HND Business: Management Accounting Report for Ever Joy Enterprises

This report provides a comprehensive analysis of management accounting principles applied to Ever Joy Enterprises (UK), a company in the leisure and entertainment industry. It begins by defining management accounting and its objectives, differentiating it from financial accounting. The report explores cost accounting systems, including direct costing and standard costing, along with inventory management systems and job costing systems. It also discusses various management accounting reports and the importance of a sound accounting system. The report then delves into break-even analysis, calculating the number of tickets needed to break even and achieve a specific profit target. Furthermore, it evaluates the use of budgeting as a planning and problem-solving tool and assesses the role of strong financial governance. The report concludes with recommendations for Ever Joy Enterprises to improve its financial management and achieve sustainable success.

Management Accounting report for Ever Joy
Enterprises (UK)
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Table of Contents
Introduction....................................................................................................................................3
Task 1..............................................................................................................................................4
Management Accounting.............................................................................................................4
a. Differences between Management Accounting and Financial Accounting.............................6
b. Cost accounting systems (Direct Costs and Standard Costing)...............................................8
c. Inventory Management Systems..............................................................................................9
d. Job costing systems................................................................................................................10
e. Different types management accounting reports....................................................................11
f. The need for a sound accounting system and the importance of the department producing
timely, accurate and relevant information..................................................................................13
Task 2............................................................................................................................................14
a. The number of tickets that must be sold to break even (i.e. the point at which there is neither
profit nor loss)............................................................................................................................14
b. If we want to make a profit of £30,000.00, how many tickets should be sold?.....................15
c. What profit would result if 8,000 tickets were sold?.............................................................16
Task 3............................................................................................................................................17
a. You are to evaluate how budgeting can be used by Ever Joy Enterprises as a planning and
problem-solving tool in dealing with financial problems, but also for leading the organization
to sustainable success.................................................................................................................17
b. You are to also evaluate how strong financial governance can help to pre-empt or prevent
financial problems for Ever Joy Enterprises and the means by which management accounting
systems can contribute...............................................................................................................19
Conclusion....................................................................................................................................22
References.....................................................................................................................................23
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Introduction
Management accounting is an integral part of the enterprises which helps them to achieve their
goals and objectives in an effective and efficient manner. This report will be prepared to reflect
and discuss the concept of managerial or management accounting and write a reference in the
context for EVER JOY ENTERPRISES (UK) that operates its business operations in leisure and
entertainment industry in the UK. This report defines the concept of job costing systems, cost
accounting systems and inventory management systems and its usage in the enterprises. This
report will also solve the given problems to assist the Ever Joy Enterprise reviewing its
performance in Manchester region to determine its feasibility by using the break-event point
formulae and which present the profits and BEP at which enterprises in the position of no profit
and no loss. This report also gives suitable advice to Ever Joy Enterprises on utilizing the
budgets as planning and problem-solving tools which solve the financial problems of the
enterprises.
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Task 1
Management Accounting
Management Accounting is the accounting branch which basically deals with providing and
presenting accounting information to the manager in such an organized manner so that it can do
its managerial functions of planning, controlling and decision- making in an efficient and
effective manner. Management accounting acts as a decision-making support system to the
manager of an enterprises (Kaplan and Atkinson, 2015).
As per Certified Institute of Management Accountants (CIMA), United Kingdom,
“Management Accounting is an essential part of the company’s management concerned with
classifying, offering, and understanding information which is utilized for framing planning,
strategy and monitoring and governing activities or events, decision- making, optimal usage of
resources of an enterprise, disclosure to stakeholders and other external to the enterprises,
disclosure to workers or employees and assets safeguarding.
Objectives of Management Accounting
The main objective of management accounting is to offer important information to the
management for an efficient and effective execution of managerial functions. Various objectives
of management accounting are enumerated as follows:
1. Planning and policy- making: Management Accounting provides or offers important and
accurate information to the management in the process of its policy- making and planning to
attain goals and objectives.
2. Controlling: Management: Accounting applies various essential techniques or methods such
as Budgetary control, Management Audit, Standard Costing, and Responsibility Accounting to
ensure an effective management control over the resources use of the enterprise.
