Management Accounting Report: BTEC HND in Business, Unit 5, Analysis

This report analyzes management accounting principles and their practical application within Connect Catering Services, a company looking to expand into the retail sector. The report examines different management accounting systems, including job costing, cost accounting, inventory management, and price optimization, highlighting their essential requirements. It assesses various management accounting reports, such as accounts receivable aging reports, performance reports, cost accounting systems, and departmental reports, emphasizing their role in decision-making. Furthermore, the report delves into cost techniques like absorption costing and marginal costing. It also explores different planning tools used in budgetary control, including activity-based budgeting, and compares organizations that use management accounting to handle financial problems. The report aims to provide insights into how these tools and techniques can enhance financial management and decision-making in a business context.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Identifying the different types of management accounting system and their essential
requirement..................................................................................................................................3
P2. Assessing different methods of management accounting reports .........................................5
TASK 2............................................................................................................................................6
P3. Applying cost techniques in the firm ....................................................................................6
..........................................................................................................................................................9
........................................................................................................................................................11
TASK 3..........................................................................................................................................11
P4. Determining different types of planning tools used in budgetary control...........................11
TASK 4..........................................................................................................................................13
P5. Comparison of organisation that adopt management accounting system to handle financial
problem......................................................................................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting refers to managerial accounting that is used by managers to
make essential decision regarding financial and non-financial. It helps them in understanding the
accounting information to perform better function in the organisation and control them
effectively (Amir and Chaudhry, 2019). In this report, chosen company is Connect Catering
services which is looking to expand their market to retail sector and sell a range of different food
items. In this report, understanding of different management accounting systems and its
essential requirement in the organisation has been studied and different methods used for
management accounting reports. Applying various ranges of cost techniques to analyse income
statement of the selected company. Assessing the advantages and disadvantages of different
types of planning tools used in budgetary control. Apart from that comparing different
organisation that are adapting management accounting system to manage the various financial
problems so that it leads to success in the firm.
TASK 1
P1. Identifying the different types of management accounting system and their essential
requirement
Management accounting refers to the useful information that is concerned with the
accounting system that assist the managers to apply in the organisation to minimize the loss and
maximising the profit. This enabled the firm to work more effectively and support the
management in formulation of policies and planning control. In the context of Connect Catering
Services, this is useful technique that is used for future as it collects and analyse data to plan
about the future. The primary function of management is to decide about future course of action.
Management accounting system refers to the internal system that used in the firm to
accurately measure and evaluate the whole management of the organisation (Amran, 2020). This
deals in many other departments as well such as IT, Human resources, Marketing and operations
and integrate achieve the common goal in the company. In the selected organisation, this
management system facilitates stakeholder, creditors in providing the information and this assist
them in appropriate decision making. Following are the management accounting system are as
follows-

 Job costing system- This cost is evaluated at any stage of job completion and the profit
that is incurred from each job is known as Job costing. Management can estimate the cost
of job on the basis of past records in job costing and on the completion of job, selling
price can be compare with the estimate for the purpose of cost control (Bedford and
Speklé, 2018). It reduces so that profit of each type of job is to be maximised in the job
costing. Due to this, management enable to compared with present job executed and able
to make decisions. In the chosen company, the essential requirement is that it helps in
determining the profitability of each job and provide estimating of cost for future time.
This also helps in detailed analysis of cost of material, labour.
 Cost accounting system- This is method, which assessed company's production cost,
inventory cost and profitability. This is internally focused system and it is much more
flexible and specific as compared to other accounting methods. It facilitates manager to
carefully look into the process of different departments and ease in controlling the cost
that is associated with many activities. This play important role in maintaining the
efficiency and effectiveness of firm' operations and increase the accuracy and
profitability in the organisation. In the context of chosen organisation, this is assist in
regulating and controlling the cost efficiency and assist in management decision. The
essential requirement is that it helps in preparing business budget and managing the cost
in calculating the selling price.
 Inventory-management system- This is very effective way to understand in terms of
earning profits and it is act as process of ordering, storing and managing the inventory of
any organisation is refers as inventory management. This is assist in knowing the dead
stock and overstock in inventory and use effective method in reducing the risk of
uncertainty. In the context of chosen company, the essential requirement is that it helps in
cost saving by determining the actual cost and it enhance the productivity in the
operations and it enables in choosing method for the management to reduce the risk in
inventory management (Bogt and Scapens, 2019). As, it is like software that helps
manually in automate all the data recording and tracking processes and leave no error.
 Price optimisation system- This is mathematical programs that used to calculate the
demand which is varied at different price levels. After, it combine all the data with the
information on cost and inventory levels to recommend price that will help in enhancing

the profits in overall management activity. As, pricing plays crucial role in revenue and
profit in the company and it is also influence the certain factors in the management. This
really helps in determining the business of initial pricing, promotional pricing and
discount pricing. This is base of generating the income in management and it is used by
companies in market and enable in taking decision-making regarding the price of
product. In the context of chosen company, the essential requirement are, it helps in
achieving the financial benefits that improve in profit margin of company and will
facilitates in making fast decisions based on data.
P2. Assessing different methods of management accounting reports
Management accounting report refers to the crucial part in estimating the performance of
business and provides complete picture to the manager and it used to produced every quarter in
order to view the business finances (Choi and Byun, 2018). This display the financial status over
specific period of time and compile all financial information. In Connect Catering services,, this
management reports helps the company in taking business decisions and guide the to achieve the
desired goals of organisation and make informed business decision making. Following are the
report are as follows-
 Account Receivable ageing reports- This report is useful for those business which are
heavily depended on the extending credit. This is helps in identifying the defaulters and
find the issues in the process of company and for that they required the tighter credit
policies to control the situation. This facilitates the manager to breaking down the client's
remaining balances in specific period (Christensen and Himme, 2017). So, this method
useful in sorting the receivables by the due date to estimate the bad debts expense. For
the selected company, this report will help in identifying the potential clients ans
analysing its credit policy to control the activities.
 Performance report- This reports are structured to review the performance of company
as whole and also each employee of the organisation. These performance reports are
made according to the departmental performance and mostly made in the big
organisation. Mangers using this report to take important strategic decisions for future
course of action. Individual performance is being determined and being analysed in order
to improve further as everyone in the organisation is playing essential role in completion
task. They provide deep insight into the operational working of company and taking

