Detailed Management Accounting Report for Swing Patrol

This report provides a detailed analysis of management accounting practices, focusing on the context of Swing Patrol, a small-scale dance class operating in the UK. The report begins with an introduction to management accounting, highlighting its importance in cost-related decision-making. It explores various management accounting systems, including cost accounting, job order costing, process costing, throughput accounting, inventory management, and price optimization systems, outlining their essential requirements and applications. The report further examines different methods used in management accounting reporting, such as budget reporting, accounts receivable aging, and job cost reports, discussing their significance in assessing firm performance and making informed business decisions. Additionally, the report delves into the benefits and drawbacks of different planning techniques and compares various management accounting systems, culminating in a conclusion that summarizes the key findings and insights. References are provided to support the analysis.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
P1. Explaining management accounting and essential requirements of different types of
management accounting systems.................................................................................................3
P2. Different methods used by the business firms for management accounting reporting.........5
TASK 2............................................................................................................................................7
P3. Calculation of net income with the help of marginal and absorption costing method..........7
TASK 3..........................................................................................................................................10
P4 Benefits and drawbacks of different kinds of planning techniques......................................10
P5 Comparing different management accounting systems........................................................14
CONCLUSION..............................................................................................................................14
REFERNCES.................................................................................................................................16

INTRODUCTION
Management accounting is the one of the important discipline that is used by the managers
to make cost related business decisions. In the current report, varied management accounting
systems are described in context of Swing patrol. Mentioned firm is operating a dance class in
the UK and comes in the category of small scale firm. In the report different management
reporting and planning tools are also discussed in detail. At end of the report, applications of
planning tools is revealed and comparison of different MAS is made.
P1. Systems of MA and their requiements
To
The General manager of Swing Patrol Date: 11/9/2017
Sub: Management accounting systems and their types
Management accounting is the one of the most important domain under which accounting
of cost is done and same is computed for varied product lines as well as deviation is same is
identified. There are number of advantage of management accounting for firms. Main merit of
management accounting is that it help management in tracking cost of project. Thus, by taking
action on time firm manage cost of its product. Main objective behind using management
accounting is to keep detail record of expenses that are incurred in the business and to take
relevant business decisions. Business firms aim at earning maximum amount of profit at any
cost. Numerous factor impede growth rate of revenue in the specific financial year. Cost is one of
the factors that affect the overall profitability of business firm. Thus, Swing Patrol aims at
reducing the cost of production and distribution as well as inventory storage so that stiff control
can be maintained on the overall cost that is beard by the business firm to produce goods at
workplace. Tracking of the cost is inevitable to maintain cost value up to certain level in business
(Burritt and et.,al., 2011). For this purpose, management accounting is used by the business
firms. Management accounting is the discipline under which cost is recorded and different
accounts are prepared to evaluate cost time to time. In this regard, some of the important tools
like variance analysis and budget are used by the business firms. In the variance analysis, actual
cost that is generated in the business of Swing Patrol is compared with the parameters and on
that basis, firm’s performance is accessed by the management accountant. Budget is another
important tool under which maximum limit is ascertained up to which business firm can make

