Analysis of Management Accounting for Excite Entertainment Ltd

This report provides a comprehensive overview of management accounting, focusing on its application within Excite Entertainment Ltd, a UK-based leisure and entertainment company. It begins by defining management accounting, differentiating it from financial accounting, and outlining its essential requirements, including cost accounting, inventory management, and job costing systems. The report then explores various management accounting reporting methods, such as budget reports, accounts receivable, performance reports, and cost reports, emphasizing the importance of accurate and reliable information. It integrates these systems within Excite Entertainment Ltd. Furthermore, the report delves into cost calculations associated with income statements, comparing marginal and absorption costing techniques, including their advantages and disadvantages. The analysis covers direct and indirect costs, providing a detailed understanding of cost management within the context of Excite Entertainment Ltd's operations.

MANAGEMENT ACCOUNTING

INTRODUCTION
Management accounting refers to the study of managing the accounting in the company
regarding analysing cost or making budgets to identify the accurate cash flows in company. It is
mainly undertaken in relation to preparing report such as financial report of the company which
indicates the organization overall working and also manages the cash flow in better way
(Askarany and Yazdifar, 2017). The main reason of carrying the management accounting in
business is relating to controlling the functions in business so that they can attract the
shareholder towards the business for longer way. Present report is based upon Excite
entertainment Ltd. which is based upon the leisure and entertainment industry mainly based in
UK. The main criteria which they carry is relating to promoting the concerts and festivals
throughout the UK to retain the interest of customer.
Report will include the matters relating to understanding the meaning of management
accounting. It also covers the matters relating to using the methods for managing accounting
reporting. Further it carries with the aspects relating to calculation cost through using the
appropriate techniques to prepare the income statement report. It also includes various planning
tools which is used in managing accounting. At last, it covers the matters relating to comparing
ways to respond to financial issues.
SCENARIO 1
A) Meaning of management accounting and its essential requirement
Management accounting: Organization mainly adapts the procedure of managing the
accounting in respect of conducting the accurate planning and analysing the aspects regarding
improving the performances. Through these aspects, it helps companies in making right
decisions and also interpret the business activities to gather relevant information. It also covers
the component relating to managing the budgets, break even analysis, valuation of stock,
estimating the cash flows and many more (Azudin and Mansor, 2018). These activities are
performed by the managers which assigned the task to manage the accounting. In respect of
undertaking the matters relating to Excite Entertainment Ltd, it is necessary to manage the
accounting which helps in getting the accurate information regarding the profits and losses which
they attained during the particular time period.
Difference between management accounting and financial accounting

Basis Management Accounting Financial Accounting
Aggregation Management accounting used
to report at most detailed level
in the organization as compare
to Financial accounting. Such
as profit by product, product
line and geographical region.
At same time financial
accounting used to report the
result of an entire business
together (Difference Between
Financial Accounting and
Management
Accounting, 2018).
Focus Management accounting used
to focus on different issue
which is causing problem and
how to fix the same in an
organization (Burritt, 2017).
Financial accounting used to
focus on profitability of
business in the long run as well
as sort run of business.
Standards Management accounting need
not compile with any of
standards. As information are
compiled for internal
consumption.
Financial accounting has to
compile with accounting
standard.
Timing Management accounting may
be issued more frequently as
compare to financial
accounting
Financial accounting is issued
during the end of an
accounting period (Golyagina
and Valuckas, 2019).
Cost accounting system
The essential requirement of the management accounting systems are as follows:
 Cost accounting systems: It is mainly adapted by firms in respect of figuring the cost
regarding selling the products which is estimated by managers. In case of Excite
Entertainment Ltd, they mainly use these systems regard to track the records of the good
inflow and outflow and manages the cost of inventories which is useful in promotion of
concerts or organizing festival in UK. The main important aspects of cost accounting

system carries the costs which is incurred in form of labour or purchasing of raw
materials or any finished goods (Honggowati and et.al., 2017). Thus, in case of Excite
Entertainment Ltd, this is useful in managing the cost for future perspective so that they
can retain the business in market for longer way.
Cost accounting system used to help Excite Entertainment Ltd in disclosure of
different profitable and unprofitable activity of organization. Also provide the basis for
organization to find the cause of decrease and increase in profit.
 Inventory management systems: In this, management is needed in respect of monitoring
or controlling the production of inventories as it can be in from of raw materials or
finished goods. Inventory management system used to provide centralised data and
element of reference to the inventory present in organization. This system also used to
provide a focused record of company asset and item present in the business (Jakobsen
and et.al., 2019).
Inventory management system used to help company in minimizing inventory
cost of and maximizing the sales and profit of company. Also used to schedule proper
availability of inventory in the company.
 Job costing System: It is used to assign overhead cost to one or more pool of cost in
organization. By adapting these systems, it helps in tracking the cost spend on particular
job. This helps in determining the accuracy of a company regarding estimating the job
costing system. This information is also sometime used to assign different inventoriable
cost to manufactured good (Jazayeri and Ahmed, 2016).
This system in Excite Entertainment Ltd help the manager in calculating the cost
of individual job in the organization, this eventually help the organization in deciding the number
of job require in organization to maximize the efficiency of work in the organization
(Makrygiannakis and Jack, 2016).
B) Different methods used for management accounting reporting
Different type of management accounting tool
Budget report: Budget report is one which used is generally used by the organization as
a primary report in management accounting reporting. As this report used to show the indirect
comparison of actual result of company with pre established budget of company. Budget report
used to help the organization in determining which expenditure level is high or low in