3. Communicating: Appropriate communication of the performance of many departments of an
enterprise to different administration levels is necessary required for planning, decision- making
and controlling.
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4. Analysis and interpretation of financial statements: Management Accounting gathers,
analyses and understands the important data from the results shown by the cost and financial
accounting system, and also offers important and appropriate information to the management in a
useful and systematic manner.
5. Decision- making: Management accounting offers important and accurate information to the
management in the process of its decision- making. The growth and success of management
highly and mostly depends upon a perfect decision- making.
6. Tax planning: Management accounting assists to the management in the process of tax
planning by availing various tax rebates and reliefs and, thus, minimizes the tax burden of the
enterprise on the whole.
Role and functions of Management Accounting
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Communication
Supplied of modified data
Preparation of reports
Performance evaluation
Collection of data
Ensuring Control
Helping in decision- making
Planning and forecasting
Analysis and interpretation of data

a. Differences between Management Accounting and Financial Accounting
Points of Difference Financial Accounting Management Accounting
Objective Objective is to account for the
day-to-day financial
transactions, and determine
the financial health of an
enterprises (Maynard, 2017).
Main objective is to report to
the management information
so that they can take proper
decisions (Weygandt, et. al.,
2015).
Purpose Beneficial both for internally
as well as stakeholders to
assess the financial
performance of the company.
Beneficial mostly for internal
management for making
decisions, for instance,
budget, or spending plan etc.
Frequency Generally, it is prepared as
per statutory requirements:
yearly statement, quarterly
and half-yearly.
Mostly prepared as per
management requirements.
No fixed interval at which the
management accounts should
be prepared.
Compliance Statutory compliance
required.
Statutory not required.
Focus Financial reports are prepared
on the basis of historical
information and reports are
Management accounting
focuses mainly on present
data and forecasting future
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prepared for a fixed period of
time.
reports.
Users External and internal parties Only internal management
Auditing and Publishing Compulsory to be published
and audited by statutory
auditors.
Neither published nor audited
by statutory auditors.
Scope The scope of financial
accounting is narrow.
The scope of management
accounting is broad.
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b. Cost accounting systems (Direct Costs and Standard Costing)
The cost accounting systems can assist the company in so many ways. It provides an exact
product cost, delivers valuable operational and financial information, and also evaluates the
performance. The cost accounting includes measuring, recording, and reporting of product costs.
This system assists to the Ever Joy Enterprises to estimate the cost of their products for
profitability analysis, valuation of inventory, and control the cost. The Ever Joy Enterprises can
utilize this framework to assess the productivity in the procedures and this framework likewise
helps in making the upgrades in the up and coming procedures of the enterprises. It will likewise
help the enterprises in value obsession of the item and limits the wastages in the assembling
procedure (DRURY, 2013). It additionally gives helpful data to the administration bookkeeper
for the further arranging of the items.
Types of costs
Direct Costing: It is a type of costing method which uses only variable manufacturing costs are
allocated to cost of goods sold and inventory. This method can be used internally and not for
external purpose. While preparing the financial statements both fixed cost and variable cost are
considered and assigned to the products (Weygandt, et. al., 2015).
Standard Costing: In standard costing some standards are fixed by the manufacturer regarding
product or service. The manufacturers identify the variances in between actual and standard
costs. If the enterprises had incurred more than the standard costs, then the enterprises will not
meet its projected or estimated net income (Maynard, 2017).
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c. Inventory Management Systems
The stock administration frameworks will allude to the way toward bookkeeping in which
inventories including the completed merchandise and work in advancement will be overseen and
revealed properly and convenient for making progress in the creation limits. The stock
administration will be vital for the venture with the end goal to accomplish the ideal dimension
of stock to be held in the organization which will result in opportune accessibility of stock and
will likewise help with accomplishing least expense of stock held in the organization (Holm,
2018). The essential points of executing stock administration framework in the enterprise are:
 Attaining an ideal stock level of stock that must be kept up in the enterprise with the goal that no
requests are postponed and the expense of support is least for the enterprises.
 Identifying the ideal level of placing the orders for buying of different materials and building the
concept of just in time inventory.
