Management Accounting Report: Financial Analysis and Reporting

This report provides a comprehensive overview of management accounting, focusing on its principles, types, and practical applications within the context of Apis Limited, a hospitality industry firm. The report begins by defining management accounting and differentiating it from financial accounting, emphasizing its role in internal decision-making and financial planning. It then explores various management accounting systems, including cost accounting, job costing, batch costing, inventory management, and price optimization. The report also examines different methods used for management accounting reporting, such as make-or-buy decisions, Just-in-Time (JIT) inventory management, and Activity-Based Costing (ABC). Furthermore, it delves into the advantages and disadvantages of budgetary control planning tools and compares how organizations can use management accounting to address financial challenges. The report concludes by summarizing the benefits of management accounting, including reduced expenses, increased financial returns, and improved decision-making processes, and highlights the importance of financial analysis and interpretation. The report emphasizes the importance of financial planning, cost control, and the use of financial data to improve business performance.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK1.............................................................................................................................................3
P1 Explain management accounting and their different types of management accounting
systems........................................................................................................................................3
P2 Explain different methods used for management accounting reporting ...............................5
P3 Prepare an income statement using marginal and absorption costs.......................................7
TASK 3..........................................................................................................................................11
P4 Advantages and disadvantages of budgetary control planning tools...................................11
P5 Comparison between how organisation could use management accounting so as to respond
to problems related to finance...................................................................................................14
CONCLUSION..............................................................................................................................16
REFERENCES .............................................................................................................................17

INTRODUCTION
Management accounting is a process that is used by the management in order to identify
and present the financial information in an efficient manner. On the basis of this data, manager
can make their plans and can take decisions so that they can achieve profits. This is more useful
for the internal manager and executives as through this they can control their expenses. The top
management can use this information in order to forecast the data on the basis of the past
information (Brosel, Toll and Zimmermann, 2012). Through this, they will be able to improve
their growth and brand position in the market. The present report is based on Apis Limited which
perform their operations in hospitality industry. They are focusing on their business activities so
that their overall performance can be improved in an efficient manner. In this context, report
explains the different types of management accounting system and methods that are used in order
to manage the overall accounting system. Along with this, it explains the cost techniques that are
used to prepare to income statement. The advantages and disadvantages of the different planning
control techniques and budgetary control are explained in detail.
TASK1
P1 Explain management accounting and their different types of management accounting systems
Management accounting refers to preparing or managing accounts, that provides straight
and timely financial content to the managers. It is helpful for them to take short term and day to
day decisions. Although management accounting, also provides annual reports to the external
stakeholders. Apis Ltd. also prefer to use to managerial accounts and financial reports. These
reports are related with sales revenue, available cash in organisation, accounts receivable,
accounts payable, outstanding debts, raw material; amounts of others in hand and inventory. It
engaged with the planning of information that is helpful to the managers in planning and
controlling their business operation's. It is also accommodating for those only peoples who are
involved in decision making process (Briciu, Groza and Ganfalean, 2009). Apis Ltd. Industry
mostly uses management accounting system to meet requirements of managers regarding with
financial reports and data. It is an internal function of any business and which is responsible for
reporting and collecting any financial information.
It is a activity of presentation, analyse and interpretation of financial information in order
to assist the process of management as daily operations, policy creation and decision making.

The objective of management accounting is allocation of resource and analyse the risk in order to
exploit the risk. It is also helpful in measuring performance of employees and measurement of
efficiency of employees. Management accounts also lean in providing content about execution
that is more often than financial accounts (Michalski, 2012). So management accounting is
based on cost and financial accounting. Management accounting is system of financial
statements through ration analysis. The main of management accounting is financial planning of
each and every activity that is related with economic resources of the business. There are
different types of management accounting; - Cost accounting system: A cost accounting system is tool which is used to assess the cost
of the product in order to make the profits in a most optimum manner. However, there is
no such tool which can be used to ascertain the appropriate cost, but by applying the cost
accounting system, company could attain the idea to reduce the cost of a product. Now,
there is a strong need to know about the product cost in order to make the product
profitable. Job costing system: Under this costing technique, there is need to know the
manufacturing costs individually for each job. This technique is useful for the firms
which are engaged in the manufacturing process. Batch costing system: this is the technique which is used like job costing technique. It is
a kind of specific order costing technique. Under Each batch, there are so many units are
covered. So, there is need to assess the total cost of the batch. Inventory management system: This system is used to know the inventory levels, orders
and deliveries. This is the system which is used to assess the stock and manage
accordingly.
 Price optimisation system: This is the system which is used to identify about the
consumer’s reaction at different at the various prices of the products or services.
P2 Explain different methods used for management accounting reporting:
These methods are regulating by Apis ltd. In management accounting process. They are
such as follow: -