organization. This report is developed departmental wise which help the manager to managed the
company in knowing performance of the department separately. At the same organization also
used to create a overall budget also in the organization, which help the company in
understanding grand scheme of organization (Malik and et.al., 2019). This report also used as a
guideline by management of organization to cut down different activity to get a cost benefit in
organization.
Account Receivable: Account receivable report is the report which used to show the
unpaid invoices balance along with the duration for which this invoices are outstanding. This
report is vital for the business who used to rely heavily on extending credit. This report also used
to break down the payment of client into specific time period (Margaret and Philip, 2017). This
help the manager in finding out the default and issue related to the company collection process.
On the basis of that identification company used to plan different activity in the organization.
Performance report: Performance report of organization used to review overall
performance of company. Also used to show the performance of every employee in the end of
every term. This type of report used to generally focused on overall and big objective of the
company (Messner, 2016). Manager at Excite Entertainment Ltd used to take performance report
as a basis to develop different key strategic decision about future of organization.
Cost report: This report used to contain the variety of cost incurred by company in
producing the product in the organization. Various cost are determined such as managerial cost,
overhead, labour. Cost report used to offer the summary of all the cost which is incurred by
company in the market. On the basis of the same the management of organization used to take
plan different activity to reduce the cost of company. As this used to provide the exact
knowledge of different cost and help organization in better utilization of organization resources.
Information presented should be accurate, relevant to the user, reliable
Providing this sort of report to management of company is not enough for the
management to plan different activity in the organization. It is very much necessary for the
management of organization to have a accurate, relevant and reliable information presented in it.
As not having reliable data will eventually consume the good amount of time of the manager of
the organization in deciding which data has to be taken as a basis to develop different activity
(Mitchell, 2017). This will eventually delay decision-making in organization.

At the same it is also very much necessary for all the organization to have relevant and
good accuracy of data, as this information used to has a direct impact on efficiency of decision
are taken in organization. As management used to take this information as a basis to make
different decision in organization.
Examining the management accounting systems and management accounting reporting
integrated within Excite Entertainment Ltd
Management accounting system in Excite Entertainment Ltd is interlinked with different
accounts report of company. As management accounting system in organization are equipped on
the basis of different information which is derives from the management reporting and on the
basis of that management accounting, manager used to make different decision (Modell, 2017).
As this integration in Excite Entertainment Ltd is interlinked between reports and system it
sometime used to create delay in decision-making in organization. As one information is derived
by laying emphasis on other information.
SCENERIO 2
Calculation of different costs associated with preparation of income statements.
There are using two types of costing which are related to marginal and absorption costing
which are as follows:
Marginal costing:
Marginal costing is that technique variable costs are changed to cost per unit and the
fixed costs and this can be attributed to the relevant period is addressed against the derieved
contribution for that period. It means that the attainment of marginal cost effect the profit related
to the change in the type or volume of outputs through differentiate between variable costing and
fixed costing (Nørreklit, 2017). This is the concept of marginal costing which is mainly based on
the behaviour of the cost which varies with the volume of production. There are some effective
and valuable benefits and advantage of businesses which are explains are as follows:
 This make easier for determine, control the cost of production in effective manner by
maintaining documents. This costing is constant like variable costs and influences from time to time, but, long run
marginal costing is stable.
Disadvantages:

 Marginal costing is a more difficult and the variable is a huge problem. This semi
marginal costing and semi fixed costing is not considered (Oyewo, Ajibolade and
Obazee, 2019).
 It is very difficult to fixed prices and basis of contribution.
 This not explain main reason for increasing in the production/ sales.
Absorption costing:
This is the method of accounting system which is summing-up the production and
manufacturing costs towards an individual products and services. It is the type of the costing
which have need an accounting standard for creating valuation of inventory. This process is
mentioned in the fixed cost. In this product might absorb board range of the variable and the
fixed cost. This includes direct and indirect cost for calculating absorption costing in effective
manner. Direct cost is directly to sub unit in the business which is analysis only uses of variable
cost to make a better decisions for businesses. Under this method, the fixed cost is
assumed to be constant and is charged in the period under which it was actually incurred.
 Indirect cost are shared resources by the entire organization such as the overhead. This
aspect takes into consideration the personal and administration costs that are associated
(Poff and Michalos, 2018). These costs are not directly associated to the production.
Some examples of indirect cost are accounting and legal expenses, administration
salaries, rent, office expenses and security expenses.
Those are the costs which are includes within the absorption cost at the time of calculation. This
has some drawbacks and benefits which are as follows:
Advantages:
 This costing is taking account in all the production cost, which is not justified the direct
cost, but the variable costing justifies. This includes in Excite Entertainment Ltd fixed
costs of operations like salary, rental facilities and utility of bills. This is accurate profit tracking and is done in the same accounting period when the
product is manufactured.
Disadvantages:
 This fails to develop a good analysis associated to cost and volume. This fails to address
to improvement of the operational efficiency (Pradhan, Swain and Dash, 2018).

 Absorption costing is not much useful in comparison of the product line as compare with
variable costing. However, this method proves to be more feasible when the potential
profitability of a company neds to be compared.
absorption cost:

Interpretation:
From the above calculation, it had seen that the profit with absorption cost is 35000 and
marginal costing is 29000. This reflects that absorption costing is better than form marginal
costing. This provides a clear and proper picture of work of profitability to considering both of

the variable and fixed costs. As per that the total production cost as per marginal costing is 6 and
as per absorption costing is 10. In the absorption costing, number of productions is also increased
in effective and valuable manner. This creates more effectiveness for business by using
absorption costing in their calculation of cost. This more beneficial for Excite entertainment Ltd.
SCENARIO 3
A) Advantages and disadvantages of different types of planning tools used in budgetary control.
Budgetary control is defined as the process through which the company takes care of the
income and expenses of the company to a great extent (Quattrone, 2017). For making the budget
the major requirement is of the different types of planning tools which assist Excite
Entertainment in planning in effective manner. The planning tools are defined as the techniques
and tools which help the company in effectively make he budgets and ensure its proper working.
The different planning tools used by Excite Entertainment are as follows-
Zero based budgeting:
Zero based budgeting is the method of budgeting which in includes planning tools. This
includes all types of expenses that are justified every year. This is known as process which used
to start with from Zero level and every function within the organization is analysed for its needs
and costs (Scott, 2019). Advantage of Zero based budgeting are as follows:
 With the help of this, outcome have more chance to employees and their seniors staff to
communicate with each other and also with another department in order to analyse
minute factor which is created more specific and effective budgets. This allows to businesses to be created strategic in their approach and only expend
amount which they needed for growing in positive manner (Sedevich-Fons, 2018). Result
of this, spending a direction and become a means for achieve goals for business.
Disadvantages:
 This has not made focus on centres help in generating immediate profit which is
encouraged funding them.
 In this requires a detail information which is complex for collecting proper information
for work.
In respect of Excite Entertainment Ltd, this planning tool if more effective for taking better
decision for communicate with their employees. For example: if company planning for

expending their department and personally communicate with employees related to changes. In
this, planning tool provide facilities as per requirements and prepare budgets for work.
Cash Flow Budgeting
This budgeting provides an estimation of cash flow of the business for a given period.
Cash flow budgeting is useful when companies forecast about the sales and production
requirement of the business. These forecasts are used for creating cash flow budgets
(Soderstrom, Soderstrom and Stewart, 2017). The cash flow budget is based on the assumption
regarding spendings and collection from account receivables. This budget is very essential as it
helps companies in identifying whether it has enough cash to carry out its business operation and
what sources of financing can be used.
Pros:
 It presents a clear picture of the company's financial position.
 It provides quick review of the cash flow from company's operating, investing and
financial activities. Helpful in finding unnecessary expenditure (15 Cash Budget Advantages and
Disadvantages, 2018).
Cons:
 Proper documentation is required otherwise it can pose as a theft.
 Lack of perspective if business is running good and the budget is formed on the basis of
this assumption.
 It is prepared based on previous years cash allocation which may not be similar to the
budgeted year and non-financial factors may influence the budgeted cash flow.
Production Budget
Production budget is a plan that estimates the number of units required to be
manufactured in a future period. This budget is based on the sales forecast report. It is used as
planning tool for the future production process (Tripathi, 2017). Upon formation of production
budget, other cost related budgets are prepared which includes direct material and labour and
other overhead cost. These cost budgets are essential in the manufacturing process. This budget
is usually prepared for the manufacturing concern and also further used for the raw material
planning process.
Pros:

 It provides guidance to the company as it sets targets which company expects to be
achieved in the given period.
 It helps in full utilization of plant and machinery as well as labour. Helps in maintaining balance between production, sales, inventory of the product.
Cons:
 Preparation of budget requires a lot of time and efforts of the management.
 Budget is prepared based on assumption so achieving accuracy level is not possible.
 The company which has started business recently will not be having past data which
makes it difficult for the business to estimate the figures for the budget.
Excite Ltd is a media entertainment company. It requires to carry out different activities and for
which proper working capital is required. So, cash flow budgeting will be very useful as it
provides clear view of cash from different sources, how much cash is generated from its
operating activities apart from other sources. Production budget is also very useful as it requires
to know the cost of production and broadcasting the particular entertainment. It provides an
estimate of how much it will cost for producing a film or any other media and make a
comparison with how much cash is available So, both the methods are very useful for excite
limited.
B) Adoption of management accounting in response of financial problems
The financial problem is some of the issues in monetary terms which the company faces
in doing the business. In any type of situation, the company can face the issues relating to
monetary problems and this affects the profitability of the company. These financial problems
are like lack of cash flow, poor accounting practices, excess marketing expenses, debt
repayment, unexpected funding and many other issues. Thus, for the management of these
financial problems some of the management accounting principles help Excite Entertainment in
dealing with these issues. These techniques are discussed in below points-
Benchmarking- This is a tool which is used by the company in order to know its position
within the market. under this technique the company compare its product and services with that
of the competitors. This is done in order to know the competitive position within the market as
with comparison the company will know about its position within the market. This will help the
company in dealing with the financial problems like bad quality of product, low production, high
cost and others financial problems (Turner and et.al., 2017).

This method is used by Excite Entertainment in order to compare its products with the
other competitors. This help the company in outlining the superiority on the basis of quality of
the products of competitors in comparison with the products of Excite Entertainment. On the
other hand, ABC Ltd company uses this technique in order to outline the difference on basis of
sales that is it compares the product on basis of sales to know the profitability and the areas in
which they need to develop.
Balance score card- This is a tool in which the company uses a performance metric
which help the company in analysing the role of business internally which impact the resulting
outcome (Woods, Linsley and Maffei, 2016). This method will help the company in measuring
the performance over four major aspect that is financial, internal process, innovation and
consumers. this help the company in dealing with the financial problems like decrease in sales
due to low innovation or changes in consumer preferences and many others.
This method is applied by Excite Entertainment to know that fact that in respect of terms
of finance and innovation where the company is lacking and what are the measures to improve
these aspects. In contrast to this ABC Ltd is using this technique in order to identify its customer
and retain them in this highly competitive world.
Variance analysis- This is a tool which help the company in determining the deviation
among the planned work and the work which takes place in actual. This is a good tool in solving
the various financial issues because of the reason that this will outline the different between what
was planned and what is done in actual. This technique of management accounting will help the
companies in resolving the financial issues in respect of gap between the actual and set
performance of the business.
It is mainly applied by Excite Entertainment in order to set some standards of working for
the quality of the product and they work in order to achieve those high-quality standards. But on
the flip side ABC Ltd uses variance analysis by setting the target for the profits and the company
works in direction of attaining those standards only.
Financial governance- This is a method which is the manager of the company collects
all the information relating to all the transactions which are financial in nature. After that all this
information are managed and monitored and proper evaluation of these information is done and
then the management accountant takes decision for the betterment of the company. It helps the

company in dealing with the financial problem such as errors in material, lack of fund and many
other problems.
The Excite Entertainment uses this tool for comparing the past performance with the
current performance and to find ways of improving the performance. On the other side, ABC Ltd
uses this technique in order to forecast the future trends for sales and revenues which might
occur.
Calculation of break even
Interpretation- From the above result it can be inferred that if the company sells 4000 units then
they will be at break even that is no profit no loss situation. In case where the company wants to
see its profit at 90000 the it is advised to sales team to sell 7000 units.
CONCLUSION
From the above discussion, it is analysed that effective use of accounting management
will help the company in attaining success. This is because management accounting ensures
proper working and timely decision making by the managers. The present report discussed about

the different management of the accounting system like job costing, cost accounting system and
many others along with their benefits. Further the discussion was made on carrying various
types of management accounting report such as cost report, performance report and many others.
Next the absorption and marginal costing techniques was discussed with help of some
calculations. In the further part the various planning tools under budgetary management and their
advantages and disadvantages was outlined. These tools were zero based budgeting, production
budget and other was discussed. In the end the different techniques of dealing with the financial
problem was highlighted like financial governance, benchmarking and many other techniques for
dealing with financial performance.

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