expenditure in its business. Budget may be prepared on quarterly basis and to control cost on
monthly basis, follow up is done. In case it is estimated that determined level may be breached
then in that situation, in starting stage, corrective actions are taken by firm to control the cost
(Burritt and Schaltegger, 2010). In break-even analysis method, fixed and variable cost are taken
in to account along with the sales price. Thus, by using output of the break even analysis method
Swing Patrol is determining the extent to which it must produce units so that cost can be covered
and sufficient amount of profit can be earned in the business. It can be said that there are
multiple benefits of management accounting for the business firms. Management accounting
system refers to the way that is followed to record costs that are related to business. According to
business requirements varied cost accounting systerms are developed. Some of the essential
requirements of management accounting systems are given as below:
Cost accounting: Cost accounting management accounting system is used by the firms.
Under this accounting system all sort of expenses are recorded by the business firms. Cost
accounting is required to make estimation about the likely amount of expenses that can be made
by the business firm in the upcoming time period (Cuganesan, Dunford and Palmer, 2012). Thus,
projections are made about the cost on the basis of cost accounting system. Under mentioned
management accounting systems all sort of expenses are classified separately. Thus, it can be
said that clear division of cost is done in the management accounting system. Managers of the
most business firms use data that is recorded under mentioned system to make business
decisions. Example: Cost accounting is followed by Toyota because it is making single sort of
product in its business.
Job order: Job order is the other accounting system which is often used by the firms that
are producing multiple products. In many firms different sort of products are produced on the
basis of order that is place by the client. Under job order accounting system cost data related to
different product lines or batch is required to be prepared. On daily basis all expenditures that are
related to specific batch are recorded in the accounting system under separate document as per
requirements. Through mentioned accounting system one easily identify the product line whose
cost is very high or skyrocketing at fast pace. By developing suitable strategy cost can be
encapsulate up to specific limit by the managers. Job order is the costing system that is widely
used by the firms especially in the manufacturing sector. Those firms that are operating in the
service sector also use mentioned approach because they offered wide variety of services to the

customers and due to this reason it is very important to do costing separately of these product
lines so that an accurate overview can be obtained about cost of each product line individually.
FMCG firms like P&G are best example of mentioned costing system which prepare wide
variety of products and they use job order costing to keep record of costing of each product
separately.
Process costing: Process costing give better picture of the overall cost of production in
respect to the firms whose business operations are very complex (Cadez and Guilding, 2012). It
must be noted that in any business firm for producing specific product different stages are
performed. Cost of these stages of production is different from each other. In the process costing
approach data related to different stages of manufacturing is required to be gathered so that
managers can obtain an overview cost of each stage of production. This approach of recording of
expenses make process costing different from other management accounting systems. So, it can
be said that in order to record expenditures in process costing business firm require to employee
different employees for different stages of production. These employees will record relevant
data. Then gathered data will be compiled to compute overall cost of production. Glaxo Smith
Kline is the one of best example of firm which is using process costing at its manufacturing
plant.
Throughput accounting: It is the accounting system that is newly developed by an Israel
business man. Under this accounting system, main focus is on cost control in the business. In the
throughput accounting system, old one is converted in to modern accounting system. Stress is
laid down on the constraints that lead to elevation in cost (Morales and Lambert, 2013). On the
basis of calculation that is done in throughput accounting system, strategies are prepared that can
be followed to reduce the cost and for maximizing profit in business.
Inventory management system: Inventory management system is one under which
detailed record of inventory is maintained in respect to different products that are manufactured
by firm in its plant. Up to date record help firm is making prudent inventory purchase and
storage related decisions.
Price optimization system: It is a system under which information related to price and cost
that are related to specific products is maintained. By analyzing changes that happened in costs
of different items cost control decisions are made by the managers to optimize price of product.

P2. Different methods used by the business firms for management accounting reporting
In the management accounting, there are different tools and methods that are used for
analysis of data. On the application of these tools and methods, varied results are obtained and
same are reported in the reports that are prepared for the business managers. Some of the
important methods that are commonly used by firms for management accounting reporting are as
follows:
Budget reporting: Budget reporting is done by the managers of Swing Patrol to its top
managers. Budget reporting is used by all the firms that come in large, medium and small sized
category. Under this report, all expenditures that come in the category of fixed, variable and semi
variable, direct and indirect expenses are listed separately. Standard values for these expenditures
are recorded in the budget report and both standard and actual values are compared with each
other. On the basis of positive and negative variance, performance of the firm is accessed and it
is identified whether firm perform will well or not. In budget report, comments are given on the
expenditures separately with respect to enhancement or reduction in the value of same. In the
report, role that business environment plays in elevation of expenses in business is clearly
communicated to the top managers. Apart from this, inefficient performance of employees on job
is also considered as a reason for poor performance of business. It can be said that budget
reporting helps managers in identifying the area where they need to work in order to improve
firm’s performance (Richardson, 2012). By preparing strategy on right time further, erosion of
firm’s performance is prevented and same is brought on the growth track again.
Accounts receivable ageing: Accounts receivable refer to the debt amount that debtor has
to pay to business firm within specific time period. Cash management of Swing Patrol and
accounts receivable are closely interlinked to each other. There are many business firms that
generate more sale on credit basis in order to compete with rival firms in the market. Due to this
reason, less amount of cash is received in the business and huge fund remain blocked in the
unsold sales. In the account receivable reports, detailed information is made available about the
receivables that are related to different entities (Bouten and Hoozée, 2013). These receivables are
classified into different categories like bad debt and probable individuals in same category. On
the basis of relevant classification, managers come to know about the receivables on which they
seriously need to work and the extent to which they must give debt to any business firm so that
liquidity would not get reduced substantially in the business

