Management Accounting Report Analysis: Excite Entertainment Ltd

This report provides a comprehensive overview of management accounting (MA) principles and practices, using Excite Entertainment Ltd as a case study. It begins by comparing Management Accounting with Financial Accounting and then delves into various MA systems, including cost accounting, inventory management, and job costing, detailing their importance and applications within a business context. The report further examines different types of managerial reports, such as cost accounting reports, inventory management reports, and performance reports, highlighting the characteristics of good information within these reports and how these systems and reports are integrated within a company. The report also analyzes costing methods, specifically absorption and marginal costing, providing income statements for each method to illustrate their impact on profit calculation. The report concludes by discussing the importance of MA in identifying and resolving financial issues and in formulating effective strategies to achieve business goals. The report provides a detailed analysis of Management Accounting, including its systems, reports, and costing methods.

Management accounting
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Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
Scenario 1........................................................................................................................................1
Scenario 2........................................................................................................................................5
Scenario 3........................................................................................................................................8
PART A.......................................................................................................................................8
CONCLUSION..............................................................................................................................11
REFERENCERS............................................................................................................................12
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INTRODUCTION
Management accounting is an elaborated program that starts with collecting of internal business
information, reporting them in proper reports, analysing the reports and determining the overall
performance of company during a year (Al-Qady and El-Helbawy, 2016). It is related to the
crucial role of internal manager of company as the make effective decision with the support of
management accounting. The major components of MA are different types of system, reports,
costing techniques, planning tool that help to examine the overall profitability of business and
detect financial issues that can hinder profit margin. It is also helpful in formulation of effective
ways to resolve the financial issues so that future goals can be attained. To better understand the
importance of MA excite Entertainment ltd have been selected.
In this report, variety of MA system and reports are defined, costing methods are used to
prepare income statement, use of various planning tool to control budgetary process are
discussed. Apart from this importance of MA system to find financial issues and make effective
plan to reduce these issues are discussed.
Scenario 1
Section A
(a) Comparison between MAS and Financial accounting.
Management accounting: This can be described as a category of reporting connected to the
compilation, evaluation and estimation of theoretical and practical data for internal document
computation.
Financial accounting: It is a method of reporting concerned with the procedure of evaluating the
financial data related with companies that is further used to prepare the accounts in reporting
year for better analysing of profit margin.
Basis of difference MA Financial accounting
Kind of
information used
In order to prepare authentic and
generally accepted internal reports
manager use to both qualitative and
quantitative type of data.
In context to prepare valid financial
document manager us to consider
each type of financial information
related to business dealings.
Legal requirement There is hardly any legal framework While preparing financial document
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to be followed while preparing
internal reports as manager for his
knowledge make internal documents.
for an accounting year it is
compulsory to follow the legal
accounting standard and norms.
Variety of MAS:
(b) Cost accounting system: It is described as crucial management accounting system
which is relevant with the guidelines for predicting costs of multiple activities and procedures.
The primary objective of cost system is to reduce and control total corporate budget. It is
therefore necessary to assign financial resources inside companies to the anticipated spending of
different tasks through firms. There are several kinds of cost techniques used in this accounting
system, such as direct, standard costing etc. Manager of Excite entertainment limited use this
system because this lets to track the costs of entertainment events related events.
Direct cost: These are the variable cost which are related with the actual labour and raw
material required to manufacture a particular product or a service in the specific time period. As
respective company provide number of services to their customer so they cost included in
making these services is the total direct cost.
Standard cost: It is related with the expected cost per unit of relevant good that are
manufactured by the company as per the different factors. This cost mainly help company to set
predefined targets that are further helpful in assessment of overall performance of company.
(c) Inventory management system: This is considering being effective MAS which help
manager to control and handle the quantity of inventory available within company. Stock can be
in three state, raw material, gods in transit and finished product. This system use different
process like LIFO, FIFO and ABC costing in order to maintain sufficient stock and regular
supply of good for continuous production cycle. In Excite Ltd manager with the help of this
system make sure that there are enough music system and LED available within a festive period
so that maximum customer can make purchase to fulfil their requirement.
(d) Job costing system: It is also related with internal process of company, which
support management to detect the total cost involved or spend on different jobs within an
organisation for a specific time period. In recent time companies are always focused to give
better job experience to their employees but at the lower cost as it can impact the overall
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business selling price. This system is useful in respective company to determine the total cost
used on different services so that profitability can increase.
E) Importance of MA systems:
1. Cost accounting system: In terms of managing the general expenditures of different
functions, cost system is advantageous for businesses. Managers in excite ltd are
implementing this accounting system to keep their expenses under control. This system
also benefit in making effective business policies that might improve the overall results
for company.
