Management Accounting Report: Techniques and Leadership Analysis

This report examines management accounting, focusing on its role in collecting, organizing, and reporting financial information to aid internal managers in reviewing company performance. It covers various management accounting systems, including cost accounting, inventory management, and job costing. The report also delves into different costing techniques such as fixed and variable costs, and discusses various types of management accounting reports like budget reports, job cost reports, and inventory management reports. Furthermore, it explores the benefits of these systems and their application to a case study of Ever Joy Enterprise, a UK-based leisure and entertainment company. The report also includes an analysis of different theories and approaches to leadership, and planning tools for budgetary control. Finally, it suggests approaches of management accounting to resolve different financial issues.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK1.............................................................................................................................................1
P1 Various types of management accounting system.................................................................1
P2 Types of management accounting reporting.........................................................................4
M1 Benefits of management accounting system and their application.......................................5
D1 Analysis of different theories and approaches to leadership.................................................5
TASK2.............................................................................................................................................6
P3 Various type of costing techniques........................................................................................6
M2. Application of management accounting techniques............................................................7
D2 Interpretation of data.............................................................................................................8
TASK 3 ...........................................................................................................................................8
P4 Various planning tool for budgetary control and its advantages and disadvantage...............8
M3 use of planning tool for preparing and forecasting budgets:..............................................10
TASK 4..........................................................................................................................................10
P5 Management accounting system and respond to financial problems...................................10
M4 Management accounting system to deal financial problem................................................12
D3 planning tool to cop-up with financial issue.......................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES .............................................................................................................................13

INTRODUCTION
Management accounting is related to the process of collecting, organising, reporting
useful financial information into statements that help internal manager to review the performance
and productivity of company (Management accounting, 2018). This report shows the meaning of
management accounting system and accounting report. Different costing method are used to
calculate the net profit margin for company. Various management techniques to analyse with
planning tool with advantages and disadvantage are discussed. Further, in this report
accountancy firm suggest company to apply various approaches of management accounting to
resolve the different financial issue. Manager of business entity collect, analyse, measure, report
and calculate the collected information that helps them to form strategies for achievement of
company goal. To understand the importance of management accounting the case study of Ever
Joy Enterprise, that is one of the leading leisure and entertainment company of UK. As an
accountant consultant firm, the report shows the importance of management accounting to
Company.
TASK1
P1 Various types of management accounting system.
In business, the process of identifying, classifying, measuring, analysing, interpreting
useful financial information to manager for the achievement of organisation goal and increasing
the productivity and profitability is known management accounting. It plays an important role in
providing useful data to the management people that further help them to create budgets, cost
management and make effective financial reports.
A) Basic difference between management and financial accounting.
Basis Management accounting Financial accounting
Aim The main aim of this
accounting is to help the
internal manager to make
effective plans for decision
making.
It mainly focus on providing
necessary information to the
business outsider such as
stakeholder, investor etc. those
are interest to invest within
company.
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Usefulness. It is related to the posting of
qualitative and quantitative
useful financial information in
report.
From the maintained report it
provide useful information to
investor as they can determine
the financial position of
company (Amidu, Effah and
Abor, 2011).
Time and use Manager use to make report to
for organisational need that
help to measure and improve
internal performance.
These financial report are used
by internal and external
investor to figure out the
productivity of Ever Joy
Enterprises.
Auditing process Report made for internal
management are never
published to the company and
are not audited by external
auditor.
These report are published to
the external auditor for the
purpose of audit.
Management accounting system: For making profit by cutting down unnecessary
expenses in Ever Joy Enterprise management accounting system are useful. There are various
type of accounting system that are help for company to measure and compare useful information
related to the increase of productivity and performance.
Cost accounting system
It is a framework used by firms to estimate the cost of their product for profitability
analysis, inventory valuation and cost control. If the mangers of the company follow this system,
they help in providing necessary cost information and controlling cost by applying some
techniques such as costing and budgetary control. This accounting system can help Ever Joy
Enterprises company accurately in cost products. provide valuable operational and functional
information and even measure performance. For example a toy company produce a different
product that requires huge cost in their manufacture. So this system would be an effective tool
manage cost and makes production department work accordingly so that profitability is
maintained.
