Comprehensive Analysis of Management Accounting and Financial Reports

This report provides a comprehensive overview of management accounting, exploring various systems and their benefits within an organizational context. It examines different types of management accounting reporting, including inventory management, job costing, price optimization, and cost accounting systems. The report delves into the relevance of management accounting and its systems, including account receivable aging reports, cost reports, and performance reports. Furthermore, it presents a detailed analysis of cost cards using absorption and marginal costing, alongside financial reporting documents. The report also covers budget preparation, ratio analysis, and the identification of financial issues and planning tools. Finally, it analyzes variances and discusses strategies to overcome challenges, offering a practical understanding of financial management.

Accounting

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
SECTION 1.....................................................................................................................................1
1.1 Examination of the terms of management accounting and analysis of various kinds of
management accounting systems.................................................................................................1
1.2 Evaluation and analysis of different types of management accounting reporting that are
very important from the company’s point of view......................................................................1
1.3 Identification of the benefits of the systems of management accounting that are related
with the organisational context....................................................................................................2
1.4 Analysis of the two aspects that are management accounting and management accounting
system and its relevance with each other including examination of different methods of
accounting....................................................................................................................................3
Section Two.....................................................................................................................................4
2.1 preparation of the cost card using absorption costing as its base..........................................4
2.2 Preparation of the financial reporting document of the company by applying different
range of the techniques of management accounting that are prevailing in the current market
scenario........................................................................................................................................6
2.3 Analysis of the financial reports of the firm by appropriate application and interpretation
of the range of different type of data that are associated with the activities that are performed
in the business..............................................................................................................................9
2.4 Preparation of various statements that are very crucial in order to examine the profit that is
generated by the company over a period of time.......................................................................11
SECTION 2...................................................................................................................................12
3.1 Preparation of different kinds of budget that are very important from the firm’s point of
view............................................................................................................................................12

4.1 Analysis of various kinds of ratios that are very essential to evaluate the overall working of
the company in the long run......................................................................................................15
4.2 Identification of various types of financial issues that the company is facing and examine
the important things that can be adopted by the firm so as to overcome all of those challenges
...................................................................................................................................................17
4.3 Identification and evaluation of different kinds of planning tools and techniques that are
prevailing in the industry in the present time............................................................................18
4.4 Analysis of different kinds of variances that possess a lot of value in the current market
scenario......................................................................................................................................18
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................21

INTRODUCTION
Management accounting is one of the most important as well as crucial aspect as it can help
a firm to grow and prosper in the current market scenario in which is highly competitive as well
as dynamic in nature as it proves beneficial in recording each and every transaction of the
business firm in an appropriate manner so that it can add value to the firm in the long run
(Amnuai, 2019). This report is a systematic and sequential examination, analysis, and evaluation
of all the related terms of management accounting that possess a lot of value in the market since
they can help the company to stand well ahead of all the rivals that are prevailing in the current
market. Apart from that the concepts of different planning tools, ratio analysis, and a preparation
of an accurate budget is also included in this report.
SECTION 1
1.1 Examination of the terms of management accounting and analysis of various kinds of
management accounting systems
Management accounting is basically regarded as a process of recording, summarising,
identifying, colleting, analysis, and evaluation of all the activities that are performed in the
company so that a detailed examination of all the aspects can be done so that it can help the
company to sustain and survive in the long term scenario. The management of the accounting
part of the organisation is a very critical part since it can help in maintaining a proper record of
all the activities so that appropriate and necessary decisions can be taken on the basis of it so that
it can help in the increase in the value of the firm by subsequently increasing its profitability.
Management accounting systems is a very important one as it helps in measuring the overall
progress of the company so that decisions can be taken which can prove in accordance with it so
that if there are some loop holes in the company’s performance so that it can be overcome by
applying effective and efficient decisions.
1.2 Evaluation and analysis of different types of management accounting reporting that are very
important from the company’s point of view
There are a number of different aspects that are involved in it and thus all of them are
explained in a well detailed and prescribed manner below-
Inventory management system- It is a system that is related with the management of the
most important aspect that is inventories that are available with the company so that a detailed

