Management Accounting Report: Decision Making Techniques Analysis

This report provides a comprehensive overview of management accounting principles and their practical application within a business context. It begins with an introduction to management accounting, differentiating it from financial accounting and highlighting its importance in internal decision-making. The report then delves into various management accounting systems, such as inventory management, cost accounting, and job order costing, explaining their benefits and applications, particularly within the case study of Pearl Chartered Accountants and its client, Connect Catering. Furthermore, it explores management accounting reporting methods, including performance reports, inventory management reports, budget reports, and accounts receivable reports. The report also examines the integration of management accounting systems and reporting within an organization, emphasizing their role in financial problem-solving and strategic planning. It then proceeds to analyze cost ascertainment techniques using marginal and absorption costing, followed by an examination of planning tools used for budgetary control. Finally, the report concludes by evaluating how management accounting systems help organizations respond to financial problems and achieve sustainable success.

Management
accounting

Table of Contents
INTRODUCTION ..........................................................................................................................4
TASK 1............................................................................................................................................4
P.1. Management Accounting and important needs of various types of management
accounting system?.....................................................................................................................4
P.2. Methods used for the purpose of management accounting reporting ?...............................6
M.1. Management accounting system benefits and their application in context to organisation?
.....................................................................................................................................................8
D1 How management accounting systems and reporting is integrated in the organisation........8
TASK 2............................................................................................................................................9
P.3. Ascertain cost with the help of using suitable cost technique to make income statement by
using marginal & absorption costing?.........................................................................................9
...................................................................................................................................................12
M.2. Accurately apply a range of management accounting techniques and produce appropriate
financial reporting documents ?................................................................................................13
D.2.Produce financial reports that accurately apply and interpret data for range of business
activities?...................................................................................................................................14
TASK 3..........................................................................................................................................14
P.4. Explain advantage & disadvantage of various types of planning tools used for budgetary
control?......................................................................................................................................14
M.3. Analyse the use of different planning tools and their applications for preparing budgets
and forecast?..............................................................................................................................16
TASK 4..........................................................................................................................................16
P.5. Compare how company are following management accounting system to respond to
financial problems ?..................................................................................................................16
M.4. Analyse, how , in responding to financial problems, management accounting can lead
organisation to sustainable success ? .......................................................................................17
D.3 Evaluate how planning tools for accounting respond appropriately to solving financial
problems to lead organisations to sustainable success..............................................................18
CONCLUSION .............................................................................................................................18

REFERENCES..............................................................................................................................19

INTRODUCTION
Management Accounting is the process in which records of internal information is to
maintained by finance team of the organisation so it become possible to do effective decision
making. On the basis of these record performance of business is analysed by workforce,
managers etc. It is also helpful for externals such as shareholders, investors, financial institution
that to analyse the actual position of company so that it they can take whether to invest or not in
the respective project and how much risk is involved in it. With the help of these data return on
investment can also be calculated. The organisation that was chosen in this assignment is a
consultancy firm whose name is Pearl Chartered Accountants. It was established in London also
it serve the services related to auditing, taxation, Accounting Standards , corporate laws etc. firm
has client Connect Catering as it deliver quality catering service solutions, specialising in
managing clients on site catering as it deliver delicious food , with exceptional services. The
topics that are included in this project are demonstration of need of management accounting
system (Cheng, M.T., 2012). Application of wide range of management accounting technique,
use of planning tool in context to management accounting is also explain in it. Comparison in
different ways in which company could use management accounting with respond to financial
issues are also discuss in this report.
TASK 1
P.1. Management Accounting and important needs of various types of management accounting
system?
Management accounting is the presentation of accounting information in such a way as to
assist management in the creation of policy as well as day to day operations of an undertaking. It
is a combination of both the activities such as management and accounting. Connect catering use
this method to measure actual performance of the company and to take effective decision making
.
Difference between financial and management accounting:
Financial Accounting Management Accounting
 It is done by finance team of connect  In this organisations performance

catering to analyse actual financial
status of the company which tends to
provide support to external like
creditors, underwriters, shareholders,
merchant bankers, etc.
 Accounting Principles as well as
applicable accounting standards must
be follow by connect catering company
to conduct the task of financial
accounting.
information is given to internal stake
holders such as managers, Chief
executive officers, chief financial
officers etc.
 For performing management
accounting, no specific standards are
follow by staff members of connect
catering firm (de Lautour, V.J., 2019)
There are different type of management accounting system used in business, few example
of these are as follows such as -
Inventory management system- As inventory in the organisation changes constantly
due to the reason of daily sales, receipts, returns, damage, theft etc. that leads to develop various
problems also in the company. So to overcome with the issues of overstocking and under
inventory, proper stock management system is used. There are various methods like LIFO,
FIFO, HIFO, weighted average are followed by manufacturing concern to make control over
their inventory. As connect catering services use inventory management system to track all their
stock that are used to serve their services. The storekeeper of company use FIFO method but in
some cases HIFO method is adopted by them. For effective results storekeeper maintain bill of
material and proper recording of stock receipt, sales or return is done on cards. The need of this
system in connect catering is that it helps to avoid problems of obsolence. If inventory is over
than it tends to create difficulty to manage and to place such extra stock. It leads to increase
expenses related to carrying cost which indirectly makes negative impact on profitability of
connect catering so their requirement is must in business to eliminate unnecessary expenses
(Garrison, R.H. And et. al., 2010).
System relates to cost accounting- It is generally adopted by manufacturing company
to ascertain the indirect , direct cost that are implied in producing particular product in the
industry. In this system costing of specific item is to be calculate for the purpose to set profit
margin and fixing selling price. As organisation connect catering follow this system for the