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There are two types of cost:
Direct cost
It related to producing a good or service. It includes materials, labour, expense or
distribution cost associated with producing a product.
Standard cost
It is a tool for planning budgets, managing and controlling costs and evaluating
management performance (Dražić Lutilsky and Dragija, 2012). It involves estimating the
required costs of a production process.
Inventory Management System
It is an accounting system designed for manufacturers that tracks the flow of inventory
continually through the various stages of production. This system is the combination of
technology and processes that covers the monitoring and maintenance of stocked products. By
using this system in the company the managers track goods through the entire supply chain. It
covers everything from production to retail, warehousing to shipping and all the movements of
stock. The company maintain a centralized record of every asset and item in the control of the
organisation, providing correct information to the location of every item, vendor and supplier
information and the the total number of a particular item in stock. For example, in Ever Joy
enterprises this accounting system improved the cash flow, increased clarity in records ,
improved supply of services etc. The managers applied this system to the company to avoid
losses, damages and misuses.
Job costing system
It is a system of gathering information about costs related to any kind of production or
service job. This information may be required in order to submit the cost are reimbursed. In the
company this system is used to accumulation of the materials, labours and overheads for a
specific job. For example Manager of Ever Joy Enterprise are beneficial with this system as they
can provide idea of to control costs separately and specificity spend on the job performed within
company.
Materials
In the company, the job costing system must be able to track the cost of materials that are used or
scrapped during the course of the job. The materials are kitted for a job in the warehouse and are
charged to a specific job.
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Labour
This system track the cost of the labour used on a job. In the company the employees charge
their time to specific jobs, which are then assigned to the jobs based on the labour cost of the
employees (Granlund, 2011).
Overhead
This system assigns overhead costs to one or more cost pools. At the end of each
accounting period, the total amount in each cost pool is assigned to the various open jobs.
P2 Types of management accounting reporting.
It is key point for all organisation to properly report each of their transaction in annual
report that shows actual position of business. It is observed that reports must be mentioned at
every quarter for better evaluation of business performance. Manager of Ever Joy Enterprise
should prepare different type of management accounting report, so that internal performance and
profitability can be determined. The different type of accounting report that are prepared by
manager within company are explained below:
Budget report: These report are most crucial for business owner, that help them to
control and reduce cost involved in business operation. They usually compare their expenses
with the last year expenses that were recorded thus, it help manager to predicts budgets for the
following year. By proper evaluation and calculation of they found the point to cut the cost and
reduce expenses that make them to maintain profit within company. In Ever Joy Enterprise,
manager should prepare budget report by proper calculation and analysis of previous year
expenses report, that help them to find specific place where extra cost could be controlled during
business operation. As a result, company performance and profitability will be increased and
income will be more than expenses (Johnson, 2013).
Job cost report: This report shows the actual cost that is involved in individual project
as compared to the expected income earned from the particular project. The main importance of
this report is that manager calculate the profitability of the total jobs involved in doing operation
on that project and focus on the most profitable job in overall business. Manager of Ever Joy
Enterprise, also prepare job cost report as they execute various kind of job in providing
entertainment services. So, this help company to known about its jobs those are most profitable
and make them aware that which job are not potential enough and need to be changed.
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Inventory management report: These report are basically mentioned by manager for
the purpose of keeping detail information about inventory available within company warehouse.
This also help to make a centralised data on the cost involved on inventory, labour and other
overheads. This cost is also involved in the production process, providing raw material for the
entertainment services.
Account receivable report: This report is helpful for company to ascertain the number
of buyer those have use service or buy a product on credit basis. With the help of this report
manager could determine the total amount outstanding with buyer and they can figure out the
total income to be generated in future (JOSHI and et. al., 20112). In Ever Joy Enterprise,
manager could should maintain these report to improve the credit policy and increase the
efficiency of collection process.