2. Inventory management system: It is helpful in managing price and volume of storage
products in warehouses of businesses. In respective firm manager take appropriate action
for commercial success through the information gained from this accounting system. This
system is totally crucial in developing the better supply chain for company as continuous
production of goods make the regular supply of goods in market which develop company
market image.
3. Job costing system: With introducing this accounting system, the firm's accounting
department becomes aware of total expenses made on each job. Like in Excite ltd their
executives are capable of maintaining direct control across the expense of numerous jobs
participating to make customer satisfied. This system support in controlling the over
expenditure of company on non productive jobs and tries to make more effective jobs in
order to gain better results.
Section B
(a) Various kinds of managerial reports
 Cost accounting report: It is regarded as major internal report comprising details on
many expenses and cost related with total activities of company. This means that all
events that involved more expenses can be tracked and proper plans are prepared to
reduce the cost. A specific report is made by the Excite ltd auditor, which lets them
accurately evaluate the entire cost that can hinder profitability in a year. For example,
company organise different live events and activities for not much popular companies,
therefore requires huge amount to manage and control these activities. But as a result,
they are Advertisement Company not able to pay full contract amount on desired time
and ask for debtor period, this can reduce the profit margin of Excite Ltd for that period.
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 Inventory management report: One of the valuable managerial reports created in
accordance with the system of supply chain management. Details Information
about availability of stock in storage place is included in this specific report. This
document is essential for organization as it guide manufacturing unit to makes
better decisions about future product and weather to increase or decrease production
process. In Excite ltd accountant can prepare these specific reports which help them to
understand the stock affordability. This further supportive to make decision related to buy
raw stuff and handle multiple machinery efficiently and effectively.
 Performance report: This is known to be a Managing Document for the assessment of
the quality of general operational fields of a company and also assessing the entire
employee’s performance to do an allocated work. The report contains data on several
events and operations with better results. The Excite Entertainment Limited Accountant
has devised this report in order to get knowledge about performance of entire staff and
business activities. It also allows them to make proper decisions to improve performance
of weak employee and to pay their employees appropriately according to their higher
performance.
Budget report: Therefore, the accountant of Excite entertainment limited prepare this
report to know about the actual and approximated results as well as on the basis of this they
make future plans and policies so that they can decided which activities is effective and which
are not. Thus, manager of respective firm prepares budget report to understand regarding the
current actual and estimate outcomes and to prepare future policies and plans accordingly. They
can easily decide about those activities which are not to profitable and make plans to improve
and mainly give importance to profitable business operation (Arnaboldi, Busco and Cuganesan,
2017).
 Accounts receivable reports: This kind of Management accounting Document is
beneficial that gives detail information about the total debt that are owned by the
borrowers from company. In addition, this really helpful for manager of company since it
contain information about both parties and detail of transaction. It allows the company to
rely on the debtors those do not settle their debts after the deadline. In Excite ltd manager
of Finance unit are able to get the knowledge about the remaining balance of debtors and
their entire details so that proper and legal intimation are given to them for repayment. In
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fact, these detailed documents were written by internal manager to get inform about total
earning that can be raised in nearby future.
(b) Characteristics of good information.
A good report is always helpful in making plans and strategies that lead for future
improvement and reach company’s results. There are specific features of good report that are as
follows: Accuracy: This is known as the principles that have meaning in accounts, and displays
the full truth. The reliability of information is important as if accounting documentation is
not reliable, so that organisations cannot determine efficiently. Relevancy: The key feature of useful information is related with accounting data
which must be focused different business dealings. For this purpose, companies should
build successful strategies. Reliable and up to date: It is crucial for company to review the accounting records as it
lets to make important strategic choices for betterment of corporation. The key features of
valuable information is that it must be accuracy and records related to accounting.
 Timely presentation of data: An aspect for good information notes that financial data
must be recorded at specific time within company which help in measuring
the profitability and effective on exact time.
C) MAS and MA reports integrated within company.
In modern business world, every company wants to get better results and profit margin to
attain the main objective. The different types of management accounting system and reports are
helpful in making an effective framework top record and analyse each and every business
dealing within a company for a specific time. Such as cost accounting system is used by manager
of Excite ltd to control and manage the total cost included within various activities. On the other
side with the support of cost report they are able to record the total spending on these activities
so that better future decision mare made to improve the present results.
Scenario 2
(A)
Different Costing methods
Absorption: This method is also known as historical costing, in this all variable and fixed cost
are taken into consideration in order to extract net profit for an accounting year.
