Detailed Report on Management Accounting for Ever Joy Enterprises (UK)

This report provides a detailed analysis of management accounting principles and their practical application within Ever Joy Enterprises (UK), a company operating in the leisure and entertainment industry. The report covers various aspects of management accounting, including different management accounting systems like cost accounting, inventory management, and job costing, and their respective benefits. It also differentiates between management and financial accounting, highlighting their distinct objectives and user bases. Furthermore, the report explores various management reports such as performance reports, inventory management reports, and account receivable reports, detailing their significance in assessing the company's financial health. The report also discusses the integration of these systems and reports to facilitate effective decision-making and improve overall business performance. The report also describes different costing techniques, planning tools used in budgetary control and how organizations can use management accounting system to resolve financial problems.

Management Accounting

INTRODUCTION
Management accounting is a technique that provides timely and valuable information to
managers and internal stakeholder of an organisation which is required to make decisions. In a
company different reports are generated that are required to analyse performance and position
and these reports consist different informations such as total receivables, available cash, total
revenues and cost incurred while manufacturing a product or performing operational activities. It
is very important for a company as it may lead the business toward success. Company for this
project report is Ever Joy Enterprises (UK), that operates in leisure and entertainment industry in
UK.
In this project report different topics are discussed such as Management accounting
system and its reports, various costing techniques, planning tools used in budgetary control and
how organisations can use management accounting system to resolve financial problems
(Amidu, Effah and Abor, 2011).
TASK 1
P1
Management accounting: It is the process of maintaining managerial reports which
communicates accurate and relevant information about the actual position of company to the
management on timely basis. It assist them to make an effective decisions and suitable plans to
achieve growth and strong financial position of an organisation.
Therefore, it is important for Ever Joy Enterprises (UK) as well to form a management
for accounting so that the information of each and every transactions made by their different
departments are easily identified. It enable company to maintain their strong financial presence
in competitive market through correcting the deviations founded by the management while
analysing all accounting transactions. Preparing managerial reports is well supported by various
management accounting systems such as cost accounting, inventory management system, job
costing system etc. But before explaining these accounting systems, it is very important to
differentiate the management accounting with financial accounting due to having little confusion
related with their concepts (Callahan, Stetz and Brooks, 2011).
Difference between management accounting and financial accounting:
Basis of comparison Management accounting Financial accounting
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Meaning It is a technique of preparing
managerial reports to
communicate relevant and
accurate information to the
management to assist them to
make an effective policies to run
the business more effectively.
It is a process of maintaining financial
statements such as Profit & Loss a/c,
Balance sheet etc. so as to determine
true and fair financial position of
company.
Information It includes both monetary as
well as non-monetary
information.
It includes only monetary information.
Users Management accounting is done
for internal stakeholders of the
company.
Financial accounting is done for
external stakeholders of the company.
Mandatory It is not compulsory for an
organisation.
It is compulsory for every
organisations such as Ever Joy
Enterprises..
Objective It helps to analyse cost
information to make strategic
decisions.
It helps to examine financial
statements of a company to determine
actual financial strength.
Various management accounting systems:
Cost accounting system: It refers to such system which identifies the cost incurred in
different business functions which makes easy for managers to prepare an effective budget for
future time period. Using such system by the management of Ever Joy Enterprises (UK) help in
recording, categorising, estimating the cost of business operations so as to achieve huge
profitability. Such system is classified into three costing methods which includes normal, actual
and standard costing. Ever Joy Enterprises (UK) is engaged in providing leisure and
entertainment activities thus can be uses such system in tracking flow of funds invested in
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execution of specific activities and prepare budget accordingly. This will minimises the cost of
business and increase profitability (Johnson, 2013). It includes:
It is compulsory for every organisations such as Ever Joy Enterprises. Direct cost: It is a
price that can be completely attributed to the production of specific goods or services. A direct
cost can be considered a variable cost if it is inconsistent and often fluctuates in amount.
Standard cost: It is the practice of substituting an expected cost for an actual cost in the
accounting records, and then periodically recording variances showing the difference between
the expected and actual costs. It assist manager to use such technique in order to identify the
differences or variances in between actual cost and cost allocated to achieve specific goals. This
will help in identifying the reasons behind excessive cost incurred which enable manager to
make strategies to control in future project activities.
Inventory management system: It refers to system which is associated with the effective
analyse and measurement of all non-capitalised inventory used in an organisation. It consists of
two types of inventory management system which in includes periodic system and perpetual
system. Periodic system uses when the transactions of inventory are recorded on monthly or
weekly basis whereas using perpetual inventory system updates the managers whenever the
product is received or sold. Ever Joy Enterprises (UK) may follows various methods of these
systems such as FIFO, LIFO and ABC analysis which update managers about availability of
resources. The main benefit of using such these systems is to create effective work order,
maintain bills of products and all supplied materials related invoices.