M1 Benefits of management accounting system and their application.
System Benefits
Cost accounting system  It assist manager in a manner, so that they can analyse
superior commercial produces of company.
 This also helps them to determine accurate values for
goods and compare with other companies.
Inventory management
system
 It help manager increase effectiveness and profitability
of Ever Joy Enterprise, by maintaining adequate stock.
 With the help of this, management of company can
increases the level of apparent information of stock.
Job costing system  Managers ascertain the productivity of discrete job
accomplished within a company involved in a project.
 It provides absolute information of cost like labour,
material and other overheads that is detailed in an
organisation.
D1 Analysis of different theories and approaches to leadership.
It is clear that management accounting report and system are very crucial for the
development of company as these assist manager to form effective strategies which ease the
process of decision making. Manager of Ever Joy enterprise uses system and report or
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management that help to set predetermined goals and objective and attain them. System like cost
accounting, that help them to get information about actual cost involved in production process.
Account receivable report help manager to improve credit policy and collection process so that
owned amount could be collected.
TASK2
P3 Various type of costing techniques.
Cost: It is defined, as the monetary value that are spent by company to supply a services
such as cost on labour, overhead etc. It is basically the flow of money from buyer to seller for
satisfy their wants and needs (Kuula, Putkiranta and Toivanen, 2012). In Ever Joy enterprise,
manager set cost of there product according to the nature of product and services provided by
them. Cost of product must faithful and appropriate so that it may attract large number of buyer.
In the context, cost have different type that are faced by organisation while supplying the
services, that are described below:
Fixed cost: It is the cost related to nature of good and services that is fixed and do not
fluctuate and remain constant. These fixed cost are paid by company to employees such as
salaries, wages, rent etc.
Variable cost: This cost is depended on the increase and decrease of demand of services
within company. It is calculated on the nature of services of proportion of production.
Semi variable cost: These cost are part of variable and fixed cost. This cost remain
fixed for a specific level and after that it changed with the quantity of production of services.
Break even point: In business, every firm wants to earn profit by making little
investment and they try to find the point where cost are equal to income. The point where
expense are similar to profit or when there is a situation of no profit no loss in company that
point is known as Break-even point. Manager of Ever Joy Enterprise calculate to analyse the
actual amount of services they need to supply to cover their total cost spent on them.
A. Total number of ticket to be sold by Ever Joy to achieve break even.
Particular Amount
Selling price (U) 20
variable cost (U) 10
Contribution 10
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Fixed cost 60000
PVR: Contribution/ sales *100
: 10/20*100= 50%
BEP: Fixed cost / contribution per unit
: 60000/10= 6000
It is assumed that, variable cost are consider to be fixed and tax rate are cited constant
while calculating Break even Analysis.
B. Tickets to be sold to achieve desired profit 30000.
Particular Amount
Selling price (U) 20
variable cost (U) 10
Contribution=profit + fixed cost 90000
Fixed cost 60000
Profit 30000
50%= Contribution/ sales
Sales= 90000/50% = 180000
In units= sales/ per unit cost
180000/20=9000.
C. Profit for company when 8000 tickets are sold.
Particular Amount
Sales 8000*20 = 160000
Contribution Sales * PVR =
160000/50% = 80000
Fixed cost 60000
Desired profit 20000
Desire Profit: Contribution – fixed cost
Profit: 80000 - 60000 = 20000.
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M2. Application of management accounting techniques.
Different techniques of management are applied in Ever Joy Enterprise that aid manager
to gather accurate information about business operation and help them to predetermined
objective. Some of the basic techniques are described below:
Standard costing: This method is used in cost accounting system that assist manager to
examine the actual differences between the total cost and budgeted (Moser, 2012). As a result it
help to make effective plans for future so the extra cost can be reduce and goals can be achieved.