The inventory management system will use different kinds of methods which are summarized as
below:
 First in first out method
 Last in first out method
 Just in time method
 Weighted average method
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d. Job costing systems
Job costing systems is a system for assigning the production or manufacturing costs to a specific
batches or products. Basically, this costing system is utilized only when the products produced
are different from each other. Job costing includes the accumulation materials, labor and
overhead costs for a particular job. For instance, a job costing is useful in the designing a
software program, manufacturing a small batch of products, constructing a custom machine
(DRURY, 2013).
In a job costing it includes the following activities which are listed below:
 Materials
 Labor
 Overhead
Job costing assists to the Ever Joy Enterprises by providing useful information regarding
particular job in an accurate manner. The management easily accumulated the price of job and
estimated how much cost involved in this job. The whole data are stored in the database of the
company which provides relevant information to the management and its customers.
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e. Different types management accounting reports
Reports Description Use in Ever Joy Enterprise
Cost and revenue reports The cost and revenue reports
give data with respect to cost
engaged with different
procedures and income
created there from. It
empowers the administration
to dissect the operational
productivity of the business
(DRURY, 2013).
It will empower the
administration of Ever Joy
Enterprises (UK) to plan
future business
methodologies and
furthermore follow if there is
any wasteful procedure.
Performance reports Performance report is an
explanation that evaluates the
result of an action over a
predefined time allotment. It
is set up to survey the
execution (Kaplan and
Atkinson, 2015).
Performance report can be
instrumental in Ever Joy
Enterprises (UK) to evaluate
its arrangements dependent
on their execution/result and
it can outline the future
systems appropriately.
Inventory reports Inventory report condenses
different things having a
place with a business,
industry, association. It gives
a record of inventory level in
an organization including raw
material, finished goods, etc.
Inventory reports can be
utilized in Ever Joy
Enterprises (UK) to monitor
stock and different things.
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(Holm, 2018).
Budgetary reports Budgetary report is a report
that empowers the
administrator to think about
the projections made toward
the start of the year with real
execution. It is intended to
decide concerning how close
be the real execution with the
planned execution (Maynard,
2017).
Ever Joy Enterprises (UK)
can utilize Budgetary report
to dissect the productivity of
the business. In the event that
there is any deviation
between the genuine
execution and planned
execution it can discover the
purpose behind a similar
which will empower it to
frame better business
methodologies in future.
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f. The need for a sound accounting system and the importance of the department
producing timely, accurate and relevant information.
A sound accounting system is a precise method for gathering and recording of the monetary
exchanges with the goal that it can empower every one of the partners to survey the execution of
the enterprise. Bookkeeping should be possible either physically or through mechanized projects.
However, a sound accounting system enhance the profits and efficiency of the enterprise and
also enhances the goodwill or reputation of the enterprises (Vanderbeck, 2012).
Following are benefits of a sound accounting system which are discussed as below:
Assists in decision making: A sound bookkeeping framework helps the administration to settle
on better choices for the business. Since the data given by the bookkeeping framework is precise
so it empowers the administration to painstakingly evaluate and examine every single viewpoint
and shape the future systems likewise.
Compatibility: It gives a system to the business to effectively share money related information.
Assume an organization buys another organization and the two are having a sound bookkeeping
framework set up then it would be anything but difficult to coordinate the records and would
spare part of time and exertion.
Improves the proficiency of a business: A sound bookkeeping framework annihilates any odds
of inconsistency and presents data convenient and precisely which thus builds the profitability of
the business. Presently days with the appearance of electronic bookkeeping frameworks different
reports can be produced with the dash of a catch which empowers the administration to take the
choices opportune that helps in the development of the business.
High level of accuracy: A sound bookkeeping gives a high level of precision in the introduction
of the last records. It limits the odds of any theft and uncovered the shortcoming assuming any.
Sound bookkeeping disposes of odds of blunders and introduces all the monetary information
definitely and precisely.
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Task 2
a. The number of tickets that must be sold to break even (i.e. the point at which there is
neither profit nor loss)
Calculation of Contribution per ticket
Particulars Amount (£)
Fixed Costs 60,000
Proposed ticket price for the concert 20
Variable Cost per ticket 10
Contribution per ticket 10
Calculation of Break Even Point (per ticket)
Break Even Point= Fixed Cost/Contribution per ticket 6000
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Interpretation: By applying the break-even point formula which is stated above, Ever Joy
Company will have to sell at least 6,000 tickets in order to cover its variable and fixed costs. It is
the situation where the company faces no profit or no loss.
b. If we want to make a profit of £30,000.00, how many tickets should be sold?
