among other accountants. The future of an organisation is depended upon management
accounting because if they are not able to provide correct information then it could hamper their
business.
In management accounting system there is various accounting system which is identified and
explained for getting the relevant information regarding the financial aspects of an organisation.
The system is as follows:
Lean accounting system
The lean accounting system is mainly gathered from a lean organisation in an international
market. In an accounting year, this accounting method is much useful in terms of reconstruction
of an organisation. As opined by Bromwich and Scapens (2016, p.8), if there is any kind of
financial issue within an organisation, then this system is much beneficial for them. The ability
and capacity in terms of aggregate are developed through the medium of an accounting system.
Any financial obstacle and marketing issue can be decreased by using accounting system. For
example, in Milton Sandford Wines Limited by using this system can enhance their flexibility as
well as increase their revenue for a long run. In the organisation of Milton Sandford Wines
Limited if there occurs any kind of financial issue then it can be tackled with the help of lean
accounting system.
Traditional accounting system
This system is regarded as the oldest accounting system method in management account history.
In any international market, the accounting system is mostly required for conducting a proper
accounting record. In the opinion of Chiarini and Vagnoni (2015, p.600), this system does not
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have any type of complication or multiple adjustments so, it is used for over the year for an
organisation. In Milton Sandford Wines Limited while using this system it can have a long-
lasting effect on any accounting activity. In addition to that, this system is mainly considered in
accounting organisation. If Milton Sandford Wines Limited uses this system then to some extent
it will not provide that much profit because it is mainly for accounting organisation.
Throughput accounting system
Throughput accounting system is mainly gathered from cost accounting system. This accounting
system can be utilized with various aspects as well as it will provide a benefit for an organisation
with the help of accounting system. As asserted by Christ and Burritt (2013, p.170), throughput
accounting can provide various organisational information as well as accounting information for
an organisation. In Milton Sandford Wines Limited, with the implementation of this system can
be helpful for overcoming all issues those are related to cost as well as loopholes.
Transfer accounting system
Transfer accounting system provides information for any kind of taxation or transferred amount
from an organisation. It mainly takes place when both organisations have a financial section in
the accounting year. As per the view of Cullen et al. (2013, p.225), this is mainly favourable for
those who hold some companies, which owns various companies in a single entity. If Milton
Sandford Wines Limited, use this system then it might not provide the correct advantage that
they are expecting from this system. In any organisation, if there is inter transaction then this
system is highly needed in an accounting year.
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Figure 1: Different Management Accounting system
(Source: Bromwich and Scapens 2016, p.8)
For Milton Sandford Wines Limited, a preferable system is lean accounting system because it
can provide benefit in the international market as well as it will be helpful for the reconstruction
of the financial structure of an organisation. Moreover, the financial issues, as well as obstacles,
can also be dealt with the help of this system. Thus, Milton Sandford Wines Limited will be
useful for using this system.
P2 Explain the various methods for management accounting
From: Management Account Officer
To: General Manager
Milton Sandford Wines Limited
Sub: Management activity Report
Introduction
In an organisation in terms of management accounting there requires a method which is suitable
for the long run in the competitive market. There are various methods and importance of
management accounting which is shown in below selection. In addition to that, there are
showcases some importance of management accounting.
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Importance of management accounting
In any business organisation, management accounting is much important because it shows
financial records; some of the importances of management accounting are as follows:
Providing financial decision
The financial market, as well as the financial accounting activities, is both looked at the
management accounting. In addition to that, the department provides various relevant decisions
regarding the growth of an organisation. In the opinion of Suomala et al. (2014, p.310), an
organisation is required to have some of the financial decision those are mainly provided by the
management accounting for the capability of growing the business. Moreover, the organisational
marketing provides a development in the accounting year. The strategies, as well as methods, are
mainly helpful for the benefit of the organisation.
Enhancement of financial returns
The management accounting system is required to have investments upon the rate of returns for
the organisation. Moreover, it has close observation of the financial statements of an
organisation. In addition to that, the close observation provides a positive impact upon the
increase in growth rate in the competitive market. As per the view of Tappura et al. (2015,
p.155), in order to get the relevant information regarding the investment policy, there is a
requirement of having a close look upon the returns as well as on the market condition. In order
to have stable growth for the organisation, there is a requirement of having an enhancement in
terms of having a financial return from management accounting.