purpose to analyse fixed , variable and semi- variable cost. The basic requirement of such system
is in the organisation is to ascertain the cost as well as to do allocation in appropriate and
effective manner (Kibangou, S.R., 2019)
Job order costing – In this method costing is differ from product to product. As per
specification of customer , order is completed and each order has different prices. It is commonly
used in producing company. The need of this system in connect catering company is to traced the
cost of direct material and direct labour as well as direct overheads. so that smart work force
take most appropriate decision and frame smart strategies to lower the cost of production.
Price optimisation system- It is a strategy with which a company, after getting to know
how sensitive its existing clients are to changes in product prices. It is most significant
component for over all price management which is crucial to profitability. The organisation
connect catering use this system because it help executives to set most suitable prices for their
product & services to serve the purpose of selling the product to customers. It also help to
identify that cost which is fixed for services or items are capable to satisfy clients expectations or
not (Lukka, 2014)
P.2. Methods used for the purpose of management accounting reporting ?
Management Accounting reporting is the process in which various management
accounting reports are generate, also in these reports detailed information regarding performance
of organisation is mentioned. The use of management accounting reporting is very important in
business because in the business various activities related to decision making, planning,
performance measurement, book keeping, regulating etc is to be done and it become possible
only with the help of it. Managers of connect catering time to time analyse such reports to
highlight some specific patterns as well as to convert them into important data and useful
information with is beneficial for organisation (Relander, 2020).
In the below paragraphs some examples of management accounting reporting is describe
such as -
Performance report- this report is maintained in company to review their performance
at particular period of time. Top manager can take investment decision and other import
decisions on the basis of these reports only. With the help of these report connect catering

company decide and give incentives to workforce. To make increment in the performance of
employees as well as on business operations, entities framed various smart strategies after
analysing these reports. As per the efforts put by employees in completing the task which were
given to them, and on the basis of financial performance dividend & bonus is decided
(Rosenthal, 2019)
Inventory management report- This main objective behind preparation of such report is
that it become possible to track record of inventory. It is most valuable for manufacturing
company. Connect catering through preparing this report easily analyse their stock level and take
effective decision to solve the problem of under stocking and overstocking. It also provide
information regarding ordering cost and carrying cost. For the entity it is most advantageousness
because stock status that whether the inventory is in warehouse, transit or delivered is to be
analyse with the help of this.
Budget report- It is an internal report of the firm which is used by management for the
purpose to make comparison between estimated and actual results during particular accounting
period. Connect catering company maintained various budgets like master budget, overhead
budget, sales budget, cash budget, etc and conclusion of all these budgets are mentioned in the
main report so that they can easily compare and take effective decision to meet the difference
that exist. This report help firm to determine in advance that whether staff members &
organisation meet the projections or not (Suomala, 2012)
Accounts receivable report- this report cover the information related to credit sales.
This report gives an overview of credit balance during the financial year. On the basis of credit
days, category are set such as one month late, 45 days, 120 days etc. so that it become simple to
observe the total outstanding during particular period of time. Credit policies can also be
adjusted by Connect catering company with the help of this report. The finance team of Connect
Catering services prepare this report after analysing vouchers. These reports also support to
collect money in exchange of bills. Connect catering prepare such reports and mentioned the
details of debtors such as their name, credit value, recovery date , address and other personal
information. On the basis of these report follow up regarding is taken by their executives at
regular period of time as it is done with the intension to fast recovery (Warren, 2020)

M.1. Management accounting system benefits and their application in context to organisation?
Management Accounting system as well as their benefits
Management accounting system Benefit
Inventory management system Connect catering company use this system for the
purpose to ascertain better product visibility in the event
of recall. By using this system , company avoid the
problem of excess stock as well as eliminate unnecessary
charges such as ware house cost, lighting expenses,
ordering cost, carrying cost etc.
Price optimisation system As connect catering fix different suitable prices for
different styles and menus of food and for services as per
the occasions so this system supports the company to
meet expectations of customers.
Cost accounting system As by using this system connect catering can easily
collect the information which is relates to cost and
proper planning is done on the basis of it so that
company can get competitive advantage.
Job costing system It is most flexible method. With support of this system
connect catering can easily analyse indirect cost that are
incurred at the time of performing task related to
business operations. And if the cost is unnecessary than
effective strategies are formulate as well as initiative
steps are taken to decrease such indirect cost.
D1 How management accounting systems and reporting is integrated in the organisation.
For beneficial to connect catering it is most significant for company to integrate both the
activity such as accounting reporting and management accounting system for the purpose to

resolve financial issues. It also supports management team to do effective decision making as
well as to prepare plan so that goals and objectives can easily achieve by the organisation.
Through preparing and maintain detailed transactional records which are perform by prime
furniture in managerial reports can tends to become possible to prepare only if correct
management accounting system are used like inventory management system. As it helps to
provide appropriate information regarding present inventory level that tends to be further
recorded in inventory management report. It tends to give true and fair information regarding
stock.
TASK 2
P.3. Ascertain cost with the help of using suitable cost technique to make income statement by
using marginal & absorption costing?