Management Accounting Report: Analysis for Connect Catering Services

This report provides a comprehensive analysis of management accounting principles, focusing on their application within Connect Catering Services, a family-owned catering business. The introduction establishes the significance of management accounting in providing crucial financial information for decision-making. Task 1 explores the essential requirements of different management accounting systems, including price optimization, cost accounting, inventory management, and job costing. Task 2 delves into various methods used in management accounting reporting, such as performance reports, cost accounting reports, budget reports, and account receivable aging reports. Task 3 examines cost analysis techniques, specifically marginal costing and absorption costing, and their impact on financial decisions. Finally, Task 4 discusses different types of planning tools used in budgetary control, including zero-based budgeting and activity-based budgeting. The report concludes with a discussion on the impact of adapting management accounting to address financial problems, providing a holistic view of financial management within the context of the catering business.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Essential requirements of different types of management accounting systems. ..................1
P2. Different methods used for management accounting reporting. .........................................3
TASK 2............................................................................................................................................4
P3. Different techniques to analyse Cost.....................................................................................4
TASK 3..........................................................................................................................................10
P4. Type Of Planning Tool Used in Budgetary Control............................................................10
TASK 4..........................................................................................................................................12
P5. Impact of Adapting Management Accounting to respond Financial Problem....................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
The concept of management accounting defines that providing information to
management and deals with financial transaction of enterprise. In an organisation, it helps
managers take a firm's decision making and gain functional efficiency of enterprise (Alsharari
and Al-Shboul, 2019). This report founded on Pearl chartered accountant one of the best
chartered accountant firm in UK. It offers professional accountant services to its customers in
respect of accounting and enterprise growth schemes. There is a new client Connect Catering
Services is a family owned business provide a catering services its clients in UK over 30 years
and deliver best quality services, fresh food policy, prepared a food in high standard chefs, online
site is also available. In this report covers various topics such as different kinds of management
systems and reports, methods used in management accounting report, calculate a income
statement, marginal costing and absorption costing, various kinds of budgetary control their pros
and cons.
TASK 1
P1. Essential requirements of different types of management accounting systems.
Management Accounting: It is a tool for management that provides financial
information to managers and help in decision making procedure. Basically it deals with internal
members of firm so that they can make a day to day transactions and mange a short term
financial position of firm (Alsharari and Al-Shboul, 2019). The purpose of management
accounting is provide financial and non financial collection to enterprise and interior decision
makers. It is a procedure to create a organization goals and objectives such as identifying,
measuring and communicating of employees for information to managers. It also focus all
accounting information related with cost of products and services to be purchased by enterprise.
Within Connect Catering Services, it aids determine firm's plan, setting budgets, and check the
entity's long term prosperity. It provide a information to managers because they achieve a
company's goals and objectives.
Management Accounting System: This system defines internal members of firm and
evaluate procedure of enterprise. It gives crucial information to managers so that they used in
effective business decision making process. In case of Connect Catering Services, managers
determine each and every department of entity that influence better decision making and study
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some upcoming challenges. Several kinds of management accounting systems are defined in the
context of connect catering services are as follows:
Price Optimization System: This system is said to be determine the variation of price
levels at different resources and how firm can decide prices of many products at a specific period
of time. In price optimization, it is important they help distributor achieve goals and objectives
of entity. Every company wants maximize profit minimize costs and predict behavior of
customers in respond changes price (Alsharari and Al-Shboul, 2019). With context of Connect
Catering Services, it is very essential requirement of firm they using tailor pricing because it
shows targeted customers are reacted price fluctuations and they defined the profitability level of
enterprise.
Cost Accounting System: It is a framework that determine the particular cost of the
entity and basically it is used for estimate the value of their products because a company must
know which product is suitable or profitable of enterprise which one is not. A manufacturer
tracking the stock or raw materials on a continuous basis through several phases of production .
In case of Connect Catering Services, it will ensure several departments and analyzing each cost
after manufacturing their products. It is a procedures applied in calculation and pursuing their
production costs.