decision making to take appropriate action. In the context of selected organisation, this
report helps in maintaining the capacity and strategy towards the mission and also helps
in identifying the performance related to the managerial reports. Some necessary
requirement need to be taken by the manager to improve the efficiency and overall
performance capacity of the organisation.
 Cost accounting system- This managerial accounting helps in computing the cost of
articles that were produced and all kinds of raw material cost, overhead, labour cost are
taken into consideration (Collis and Hussey, 2017). This provides the overall summary
of cost involved in the production and it facilitates in knowing the capacity of cost price
of items as compared to the selling price. This is important tool for the manager to
estimate the profit margin and regulate all types of cost went into the production. It is
essential part of managerial accounting reports that provides the exact understanding of
all expenses. In Connect catering services, this report helps in analysing the method to
optimize all resources of all departments and support the management in taking
decisions.
 Departmental reports- This types of reports provides the report according to the
different departments exist in the company. Some key departments are IT, HR, Marketing
and Operations that perform certain activities and functions related to their nature. These
reports of individual departments depicts the overall performance of departments that
helps in analysing the efficiency and effectiveness of organisation (Machado and Alves,
2017). In the context of chosen company, this report helps taking key decisions regarding
the departmental issues and policies as this facilitates in improving the efficiency each
activities. This types of reports useful in the big organisation who has diversity in nature
and that leads to appropriate actions to maintain their performance.
TASK 2
P3. Applying cost techniques in the firm
Cost refers to amount which is spend by producers to manufacture the products. This is
very important form of money that is used by business where an a specific amount is being spend
to acquire or expand to deliver it to the customers. There are certain types of cost incurred by the
company and has their own nature that used to deal by the organisation. In the context of

organisation, this cost is essential part that need to understand by the firm properly and try to
minimise them in order to maximise the profit for long period of time.
Absorption costing- This reflects all kind of manufacturing cost that is assigned to
produce the goods. It required for the external financial reporting and for the income tax
reporting that is required by the accounting standards to create the inventory valuation. This
include the direct material, Direct labour and Fixed manufacturing overhead and variable
manufacturing overhead. In Connect Catering services, this facilitates in making appropriate
decisions regarding the allocation of cost.
Marginal costing- This concern with the increase or decrease in the cost of producing
one or more unit and this also known as the incremental cost (OTLEY, 2019). This based on the
production expense such as labour, material and equipment. In the context of the chosen
organisation, this cost determine the point at which increasing number of item produced will
push the average cost up and the proper understanding product' s marginal costing will help in
asses the probability to make the essential decisions related to the product.

TASK 3
P4. Determining different types of planning tools used in budgetary control
Budgets refers to estimation of all revenue and expenses over specific period of time that
is usually compiled and re-evaluated on periodic basis. This is micro-economic concept that
shows the exchange the goods and services over period of time. In Connect Catering services,
budgets are helps in managing overall activities and functions that used by managers to take the
actions for future period of time. Budgetary control concern with the process of determining
various results with budgeted value for future periods. This supports the management to compare
the figures to calculate the variances that facilitates the managers to take measurable action in pr
proper period of time. In the context of selected organisation, this helps in controlling the

operational activities to meet the requirements of the firm. Following are the budgets are as
follows-
 Activity-based budget- This types of budgets is carried out to develop the efficiency in
the functions of organisation (Saeidi and Othman, 2017). This is activity based and not
function oriented as it evaluates each and every cost driver. This helps in reducing the
irrelevant activities and were eliminated that increases the profitability in the
organisation. In the context of the chosen organisation, this budget helps in planning the
appropriate activities that include minimal cost and useful in removing unnecessary
activities.
Advantages-
 This helps manager to view the business as single unit and in the form of departments.
This gives the proper knowledge to the top management about the activities and useful in
deep research and analysis.
 This also helps in eliminating the bottleneck and carried out the activities smoothly by
removing the all sort of unnecessary activities (Wu and Wang, 2020). In the context of
the company, this will help them in achieving the efficiency in the management by
reducing irrelevant functions.
Disadvantages
 To conduct this budgeting tool it require proper understanding of the budget rules and
method and it is little bit complex in the structure. In Connect Catering services, this
need proper knowledge of budget as it has some complexity in the formation of this type
of budget.
 Zero based budgeting- This budgetary tool states that preparing the budget from the
scratch with zero-base. It also include re-evaluating every line items of cash flow
statement and justifying expenditure that used to incurred by the management
(Zadorozhnyi, Muravskyi and Shevchuk, 2018). This method concern with the
calculating on the basis of actual expenses that to be incurred and not on the differential
basis. This method involves that every activity need to be justified properly. In the
context of chosen organisation, this budget helps in planning the arbitrary changes to the
previous year's budget and makes every department re-look each item of the cash flow
and helps in computing the operations cost.