Management Accounting Report: Excite Entertainment

This report provides a comprehensive overview of management accounting principles and their application within the context of Excite Entertainment. It begins by explaining the core concepts of management accounting (MA) and its significance, differentiating it from financial accounting. The report then delves into various MA reports, such as cost reports, execution reports, and accounts receivable reports, highlighting their roles in decision-making, control, and planning. The study includes the calculation of profits using both absorption costing and marginal costing techniques, demonstrating their practical application. Additionally, the report evaluates the benefits and limitations of different planning tools used for budgetary control, such as cost accounting and inventory management systems. Finally, the report examines how organizations adapt MA systems to resolve financial problems, providing a critical analysis of the integration of MA systems and reporting within operational processes, and emphasizing the importance of reliable, accurate, and updated information.

Management accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
P1. Explaining concept of the management accounting and significance of its systems ...........3
P2. Describing several kinds of the MA reports .........................................................................4
M1. Evaluating different benefits of the MA systems ................................................................5
D1. Critically evaluating the ways in which MA systems and the reporting must be integrated
within the operational process of Excite Entertainment .............................................................6
D2. Explaining the reasons behind the presentation of an information need to be reliable,
accurate and updated....................................................................................................................6
LO2..................................................................................................................................................7
P3. Calculating the profits by employing appropriate techniques ..............................................7
LO3..................................................................................................................................................9
P4. Evaluating benefits and the limitation of different planning tools that are been used for the
budgetary control ........................................................................................................................9
M3. Analysing uses of the various planning tools for framing the budget................................11
LO4................................................................................................................................................12
P5. Comparing the ways in which an organization adapts MA systems in resolving the
financial problems .....................................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES................................................................................................................................1

INTRODUCTION
Management accounting means a practice of managing the internal work environment
through preparation of the reports and application of the planning tools and systems. The present
study is based on Excite Entertainment, an entertainment and the leisure industry in UK.
Furthermore, the study highlights concept of MA and its systems with presenting different
reports. It also includes computation of the profits by using absorption and the marginal costing
technique. Moreover, it includes various planning tools adopted by business and MA techniques
in resolving the financial problems.
LO1.
P1. Explaining concept of the management accounting and significance of its systems
MA is stated as presentation of an accounting information fro the purpose of framing
policies that needs to be used by management and enables in smooth working of the routine
activities (Bataineh, 2018). It helps an internal management in performing all the managerial
functions involving planning, staffing, organising and controlling.
Difference between financial accounting and management accounting
Management accounting Financial accounting
It refers to an accounting system that facilitates
appropriate information to managers in
framing policies, strategies and the plans in
running the business effectively.
It means the system that emphasize on
preparing final report of an entity in order to
facilitate financial information to the interested
users.
It acts as the main branch of an accounting that
reports and records financial as well as non-
financial information of an enterprise.
This accounting branch keeps a track of only
the financial information of the company.
It is seen as entirely different from financial
accounting as it provides an information to the
people within an enterprise.
It mainly facilitates information to the
outsiders.
There does not present any prescribe format in
relation to management accounting.
On the other hand, financial accounting needs
to be done in the prescribed format.

It focuses on the facilitating an information for
helping it in evaluating performance and in
devising the plans for future concern
(Difference between MA and FA, 2017).
It emphasize on providing an information
regarding the functioning of an entity's
business to users.
Under this, an information need not to be
audited or published as it is only for an internal
use.
Under financial accounting, an information
need to be audited or been published by the
statutory auditors.
Essentials of MA systems-
Cost accounting system- It is the framework that is been used by an enterprise in
estimating cost of of the products for the purpose of making profitability analysis, controlling
cost and valuation of an inventory (Ellegård and Glenngård, 2019). It is very important for
Excite Entertainment in making use of this system as it helps in anticipating the accurate product
cost that tends to be critical for gaining the profitable operations. For instance- Job order costing,
process costing, standard costing etc. There are different costing techniques that helps in
ensuring control over cost that are as follows-
Standard costing technique- This technique comprises of setting the predetermined cost
estimation or budgeted cost and compares it with the actual cost for analysing the variances.
Process costing- It is the technique that the firm uses for producing its products with a
well defined process for each and every type of the product.
Direct cost- It means the cost that are incurred for the particular or specific cost unit,
department and the process. For example- wages, raw material cost etc.
Accounting standards cost- It means an estimated expense which occurs in the
production of the product or the service performance.
Inventory management system- It means a system that involves combination of the
technology, processes and the oversees maintenance and the monitoring of the stocked products.
This system is critical for Excite Entertainment in keeping the tabs on the present stock level and
in understanding the items that moves on a quick basis and the items that are slow-moving. It
helps the company in determining the re-order period with a greater level of accuracy. For
example- LIFO, FIFO, ABC analysis etc.

