Management Accounting Report: Planning and Budgetary Control Analysis

This management accounting report provides a comprehensive analysis of various accounting systems and their applications within an organization. It begins with an introduction to management accounting, its essential requirements, and different reporting methods. The report then delves into the formulation of income statements using absorption and marginal costing, highlighting their differences and implications. Furthermore, it examines the advantages and disadvantages of different planning tools used for budgetary control, such as cash and production budgets. Finally, the report compares organizations based on their management accounting systems in responding to financial problems, providing valuable insights into the role of accounting in organizational decision-making and financial management. The report uses Eastern Engineering Limited as a case study throughout, exploring practical applications of the concepts discussed.

Management Accounting
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Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management accounting and its essential requirements...................................................3
P2 Different methods used for management accounting reporting........................................5
Evaluation of management accounting and reporting system and it integration among
organisation process...............................................................................................................6
Benefits of management accounting system and its implement within organisation.............6
TASK 2............................................................................................................................................7
P3 Formulation of income statement using absorption and marginal costing........................7
TASK 3............................................................................................................................................7
P4 Advantages and dis-advantages of different types of planning tool used for budgetary
control.....................................................................................................................................7
TASK 4............................................................................................................................................9
P5 Comparison of organisation on the basis of management accounting system for responding
towards financial problems.....................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
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INTRODUCTION
The term management accounting explains about all types of accounting provision, techniques
and tools which maximise the profits of organisation. The prime focus of accounting
management is to perform all task or project within decided budget for controlling and reducing
the unnecessary operational cost from business. In simple terms, management accounting is
responsible for formulating all financial decisions related with business. The selected
organisation for this report is Eastern Engineering Limited and it performs their operations in
manufacturing sector (Alawattage, Wickramasinghe and Uddin, 2017). Moreover, this report
highlights on evaluation of management accounting and management reporting system related
with organisational process of business. Benefits of management accounting system and it
application among organisation will also include in this report. In the last, advantages and
disadvantages of different planning tools are focused in the upcoming report.
TASK 1
P1 Management accounting and its essential requirements
Accounting system is explained as the artifacts and they are created by individuals for
accomplish of task according to decided audit. In simple terms, management accounting refers to
use all tools and techniques that related with accounting and support management to achieve
their goals and objectives. Some different types of management accounting system are mention
as follow:
Cost accounting system- The main role of cost accounting system is to utilise method and
technique that directly relates with cost and overheads of business products (Azudin and Mansor,
2018). Manager of Eastern engineering decide its product cost according to cost accounting
system for achieve their goals and objectives with minimum cost.
Essential requirements
 Product costing- Cost accounting system decide overall cost of products and in this way
it leads manager for maximise the number of profits by cutting unessential cost from
products such as to manufacture products according to demand.
 Activity based costing- In the present scenario, accounting system perform an important
role and as per this it is identified that overheads increase cost of products. So cost
accounting system helps to decide cost according to number of activities.
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Financial accounting- Financial accounting system is explained as a process for maintaining
financial accounts. The term accounting is explained as the bookkeeping method and this is
involved within financial record to perform task as per decided business. In simple terms, debits,
credits and billing is considered within financial accounting system.
Essential requirements
 Rules and procedures- Regulations related with financial accounting engage, record,
summarise and report all transactions and economic activity related with business
operations.
 Accounting information system and internal controls- It is governed according to decided
set of practices that internally relates with Eastern engineering limited (Bobryshev and et.
al., 2015). On the other side, management control business system through monitor and
track all business transactions.
 Auditing- The current audit systems analyse all factors by which company analyse,
lender and monitor its financial information.
Management accounting system- The term management accounting system is used to provide
all essential information related with management and their use in operations of business.
Eastern engineering limited utilise management accounting system to manage its process in
proper manner to perform task with decided budgets.
Essential requirements
 Decision support- With use of cost information related with pricing, marketing and
capital investment company process is improved to make decisions.
 Organisational control- Collecting and controlling of stocks, cash and other resources
perform an important role to track and record manufacturing cost of Eastern
engineering limited.
 Cost management- To control overall cost management accounting system compare
and forecast all budget of respective organisation.
 Profit management- Gross margin perform an important role and it is used by
management to complete their work in an organised manner and Eastern engineering
limited increase their net profits through improving the number of profits (Bui and De
Villiers, 2017).
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Tax accounting- The term tax accounting is explained as a structure of accounting methods that
focus on tax instead of public financial statements. In simple terms, tax accounting is subsector
of accounting that deal with preparations of tax returns. It is used by Eastern engineering limited
to control the tax (Carlsson-Wall, Kraus and Lind, 2015).
Essential requirements
 Individual- In terms of tax accounting individual consider that their task is managed
according to decided tax rates.
 Partnership and corporation- Tax accounting is required among corporation and
partnership to reveal their profit sharing ratio.
 Estate and trust- They utilise tax accounting system for control and utilise tax in social
welfare.
 International taxation- With overall knowledge management of tax accounting
increase their business size in international market.