Make or buy decision- the make or buy decision concerns with choosing among
manufacturing a product in industry and purchase it from another supplier. The most important
factors in make or buy decisions, that they are regarding with the part of numerical analysis. In
that products are associated with production costs and whether business have the ability to
produce at require levels. Basically every item which is presently buying from an external seller
is a person for internal production and every part which is currently factory-made in house is a
latent candidate for acquisition. Make and buy decision are basically take in the basis of prices.
But is is only single criteria which is to be measured in strategical decisions.
JIT:- It is also known as Toyota production system. Just in time method is a
merchandise strategy of industries. Apis Ltd. Prefer such kind of strategics. In that increasing
employee’s effectiveness and his efficiency and decreasing wasting by establishing good
production methods. It is helpful in reducing inventory costs and provides producers to
forecasting of demand accurately. A good example if JITN is a car manufacture that functions
with very low product levels and relying on its supply chan. It makes ease up the production, by
this procedure can move one product to another very easily (Dechow, Myers and Shakespeare,
2010). Just in time method also reduces cost by destroying wastage keeping needs. It is a
management philosophy, that is used by managers to reduces wastage in production system by
using new techniques and strategies. There are several types of reducing wastage. Such as
inventory wastages, waste of motion, processing wastage, transportation wastage, wastage of
waiting time and waste from overproduction. Apis Ltd. Must have to make plan and strategics
to stopped these wastages that can ease up the production cost and production process also.
Activity based costing- ABC analysis is the managerial accounting methods that
accommodating in identifying the activities on which a firm is performed and it assigns
production's cost. It recognizes the relationship between product, cost and activities and through
this, ABC also assigns indirect costs of products makes less randomly than conventional
methods. In Apis Ltd. ABC found its place in today's manufacturing sector. Mostly hospitality
industries prefer to usage ABC analysis, because it extends the dependability of cost data. Th
method is used in profitability analysis, product line, target costing, service pricing and product
costing (Cohen and Zarowin, 2010.). If cost of product is better grasped, so organisations can
make convergent strategics. Under this system, any activity can be considered as an event or a
transaction. These activities are consumed as considers cost objects and elevated resources.

Inventory Management: - Inventory means an idle stock of goods and services that
would be transform in an item. For Apis Ltd. It is very essential thing manages its inventory and
stocks. The main of this method it is to reduces wastages in production. It determines the impact
of financial activities on balance sheets and health of supply chain management. Every
organisation continuously to maintain inventory by applying various methods of productions.
The main impact of inventory management is on financial figures of the business. (Hillier,
Grinblatt and Titman, 2011.) Because inventory is flexible and dynamic Inventory management
defines the evaluation of internal and external factors, constantly and carefully and controlling
through preparation and reviewing.
Many organisation prefers a separate department for inventory managers, who are
constantly planning and managing inventory and interact with procurement, financial and
production departments.
There are some different methods which can be used by an enterprise in order to make a
management accounting report. Some of these are as follows:
Sales report: It is a kind of report which includes data of products and services sold in
the market at particular time frame. This can be prepared for monthly and quarterly so that data
can be managed in an appropriate form.
Account receivable report: This can be prepared by companies in order to manage their
cash flow. This report is based on the balances that are credited to the customers. Along with
this, most of these are prepared on the basis of aging that in what duration the consumer
repayment the amount.
Performance report: These are prepared monthly or quarterly as per the need of
companies. The accountant prepare budget in order to compare their actual expenditure with the
total revenues that are generated by them after performing some operations. so, in this manner
Apis Ltd will be able to evaluate their current performance as compare to their past data.
Inventory management reports: The business organization can use these reports in order
to maintain their inventory level. This includes some factors such as labour cost, inventory waste
and overhead cost. By preparing this, manager can make the improvements at the workplace so
that their performance can be improved.

