Management Accounting Report: Systems and Reporting

This report delves into the core concepts of management accounting, encompassing various systems and techniques applied to Creams Ltd, an ice cream, waffle, and doughnut business. It explores management accounting systems such as inventory management, cost accounting, price optimization, and job costing, highlighting their advantages and integration within organizational processes. The report also examines different types of management accounting reporting, including budget reports, performance reports, and accounts receivable reports, demonstrating their significance in facilitating strategic decision-making. Furthermore, it provides a detailed comparison of marginal and absorption costing methods through income statements, and it discusses the use of planning tools for budget preparation and financial forecasting. The report concludes with an evaluation of how management accounting systems are utilized to address financial problems, ultimately contributing to sustainable success. The analysis includes relevant financial reports and their interpretation for business operational activities.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1. Management accounting systems......................................................................................................3
P2. Management accounting reporting....................................................................................................5
M1. Advantages of management accounting systems..............................................................................6
D1 Evaluation of accounting systems and management accounting reporting that are integrated within
organizational processes..........................................................................................................................7
TASK 2..........................................................................................................................................................8
P3 Preparation of income statement by using marginal or absorption costing method............................8
M2.Application of wide range of management accounting techniques and production of appropriate
financial reporting documents...............................................................................................................14
D2. Financial reports which helps in interpreting business operational activities..................................14
TASK 3........................................................................................................................................................14
P4 Planning Tools..................................................................................................................................14
M3 Application to prepare and forecast budget.....................................................................................16
TASK 4........................................................................................................................................................17
P5 Use of management accounting system for responding few of financial problems..........................17
M4 Responding to financial problem, management accounting lead to sustainable success.................19
D3 Evaluation of planning tools for address financial problem.............................................................19
CONCLUSION.............................................................................................................................................19
REFERENCES..............................................................................................................................................21

INTRODUCTION
Management accounting involves different processes related to preparing along with
presenting annual reports in this way as to facilitate internal development in planning for the
future, formulating strategies and managing company activities (Bennett and James, 2017). Such
accountability has the purpose of assisting managers when making choices to enhance the
business. Any company does not need to follow management accounting, as its criteria rely on
organizational priorities. To better understand the concept of management accounting selected
Creams Ltd, who is dealing into ice creams, waffles, doughnuts and many other products. The
study addresses management accounting frameworks with their key criteria, accounting
procedures, use of acceptable market analysis methodology to prepare financial statements
utilizing absorption charges, and also marginal costs. This also requires tools for preparation
with benefits and drawbacks, the use of accounting management solutions to react to financial
issues that contribute that sustained performance.
TASK 1
P1. Management accounting systems
Management Accounting: Management accounting is a systematic process that involves
recognizing, defining, documenting, evaluating, assessing and transmitting financial and semi-
financial details to main executives in order to make strategic choices to achieve organizational
objectives. This reporting also deals with systemic considerations, as well as helps financial
professionals in the planning and presentation of essential financial reporting. It is also used by
Creams Ltd's executives when they make quick-term and lengthy-term actions to take through
activities or events without further obstacles.
Management accounting System: The management accounting system definition is a
long run-oriented approach that incorporates numerous processes and has broad range covering
different company divisions. Many of Creams Ltd's company information systems shown are as
pursues:
Inventory Management system: Inventory represents the amount of stock of the
products used at different levels to manufacture a finished brand and make it available for sale.
Such program is concerned with both administration and monitoring of business products. A

detailed database is kept to use such a method, which involves the date and time of the amount of
product brought into the company, and its storage, including the removal of larger quantities for
sale, it is simple to measure and assess the existing properties accessible and the inventory
needed for more activities(Christ, 2014). Within Creams Ltd's framework, administration utilizes
this method to monitor stock at various organizational places in order to obtain reliable
information connected to current storage volume that tends to make choices about additional
stock needed. The main benefit of the inventory management program is to maintain a
comprehensive stock level database in order to avoid overstock-related or stock-related issues at
different processing points. The essential requirement of maintain stock level in appropriate
manner and supply on time.
Cost accounting system: The system that succeeds in estimating the value of different
organizational goods and evaluating factors linked to productivity, assessment of stock and
regulation of costs. Estimating reliable expenses related with goods is very critical for
manufacturing leaders, as successful evaluation contributes to efficient processes. Creams Ltd
executives need such a method to measure the stock cost of the closure stock, the stock of
manufactured goods and the function in the stock of processes. The benefit of this method,
administrators establish appropriate accounting sheets are tracking the expense of raw resources
used when processing final fruit drink items such as sugar amount, berries, sugar, water content,
colors, etc. In order to measure the cost of various sales volumes of organizational goods as to
make finished reports, the cost accounting method is effectively necessary at workspace. The
essential requirement of this system to analysis the cost of every product that manufacturing by
an organisation.
Price optimization system: A statistical model in which production fluctuations are
measured at various price rates is called the method of market optimizations. Administrative
executives use it to monitor crucial-resource costs (Fullerton, Kennedy and Widener, 2014).
Creams Ltd's administrators decide user reply to various price points of ice creams, waffles, and
soft drinks would use such a model. To determining retail prices, it allows supervisors to assess
different flavors in this kind of way that maximizes the profitability. It is essential require to
efficiently distribute commodity prices resulting in the fulfillment of both functional and
corporate priorities.