Job costing system: It is the system which identified the cost allocated to produce
individual product or group of products so as determine the profitability of each product in the
market. Cost includes the efforts, time and employees engaged in execution of different business
functions. Such system consists of two types which includes batch costing and process costing.
The managers of Ever Joy Enterprises (UK) uses such system to identify the cost invested in
providing leisure services to their clients and accordingly calculate and measure the cost of
individual job associated with production.
P2
Every organisation that wants to grow and sustain in competitive market should require
to follow management accounting systems as well as maintain reports which contains the
relevant and accurate information about the transactions expressed in both monetary and non-
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monetary terms made by different departments of an organisation. Such kind of reports should be
maintained by manager at the end of every quarter in order to analyse the actual position of
business. Therefore, Ever Joy Enterprises (UK) is also required to prepare various kinds of
reports to expand its business at large scale (Klychova, Faskhutdinova and Sadrieva, 2014).
Such reporting systems includes performance report, inventory management report, account
receivable report etc. Such kinds of reports prepared by managers which brings overview of
company as well as help their shareholders to make valuable decision for their investment within
the company. It is further understood in detailed manner as under:
Performance report: It is considered as important report which is prepared by the
management to analyse the performance of each employee with actual and standard. This will
help in identifying the deviation which restricts employees to perform well and enable
management to plan accordingly. Such reports includes employee annual performance report,
success report of a project and product etc. Therefore, it is more suitable reporting system which
must be prepared by Ever Joy Enterprises (UK) to bring out maximum output from their
employees.
Inventory management report: This the report which contains the relevant and accurate
information about closing and opening stock with the company. It assist management to manage
stock movement that are kept by Ever Joy Enterprises (UK). It helps in reviewing the current
status of company stock by location, time of arrival and departure of inventory etc. Ever Joy
Enterprises (UK) is engaged in providing leisure and entertainment services due to which it is
important for management to maintain such kind of report to find out the profitability, turnover,
demand for the inventory. There are different techniques which are taken into considerations by
Ever Joy Enterprises (UK) such as Just-in-time, EOQ, and Turnover ratio.
Account receivable report: This is the report which contains the detailed information
about the unpaid customer bills and unused memos that assist management to recover the same
within certain period of time. It facilitates management in identifying the unpaid debtors and
putting maximum efforts in recovering the outstanding bills on due date. Thus, the management
of Ever Joy Enterprises (UK) must required to maintain such kind of report in order to maintain
their financial condition due to collecting unpaid amount on time. This will also directs them to
make relevant changes in their credit policies so as to avoid any bad-debts (Kuula, Putkiranta and
Toivanen, 2012).
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Batch costing report: This is the report prepared by management with an objective of
tracking the overall cost involved in performing an individual job or batch of job. It consists of
different category such as labour cost, material cost, production overheads etc. Preparing such
report by Ever Joy Enterprises (UK) assist managers to record total cost incurred in organising
concern and other entertainment programs for their loyal clients and control these costs if
required. This will support in increasing profitability of company.
M1
Benefits of using management accounting systems:
Costing accounting system: Using costing accounting system assist management in
preparing an effective budget for the future business activities after analysing the cost incurred in
past years. This will help in minimising the chances of having wastage of cost due to which the
business cost has been reduced and company also enable to offer products to targeted people at
an effective prices.
Inventory management system: Using inventory management system assist company to
maintain adequate amount of inventory with them at the time of taking bookings from their
clients. This will help in building trust and loyalty of targeted clients through providing them
valuable leisure and entertainment services on time. It reduces the storage cost as the inventory
manager order products only when there is any shortage within an organisation. It directly
supports in increment in the profitability of company.
Job costing system: This system help to identify the total cost incurred on individual job
and financial position of company which makes easy for management to make decision related
with allocation of cost to execute different business activities. It facilitate management to make
proper allocation of cost to produce specific products in the future period of time which brings
more profitable outcome to them.
D1
As Ever Joy Enterprises (UK) uses management accounting system and reporting that
provide useful information financial position and current status to the shareholder and other
investor. The link among report and system of management within as organisation process is said
to be integrated accounting system. Performance reports, inventory management report, account
receivable report etc. are more useful for Ever Joy Enterprises (UK) to prepare to acquiring
information about the actual position of business at present time. For example, inventory
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management report and system assist managers to maintain adequate level of inventory within an
organisation so that the production process should be disturbed. Another example is performance
report which contains the current performance level of employees. It enables managers to
enhances their performances through providing training and development programs so that the
business functions can be properly executed by their employees. Integration of various
management reporting and accounting system assisting various departments to perform their
duties and responsibilities in a desired manner that will definitely support organisation in
achieving huge sustainability and profitability.
TASK 2
P3
Cost: It refers to the amount which is given up to produce something with a clear
objective of earning maximum profits. It includes many elements such as efforts, time, human
capital etc. who are valued in terms of cost of products and services.
