Management Accounting Report for Conrad London St. James Analysis

This report offers a comprehensive analysis of management accounting principles, focusing on their application within the context of Conrad London St. James. It begins with an executive summary and table of contents, followed by an introduction that defines management accounting and its importance in organizational strategy and objective setting. The report then delves into various aspects of management accounting, including different systems like cost accounting, lean accounting, and inventory accounting, along with their respective requirements. Different methods of management accounting such as financial planning, budgetary control, and marginal costing are examined. The report also presents a detailed discussion of marginal and absorption costing, including the calculation of net profit using both methods and the differences between them. Furthermore, the report explores the benefits and limitations of various budgetary planning tools such as incremental budgeting and zero-based budgeting. The report provides a thorough overview of management accounting principles and their practical application in a business setting.

MANAGEMENT ACCOUNTING
1

Executive Summary
Management accounting suggests the procedure of preparing management reports along with
accounts. It provides the organisation, fiscal and statistical information regarding the
organisational performance and operation. It provides complete different information
comparing with the financial accounting. Instead of looking towards backward, management
accounting reports aim towards the future. This report is meant for the organisational
practice, as it is an internal factor of the organisation. This is an important factor for the
organisation regarding the determination of strategies and objectives. This study is based on
Conrad London St. James. This study has presented a detailed discussion about management
accounting including several systems of management accounting. This also presents the
requirements of those systems. There are several methods regarding the application of
management accounting. Net profit can be calculated through the application of marginal cost
as well as absorption cost. This study has presented an illustration of calculating net profits. It
also presents the difference between the marginal costs and absorption costs. There are
certain tool and techniques to determine the budgetary planning. This study has exhibited
advantages and limitations of those tools and techniques.
2

Table of Contents
3

From: Management Accounting Officer
To: GM, Conrad London St. James
Subject: Management Accounting
Introduction
Management accounting suggests the procedure of preparing management reports along with
accounts. It provides the organisation, fiscal and statistical information regarding the
organisational performance and operation. It provides complete different information
comparing with the financial accounting. Instead of looking towards backward, management
accounting reports aim towards the future. This report is meant for the organisational
practice, as it is an internal factor of the organisation. This is an important factor for the
organisation regarding the determination of strategies and objectives. This study is based on
Conrad London St. James in order to discuss about management accounting. This study is
intending to present a detail discussion on management accounting along with its implication
on organisational context. Conrad London St. James could apply several methods for
management accounting and the learner will present significant description about such
methods. There is certain difference between marginal costs and absorption cost. This study
will exhibit the calculation of net profit applying those costs along with the differences
between them.
Task 1
LO1
P1 Detailed explanation of management accounting along with their requirements
From: Management activity officer
To General manager Conrad London St. James
Subject: management accounting system.
Introduction
Management accounting system provides data regarding the organisational performance and
achievement. It is an internal factor of the organisation as this presents report consisting
information about sales, revenue and profit of the Conrad London St. James. As stated by
Ward (2012, p.57), management accounting is helpful for the managers to determine the
organizational strategies regarding the operation, objectives and strategies. There are several
types of accounting systems. These include managerial accounting, inventory accounting,
4

non-profit accounting and industry related accounting. Such reports are also related with
certain expenses including manufacturing, opportunity and sunk. Managerial accounting
report can also be of different types such as budget report, report about cost of job,
manufacturing and inventory report.
The prime purpose of a managerial accounting is to deliver information to managers of
Conrad London St. James about plan, operation and control of the business. As stated by
Drury, (2013, p. 59), this is an important factor regarding the organisational decisions. One of
the important system of managerial accounting is the cost accounting that provides data about
actual costs appeared while delivering any service, comparison between such expenses and
planned or standard expenses and highlight the variance while investigate and follow. Lean
accounting is another type of managerial accounting system. It includes evaluation of the
procedure and results in order to determine the process of creating additional values for less
waste elimination of resources and cost for betterment of Conrad London St. James. As
opined by Weygandt et al. (2015, p.79), cost accounting system has certain requirements.
Profitability analysis of individual product is the primary requirements in this context. In
order to apply cost accounting system in the organisation, it is important to provide
information about management and their requirements along with other factors. These factors
include frequency of information, process of production, organisational structure and
information about different expenses.
Another accounting system is the inventory accounting that helps to design the planning
about the tracking of inventory and its related factors. This is applied to manage the activities
of inventories of the organisation. Application of new inventory or modification of available
one is prime factors regarding this accounting system. There are certain factors related with
the industry that influences the organisational performance. Industry based accounting
provides information related with the organisational performance in the context of the
industry. According to Edmonds et al. (2016, p.89), different industries have different
requirements. Based on that, organisations determine their objectives and policies. One more
type of accounting is the non-profit accounting. This suggests the management of funds
especially for those organisations, which are dependable of donations in order to manage the
operations of the Conrad London St. James.
5