Inventory Management System: This type of system defines track the records of stocks
from one place to another place and maintain each and every asset in enterprise are under
control. It decrease cost savings and knowledge to make a better decisions and this system also
helps analyze the proper utilization of resources. It requires various position to protect stock or
raw materials of moving out goods from one place to another and concerns with related transport
costs, stock evaluation, quality management etc. In case of Connect Catering Services, firms
used this system decrease cost and track their products from seller to storage warehouse. It helps
the management preparation of cost necessity.
Job Costing System: According to this system, it determines particular cost for a
specific job and record the dealings of manufacture rather than procedure. Each cost is
determined by increase direct materials, labor, overheads (Alsharari and Al-Shboul, 2019). This
system create cost data which is useful for administration team and check whether it is a profit
or loss in the firm and compare actual cost with standard cost. Job costing includes several
methods process costing, job order costing and direct costing. In case of Connect Catering
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Services, entities used this type of system that helps track expenses as per specific cost to
specific job in order each and every customer delegate how many labors work on each project
according to time.
P2. Different methods used for management accounting reporting.
Management Accounting Report: The concept of management accounting report is a
tool for knowing numbers and analyze what is going in business and provide information needed
to reduce costs, payment high performing worker that offers best financial movement in
business. This reports shows financial position of enterprise over a particular period of time and
includes several accounting records such as transactions, profitability and sales (Alsharari and
Al-Shboul, 2019). Basically, it involves in designing, measure performance and decision making
procedure continuously generated in book keeping system. This report are prepared for the
internal members of the enterprise and report should focused at least one detail page on each of
long term goals and objectives. They are simple to read, broad reference and many more. Within
Connect Catering Services, they can rely on management accounting so that they can collection
of information easily and help manager to take a better decision making and achieve goals of the
enterprises. It create reports only for internal members of firm as conflicting with external
members of firm.
Performance Reports: According to this report, it helps check performance for each and
every employee of enterprise. This report compare the actual result with standard result and
assembling information affiliated to work performance. It provide all information about firm
related to owners, shareholders, employees and many more. All the reports should be in precise
form and true picture which is represented. In this report should not include cost, quality, scope
and schedule also. Within Connect Catering Services, managers use this report to make a
important decisions about the enterprise and modify worker morale and accomplish goals and
objectives and enhanced productivity and profitability.
Cost Accounting Reports: The concept of this report is involved with identifying costs,
expenditure and profitability of each specific job. This report shows expenses for a specific job
by small firms and managers capability recognize cost price of items as well as their selling
items. It helps higher business profits area so they can focus only extra jobs instead of wasting
money and time(Alsharari and Al-Shboul, 2019). Within Connect Catering Services, it helps to
determine internal team members so all variable and fixed costs are connected. They determine
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whether money is invested or wasted and how much firm can achieve a better utilization of
resources.
Budget Reports: According to this report, budget helps to analyze entity performance
and set a each and every department budget and control the cost. These budget reports are used
to provide motivate employees to accomplish desirable objectives. It includes all sources of
income and expenditure, identify budget estimate based on preceding expenses. The preparing of
budget report some steps need to be followed are make a budget package, modify budget
assumptions, costing factor, number budget etc. Firm budget report depends on several section
based on financial needs such as income and sales, net quality of whole enterprise. In case of
Connect Catering Services, managers used budget reports offer a better incentives, cost to
employees. Qualified income financial statement can be used in this report.
Account Receivable Aging Report: The concept of this report consists summary of all
assets collect from customer at a given point of time. This report helps to identify financial
health of enterprise and ascertain credit effectiveness, collection of functions and many more. It
discriminate invoices 30 days buckets from that day when customer issued invoices. Account
receivables develop when firm provides several goods and services on credit to customers
(Alsharari and Al-Shboul, 2019). Within Connect Catering Services, it can help to make a
decisions like how firm can collect money from customers and provides a specific information
related to invoice based on age. When calculation of bad debts report on a firm's statements it is
useful to analyze and estimate the entire amount.