Job costing system: The aggregation of inventory, payroll and wage costs for a specific
product or job is referred to as a method of labor costs. Such a program is implemented in the
workforce as multiple items are manufactured which are distinct from one another and require
considerable costs in each object. Moreover, it discusses production costs through sub-parts
including direct content, specific manpower, depreciation and therefore with the intention of
calculating real product costs. With respect to Creams Ltd, it is built a different section that is
responsible for controlling expenses including major product expenditures. The benefit of this
system to analysis job cost and essential requirement of this system that to analysis sub
production cost in authentic manner.
Thus, the successful use of any of the above-mentioned accounting systems allows Creams Ltd's
administration to regularly maintain perfect accounts of the events or procedures that occurred at
the workplace. All of this helps to boost the operating performance to growing the firm's
profitability.
P2. Management accounting reporting.
Management Accounting Reporting: Different types of reporting documents are
compiled in a company, all of which have important relevance when supplying details to top
management agencies. Financial reporting documents are written with the aim to assist in
preparation, success assessment and successful policy taking. Both administrators on the
employee compile these documents, since they provide consistent and reliable statistical or
financial records (Hall, 2016). Creams Ltd heads of departments arrange the preceding
accounting reports:
Budget Report: The critical report which aims to measure overall financial results over
the accountability term. They are organized by the executives at organizational and
administrative stage, which allows formulating the company's overall plan. Creams Ltd's
executives evaluate all previous fiscal assets output, and devise potential strategies to achieve
realistic results
Performance Report: As whole and performance documents are designed for the
intention of monitoring and assessing staff and organization results. Such a study offers a
comparison of results in each venture within overall results and dependent boarded output. The

variations determined by analyzing actual outcomes and regular output are evaluated specifically
and are described in these studies. Using all these reports, Creams Ltd's administrators evaluate
efficiencies as well as job performance failures and other operations, and assess real behavior in
order to make choices about the enhancements.
Account receivable report: These are perfectly portioned by companies that rely on
increasing balances and also helping to assess the repayment of questionable reports. It
categorizes the organizations' accounts receivable by the time remaining period associated with
an invoice. In addition, and use such a document, the administration of Creams Ltd determines
the financial situation of clients and produces a document by creating separate categories for the
money received and the money not collected from buyers, that allows to identify the identity of
borrowers by brief glance.
Inventory and manufacturing report: Organizations included in production operations
are planning this form of reporting document to document all operations centered on stock use
and product production so that the specific practices are accurate and successful. It includes
specific details including depreciation cost per unit, consumption of inventories and labor costs.
Creams Ltd's executives equate their current records with previous year as well the study to
assess the need for changes. By reviewing these report administrators may implement ideas for
making stock and service management efficient (Lavia López and Hiebl, 2014).
Therefore, all of the above financial documents are used by administrators of Creams Ltd
to track different costs as well as make changes in the fields they are missing inside which will
contribute in more effective performance of business units.
M1. Advantages of management accounting systems
Accounting system Advantages
Inventory management system This system is useful for maintaining stock information and
handling them correctly. With the aid of this device
Creams Ltd will help the environment and increase output.
In addition, using that same program organization can
position last ordering to raw resources that allows

sustaining a lengthy-term market.
Cost accounting system It helps to reduce operational costs and monitor increased
demand inside Creams Ltd. Managers will predict all
expenditures and determine all manufacturing costs by
considering expenditures.
Price optimisation system Its benefit is to determine the quality of the services and
products. By using this process, Creams Ltd is gaining
advantage as it sets the prices of raw materials which
actually boost production and productivity. Institutions
should also use this method to set reasonable market rates
and also gain competitiveness.
Job order costing system This method offers a profit for Creams Ltd in distributing
employment to staff and handling research as per the goals.
The boss of Creams Ltd divides duty and organizational
accountability, and improves performance.
D1 Evaluation of accounting systems and management accounting reporting that are integrated
within organizational processes
Management report and accounting framework are combined with operational procedures
such as helping to assess, identify and make strategic decisions to operate a company.
Administrators prepare financial statements for the intention of matching standardized reports
with real evidence that allows taking the appropriate action. In Creams Ltd, director uses various
account systems such as price optimization, managerial accounting, job order costs and stock
control tool that helps to organize budget report, results, inventory control and account
receivable reporting to conduct commercial transactions that aid in administrative activities. If
Cream's administration utilizes these tools correctly and produces reports then company sector