Job cost reports: This report shows the expenses which are related to particular project.
The total expenses are estimated on the basis of revenues so that profitability can be achieved.
Through this, time can be saved and cost can be reduced.
M1
These are benefits of management accounting. Such as: -
 Reduces Expenses: - If Apis Ltd. Industry manages their expenditures and also managing
reports of financial data, it would be lower their expenses in their operations. It also
improves the cash inflow of the organisation by creating m,aster budget for whole
expenses(Burritt and Schaltegger, 2010). It allows managers to find out how much
money and its cost on production.
 Increases financial returns: - Managers can increases their return son investments by
forecasting consumers demand and prices changes & its effects on economy. In
management accounting, Managers, makes budget annually and taxation for each and
every task of the organisation to analyse the computation of variants.
 Ease up the Decision making process: - It is simplifying the decisions making process, by
using past data (Badertscher, 2011). Financials reports and statements are able to take
appropriate decisions for the betterment of the business.
 Financial Analysis and interpretation: - Management accounting is a study of financial
statements and reports and it is essential is strategic decision making process. Many
managerial executives do not have good technical knowledge. So management
accounting provides them to different policies and information in terms of financial
decisions.
D1
There is some reason, that are helpful in evaluating the management accounting system.
Such are as follows: -
 Helps in preparation of plan- Management accounting describes the analytical evaluation
of financial data and reports for an organisation. It is conducting a plan or set aims &
goals on the basis of forecasting.
 Better services to customers: - If managers have proper knowledge of market, they also
know customer's taste and choice. So they trying to produces according to same. And

then customers can easily meet with their needs and wants by consuming quality products
and services.
 Measurement of performance: - The techniques to budgetary controls, in standard costing
able to measure the performance of employees. It is also helpful in analysing the
efficiency of the employees.
P3 Prepare an income statement using marginal and absorption costs
Apis Ltd can use different cost analysis techniques in order to prepare an income
statement. These tools and techniques are:
Absorption costing: It is a kind of technique that is used by an enterprise in order to
calculate their overall cost by focusing on the direct and indirect expenses. Through this, an
organisation will be able to calculate the overall cost for manufacturing the products and total
labour cost. The firm will be able to manage their overall operations so that net profits can be
calculated in an efficient manner.
Income statement for Absorption costing method
Selling Price £35
Unit costs
Direct materials £6
Direct Labour £5
Variable Production overhead £2
Variable sales overhead £1
Budgeted production for the period is 600 units
Fixed cost for a month:
Budget cost Actual cost
Production overhead £1,800 £2,000
Administration cost £800 £700
Selling cost £400 £600

Sales (35*600) 21000
less:
Cost of Production (6+5+2) -9100
closing stock (100*13) -1300
variable cost -7800
Contribution 13200
less:
variable sales overheads (600*1) -600
fixed overheads -2000
Admin & selling cost (700+600) -1300
-3900
NET INCOME AS PER MARGINAL COST 9300
NET INCOME AS PER ABSORPTION
COSTING:
Sales (35*600) 21000
less:
Cost of Production 9600
Gross Profit 11400
LESS:
Fixed and variable cost:
variable sales overheads (600*1) 600
Admin & selling cost (700+600) 1300
less;over absorbed fixed production overheads -100 -1800
NET INCOME AS PER ABSORPTION
COSTING: 9600

