Management Accounting Report: Costing, Planning and Financial Problems

This report analyzes management accounting principles and their application within Capital Joinery Limited. It begins by defining managerial accounting and explores different management accounting systems, including cost accounting, price optimization, inventory management, and job costing. The report then examines various management accounting reports, such as performance, cost, and budget reports. It delves into absorption and marginal costing methods, highlighting their calculation and application. Furthermore, the report discusses the advantages and disadvantages of planning tools, emphasizing their importance in business decision-making. Finally, it investigates how management accounting systems can be used to respond to financial problems, evaluating the effectiveness of planning tools in resolving these issues and analyzing how management accounting tools contribute to organizational success. The report concludes with a summary of the findings and provides references to support the analysis.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Explanation of managerial accounting and requirements of different types of management
accounting system. ......................................................................................................................1
P2 Different methods used by organization for prepare management accounting reports..........3
M1 Benefits of management accounting system.........................................................................4
Essential requirements of managerial accounting system...........................................................4
D1 Integration of management accounting reports with its systems...........................................5
TASK 2............................................................................................................................................5
P3 Calculation of absorption and marginal costing.....................................................................5
M2 Accurate applies range of management accounting techniques............................................6
D1 Integration of management accounting reports with its systems...........................................7
TASK 3............................................................................................................................................7
P4 Explanation of advantage and disadvantages of planning tools.............................................7
M3 Importance of different planning tools..................................................................................9
TASK 4............................................................................................................................................9
P5 Use of management accounting system for responding financial problems..........................9
M4 Analysis of how management accounting tools useful in lead organization success.........11
D3 Evaluation of how planning tools respond for solving issue of financial problem..............11
CONCLUSION..............................................................................................................................11
REFRENCES.................................................................................................................................12

INTRODUCTION
Management Accounting this term is formulated by two words management is the procedure
of analysing recording controlling organising and managing each and every business department
strategies on the other side accounting is the process of recording transaction by using
Management Accounting organisations able to represent their accounting information in a
systematic way which help in take effective business decisions as well as representing internal
information to their stakeholders in order to understand the reliability of Management
Accounting, capital joinery limited has been taken this is the small organisation which Run their
business in manufacturing industry this report has been define requirement of various type of
managing accounting system as well as use of various reports which help in formulation of
budget by using cost and Management Accounting technique organisation able to evaluate their
prices of cost on the basis of recognising planning tool business organisation formed policies and
take decision this report also define those tools which useful in overcoming financial problems.
TASK 1
P1 Explanation of managerial accounting and requirements of different types of management
accounting system.
Management accounting: This is the tool of accounting which is help in attaining business
goals by using and applying various tools. Management accounting is systematic procedure
which help in formulating, recording , and presenting transaction in effective way which helpful
in attain business goals. The main purpose of management accounting in take effective business
decision which useful in attaining long term business goals. There are two types of accounting
system , financial as well as management both are different due to their accounting transaction
procedure (Shields, and Shelleman, 2016).
Difference between management and financial accounting
Financial accounting Management accounting
This accounting branch useful in providing
essential information regarding external
users.
Managers use this system for providing
information to internal users.
It record only transactions which is related
with finance cash.
Management accounting is useful in recording
every transaction.
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It is essential for formulate financial
statement which useful in representing
accounting information
It is not required for formulate management
accounting statement.
Different types of management accounting system: Business organization apply various
types of tools which help in running business activities as well as recording transaction and
formulate effective business strategies by using theses systems.
Cost accounting system: This system is help in recording all the essential information
regarding cost. Each and every cost is directly impact on profitability rate of organization. With
the use of cost accounting system management department able to identified cost required for
running business organization. As well as cost required for purchasing of raw material.
Management department use various cost technique and strategies which is useful in identifying
and recognizing cost and profit value which is aeries by selling of products. In the context of
above Capital joinery limited, cost accounting system is used with an aim of managing different
kinds of costs like raw material cost, processing cost and many other. Through, above accounting
system their managers become able to know which activity is leading to higher expenditure
compared to budgeted value. This accounting system is essential for above company due to
following reasons:
Essential requirements: In Capital joinery limited, the finance manager uses such
accounting system at the end of each month or quarter. The rationale behind this is that finance
managers of company need to know cost of each item which is produced like joinery for doors,
windows etc. By help of above accounting system, a detailed overview of cost is gathered by
finance managers. And on the grounds of cost of product they assess efficiency of their
operations and activities. On the basis of use internal source manager collect information which
beneficial for internal users also.