Historical costing: This costing method is related to recording of exact value of assets
when it was acquired for the first time by company. Manager of Ever Joy enterprise used this
method to record all assets and liabilities at original cost in there statements.
D2 Interpretation of data.
From the above solved question, it has been analysed that company can reach the break
even point if they sells 6000 tickets that help them to recover total cost involved in production. It
is noticed that when fixed cost are 60000 and their contribution is 10 units the the BEP is
determined as 6000 units. In case if Ever Joy enterprise want a desired profit of 30000 so, it is
important for them to sale 9000 tickets. And if 8000 tickets are sold by company then they
might achieve a 20000 as a profit.
TASK 3
P4 Various planning tool for budgetary control and its advantages and disadvantage.
Budget: It is defines as the tool that is used to estimate all the possible expenses and
revenues over a specific period of time. It is a financial plan to defined period of a year.
Budgetary Control process: It refers to how well managers utilize budgets to monitor
and control costs and operations in a given accounting period. It is a process for managers to set
financial and performance goals with budgets, compare the actual results and adjust
performance. There are four steps of budgetary control process for the company:
 Budgetary Objectives: The objectives to be attained during a particular period of time
should be describes clearly before making budget.
 Budgetary Organisation: A budgetary committee is formed which comprises the
departmental heads of different departments. Departmental managers are given the
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authority to prepare functional budgets. The chief executive is responsible for the co-
ordination of different budgets.
 Budget Centres: It is the part of the organisation for which the budget is prepared. This
centre may be department, section of a department or any other part of department. It is
also necessary for cost control purpose (Parker, 2012).
 Budget manual: It is a document which spells out the duties and also the responsibilities
of the various executives concerned with the budgets.
 Budget controller: In the company a officer who gives useful advice and helps in the
construction, implementation, coordination and revision of business budgets. He also
provides timely warning of variations from the budgeted performance.
 Budget Period: A budget period is the length of time for which the budget is prepared
and employed. The period and the duration should be determined according tp the
circumstances of the organisation.
Master budget
In the company, the master budget is basically management's strategic plan for the future
of the company (Quinn, 2011). It includes all other financial budgets as well as a budgeted
income statement and balance sheet. In Ever Joy Enterprise, master budget is used by manager to
record all types of direct activities and business operation and help them to forecast and control
spending.
Flexible budget
It is a budget that is prepared at the beginning of the year and not changed until it's time
to make a new one at the start of the next year. It represent the amount of expense that is
reasonably necessary to achieve each level of output specified. Manager of Ever Joy Enterprise
prepare this budget to predict about total expenses and income for upcoming period and assist
the to ignore any negative event that can affects operation activities.
There are different planning tool that are implement by Ever Joy Enterprise that are explained
below:
Forecasting Tools: This tools uses historical data as inputs to make informed estimates
that are predictive in determining the direction of future trends (Schaltegger, Gibassier and
Zvezdov, 2013). It is the business function responsible for analysing current internal business
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information, external economic information and processing these items through a financial
calculation.
Advantages of forecasting tools
Forecasting tools plays a vital role in the process of management. For the company it is a
necessary aid to planning and planning effective operations. It facilitates development of new
products by helping to identify future demand patterns.
Disadvantages of Forecasting tools
It is not possible to accurately forecast the future. Because the qualitative nature of
forecasting, a business can grow up with different scenarios depending upon the interpretation of
the data.
Contingency tool: This tool is mainly used by companies to estimate positive and
negative events that might happen in future. Manager of Ever Joy Enterprise uses this tool to
analyse such factors that have adversely effect on the performance of business operation. Some
of the basic advantages and disadvantage of tool such as:
Advantages: It help manager to be aware about the possible risk and uncertainty. So they
make appropriate strategies to cop up with consequences.
Disadvantage: It requires huge cost for its implementation and take high time to give
appropriate and accurate result (Soin and Collier, 2013).