examination of it can be done so that all the activities of the firm can be performed in a smooth
manner. Thus the stock that is with the company is analysed in it so as to determine the quantity
of raw material that will be needed for further operations so that it can prove beneficial for the
company in the long term conditions. It has many sub parts and all of them are explained below-
 FIFO- It is a method in which the stock that is received first will be sold first and the
process is repeated like that only (Andriyanto, 2016).
 LIFO- In this method the stock that has come last in the company is sold first and in this
also the process is repeated like that only.
 Average Cost method- This is a method in which the average price of the stock is
calculated and the whole stock is sold at that price only irrespective that the inventory has
came first or last.
Job costing System- It is a system which is related with allocation of funds according to
the job performed by it so as to reduce the unnecessary expenditures of the company resulting in
increase in the value of the firm and also it can help in the increment in profitability of the
enterprise in the long run.
Price optimization System- This is a system that helps in determining the actual price of
the product by analysing and evaluating all the relevant factors that are associated with it so that
it can help in striking a balance between the price and the profitability. This system is very
beneficial as it helps in cutting down irrelevant expenses that are included in the price level of
the organisation.
Cost Accounting System- It is a system that is related with evaluating all the costs that are
associated with the production of a product so that unnecessary additional cost that can be added
to the product can be reduced which can prove useful for the company so as to increase its
overall performance in the long run.
1.3 Identification of the benefits of the systems of management accounting that are related with
the organisational context
Management
accounting system
Key benefits
Inventory Management
System
The foremost benefit of this kind of system is that it helps in
controlling the level of the inventories so that it can help in using

the resources of the company in an effective and efficient manner.
Job costing System The benefit of this system is that it helps in doing the job or the
task in a precise format so that all the costs can be allocated
according to the role that is performed by the job.
Price optimization
System
This system help in striking a balanced price level so that the
company can stay competitive in the market as well as it can
maintain its level of profitability too in the market in which it is
operating (Bassani and Cattaneo, 2019).
Cost accounting system The main benefit of this kind of system is that it helps in analysing
the overall cost that is incurred while producing goods and
services so that cost can be reduced as per the requirements of the
organisation’s higher management.
1.4 Analysis of the two aspects that are management accounting and management accounting
system and its relevance with each other including examination of different methods of
accounting
The two aspects that are management accounting and its systems are inter related with each
other as one helps in gathering all of the relevant information about the working of the company
so that the other one can help in taking important natured decisions that can impact the whole
working of the organisation in a positive way. The different reports of management accounting
are elaborated below in detail-
Account Receivable Aging Report- It is a report that is helpful in analysing the debtor’s
aspect of the company in the long run as to evaluate that the company is able to receive the
amount that is outstanding with the debtors in a well précised time limit or not so that
appropriate measures can be taken in that regard which can prove useful for the company.
Cost Report- It is a report that is related with the evaluation of the cost aspect that is
incurred while producing the goods and services so that it can be used by the society. This type
of report includes all the cost starting from procurement of raw material to supplying goods to
the prospective customers and hence it helps in cutting down the costs if it is not as per
expectations in an area.
Performance Report- It is a report that is formulated on the performance of the
individuals that are working in the firm so that proper examination of the performance can be

done so as to evaluate the reasons for deviation if any. There are different ways in which it can
be evaluated and mostly it is analysed on a yearly basis so that overall evaluation can be done in
a well précised and accurate format (Bloechl, Michalicki and Schneider, 2017).
Section Two
2.1 preparation of the cost card using absorption costing as its base
Cost Card Using Absorption costing
January February
Particulars Details Amount
(Pounds) Details Amount
(Pounds)
a) Units
produced 11000 9500
b) Direct
Material (4kg*3pound/kg*11000) 132000 (4kg * 3 pound / kg *
9500) 114000
c) Direct
Labour
(4 hrs * 2 pound / hr *
11000) 88000 (4 hrs* 2 pound /
hr*9500) 76000
d) Variable
Overhead
(5 pounds / desk *
11000) 55000 (5 pounds / desk *
9500) 47500
e) Prime Cost 275000 237500
f) Production
overhead 20000 20000
g)
Cost of
goods
produced
295000 257500
h) Variable
sales cost
(1 pound / desk *
11000) 11000 (1 pound / desk *
9500) 9500
i) fixed selling 2000 2000