Calculation of the ticket to be sold in order to achieve the desired profits
Particulars Amount
(£)
Desired Profits 30,000
Fixed Costs 60,000
Contribution per ticket 10
Ticket to be sold in order to achieve the desired profits
(Fixed costs + Desired profits/Contribution per ticket)
9000
Interpretation: Above calculation shows that Ever Joy Company will have to sell 9,000 tickets
or sales will be £ 1,80,000 (9,000 x £20) to meet the desired profit of £ 30,000.
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c. What profit would result if 8,000 tickets were sold?
Calculation of Profits
Particulars Amount (£)
Sales of tickets 8,000
Contribution 10
Fixed Costs 60,000
Profits = (Sales x Contribution per ticket) – Fixed Costs 20,000
Interpretation: Above calculation shows that Ever Joy Company would achieve £ 20,000 as a
profit while selling of 8,000 tickets.
The break-even point is very essential method of management accounting which study the
relationship between fixed costs and variable costs and revenue. The break- even point shows
that at what moment the sales will commencing a positive return to the enterprises. It is a helpful
apparatus to choose if the organization ought not or should begin creating and offering an item. It
is otherwise called Critical Point. On the off chance that the deal at which the aggregate income
is equivalent to the aggregate expenses, all things considered, the organization would be in the
circumstance of no benefit and no loss. For another situation, if the deals are lower than the
costs, it is a misfortune for the organization. Everything which is over the Break-Even Point can
be reserved as benefits for the organization. The principle advantage of a break- even point is
that it clarifies the connection between the costs, income, and production units (Sandalgaard and
Nikolaj Bukh, 2014).
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Task 3
a. You are to evaluate how budgeting can be used by Ever Joy Enterprises as a planning
and problem-solving tool in dealing with financial problems, but also for leading the
organization to sustainable success.
Budgeting
Budgeting is the way toward making an arrangement to spend the cash in the most proper way.
The spending plan is known as a financial plan. While making a spending plan it permits the
managers of the enterprises to decide ahead of time whether the enterprises will have sufficient
capital or cash to spend on the up and coming plans or not (Lavia López and Hiebl, 2014).
The Ever Joy Enterprises can used budgeting as a planning and problem-solving tool in dealing
with the financial problems. The budgets set the income and expenses that the enterprises have to
be spend in the future projects. The budgets create a road map for the management and its
departments for achieving their goals and objectives in an appropriate manner. The budget sets
the target for the enterprises and leads to sustainable success to them. In budgets the targets are
set in volume and in amount which shows overall income and expenses to the management of the
enterprises.
Types of budget
 Sales budget
 Production budget
 Cash budget
 Fixed or flexible budget
 Master budget
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Benefits or advantages of budgeting:
1. Budgeting assists the Ever Joy Company in defining the weaknesses and strength on
which the entity can concentrate.
2. Budgeting increases the possibility that the company objectives and goals will be
achieved.
3. With the help of budgeting, there is effective coordination of activities in each
department of the company.
4. Budgeting also helps the manager of the company to allocate the resources to each
department.
Disadvantages or limitations of budgeting:
1. Lack of coordination in between the functions or departments, which may result in
operational plans of the company being in conflict.
2. Departments may be demotivated, if the targets set are too rigid or does not identify
themselves with the assigned targets.
3. In a company, if a department does not fulfill its budgeted target or standards, the
department manager may blame to other departments that provide services to it.
4. It mainly concerned with the distribution of cash or money to the activities which are
estimated and expected outcome or results of the business transactions. Budgeting is not deal
with the other issues like products quality or services provided to the customers.
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b. You are to also evaluate how strong financial governance can help to pre-empt or
prevent financial problems for Ever Joy Enterprises and the means by which management
accounting systems can contribute.