Enhancement of cash flow
In an organisation, their final year in terms of any financial activity is needed to obtain the
management accounting in the final year. Moreover, forms are required to be obtained from
various aspects those are gathered from the organisation. In the opinion of Dekker (2016, p.90),
both accounting methods and business strategies are required to be analysed by keeping in mind
the competitive market. If the methods are properly utilised then it can provide a higher amount
of profits for the benefit of an organisation in the long run. It will be seen that cash flow
automatically get increased.
Analysation of organisational performance
In management accounting system there is various aspects those mainly consists of close
observation in organisation performance. Moreover, the various departments such as financial
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department, production department and sales departments come under the close observation of
management accounting department. As per the view of Drury (2013, p.56), in an organisation,
there are various loophole those are resolved with the help of management accounting
department.
Forecasting and reducing expenses
In management accounting, an important activity is mainly to develop the methods of costing
and production in an organisation. In addition to that, management accounting departments are
much development in terms of gathering information for achieving targets. As per Figge and
Hahn (2013, p.390), management accounting department properly knows that in order to
increase the level of profit is by reducing the product. Management accounting department
provides important information which is beneficial for raising the level of investments.
In Milton Sandford Wines Limited, with the implementation of management accounting
department is getting profit for a long run. In addition to that, their profit is increasing with the
proper flow of information in terms of financial records.
There are various methods of management accounting reporting. Those are as follows:
Financial planning
The financial planning is mainly thought out process in terms of various financial decisions those
are taken in the financial year for a strengthening of an organisation. In addition to that, in
financial planning, there is various information regarding financial statement as well as ideas for
achieving financial goals.
Communication of information
In order to develop an organisation activity, there is a requirement to have a proper flow of
communication which mainly consists of information about financial status. As per Fullerton et
al. (2013, p.70), in any organisation, it is much needed to have a proper flow of information for
gaining profit. The management is needed to have a proper flow of communication in terms of
information regarding the financial statement.
Decision making
The financial condition, as well as market valuation, is demonstrated through accounting system
which is provided by an organisation. In addition to that, management accounting is helpful for a
proper flow of information which is helpful for tackling relevant decision. As per Vosselman
(2014, p.200), the proper decision making is done with the help of management accounting.
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Budgetary control
The close observation of cash flow is required to have an activity in terms of budgetary control.
As opined by Hall (2016, p.70), the financial cost is required to be decreased so that it can have
the huge amount of profit and revenues.
Analysation of financial status
In order to gain again financial activity of an organisation, there is a requirement of proper
analysation of financial status. The analysation of marketing and finance are mainly based on the
organisational report. Management accounting department has a close look at the balance sheet
along with that income statement of an organisation.
Figure 2: Methods of Management Accounting Reporting
(Source: Hall 2016, p.70)
In Milton Sandford Wines Limited, the there best method for gaining the profit is mainly by
using analysis of financial statement. In addition to that, the proper analysation of financial
statement is helpful in terms of having a close observation of organisational financial record. The
proper analysation can be helpful for gaining profit in the competitive market.
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Task 2
LO2 Application of management accounting technique
P3 Calculation of cost with the help of various techniques and explain the
difference
Calculation of the net populist with the help of absorption costing method
Marginal Costing
Years 1
Particulars Amount ($) Units
Sales volume 600
Production 500
Sales 17500
Net sales 17200
Less. Cost of sales 450
Opening inventory 0
Direct material 3700 6
Direct labour 3100 5
Variable production overhead 1100 2
Less. Closing inventory 10000
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Variable sales overhead 400 1
Total variable cost 18200
Contribution -1100
Administrative expenses 800
Less. Fixed cost 2100
Operating profit -4100
Distribution expenses
Interest expenses
Less. Non-operating expenses
Less. Tax -1230
Net profit before tax -4100
Net profit after the tax -2870
Calculating the net profit by using marginal costing method
Absorption costing
Year 1
Particulars Amount ($) Units
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