Conclusion
These types of accounting are responsible for the organisational performance considering
different factors. Each of the accounting system provides certain information regarding the
organisational performance and based on that the organisation could develop their strategies
6
Illustration 1: Management activity system
Sources: Activity Management system Data flow Diagram, 2018.

and objectives of Conrad London St. James. While managerial accounting provides
information about the regulation and control over the organisational process, inventory
accounting offers information about managing inventory and industry-based account provides
data related to the market. Hence, these accounting systems are enabling to provide certain
information to the Conrad London St. James.
P2 Different method of management accounting
From: Marketing activity officer
To: General Manager Conrad London St. James
Subject: Management activity Reports
Introduction
In order to prepare management accounting report, organisations are required to apply certain
methods. These include financial planning, budgetary control, financial statement analysis,
marginal costing, historical cost accounting, statements of funds flow and cash flow and
others. These methods have certain features that influence the Conrad London St. James
performance.
Financial planning provides fiscal data related to the operation of the organisation. This helps
to provide early information to the organisation about the required fiscal activities in order to
meet the objectives of the objectives of the company. As this method provides information
regarding short term and long-term goals of the organisation, Conrad London St. James could
determine their fiscal policies aiming towards its goals. It is not restricted to achieve highest
return on the investment. Financial planning offered information related with the requirement
of funds, its sources, distribution and determination of income and determining the optimum
level of capital regarding different assets.
Financial statement is another important method regarding the management accounting.
Analysis of fiscal statement suggests the attempt to design the meaning band significance of
the data of fiscal statement. It helps to determine the forecast regarding the prospects of
earnings in future, capability to pay the interest back and maturities of debt along with
profitability of significant policy regarding dividend. This method provides an analysis
regarding the financial statement, trends, statements of cash funds flow and ration.
Another important and effective method of management accounting is historical cost
accounting. This method provides data based on the historical evidences regarding each job,
department and process. As opined by Demski (2013, p.79), a comparison can be drawn
7

based on the standard cost. This could the organisation to determine the future policies for the
Conrad London St. James and to control the cost. Standard costing suggests the development
of standard costs under such effective condition of operation, analysis and calculation of
variances comparison between standard and actual cost. This could help to comprehend the
reason along with certain responsibilities to determine remedial activities to stop the
repetition of adverse things. This method of management accounting could help the
organisation regarding the control over cost. In order to regulate the activities of the venture
along with determination of planning for such activities, management accounting applies the
method of budgetary control within Conrad London St. James. It is important to determine
the direction of the operation of business including its achievement of successful return from
such investment. Marginal costing is also an important method regarding the management
accounting. These include break-even analysis to regulate cost, differential costing and
increment of profit and determination of strategies.
Statements of flow of funds are also an important method regarding the analysis of changes
faced by the organisation regarding the fiscal position of the Conrad London St. James. It
presents an analysis regarding the source of the funds, its application and impact of the funds
on the business. Hence, this method assists the organization regarding the regulation of costs,
further guidance along with comparative studies.
Conclusion
Certain methods are also responsible regarding the decision making of the organisation,
analysis of the flow of cash and graphs and statistics regarding the organisational
performance. Hence, application of these methods could help Conrad London St. James to
determine organisational strategies in order to meet the objectives of the organisation. This
analysis could also assist the organisation control its fiscal activities.
Figure2: Different methods of management accounting
(Source: From the view point of Weil et al. 2013, p.91)
Task2
LO2
8

P3 Calculation of net profit applying absorption and marginal costs Difference between those
costs
Calculation of Net profit (Absorption costing)
Calculation of Net profit (Marginal Costing)
There are certain differences regarding the concepts, application and impact of
marginal costs and absorption cost. Conrad London St. James is able to determine the profit
9