Job cost report: In the mentioned report cost of different product lines is mentioned.
Through review of the job cost, report managers come to know about the cost that is incurred in
different product lines by business firm. On the basis of evaluation of facts and figures, managers
come to know about the product lines whose cost is so high. They also come to know about the
return that is made on specific product line whose cost is so high. Thus, by comparing the cost
and return profile of product line, managers make business decisions. It can be said that there is
high significance of the job cost report for managers. Better decisions are made by the managers
with respect to whether further investment must be made on the specific product line or not. It
can be said that job cost report has high importance for the business firms.
Inventory and manufacturing: Inventory and manufacturing reports are prepared on large
scale by Swing Patrol and under this, in the report inventory that is in the warehouse is reported.
Past year inventory figures are compared with the current year’s values in order to access firm’s
performance and efficiency as well as accuracy of business decisions. Comments are made in the
report about reasons due to which excessive inventory is observed in the warehouse and amount
of money that is blocked in the unsold goods of business (Papaspyropoulos and et.al., 2012). It
can be said that inventory report helps managers in formulating a strategy that can be followed to
improve the cash management in business. Value of inventory that remains in the business is
taken into consideration in order to determine the number of units that must be further produced
so that demand can be met on time and less elevation will be observed in the inventory value. It
can be said that there is due importance of inventory and manufacturing report for the business
firm. Mentioned reports must be taken into account to make the business decisions.
.
TASK 2
P3. Calculation of net income with the help of marginal and absorption costing method
Profit is the one of the important parameter by using which performance of the business
firm is measured. There are different ways in which net income is computed in the business. In
order to compute net income most of times direct expenditures are subtracted from the cash
inflow amount and in this way gross profit is computed. Thereafter, opposite sort of expenses are
subtracted from the gross profit in order to calculate net profit. In the management accounting
marginal and absorption costing are the two approaches that are followed to compute profit. The

way of calculation of net profit is different in both methods (Quinn, 2014). In the absorption
costing method both fixed and variable expenses are taken in to account for computing profit.
Vice versa happened in case of marginal costing.
Figure 1 Profit by marginal costing method
Figure 2 Profit by absorption costing method

Interpretation
It can be identified from the tables given above that net income of different value is
calculated under absorption and marginal costing method. This is the reason due to which value
of profit in the marginal and absorption costing method is different from each other. It can be
observed from the table that value of profit in case of marginal costing is 9600 and value of same
in case of absorption costing is 9300. This happened because in the absorption costing variable
and fixed both expenses are considered and due to this reason profit amount decline sharply in
the business. Both methods are widely used by the firms to compute profit in the business. Some
assumed that fixed cost is incurred by the firm in single time period and not again and again. Due
to this reason considering it in calculation of cost every time is not a right approach. This is the
reason due to which most business firm use marginal costing method in their business to
compute profit in the business. Some firms used absorption costing method because fixed cost is
incurred in the business and same cannot be ignored and due to this reason it is very important to
use absorption costing method in the business to calculate absorption costing method to calculate
profit in the business. Thus, it can be said that there is significant importance of the marginal and
absorption costing method for the business firms.
Differentiate between marginal as well as absorption costing techniques
Marginal costing technique Absorption costing technique
One of the main difference between both
methods of costing is that in marginal cost
method non static expenses are only
considered. This means that expenses that are
stationary in nature are not taken in to account
to calculate profit in the business (Hiebl,
Feldbauer-Durstmüller and Duller, 2013).
Absorption costing method is totally different
method in comparison to the marginal costing
method. This is because in the absorption
costing method expenses that are static in
nature are considered to compute cost and
profit of the product line.
Direct material and human resources are the
major elements of the cost that is computed
under marginal costing method.
Fixed expenditures like land and building and
plant as well as machinery expenses are the
major elements of the absorption costing along
with variable expenses.
In order to calculate profit under the marginal In case of absorption costing method major