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Income statements using absorption costing
Sales 120000
Less: Cost of goods sold
Opening stock 5000
Production 100000
(-) Closing stock -20000 -85000
Profit 35000
Marginal: This method is related with computing the total extra cost a company spend on
producing an additional unit of output as per the requirement. In marginal costing method
variable cost are consider as unit cost of product and fixed cost are written or absorbed off.
Income statements using marginal costing
Sales 120000
Less variable cost
Opening stock 3000
Production 60000
(-) Closing stock -12000 -51000
Contribution 69000
Fixed production 40000
Profit 29000
From the above calculation it has been interpreted that company has a total sales of about
120000 and the co0ntribution for the year was 69000 and the total fixed production was 40000.
In the respective year the actual profit was 29000 from marginal costing. While on the other side
through absorption costing the profit for the year was 35000. this means that company should
implement absorption costing techniques in order to calculate the net profit in future and present
time period.
(B)
Variables which can have a breakpoint output:
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 Selling price: That's the principal component which may influence the determined point
of break even. That's because some cost increase may influence the contribution level.
The breakpoint can also be made due to changes in input factors.
 Variable cost: Besides variable cost, the value of break point can even be affected. That's
because if operating cost changes, both break point and contribution gets affected.
MA techniques to produce financial statements.
For accounting, a wide number of methods are used to draw up accounting statements. Such
accounting methods essentially provide bookkeepers with an acceptable structure for the
development of income statement, so that they are more accurate and equivalent. In attempt to
compile financial statements related with financial transactions for different tasks, the manager
of Excite ltd uses absorption and marginal costing techniques.
E) Benefits and drawbacks of various types of planning tools used for budgetary control.
The budgets or expenditure plan can be described as a future income and spending estimate for a
company. Budgets are usually created for the longer time period especially for a year or more to
have greater impact on company operations. The formulation of budgets is a compulsory
program for businesses as they help manager to properly manage the available monetary
resources and extract best results. In above-mentioned company accountant produces different
budgets that gives a systematic control over different areas (Baumann, Lehner and Losbichler,
2015). These are elaborated below:
1. Zero based budgets: In comparison to any specific other budgets, ZBB is considers
being more effective because it has different special function which easier for company
to make better prediction. The ZBB budget process do not consider anything from the last
year budget, and most importantly all financial activities are validated in preparing the
current budget. Almost expensive, however, this budget gives financial activities with
accuracy. This plan for the current financial activities shall be compiled by the auditor of
Excite ltd. Some of its pros and cons are discussed below:
Advantages
As stated above, ZBB is advantageous to enterprises in updating financial transactions for
current year. Due to this budget, company managers distribute the necessary resources for the
business operations.
Disadvantage
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It requires more time and cost to be prepared separately for every year which can lead to
increase the burden over Excite ltd.
2. Production budget: This sort of budget is mainly prepared by organisation to estimate
the total expense and volume of stuff that can be actually needed in the process of
production of different goods for company. In Excite ltd, accountants
prepare production budget to take action to improve the quality of services provided to
customer. As they make proper spending plans for training secession and also estimate
about income generation through customer satisfaction. It has certain advantages and
restrictions, like
Advantages
The above expenditure plan helps firms to allocate materials and stuff effectively during
the production process. In addition with the support of production budget, businesses can
regulate and handle the cost spend on developing different services (Busco and Quattrone,
2015).
Disadvantage
The major downside of this plan is that businesses can't fully transmit their forecasts, because
any incorrect prediction can contribute to an enormous financial failure of the company.
3. Incremental budget: It is a kind of spending plan that accountant prepare by collecting
financial details from prior years. The incremental budget is essentially designed with a
few minor modifications made to the last year budgets which enable companies to attain
maximum benefits in present time. In contrast to this estimate, management od respective
company may adjust the current year's plan as per adjustments. Like the above budgets,
there are also certain advantages and disadvantages, for example:
Advantages
The main advantage of this budget is that it is cheaper and takes less time to prepare.
Thanks to the versatility element, various teams can also be easily implemented in corporations.
Disadvantages
Besides the advantages, this plan has certain limitations, which also push administrators
to invest more on various operations to produce desirable results. Therefore, lack of creativity is
another downside for this plan.
Use of planning tools for preparing and forecasting of budgets:
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The budgetary control planning tools are beneficial for accountability. Various expenditures
plans like incremental, zero based and production budget are consider being the major planning
tools. All the above forecasts allow bookkeepers to plan and predict future sales and spending.
Likewise, in Excite Ltd the manager use to prepare different budget which give them legal
framework and actual understanding about total expenses and income from different activities.