cost
j) Cost of
Goods sold 308000 269000
k) Profit= l-j 77000 63500
l) Sales (35 pounds / desk *
11000) 385000 (35 pounds / desk *
9500) 332500
Cost Card Using Marginal costing
January February
Particulars Details Amount
(Pounds) Details Amount
(Pounds)
a) units
produced 11000 9500
b) Sales price
per desk 35 35
c)
Variable
cost per
desk:
Direct
material (4 kg * 3 pound / desk) 12 (4 kg * 3 pound / desk) 12
Direct
Labour (4 hrs * 2 pound / hr) 8 (4 hrs * 2 pound / hr) 8
Variable
overhead 5 5
Variable
sales
overhead
1 1
d) Contribution 9 9
Total
contribution 99000 85500

e) Fixed costs
Production
overhead NOTE 1 22000 19000
Sales
overhead 2000 2000
Profit (d-e) 75000 64500
NOTE 1- Production overheads here are regarded by considering average productions per month
= 10000 units. Thus, for Jan. month, overheads amount= (20000/10000) *11000. While, for Feb.,
overheads amount= (20000/10000) *9500
2.2 Preparation of the financial reporting document of the company by applying different range
of the techniques of management accounting that are prevailing in the current market
scenario
Financial reporting
For the period ending February
Revenue
Sales for January 385000
Sales for February 332500
Total revenue (A) 717500
Cost of goods sold
Cost for January 308000
Cost for February 269000
Total Cost of goods sold (B) 577000
Net income(C= A-B) 140500

Financial reporting
For the period ending February
Revenue
Sales for
January 385000
Sales for
February 332500
Total
revenue (A) 717500
Cost of goods
sold
Cost for
January 308000
Cost for
February 269000
Total Cost of
goods sold
(B)
577000
Net
income(C=
A-B)
140500
Working

Notes - Cost
of Goods sold
January February
Particulars Details
Amount
(Pounds
)
Details
Amount
(Pounds
)
a) Units produced 11000 9500
b) Direct Material
(4 kg * 3
pound / kg *
11000)
132000 (4 kg * 3 pound / kg *
9500) 114000
c) Direct Labour
(4 hrs * 2
pound / hr *
11000)
88000 (4 hrs * 2 pound / hr *
9500) 76000
d) Variable Overhead
(5 pounds /
desk *
11000)
55000 (5 pounds / desk *
9500) 47500
e) Prime Cost 275000 237500
f) Production
overhead 20000 20000
g) Cost of goods
produced 295000 257500
h) Variable sales cost
(1 pound /
desk *
11000)
11000 (1 pound / desk *
9500) 9500
i) fixed selling cost 2000 2000
j) Cost of Goods
sold 308000 269000

2.3 Analysis of the financial reports of the firm by appropriate application and interpretation of
the range of different type of data that are associated with the activities that are performed
in the business
(a)
Month Hours
Spent Expenses
January 630 7960
February 505 7410
Mar 705 8285
April 555 7535
May 780 9110
June 795 9820
Highest number of hours = June =
795
Lowest number of hours = February
= 505
Variable cost= (9820 - 7410)/(795 -
505)
Variable cost= 8.310345 pounds per
unit
fixed cost= 9820 - (795 * 8.31)
fixed cost= 3213.55 pounds
expenses for July= 3213.55 + (650 *
8.31)
expenses for July= 8615.05 pounds