priorities and targets can be achieved. As a consequence, high efficiency and competitiveness are
considered systems of organization (Maas, Schaltegger and Crutzen, 2016).
TASK 2
P3 Preparation of income statement by using marginal or absorption costing method
Marginal costing: The costing approach which is efficient and also commonly used is
variable costing. It is cost of production consisting of cost of production, fixed costs and labor
costs. Supervisors are using it to measure overall cost of producing approximate amount of
goods.
Income statement using marginal costing for January
Sales (10000*25) 250000
Less: Cost of goods sold 130000
Opening Stock 0
Add: Direct material 50000
Add: Direct labour 30000
Add: Variable manufacturing
overhead 20000
Less: Closing stock 0
Add: variable selling overhead 30000
Contribution 120000
Less: Fixed costs 70000
Fixed manufacturing overhead 40000
Fixed selling and distribution
overhead 30000
Profit 50000
Income statement using marginal costing for February
Sales (5000*25) 125000
Less: Cost of goods sold 80000
Opening Stock 0
Add: Direct material 50000
Add: Direct labour 30000
Add: Variable manufacturing
overhead 20000
Less: Closing stock (5000*10) 50000
Add: variable selling overhead 30000

Contribution 45000
Less: Fixed costs 70000
Fixed manufacturing overhead 40000
Fixed selling and distribution
overhead 30000
Loss -25000
Working Notes (1) Marginal cost unit
Direct material + direct labor + variable manufacturing overhead/units
50000 + 30000 + 20000 = 100000 / 10000 = 10 per units
Working Notes (2) COGS (January)
Opening Inventory + Production – Closing Inventory
0 + 10000 – 10000 = 0
As per the overall calculations it has been analysed that while calculating profits from
marginal costing the entity will generate profits of 50000 for January month and loss of 25000
for February month.
Absorption costing: The other costing form is absorption costing that involves all expenditures
specifically related to the development of the business's specific product. It provides correct net
returns, as it contains all expenses.
Income statement using Absorption costing for February
Sales (10000*25) 250000
Less: Cost of goods sold 140000
Opening Stock 0
Add: Direct material 50000
Add: Direct labor 30000
Add: Variable manufacturing overhead 20000
Less: Closing stock 0
Add: Fixed manufacturing overhead 40000
Gross Profit 110000
Less: Non manufacturing cost 60000
Add: Variable selling overhead 30000

Add: Fixed selling and administrative
overhead 30000
Profit 50000
Income statement using Absorption costing for February
Sales (10000*25) 125000
Less: Cost of goods sold 70000
Opening Stock 0
Add: Direct material 50000
Add: Direct labour 30000
Add: Variable manufacturing overhead 20000
Less: Closing stock (5000*14) 70000
Add: Fixed manufacturing overhead 40000
Gross Profit 55000
Less: Non manufacturing cost 60000
Add: Variable selling overhead 30000
Add: Fixed selling and administrative
overhead 30000
Loss -5000
The above calculation of absorption costing is showing that when it will be used by the
organisation then the total amount of under absorption will be around 51000 in February and the
net profits will be same as marginal costing.
January February
Managerial cost for profit 50000 -25000
Add: Production overhead
fixed cost element in closing
inventory 0 20000
50000 -5000
Less: Production overhead
fixed cost element in
opening inventory 0 0
Absorption costing profit 50000 -25000
Calculation of variances:

From the above calculations of variances, it has been determined that labour rate and
quantity variances for the organisation will be 3638 (a) and 6428 (a). Material cost and quality
variance for the organisation will be 900 (f) and 2000 (f).
M2.Application of wide range of management accounting techniques and production of
appropriate financial reporting documents
Management accounting methods are commonly used against company's bookkeepers to
routinely prepare financial statements. Creams Ltd's Accounting Administrators use marginal
costing accounting methods including absorption costs when generating paper reporting. These
records are also used for informed decision taking by outside entities including shareholders or
stakeholders. Various departments’ managers are accountable for recording all operations in the
corresponding documents and sending them to the division of finances for additional operations.
Business managers review all details on these documents critically and then review financial