Price optimization system: This is also useful and effective business system. Price are
most essential elements for every organizing. Profit is arises by applying effective business
strategies and using price strategy. There are various strategies which used by organization for
setting their rice volume. By using effective pricing policies Capital joinery Limited able to
attain their profit goals. Under this accounting system, prices are set in accordance of customers'
feedback and demand of item in the market. In the aspect of Capital joinery limited, this
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accounting system is crucial to keep prices of different products at a level on which both
stakeholders (company and customers) can satisfied. It is essential for above company because
of following reasons:
Essential requirements : In above company, there are a large product portfolio of joineries of
door and windows, thus it is essential for sales manager to fluctuate prices of items as per the
need of customers and demand. The sales manager of above company utilizes key information
from internal sources because help of such sources they can assess about company's revenues
and can assess need of prices fluctuation. By using information from external source manager of
Capital Joinery able to formulate their pricing policies which also useful for external users as
well as this help in attain business gain.
Inventory management system: This system is related with managing inventory.
Business organizations able to attain their success by maintain and managing their stock . It is
really essential to record each limit of storage. By using management inventory technique, JIT,
ABC analyse and using LIFO as well as FIFO method organization able to identifying maximum
as well as minimum of their business transaction. Management department of capital joinery
Limited apply this methodology through which they manage their inventory. This accounting
system is essential for above company as:
Essential requirements :The production manager of Capital joinery limited needs such
accounting system to take corrective actions about production of new joineries. It becomes
possible because under stock management system a detailed report is prepared which contains
information about how much quantity of raw material, finished goods and prepared goods are
available in warehouse. This information is utilized by production department to analyse need of
purchasing raw material or producing new joineries etc. Information has been collected for using
inventory system from external sources they on the basis of using vouchers, credit notes, and
debit note organization can find out the information regarding level of stock required by
organization.
Job costing system: This system is user by organization to find out time required for
each and every job as well as they find out cost required for fulfilling requirement of every job.
Organization on the basis of using job costing system able to fulfil requirement of every business
transaction. Capital joinery Limited uses this methodology which useful in tracking each
business transaction. This accounting system is used to assess cost of each item in a separate
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manner because under it cost of each operation is measured with rationale of job cost. It is
essential for above company due to following reasons:
Essential requirements :In the context of above company, their finance department relay on
such accounting system with an aim of analysing cost of each item or joinery. They do so in
accordance of prepared report under this accounting system in which each products' cost is
categorized in separate elements. They collect theses sources from using internal sources of
organization. On the basis of that these information are used to measure as quantitative method.
P2 Different methods used by organization for prepare management accounting reports
Reports are essential through which every information is recorded in particular file
document. These are help in formatting and providing path for creation f budget. On the basis of
report organization able to proved essential business information. Capital joinery limited
formulate following reports which help in attaining their business goals (Maas, Schaltegger, and
Crutzen, 2016).
Performance report: This report has been formulate for identifying performance of each
department generally small business organisation don't have large period is there this is activities
world limited in some departments with the user performance report organisation able to
understand that you off and identify performance of each department which include marketing
financing production as well as capabilities and is case of human exorcist they hired for their
functions this is the submission of all the report management department of sunshine used report
for 4 minutes effectiveness titans on the basis of identify icing performance
Cost report: This report has been used to define it in every element coach price on the
basis of foreman eating this report management apartment able to recognise for particular
business activities rising in various transactions call report cause report cost report. Coach report
useful in identifying kitchen every transition cost to with organisation bell to formally defective
this is policies for controlling and managing court manager road Capital joinery limited use this
policy through with take enable to control there cost.
Budget report: This report is for imitating for providing guidelines regarding for me
letting of budget it is us conclusion of all the report with his prepared by organisations by using
management accounting technique but it report shows future expenses as well as profit and
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organisation have ability to earn it in court all the activities with through which organisation able
to attend the year future business.
Account reliable report: This report is formulating for the purpose of finding out those
debtors which are not able to compete their debt liabilities. Those which consider convert as non
performing business assets of the organization. On the basis of formulating of theses report
organization able to decision and formulate effective business policies to control and proved
effective business offer which useful in attaining business goals. Management department of
Capital joinery limited use this report through which they can able to formulate those business
strategies which useful and helpful in increasing cash limits for the organization. It will helpful
in increasing cash inflow for organization.