Financial governance alludes to the manner in which an organization oversees, gathers, screens
and controls the money related data. The budgetary administration incorporates how the
organization tracks its money related exchanges, control information; oversee execution,
activities, consistence, and exposures (Nitzl, 2018).
The sound financial governance helps the enterprises to solve the financial problems for Ever Joy
Enterprises in the following ways:
 It enhances the reputations of the company in the competitive market.
 It protects the enterprises from heavy penalties.
 With the help of financial governance, the management can take proper decision regarding
enterprises growth and success.
 Good governance attracts the external stakeholders to the enterprises which assists the
enterprises to enhance their capital and funds also.
The accurate and correct information from the relevant reports helps the management to prepare
the strategy for the future growth and development. With the help of financial governance, the
management can prepare financial policies and procedures according to their needs. The strong
and effective financial governance attracts the financial institutions how provides loans and other
benefits to the enterprises when the shortage will be incurred. By conducting regular audits of
accounts and reports the financial reports shows the transparency in each account which attracts
more investors to invest in the enterprises. The management can easily assess the risk in the
business operations with the help of financial governance (Griffin, 2017).
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There are various tools and techniques used by the Ever Joy Enterprises in order to reduce
the financial problems and enhances the level of performance. Some of them are mentioned
as below:
Benchmarking: A measurement of the quality of an enterprises product, programs, strategies,
policies, etc., and their comparison with standard measurements, or similar measurements of its
peers (Mayne, 2017). The main objectives of benchmarking are:
 To analyze how organizations, attain their high-performance levels
 To determine what and where improvements are called for
 To utilize this information to enhance or improve the performance
By using benchmarking, the Ever Joy Enterprises can check their performance level in
competitive market and also check the quality of their products or services with the prescribed
standards. Some of the useful financial benchmarks include:
 Financial benchmarking
 Benchmarking from an investor perspective
 Performance benchmarking
 Process benchmarking
 Functional benchmarking
 Product benchmarking
 Strategic benchmarking
Benchmarking does not provide a solution to all the problems rather it examines the situations
and processes and assists in improving the performance of an enterprises. It is a continuous
improvement process and it improve the overall performance of the departments or divisions in
the enterprises. In this process, an enterprises major business operation is compared and
measured with the competitors and acknowledged leaders of the industry (Maher, et. al., 2012).
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Key performance indicators: A key performance indicator is computable value that shows how
efficiently an enterprise is attaining key business objectives. The Ever Joy Enterprises use key
performance indicators at multiple levels to assess their growth and success at reaching goals. It
is a form of measurement performance and are commonly used in the organization (Rogulenko,
et. al., 2016). The Ever Joy enterprises can use the KPIs to measure and evaluate the financial
performance which is listed below:
 Profitability ratio
 Liquidity, debt and solvency ratio
 Break- even analysis
 Operating ratio
 Turnover ratio
 Other useful ratios (capital structure ratio)
With the help of above ratios company can evaluate the performance level. The Ever Joy
Enterprises can compare the past performance with present performance with the help of this
above ratios. KPIs also assists the management to evaluate the performance of employees and
how they achieve their targets in an effective and efficient manner. In other words, KPIs is kind
of performance measurement that assists the enterprises to understand how the enterprises or
divisions is performing. A good key performance indicator should act as a compass which assists
the enterprises and its employees whether both are taking the right path towards strategic goals
prepared by the managers (Di Vaio, et. al., 2018).
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Conclusion
This report is concluded that the management accounting tools and techniques helps the
company to achieve their targets and goals in an effective and efficient manner. This report also
shows that how different management accounting systems assists the Ever Joy Enterprises to
enhance their productivity and its business operations. While using Break-even analysis, it shows
the situation where the company in the position of no profit or no loss. This report also tells how
budget can solve the financial problems of the company and act as an effective financial tool for
the management of an enterprises. The good and strong financial governance assists to the
company in solving the financial problems and attracts the investors to the enterprises. The Ever
Joy Enterprises use various methods like KPIs and Benchmarking to check their performance
level and other things in an accurate manner.
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Nitzl, C., 2018. Management Accounting and Partial Least Squares-Structural Equation
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Rogulenko, T., Ponomareva, S., Bodiaco, A., Mironenko, V., and Zelenov, V., 2016. Budgeting-
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