P2 Different methods used for management accounting reporting
Management accounting report is utilised by organisation for interpreting and analysing all
relevant information that is related with business. In context of Eastern Engineering limited
management accounting report ensure that they are able for analysing as well as interpreting all
information through which organisation efficiency is improved.
Types of management accounting report are as follow:
 Budget report- This report is based on the bases of various budget related with
organisation such as cash budget, master and production budget. To improve overall
efficiency budget report is utilised by Eastern engineering limited in an organised
manner.
 Account receivable report- According to this report an organisation is able to monitor
all accounting receivable to record and collect amount from debtors (Endenich, 2014). It
is used by Eastern engineering limited to complete task by gathering trade receivables in
minimum time. Further, manager ensures that account receivable report utilise by
management to achieve their goals and objectives with use of debtor amounts.
 Cost accounting managerial report- The cost accounting report is used by companies to
improve their task with analyse of all companies and methods. Moreover, cost accounting
results towards improving organisational efficiency by interpret as well as analyse of
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cost. From the perspective of Eastern engineering limited cost accounting managerial
system increase overall profits of managers.
 Performance report- Report is utilised by organisation and this enable management to
increase overall performance. This is also used by management for evaluate overall
performance of organisation. Deviation and variances is managed and controlled by
management through completing all work by analyse of actions and activities related with
business (Endenich, Trapp and Brandau, 2017). It also leads to generate competitive-edge
in market through completing all work in a well performed manner. Eastern engineering
limited complete task with understand of overall success factors related with business.
Evaluation of management accounting and reporting system and it integration among
organisation process
Management accounting system is utilised by organisation so they are able to perform task
according to decided level and standards. The main motive of all business is to implement
management accounting for complete their work with high efficiency and effectiveness. Along
with this accounting system and management reporting both are integrated with each other. Like,
manager of Eastern Engineering or other business generates decision according to management
accounting system and to induce it organisation consider that their task is completed within
decided budget. On the other side, management accounting and reporting is able to perform task
as per approach that increase overall productivity of business. Short term and long term goals
both are adopted through completing work with analyse of future factors.
Benefits of management accounting system and its implement within organisation
The management accounting system provides various benefits to business and it increase
overall efficiency of organisation. From the perspective of organisation it defines as well as
ensures that cost is reduced by management through adoption of cost accounting system. On the
other side, financial accounting improves overall efficiency by record all transactions related
with business. It increase the number of business operations by monitoring business factors to
complete task in a profitable manner. Similarly, tax accounting considered that all work is
managed by performing work according to decided tax (Granlund and Lukka, 2017). So
government not generate problems for business and also tax fulfilling helps for managing work
in an ethical manner. Also, it ensures management accounting benefits companies to maximise
overall profits of business.
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TASK 2
P3 Formulation of income statement using absorption and marginal costing
Marginal costing
The term marginal costing is explained as a technique by which unit cost is charged from
individuals (Hirsch, Seubert and Sohn, 2015). While, fixed cost is written off against their
contribution. Eastern engineering limited utilise marginal costing method because it helps them
to calculate overall profits related with business.
January February
Variable production cost 4,50,000.00 5, l7,500.00
Per unit cost 45.00 1-45.00
Income statement January February
Sales 13,23,000.00 15,68,000.00
Less: Marginal cost of sales 4,41,000.00 5,04,000.00
Variable production cost 4, 50,000.00 5, l7,500.00
Closing stock 9,000.00 22,500.00
Opening stock 0.00 15,400
Contribution 8,82,000.00 10,64,000.00
Less: Fixed production cost 3,50,000.00 3,40,000.00
Net income 5,32,000.00 7,24,000.00
Absorption costing
It is explained as the technique that is used by manager of organisation to analyse and
identify overall and full cost that is related with production process. Eastern engineering limited
complete their task with adoption of managing task through which work is managed through
determining overall profits by determining and including overall overheads or cost of business.
Preparation of income statement by Absorption costing:
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Techniques of management accounting
The techniques of management accounting are implemented in an organised manner and
as per this objectives and goals are achieved in an organised manner. According, to this Eastern
Engineering limited management analyse as well as interpret all cost related aspects with
organisation by completing work according to financial data. Proper use of techniques ensures
work is managed with adoption of absorption and marginal costing to gain sustainable success in
future (Hrasky and Jones, 2016). Moreover, strategic edge is obtained by competitors by
implement financial task and techniques to increase operational efficiency.
Financial report for application and interpretation of data
Financial report is used by organisation so it is easy to implement and induce by
management in an organised manner. Management ensure all objectives and goals are
accomplished through analysing the problems that generate issue for management. Along, with
this it is also analysed that organisation perform work through understanding roles related
strategic information. Moreover, financial factor and report improve strategic phase of
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organisation to complete task with decided approach. It also define Eastern Engineering limited
generate better as well as longer results through managing task according to strategic edge.