costing method profit volume ratio is take in to
consideration by the managers.
elements are variable expenses and fixed cost
like purchase of land and building.
Inventory that is valued in the last year is not
again recorded in the present year accounting
statements.
In case of the absorption costing method
opposite is done and last year stock value is
added in the present year financial statements.
TASK 3
P4 Benefits and drawbacks of different kinds of planning techniques
Planning in context of management accounting refers to the situation where specific
actions are determined that will be taken to handle specific situation. On other hand, budgetary
control refers to the situation in which standards and actual performance are compared with each
other to determine performance.
There are different type of planning tools that are used by the Swing Patrol in its business.
Some of the important planning tools are budget, project evaluation methods and ratio analysis.
There is a significance importance of these methods for the business firms (Malmi, 2010). Merits
and demerits of the mentioned methods are explained below.
Cash budget
Cash budget is the one of the most important method that is used by the business firms to
control cost in the business. Under cash budget projections are made by the business firms.
May June July August September October
Opening balance 6000 14510 20910 26010 28710 29110
Sales 25010 26000 28000 29000 30000 31000
Total cash available 31010 40510 48910 55010 58710 60110
Uses of cash
Material purchase 7000 8000 9000 10000 11000 12000
Labor cost 5000 7000 9000 11000 13000 14000
Overhead 1500 1600 1900 2200 2500 2700
Sales and office expenses 3000 3000 3000 3100 3100 3200
Total uses of cash 16500 19600 22900 26300 29600 31900
Net cash position 14510 20910 26010 28710 29110 28210
Merits

 One of the main merit of the budget is that in this parameters are determined up to which
cost must be controlled in the business. Thus, there is a target in front of the managers
which they have to achieve at any cost for welfare of the organization. Budget ensured
that management will successfully maintain stiff control on the cost.
 Budget motivate employees to work hard for benefit of the Swing patrol. As mentioned
above in the budget targets are set for the employees (Hopwood, Unerman. and Fries,
2010). They strive to achieve same and this thing motivate them to work hard. Thus, it
can be said that by using budget effective use of human resources can be made in the
business.
 Budget ensured that resources will be effectively used in the business. Analysis of
business environment is done in order to make prediction about the variables of the
budget. Thus, according to estimation about the likely business conditions resources are
allocated effectively among varied business activities and by doing so effective use of
resources is done in the business.
Demerits
 Main demerit of the budget is that it is very difficult to make prediction in the budget.
This is because it is very difficult to make prediction about the future time period. If
prediction is wrong then in that case wrong values will be determined in the budget (Cash
budgets, 2017). Thus, wrong decisions will be made on the basis of budget. This is the
major limitation of the budget.
 In the budget in order to make prediction past year figures are taken in to account. It is
not necessary that past will repeat itself. Hence, if same thing will really happened then in
that case wrong prediction will be made in the budget and decisions made on the basis of
budget will also be wrong.
 In case of budget it is observed that business firms does not have skilled employees.
Relevant employees make wrong prediction and there is a very high probability of
happening of same. Thus, if wrong estimation will be made then wrong decisions can be
taken on the basis of budget.
Ratio analysis
Table 1Ratio analysis
Gross profit 2000