TASK 2
P3. Different techniques to analyse Cost
Marginal Costing:
Marginal costing refer to change in total production cost due to change in production of
one extra unit (Chenhall and Moers, 2015). It can be calculated by dividing change in production
cost with change in quantity. It helps to identify the point where firm can achieve economy of
scale. This technique is easy to understand and help the manager of Connect Catering Service to
effective decision making.
Absorption Costing:
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Absorption costing refers to system which helps in valuation of inventory (Phan, Baird
and Su, 2017). It include cost of labour, material, fixed and variable manufacturing expenses. It
consider all the cost related to production and helps to track the profit within organisation as it
provide accurate picture of company's performance.
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TASK 3
P4. Type Of Planning Tool Used in Budgetary Control
Budget is a tool used to approximate the income and expenses for a specific period of
time (Rustamov, 2019). Budget include planning of sales, income, expenses, assets, liabilities
and cash flow etc. It helps to allocate financial resources to different activity and used by
business, individual and government.
Budgetary Control is comparison of budget with actual performance and find out
variances to take corrective actions in order to meet predetermined targets. It helps the Connect
Catering Service in future planning so that entity can achieve its goal efficiently. It helps to
define goals and policy of the organization to optimally utilise resources and efforts. Following
are the budget company can use ass a planning tool:
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Zero Based Budget:
Zero based budgeting is a technique to make a budget from zero base and it is not based
on previous year budget (Darvas and Wolff, 2018). The main focus of this budget is on reducing
expenses before adding it to the main budget. In this, Funds are allocated by analysing need and
cost of every activity regardless of previous year budget. Manager of Connect Catering Service
can this budget as it help them to reduce the cost and expenses of the business.
Advantage: This budget helps manager of Connect Catering Service in ensuring control
over cost and helps them to reduce the wastage in organization. This budget helps to allocate
resources efficiently and provide cost benefit to the enterprise. It also enable better coordination
in department and allow free flow of communication which increase efficiency in organization
Disadvantage: This budget increase the cost of time and efforts of managers as it require
more man power to enable this budget. It is difficult process to explain each cost which require
proper training of mangers. It is difficult to make any changes in this budget which may create
problem for the managers.
Activity Based Budgeting:
Activity based budgeting is a technique activity are analysed so as to control the cost of
the company (Brown and Caldeira, 2017). It helps to analyse each activity which create cost to
company in order to increase the efficiency. It is beneficial to those company which is going
through material changes. Manager of Connect Catering Services can use this techniques to
calculate the cost per unit can control their cost of the business and increase profitability. It
increase the efficiency of each activity and identify cost driver in the enterprises.
Advantage: This method helps the manager of Connect Catering service to identify cost
connected to each activity which helps them to evaluate the business units effectively. It also
help manager to identify unnecessary business activity and eliminate them in order to increase
the efficiency.
Disadvantage: This budget require proper understanding of different activity in an
organisation. It is difficult for the manager of Connect Catering Service to evaluate each activity
of the business which is a complex process. It also consume different resources like time and
efforts of the company that is a costlier affair.
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Master Budget:
Master Budgeting is the technique that include sum of different small budget of different
area and also include forecast of financial plan, cash flow and budgeted annual
statements(Rubin, 2015). It can be presented in monthly or quarterly format. It provide a brief to
manager of Connect Catering Service for allocation of finance and ensure control over financing
activity. It is a planning tool that show profit generating activity along with income and expenses
of the company.
Advantage: It provide overview of firm's budget to the manager to Connect Catering
Service and helps them to ensure proper planning of each function in advance to achieve the
predetermined goals. It helps to identify possible issues at early stage so that manager can take
effective decisions related to it.
Disadvantage: It is difficult for the manager of Connect Catering Service to make any
changes or any updater in this budget. This budget has lack of specificity as it is difficult to
identify expenses and earning of particular department of the organization.