M3 use of planning tool for preparing and forecasting budgets:
Different financial problems are faced by each organisation. Similarly Ever Joy
enterprises also faces certain kind of financial problems that are solved with the formation of
different kind of budgets. Every budget have its own important, such as master budget acts as an
major of other budgets as it includes cash, production, sales budgets etc. This help in making
future strategies so that financial problem are sorted and company performance is not effected.
While Forecasting Budget helps in making estimation about future happening that makes them to
deal with financial problems.
B Management accounting system and respond to financial problems.
Financial problem is related to the situation where shortage of fund may effect the
operational activities within an organisation. It is a condition when firm do not sufficient amount
to execute its business operation that have an adverse effect on the profitability and performance
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in an accounting year. Ever Joy Enterprise, faces various kind of financial problem due to which
efficiency can be reduce. Some of the common financial issue are described below:
Lack of money management: It is a situation when organisation does not follow
accounting standard to record transactions. So they might faces the situation of improper flow of
money that can create financial problem (Wickramasinghe and Alawattage, 2012). Manager of
Ever Joy Enterprise are not able to follow rules of accounting to record finance information and
result in big financial problem.
Late payments by clients: This issue arises when credit policy and collection process of
company is not effective so, they are not able to collect money owed to clients. In Ever Joy
Enterprise, they provide services credit to their buyer and are not able to recover outstanding
amount thus, faces financial issue.
Unexpected expenses: Those expense that are not expected by companies and result to
decrease the performance of company. So to resolve these expense company uses there reserve
that create a financial problem. Ever Joy Enterprise is also facing this problem as some of the
expense cannot be planned in advance.
There are different management accounting techniques to identify different financial
issue within company.
KPI: Key performance indicator is used to evaluate the performance of an organisation
whether doing well or not. There are two different types of KPIs such as:
 Financial KPI: This measure the monetary value that is used by entity to ascertain that
plan are executed properly to generate profits and revenues. Manager of Ever Joy
Enterprise, use this to figure out problem of unexpected expenses and lack of money
management.
 Non-financial KPI: This KPI is a tool which is used to determine organisational
processes that may result in success and achievement of goals.
Benchmarking: This technique is used to compare one business process to another.
Manager of company determine financial issue related to late payment by client as, it help to
compare credit policy with other businesses within same industry.
To resolve different type of above mention financial issue management of company uses
financial governance that is explained below:
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Financial governance: Management of Ever Joy Enterprise uses this technique to
resolve financial issue. As it is a process that enables company to collect, record, monitor and
control financial information. They overcome the issue of unexpected expenses, late payment by
client and lack of money management by recording accurate information and setting effective
strategies so that appropriate credit polices can be formed with specific guidelines.
Comparison
Ever Joy Enterprises (UK) Airdri.
Cost accounting system is used to examine
costs of each activity
JIT (Just in time) is used to cut down time
involved in production process.
Inventory management system is used to
record all act related to the stock list that are fit
to the company.
Price optimisation system is enforced to fixed
appropriate price for the goods.
Job order costing system is used to examine
cost of each job performed by the company.
JIT is used to meet the demand of customers.
M4 Management accounting system to deal financial problem.
Different system aid manager to deal with fiscal problems and record necessary
information in reports. As financial governance support in formation of proper plans that guide
them to deal with specific issues that may be an crucial factor that reduces the productivity. They
gather information for different sources and makes plans accordingly. Financial governance
assist to defeat all financial problem, as it aid to set guidelines to be followed at the time of
recording information.
D3 planning tool to cop-up with financial issue
The most important planning tool such as forecasting and contingency is used by
manager of Ever Joy Enterprise in budgetary control process. These tool are helpful to resolve
financial issue by making prediction in advance about certain problem that might happen in
company.
CONCLUSION
From the above report it has been concluded that management accounting system and
report are helpful in collecting and recording useful financial data for an accounting year.
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Manger uses different costing system to ascertain the net profit and BEP for company. Every
organisation is faces difficulty that are mainly affiliated to finance, all these issues can be
resolved with the help of planning tools. These tools may also help to forecast and control
budgets so that overspending of funds can be reduced.
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