Sales revenue 25000
Gross profit ratio 8.00%
Net profit 1000
Sales revenue 25000
Net profit ratio 4.00%
Current assets 2000
Current liability 4000
Current ratio 0.50
Total assets 7000
Sales 25000
Total assets turnover
ratio 0.28
Debt 4000
Equity 2000
Debt equity ratio 2.00
Merits
 There are some merits of the ratio analysis and evaluation of the firm performance is one
of them. By determining target percentage of gross and net profit sales and expenses
amount in budget can be determined and in this way budgetary control can be performed
in the organization. There are different ways in which performance of the Swing patrol
can be measured and ratio analysis is one of them. By using ratio analysis performance of
the business firm can be measured easily.
 Ratio analysis is the technique that can be used by any person. There are not complex
process that one need to follow in order to do calculation (Merchant, 2012). Thus, easy to
use feature of the ratio analysis is the one of the major strong point of this method.
 Risk management strategy in respect to budget can be prepared on time by using ratio
analysis method. Current ratio reflects the liquidity position of the business firm. If
current ratio is below 1:1 there is alarming signal for the firm that its liquidity position is
not good. Accordingly firm can determine value of short term loan in its relevant budget.
Thus, it can be said that ratio analysis help in budgetary control. In such situation by
taking actions immediately firm can prevent itself from facing problem of liquidity
crunch.
Demerits

 Major limitation of ratio analysis is that in the mentioned technique standards are
determined. Every time these standards that are prepared in respect to ratio and budget
are considered to interpret the firm performance. If economy is in recession business firm
face a lot of problem in earning a sufficient amount of profit in its business. Due to this
reason it is not possible to maintain standard value of ratio 2:1. If in recession ratio value
is 1 then in that case also it will be assumed that firm given poor performance in its
business (Hiebl, 2014). Thus, it is one of the main limitation of the ratio analysis. Many times business managers make entire interpretation of the firm performance on the
basis of few ratios. In such a situation it is not possible to make accurate interpretation of
the firm performance. This is because some ratios may reveal negative performance.
While some ratios may show positive performance. If only few ratios will be taken in to
account it is not possible to make accurate interpretation of the firm performance,
P5 Comparing different management accounting systems
Financial problems can comes in existence due to number of reasons like firm inability to
achieve determined objectives. Firms determined their objectives and make an attempt to achieve
them. In case of failure to do so it earn less profit in its business which lead to origination of cash
crunch in business. Thus, it is very important to address these problems in appropriate manner.
Some of management accounting systems that can be adopted to respond in better manner to
financial problems are given below. Key performance indicators: By using KPI on cost close monitoring can be done on cost
on daily basis which affect firm profitability. By doing so time where control on cost
reduced can be identified and by taking action on time problem can eliminated from
occurrence and financial problem can be prevented. Budgetary targeting: Under this in respect to budget on monthly basis targets can be
determined (Cadez and Guilding, 2012). By comparing target with actual results point
where action need to be taken can be identified and occurrence of financial problem can
be prevented. Benchmarking: Benchmarking is similar to budgetary control and in its case also by
comparing objectives with actual values performance is accessed and financial problem is
controlled.

 Financial governance: Under financial governance there are few entities that are made
responsible for specific tasks. In case they failed to achieve objectives action is taken to
control financial problem.
On comparison of different management accounting systems it can be said that process
costing is the one of the best accounting system. This is because in the process cost accounting
system process costing is done and in this way in best way cost of the production is computed.
Job order costing is another accounting system and it is totally different approach. In comparison
to process costing firms can use job order costing because every firm produce number of
products in its business and due to this reason it is very important to gather data of costing
separately for all these products (Arroyo, 2012). Throughput cost accounting system is another
alternative that can be used by Swing petrol but it will not be better because in same main focus
is one constraints in respect to cost. This method does not reveal cost of product lines and varied
production processes. Thus, it can be said that for Swing petrol job order costing is best then any
other method.
CONCLUSION
It is deduced that there is a huge importance of the management accounting systems for the
business firms. This is because proper recording of expenditures is determined by the
management accounting system. There are varied ways in which management accounting
reporting can be done by the business firms. Thus, firms can use all above discussed
management reporting methods in order to take more better and wise business decisions. There
are different planning tools that are available to the business firm. Each of these tools have some
positive and negative points. All these must be used with care by the firms because decisions are
made on the basis of output that is generated by the planning tools.

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