Such plans give an indication of future financial expenses and their accountants take appropriate
expenditure prediction measures appropriately. Such as ZBB start with null values so manager
do not have to analyse any information from the past scenarios and circumstances thus it require
less time and cost in extracting better results. On the other side incremental budgets are basically
prepared with the last year information thus manager of company are required to properly
analyse the whole information from past to draw better future results.
Scenario 3
PART A
Financial governance may be defined as an integrated system that includes financial
information gathering, processes and operations administration, performance analysis and
regulation of the financial data, processes, and activities (Chiapello, 2017). It also assist with the
settlement of financial troubles by internal management, fiscal policies, internally and externally
monitoring, process management, data tracking and data protection management. Financial
governance aims to solve significant financial issues like missed payments from clients and poor
wealth management in the background of the chosen company. It aids management in evaluating
the feasibility of the firm's credit aspects and practices, as well as suggesting solutions to
improve reforms when necessary. This governance procedure is also facilitates in the
establishments of internal reviews to find gaps in the accounting system and to introduce an
efficient managerial accounting program.
Full Compliance Management System is software and process that mainly aimed at
keeping a company informed about use suitable lending regulations and remains at the safe side
within organization's processes. To stay profitable, financial companies must simultaneously
adjust investment products and handle compliance according to the new regulations and
standards. A compliance management system is helpful for management to enforce appropriate
norms, practices and regulations that help to detect and resolve complex financial issues.
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Discussion on benefits of full compliance system.
 Complete management system of compliance is beneficial to keep the business processes
of different business activities and reduce the possibility of risk. It empowers workers to
have limited or specific connect directly to patient data to make sure that verified data is
received.
 Control of regulation also helps to reduce contractual disputes and prevent future charges.
This allows the organization to encourage good data protection and completely avoid a
failure such that the institution has no financial consequences or long-term damages.
 A compatible CMS assists to communicate the task between the staff and the entire
company, monitor functions and procedures within the standard and establish a strong
market share.
In order to monitor,
Monitoring System: This relevant company uses the financial governance system for measuring
and managing activities and for assessing the deviations and anomalies in the final results from
specific objectives. Efficient compliance with the financial system of governance enables
executives to calculate goals and regularly monitors the productivity of businesses and
individuals. This enables to evaluate and to identify variances in reliability. It enables in the
implementation of norms and procedures after defining differences to regulate differences and
right processes and systems.
MAS to solve financial issues:
The use of various systems in a company is advantageous for reducing the financial issue
which can impede the general performance. There have been various financial issues within the
above-mentioned organization which affect the running of the firm and affect the overall
profitability and efficiency.
Part B
Calculation of contribution per unit
Selling price per unit 40
Less: variable cost per unit -10
Contribution per unit 30
BEP in units
Fixed cost 120000 4000 units
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Contribution per unit 30
BEP to attain desired profit
Fixed cost + desired profit 180000 6000 units
Contribution per unit 30
When there are 4000 units
Profit at sales of 4000 units
Sales (4000*40) 160000
(-) Variable cost (4000*10) -40000
Contribution 120000
(-) fixed cost -120000
When there are 6000 Units.
Profit at sales
of 6000 units
Sales (6000*40) 240000
(-) Variable
cost (6000*10) -60000
Contribution 180000
(-) fixed cost -120000
Profit/loss 60000
To gain the desired benefit, 6000 passes are therefore required. It's because there is no
gain or loss by selling 4000 seats. Therefore, 6000 tickets must be sold to reach the desired level
of profit. At the other side it is determined that there is no profit or loss for selling 4000 tickets.
This enables to evaluate and to identify variances in reliability. It enables in the implementation
of norms and procedures after defining differences to regulate differences and right processes
and systems. This techniques is very much productive for company in order to resolve the
financial issues like it determined the actual point where income are equal to expenses. Financial
problem like over spending to get better results is basically resolved with break even analysis as
manager determined the actual point at which they can spend to get the favourable results.
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CONCLUSION
In conclusion of management accounting report, it has been founded that it is essential
for internal manager to have a full record on each and very business transaction which help to
evaluate the overall profitability. There have been different MAS and MAR that are used to
record and evaluate the essential information of every aspect of business dealing within an
organisation that help to make better decision. Such as cost accounting system is supportive to
control and manage the total cost spend on different business operation, whereas cost report help
to record the cost transaction on specific period. There are different costing techniques which are
beneficial to prepare net income statements and determine the total net profit for respective year.
With the use of variety of planning tool company is able to manage its budgetary prices and
figure out ways that remove the financial issues in particular time period. There are various
management accounting system such as financial governance and full compliance system that are
effective to provide necessary framework to detect financial problems and make appropriate
solution to get over these problems.
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