of the organisation applying these costs individually. Marginal costs help the organisation
regarding the process of decision making in the context of the organisation. On the other
hand, absorption costing helps the organisation regarding the external reporting. Marginal
costs put importance on the value of inventories regarding the production cost. Absorption
cost put the value of inventory while determining the cost for the total production. According
to Maher et al. (2012, p.81), the values of the inventory are higher in absorption cost
comparing to the marginal cost. Accounting standard does not allow marginal cost to value
the inventory. On the other hand, absorption cost is allowed to value the inventory according
to the standards of accounting at Conrad London St. James. Fixed production is not
considered as overhead of the costing of product under marginal costing. Hence, there is no
chance to raise any challenge regarding the arbitrary apportionment over the production
overhead. While comparing the scenario with absorption cost, determined factory overheads
are considered as part of the cost centres. This results in under the overheads of absorption
cost. Based on the relevance of the profit of the year, marginal costing is allowed to change
the fixed cost. Absorption cost valued the inventories regarding the cost of total production.
Hence, cost of sales could include the expenses of sales for a certain period and determined
the overheads appeared in earlier periods.
Task 3
LO3
P4 Benefits and limitations of different planning tools applied for budget control.
Incremental budgeting: in this budget control method helps to focus on the budget
controlling and more focusing towards the execution is to be taken as inferior and after that
additive amount of money area unit enclosed for the fresh disbursal year.
Advantages
Advantages of this method is that easy to implement and does not entail any complex
calculations. This also helps to ensure continuity of funding for the departments. This also
disconnect with the reality.
Disadvantages
Major limitations of this incremental budgeting is likely to be marginally different
from previous year.
In order to control the budget, there are different techniques and tool. Budgetary
control has certain advantages regarding the Conrad London St. James performance.
Application of those tools is also subjected to certain advantages and limitations in the
10

context of budgetary control. There are three prime tools including financial budget, non-
monetary budget and operating budget. These tools also include certain factors regarding the
budgetary control.
Zero base budgeting
It is the another method in which all expenses must be justified for each new period.
Under which company cannot considered previous base budget and starts from zero.
Advantages
 It has full accuracy power and efficiency level of work as well. This helps to allocate
all resources in most perfect manner.
 It also helps to improve coordination and better communication channel between all
departments
Disadvantages
 It is time consuming process
 It has lack of accuracy power that affect the business ineffective level of working.
 Lack of expertise who handles this budgetary system process.
Financial budget
This budget could present the financial statement for the organisation and determine
the strategies of the organisation regarding the application of its funds. Such funds include
sales revenue and assets along with loans and stock issuance. Financial budget consists of
three factors. These include cash budget, budget of capital expenditure and balance sheet
budget.
Cash budget
This budget Suggests the forecasting of disbursements and cash receipts comparing
with the actual cost. It helps to measure these factors. Application of cash budget is also
helpful to regulate an enterprise as presents the outgoing and incoming cash as small periods
including daily, weekly and monthly periods. Thus, the application of this tool is helpful for
the organisation regarding the managing of certain obligations. The Conrad London St. James
could also generate statements and strategies through the application of this technique
regarding the availability of additional cash, Based on that statements, the organisations are
also allowed to determine their strategies regarding investment for profit.
Capital cost budget
It is the another technique that assists the organisation to determine the strategies
regarding major assets including machinery, plant or land. Based on this analysis,
11

organisation could determine financial activities to borrow additional loans in respect of those
assets. Hence, this technique is influential for the Conrad London St. James regarding the
financial statement and activities.
Advantage
The prime advantage of this technique is the analysis about the assets of the
organisation as this presents the investment of the organisation regarding its assets. Balance
sheet budget is also an important technique regarding the financial activities of the
organisation. This suggests the forecast regarding the balance sheet of the Conrad London St.
James based on the success of other budgets.
Disadvantage
The prime limitation of this technique is the dependency on other budgets. Hence, the
advantages of financial budget include the fiscal situations and analysis of expectation
regarding its status. As this tool provides all the data as an expectation and probability and
related with other factors. Hence, this is prime challenge for this tool.
Operating budget
That include certain techniques such as revenue budget or sales budget, expense
budget and project budget. Operating budgets put emphasis on the operation of the
organisation. Revenue budget put emphasis on the earning of the organisation based on the
general operations of the company. As this suggests the organisation of regarding its future
fiscal status, the Conrad London St. James could determine future planning regarding its
operation. Expense budget determines the probable expenses of the organization regarding its
activities. According to Warren et al.(2013, p.83), this technique allows the organisation to
comprehend the possible expenditure of the organisation.
Advantage
Prime advantage of this technique is that the organisation could determine strategies
based on that anticipated expenses. There always remain a certain gap between the expense
and revenue of the organisation. Project budget put emphasis on that gap. Based on this
technique, the organisation could comprehend the range of the anticipate gap. The
organisation could determine certain strategies regarding this analysis and could earn
significant profit. Hence, the application-operating budget could help the organisation
regarding the determination of organisational strategies to earn profit. As this suggests the
organisation about the forthcoming challenges, hence the organisation could determine
12