In business organisation, all expenses are cost whereas all cost are not considered as
expenses as some of the cost are involved in income generating process. Ever Joy Enterprises
(UK) is organising a concert and other entertainment programs which requires cost to invest in
order to achieve huge profitability. For this, the management of Ever Joy Enterprises (UK) is
required to prepare budget in order to allocate cost to each department and analyse their
outcomes with the total cost allocated so as to determine the net profitability. There are different
types of costing methods which includes marginal and absorption costing method which assist
management in calculating the net profitability of company (Nixon and Burns, 2012). It can be
further understood in brief as under:
Marginal costing: This is the cost which is invested by company to produce one extra
unit of output that can be supposed by total variable cost incurred to one unit of product. It
considers only variable cost in order to determine overall sales by which net profit is calculated
for an organisation. Such variable costing method includes direct labour and material involved,
selling cost and management overhead. The main objective of using such costing method to
increase profitability of company due to exclusion of fixed cost while calculating net
profitability.
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Absorption costing: All those fixed and variable cost which are incurred in execution of
different business functions is known as absorption cost. It is also known as full costing method
due to including both variable and fixed cost while calculating net profitability of company
(Zimmerman and Yahya-Zadeh, 2011). In this costing method, direct labour, material and fixed
and variable manufacturing overheads are included. It is more effective method as compared
with the marginal costing method due to absorbing fixed and variable costing during execution
of business activities.
Ever Joy Enterprises (UK) is reviewing its concert event in Manchester region to
ascertain its viability which are given as under:
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Particular Amount
Selling price (U) 20
variable cost (U) 10
Contribution 10
Fixed cost 60000
PVR: Contribution/ sales *100
: 10/20*100= 50%
(a):
BEP in units: Fixed cost / contribution
: 60000/10= 6000
BEP in amount: Fixed cost / contribution margin
: 60000/50% = 120000
(b)
Total number of ticket needed to be sold
Particular Amount
Selling price (U) 20
variable cost (U) 10
Contribution=profit + fixed cost 90000
Fixed cost 60000
Profit 30000
50%= Contribution/ sales
Sales= 90000/50%= 180000
Tickets to be sold = sales / selling price
180000 / 20 = 9000
(c):
Calculation for desire profit
Particular Amount
Sales 8000*20= 160000

Variable cost 8000*10 = 80000
Contribution 80000
Less: Fixed cost 60000
Profit 20000
Desired profit is 20000.
M2
It has been analysing that there are various kind of accounting tools which will be taken
into account as more valuable part of effective decision making. Some of them are discussed
below:
Marginal costing tools: It is one of the reliable techniques which can assist in analysing
the total net profitability of “Ever Joy Enterprises (UK)”. Basically, this tool used to assess
manager to determine the additional units of products that should be produced as long as
marginal benefits exceeds the marginal cost.
Historical cost: This particular tools values an asset for overall balance sheet objectives
at the price which is been paid for the assets during the time of acquisition. By the help of this
tools, accountant used to record earning, expenses and other disposal value at historical cost.
D2
In accordance to deal with different kind of assets those are arises within an organisation in
coming period of time, they need to make use of various costing method. It would be profitable
for “Ever Joy Enterprises (UK)”. In order to determine the break-even point, the company need
to sell around total of 6000 units. To analyse the total sale of tickets they need to sales about
45000. As well as in order to earn a desire profit with total of 8000 sales, Ever Joy Enterprises
(UK) can be able to get desire profit of 80000.
TASK 3
P4
Budget: It is an estimation of revenue and expenses over a specified future period of time
with an intention of utilising available resources in an optimum manner. It explains the costs
allocated to execute different business activities after analysing the cost incurred in previous
period of time. For business organisation, budget is considered as an internal tool which is not
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required for reporting by external parties. There are different types of budget which are given as
under:
Cash flow budget – it is concerned with income and expenditure of a firm. It assists to
financial department in managing the cash of organisation by using such factors as Bills payable,
Bills receivable.
Merits
 This budget is made by experienced employees if they have any requirement they can
take supports from outsider. It will be prepared in time if issues are ignored.
Demerits
 Top management can't take part in preparation of budget which impacts on whole
organisation. This budget can't be prepared properly, because they have no idea of department wise
expenditures
Sales budget – It is a key element of budgeting It assists the management in estimating
the revenue and expenditures of firm in future.
Advantages
 It assists management to achieve the sales targets of the firm. The whole organisation's market strength is based on this budget.
Limitations
 It can not measure the future sales properly. It may not adopted by all departments easily due to its over dependence on future.
Production budget – It is an analyse of producing units and supplying units which is
made on the basis of direct labour, direct material and overhead cost.
Advantages
 It assists to management in remove unnecessary functions from manufacturing due to
this, the cost will be reduced. It assists to finance department in giving proper remuneration to the employees for their
work.
Disadvantages
 It is a complex in nature which requires very hard work in analysing all things.
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