M1 Benefits of management accounting system
Cost accounting system This system useful for Capital joinery limited to
finding out profit value and cost of each
business activity. On the basis sing this system
management department able to find out the
best way of generating profit as well as those
activities which become the reason of high
generation of cost for organisation (Ameen,
Ahmed, and Abd Hafez, 2018).
Price optimization system Capital joinery limited use this system for
recognizing best pricing strategy . They use
price optimization system which useful in
selecting price according to their products.
Job costing system Management department of Capital joinery
limited use job costing system which helpful in
Inventory costing system This system is help providing information
regarding stock as well as useful in manning
each costing system. Management department
of Capital joinery limited use this tool for
managing and controlling wastage of inventory.
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D1 Integration of management accounting reports with its systems.
Management department of Capital joinery limited apply management accounting tools and
technique they use system of management accounting though which organization able to proved
base for formulation of report. Theses report are useful in attaining business advantage by help in
them in taking effective business decision.
TASK 2
P3 Calculation of absorption and marginal costing
Absorption costing: This method is useful in identifying value of cost of organization
which incurred for business activities. They consider only variable cost thus it also known as
variable costing method. This is most self method which apply by organization. This is most
useful method which help in attaining business goals.
Marginal costing: This technique considered all the essential factor and element. They
considered fixed cost and a well as variable cost through which organization take decision. This
will useful in finding out best way and rate of profitability through which organization set their
target . This is most useful strategy apply by organization for finding out their cost.
Standard costing: This is the technique which help in identifying the main reason and
difference aeries between actual and budget cost. It help in finding out variance which become
he reason o and cause of finding out difference. It is most useful technique which self in finding
out main variance. It help in formulating of business decision and made policies which useful in
attain business goals. Standard costing labour, material and overhead variance through which
organization able to understand the reason of defence it help in finding out best opportunities
within given time period.
Absorption costing:
absorption costing
Particulars May June
Sales 25000 18750
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absorption costing
Less: Cost of goods sold
Variable sales commission 500 275
Variable manufacturing cost 2000 1500
Direct material 6000 4500
Direct labour 4000 3000
Fixed production expenses 2000 2000
Gross profit 10500 7475
Less: Selling and distribution
costs
Fixed selling 1000 1000
Fixed administration 3000 3000
Net profit 6500 3475
Total cost of production:
Direct materials 60
Direct labour 40
Variable production cost 20
Fixed production cost 20
Full production cost 140
Income statement:
Particulars May June
Sales 25000 18750
Less: Cost of sales
Direct materials 6000 4800
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Direct labour 4000 3200
Variable production cost 2000 1600
Fixed production cost 2000 1600
Opening stock 0 0
Closing stock 0 700
Under/Over absorption 0 400
Gross profit 11000 7850
Less: Expenses
Variable sales commission 500 375
Fixed administration 3000 3000
Fixed selling 1000 1000
Net profit 6500 3475
Marginal costing:
marginal costing
Particulars May June
Sales 25000 18750
Less: Variable costs
Sales commission 500 375
Manufacturing cost 2000 1500
Direct material 6000 4500
Direct labour 4000 3000
Total cost 12500 9375
Contribution 12500 9375
Less: Fixed cost
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marginal costing
Fixed selling 1000 1000
Fixed production overhead 2000 2000
Fixed administration 3000 3000
Net profit 6500 3375
Total cost of production:
Direct materials 60
Direct labour 40
Variable production cost 20
Full production cost 120
Income statement:
Particulars May June
sales 25000 18750
Less: Variable cost
Direct materials 6000 4800
Direct labour 4000 3200
Variable production cost 2000 1600
Opening stock 0 0
Closing stock 0 600
Variable sales commission 500 375
Contribution 12500 9375
Less: Fixed cost
Fixed production 2000 2000
Fixed administration 3000 3000
Fixed selling 1000 1000
Net profit 6500 3375
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Reconciliation statement:
reconciliation statement
Particulars May June
Profit/ loss under marginal
costing
6500 3375
Less: Profit under absorption
costing
6500 3475
Add: closing stock 8000 6400
Over absorpiton 8000 6300
material variances
Particulars Amount
Material cost variance
Standard cost 24000
Actual cost 22400
Result 1600
Material price variance
Standard price 12
Actual price 9.3
Actual quantity 1000
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