TASK 3
P4 Advantages and dis-advantages of different types of planning tool used for budgetary control
Some of the tools which are used for completing all task according to budgetary control are
mention as follow:
Cash Budget
The term cash budget is formulated by organisation so that they are able to manage task
with estimation of all income and expense related with project. Also, cash budget include all
expenses related with a particular year (Kostyukova and et. al., 2018). Eastern engineering
limited use budget to perform task in minimum cost.
Advantage
 Cash budget is used by organisation for maintaining their liquidity level and ratio that
helps for controlling expenses.
 Cash budget support organisation to maintain overall efficiency by controlling un-
necessary expenses.
Dis-advantage
 Cash budget are not flexible so this generate challenges for management to generate
certain expenses.
 Preparation of cash budget is a costly and time-consuming process so sometimes it
requires expert. Due to which budget cost is increased.
Production budget
The production cost is utilised by organisation for forecast all types of requirements to
complete task in decided manner (Quattrone, 2016). All level related with production consider
Eastern engineering limited use the budget for forecast and generate all future perspective related
with business by controlling their future cost.
Advantages
 Production budget help organisation for identify of all types as well as requirements that
is related with goods production and use it for future.
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 The term production budget help organisation to ensure production happens on time and
with low cost method.
Dis-advantage
 Budget relies on different assumptions and due to this it is complex for management to
forecast data and information. It results overall forecasting create problems to decide an
accurate budget.
 The term production budget is not adjusted according to future changes within demand
and supply.
Master Budget
It exists for organisation and comprehensively it express about financial and operating
plans related with project (Lavia López and Hiebl, 2015). From the perspective of Eastern
Engineering limited all task is completed in a year through summarising budget related financial
statements.
Advantage
 Master budget help organisation for preparation of budget with analyse of all multiple
departments (Nitzl, 2016). Prime focus of Eastern engineering is to complete work
according to master budget.
 Business is able for complete their task with no or less issue through match desired goals
and objectives of Eastern engineering with master budget.
Dis-advantage
 Accurate and effective results is complex to achieve and it define major disadvantage of
master budget is that it not generate accurate results.
 Master budget is developed for all department of organisation so it is a time consuming
process.
Use and application of planning tools
Budgetary control planning tools perform an important role for organisation to complete
its task in an efficient manner. Cash budget aids business to manage their task through
developing of budget that aids business to manage work in decided cash. Eastern engineering
limited implement cash budget through developing effective rules. Similarly, production and
master budget are under the control of manager so they are implemented under monitoring of
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manager. Moreover, with implement of master budget application organisation maximise their
profits with minimising company problems.
TASK 4
P5 Comparison of organisation on the basis of management accounting system for responding
towards financial problems
Financial problems- It refers to number of situation in which management face issue or
constraints to complete their task as per decided financial factors (Quattrone, 2016). Eastern
Engineering analyse the financial problem and according to this manufacturing cost of business
is increasing with rapid speed that impacts on profits levels.
Technique to overcome from financial problems
Benchmarking- This is explained as a technique among which financial standards are decided by
management so all work and task is completed in future according to goals and objectives. This
also consider about performance methods which is related with techniques of organisation.
Eastern engineering limited resolve financial challenges by managing and completing work as
per benchmarks.
KPI- Key performance indicator performs an important role and they are universal in nature.
Easter engineering limited estimate all performance and also rectify variances which create
problems for organisation (Quinn, Strauss and Kristandl, 2014). In the context of Eastern
engineering KPI control business cost by monitoring business cost on constant basis.
Financial governance
Financial governance performs an important role and it refers to different measures and
most of them are undertaken by organisation to minimise the financial discipline. In context of
financial governance, this is analysed and identify by organisation that techniques perform an
important role in improving and enhancing financial problems through manage all cost aspect
related with business and particularly, Eastern Engineering limited control excessive cost and
financial related factors by controlling their operational cost.
Compare of organisation
Basis Eastern Engineering Zutec
Financial problem Increase in cost is the major
problem face by management
Zutec face problems which is
related with amount receivable
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of Eastern engineering. and payable due to which it
create issue for management
to manage budget.
Use of management
accounting system
Tax accounting is utilised by
organisation as it aids
management to manage cost
on internal and external level.
From the perspective of Zutec
management utilise cost
accounting system to control
cost of organisation.
Application of system Tax accounting system is used
by organisation for managing
business with fulfils of proper
tax values. It helps
management to complete work
with proper inflow and
outflow of cash.
Cost accounting complete task
with decided values that exists
among budget. It define about
all values that increase and
enhance all values by
monitoring cost of
organisational task or
operations.
CONCLUSION
From the above report, it is concluded that management accounting perform an important
role and it is effective for organisation to take effective decisions related with finance. With use
of accounting system in an organised manner management ensure that all work is completed
according to decided values. Management accountants induce effective methods and techniques
and it support organisation to improve their efficiency and also to perform work with high
productivity. Different account related system and its implementation within business is also
included in the report. In the last, advantage and dis-advantages of budgetary control for
analysing all is also undertaken in this report.
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