TASK 4
P5. Impact of Adapting Management Accounting to respond Financial Problem
Financial problem are related to shortage money in an organisation as they face difficulty
to pay bills and debts (Ismail, Isa, and Mia, 2018). It is due to overspending of money and not
making adequate profit to meet the expenses of the organisation. Connect Catering Service is
facing financial problems which are as follows:
Improper Utilisation of Resources: Manager of Connect Catering Service is failed to
allocate the resources to different activity of the enterprise. As a result they not utilising their
resources efficiently which increase the cost burden and decrease the level of profit of company.
It also make it difficult to coordinate different activity and increase cost per unit of the company.
Excessive Debts: Connect Catering Service is taking loan for conducting their operation
which create interest burden on the organisation. It also decrease credit worthiness of the
company and affect the financial position of the company in the market. It increase the cost of
company and decrease the profit as they find it difficult to manage the cost of business.
The manager of Connect Catering Service can use different tools to identify the financial
problem which are as follows:
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 KPI: KPI is a tool used to measure the performance of the organisation, project or
activity. It is key performance indicator that determine success of the business. It helps in
strategic improvement and better decision making in the enterprise. It also helps to
identify issues which need more attention. It provide different measure to the company
like risk, operational, employees and project etc. This tool helps the manager of Connect
Catering Service to identify problem related to improper allocation and utilisation of
resources.
 Benchmarking: Benchmarking is a technique that enable manager to compare the
performance of the organisation to other company within industry. It helps the entity to
identify the area which need improvement. It ensure effective monitoring and
improvement of performance. It also provide competitive analysis as it include
comparison of performance to other player within industry. With this techniques manager
of Connect Catering Service can identify problem related to excessive debts.
 Financial governance: Financial governance refers to the system in which company
direct and control performance, measures. This technique helps the manager of Connect
Catering Services to assess risk and cost related to the operation. With the helps of this
tool they can identify the problem like excessive debts, improper utilisation of resources
and bad cash flow management etc. Manager can solve these problem by ensuring better
control over the functions of the organisation.
Comparison of :
Basic Connect Catering Service Class Catering Service
Financial Problem Connect Catering service is facing
financial problem related to
improper utilisation of resources
that increase the wastage of
resources in the organisation and
decrease the level of profitability.
Financial problem of Class
Catering is they have excessive
debts which decrease the credit
worthiness the firm and also
increase the burden of tax on the
company.
Management
Accounting Techniques
The manager has used KPI to
identify the problem within
The manager of this company
used benchmarking to identify
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organisation as this tool helps to
measure the performance of the
firm effectively.
and evaluate performance. It
helps to compare the
performance of firm with other
player in the same industry.
Application of System With rationale to this company, it
can be inferred that they applied
stock management system with an
aim to deal with their issue. This
system worked for them effectively
because under it stocks or resources
are managed in systematic manner.
After applying such system, they
were able to know that which
resources’ need is more and
accordingly they made purchase for
new resources. Such thing worked
for them to deal with their financial
issue.
In the context of above
company this can be stated that
they used cost accounting
system to deal with their issue.
This is so because their issue is
related to more number of debts
due to higher expenses. By
applying such accounting
system, they became able to
know that which activities are
leading to higher expenses and
accordingly they deal to solve
their issue.
In accordance of above done comparative analysis, this can be inferred that Connect Catering
Service limited solved their issue in more comprehensive manner. The rationale behind this is
that they managed their stock after applying respective accounting system. While their
competitive company faced issue to cope up with new accounting system to manage their
expenses.
CONCLUSION
As per the above mentioned report it can be concluded that management accounting
provides financial information to the manager of the company that enable them to make better
decision for the company. It helps the manager to forecast the business trends and also enable
them to take decisions accordingly. Management accounting reports are internal reports and
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based on previous year data. Management accounting helps manager of Connect Catering
Service to improve their performance and effective planning. They can also use different costing
methods to compare the cost of the company. Company can also use different budget as a
planning tool like zero based budgeting, activity based budgeting, master budget to ensure proper
control over business activity. But sometimes business does not get proper funds due to which
face financial problem. These problem can be identifying through evaluation techniques like
benchmarking and KPI. These techniques help the company to determine problem like excessive
debts and improper utilisation of resources. It also helps to solve these problem by better control
over business activity.
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