Marginal costing: Marginal cost is the alteration in the opportunity cost that increases
when the increment of one unit in the quantity produced is examined. Simply it is the price of
constructing one more unit of goods. The variable costing includes costs of labour and the
material, plus an estimated part of stable costs like management elevations and selling charges
(Renz, 2016).
In some corporations where average costs are really persistent their marginal cost is simply
equating the average cost. This idea of marginal cost is quite important in resource assignment.
Marginal cost is the alteration in the opportunity cost that increases when the increment
of one unit in the quantity produced is examined. Simply it is the price of constructing one more
unit of goods. The variable costing includes costs of labour and the material, plus an estimated
part of stable costs like management elevations and selling charges.
In some corporations where average costs are really persistent their marginal cost is
simply equating the average cost. This idea of marginal cost is quite important in resource
assignment.
M2
Apis Ltd can use management accounting techniques in order to improve their financial
growth in the market. The hospitality industry has approx 50 employees and their turnover is
£500, 000. So, in order to increase their turnover, they can use some of the functions in order to
enhance their overall performance. Some of these techniques are:
Absorption technique: This is a kind of technique that is used by an organisation so that
they can they can calculate their overall expenses. Through this, they will be able to prepare their
income statements so that overall account can be managed (Chandra, 2011.). Apis Ltd has total
fixed production is £200 and they have total gross profits is £9800. On the basis of this they will
be able to assess their financial growth so that they will be able to achieve success in the market.
Cost volume profit technique: On the basis of this approach, Apis ltd can determine
their overall cost so that they can identify their profitability level. This will be beneficial for the
hospitality industry as through this they will be able to enhance their performance.
D2
Organisations are performing their operations in the business environment so that their
growth can be improved. Here, Apis Ltd can use some methods and techniques in order to
calculate their financial data. Through this, the overall expenses can be identified so that they can

achieve success in the market (Schaltegger and Burritt, 2010). As per the marginal costing
technique the net profit is 7500. so, through this, they will be able to make an effective strategy.
TASK 3
P4. Advantages and disadvantages of budgetary control planning tools:
Budgetary control can be defined as how well superiors or managers can make utilisation of
budget so as to monitor or control operations and cost in the specific accounting time (Renz,
2016). In Apis Ltd., it is the process for managers to fix performance and financial goals with
budgets and then compare the actual results with desired results and adjust performance
accordingly as needed. Budget is the formal statements of the financial resources that is used to
carry out specific activities in a specific time. Budgetary control is the technique where actual
results are compared with budget.
Budget is essential for the planning of financial resources in the company. There are various
planning tools for the budgetary control: Operational Budget: It is concerned with expenses and revenues of operating activities.
Profit from sells is revenue and the expenses which are there in process are expenses on
operating. Master Budget: It is the comprehensive projection that explains in which way company
wants to carry out its operations in period of budget. Income statement, cash budget give
supports to master budget (Lukka, 2010) Financial Budget: It provides a detailed view on how to manage funds and from where
the funds will be collected. It provides revenue information and return from capital
expenditure. Static Budget: Budget of static contains those elements which are not modified according
to sales. Overhead cost shows a static budget type. These kinds of budgets are used by the
non-profit organisations and SME's .
 Cash flow Budget: It is prepared to manage flow of cash during the business operations.
Cash flow budget is being prepared by accounting officers to get useful information
regarding shortfall in expenses and sales. With the help of it the movement of cash can be
monitored by the entity and can be used in useful projects (Zadek, Evans and Pruzan,
2013)

Advantages and disadvantages of budgetary control planning tools are:
Advantages Disadvantages
 Planning tools help in coordination
among various departments of Apis
Ltd., so that they can work accordingly
and can get satisfactory results. It helps
employees to communicate important
facts with each other that will affect
operations of mentioned entity
(Easterby-Smith, Thorpe and Jackson,
2012).
 Planning tools help in allocation of
resources, so it is possible that there
will be improper or less efficient
allocation, because of which there may
be disputes among several departments.
 Planning tools helps managers in
strategy preparation which may be
related to operations in future, because
of it plans can be made and those plans
can be implemented later on.
 Planning tools of budgetary control can
put a pressure on the employees of Apis
Ltd., as the targets will get created and
it became difficult to achieve those
targets.
 With the help of budgetary control
planning tools, a system is made by
company through which various
responsibilities of employees can be
made addressed.
 High cost of estimation can be made by
the managers of the company while
preparing budget (Lukka, 2010)
 It helps in appraisal of workers and
employees of the mentioned entity.
Planning tools helps in the comparing
planned performance with desired
performance.
 If there will be improper achievement
of targets because of planning tools
than it may cause conflicts among
several departments and that will be a
disadvantage for an organisation.
 Planning tools helps the accounting
officers for taking quick decisions if
there will be any difference in the