Job costing system- This system is defined as the technique of recording cost of
manufacturing the job, instead of the process. With an application of this system, Excite
Entertainment could keep a tracks of cost for each job for maintaining the data that is often
counted as more and more relevant to business operations (Emerling and Wojcik-Jurkiewicz,
2018). This system acts as most important because it helps the firm in leading towards better
profitability, estimating the project, taking management decisions and provides for timely
reporting. For example- cost of designing software, manufacturing batch of the products etc.
P2. Describing several kinds of the MA reports
MA reports are been prepared internally that mainly concentrates on receiving the data
relating to the cost, performance and receivables of the firm (Otley, 2016). There are different
MA reports formulated by managers of the Excite Entertainment for making the suitable
business decisions, controlling and planning.
Cost reports- Under this report, entire data in relation to the final cost is been taken into
account that enables managers in looking towards an ability of the firm for seeing to the prices of
the goods against the selling costs. It helps managers of an Excite Entertainment in planning for
the cost projections and in managing the income limit for attaining higher profitability. For
instance- data relating to raw material cost, production cost, fixed cost, variable cost etc.
Execution reports- In this report, managers uses the spending plans for contrasting the
genuine uses and the incomes with that of the planned sums. After identifying the new budgets,
changes made are analysed and overall data regarding such amount are been listed on the
performance report. This reports helps the directors in getting ready for an assessing the future
demand in the productions and the cost additions. For example- implementation plan for the
employees in performing the task as per the planned cost and expenses.
Accounts receivable report- This report breakdown balances of the customer in relation
to the period for which the amount had been owed. It acts as the critical tool for Excite
Entertainment in managing the cash flows in case it extends the credit to the customers of the
business (Mårtensson and et.al., 2016). This report can be used by manager in finding the
problems with respect to collection process of the firm. It enables the managers or the collection
department in overlooking the debts. For example-

Job cost report- It is the report that shows an expenses for the particular project that is
been financing by business organization. It is usually matched with revenue estimation so that
profitability of each job could be evaluated. It helps in determining higher profitable areas of
business so that manager of Excite Entertainment can emphasize for additional efforts rather than
wasting money and the time on each job with the lower profit figures. It report is used for
analysing expenses at the time when the proposal is in work in progress so that managers could
correct the areas of the waste before the costs are seen as out of control. For instance-

Inventory report- In this report, manager provides for a record of physical inventory or in
producing the products. It is used by the managers in making production process more and more
efficient (MA reports, 2018). Such reports includes an items like inventory waste, labour cost,
overhead cost etc. Inventory report helps in comparing the different kinds of assembly lines
within the business for highlighting the areas for an improvement or in offering the bonuses to
departments that are best performing. For instance-

M1. Evaluating different benefits of the MA systems
MA systems Benefits
Job costing It allows the managers in computing an
earnings with regards to each job. This system
helps them in understanding that the particular
job are desirable for pursuing in future.
Inventory management system This system helps in minimizing the cost of
inventory and in maximising the profits and the
sales (Cooper, Ezzamel and Qu, 2017). It
provides for automation of the manual tasks
and traces the flow of an inventory in an over
supply chain.
Price optimization system It enables Excite Entertainment in automating
an entire process and also helps in making
better decisions relating to setting up of the
price.
Cost accounting system This MA system helps in disclosing the
activities that are profitable and non-profitable
(Weygandt, Kimmel and Kieso, 2019). It
ensures proper controlling over the supplies
and the materials of an items.
D1. Critically evaluating the ways in which MA systems and the reporting must be integrated
within the operational process of Excite Entertainment
MA systems and the reporting are seen as integrated as it helps in evaluating the
performance and in ascertaining the cost accurately so that uncertainty in the future reduces. On
the other hand, systems and reporting under MA is based on estimations and the accounting
figures which leads to misleading evaluation of the profit and the sales projections. Moreover,
reports helps in controlling the cost and maintaining adequate inventory so that higher

profitability can be attained by the company. However, application of the MA systems and
preparation of the reports involves huge cost and are counted as time consuming.
D2. Explaining the reasons behind the presentation of an information need to be reliable,
accurate and updated
It is crucial for the firm to present an accurate, reliable and updated information because
it helps the users in making appropriate and suitable decisions. It also helps the firm in showing a
true picture of the company's position and the performance against its rivalry. For example-
managers can use such information in forecasting the future expenses that might incurred. It
helps in management of internal department in effective and efficient manner.
LO2.
P3. Calculating the profits by employing appropriate techniques
Absorption costing- It indicates all the manufacturing cost that had been assigned
towards units produced (Schaltegger and Burritt, 2017). It includes both variable and fixed cost
as the part of the products cost. It is the method in accumulating cost attached with the specific
process and in apportioning it to an individual products.
Marginal costing- It means the technique where only the variable cost is been charged to
the cost units, however, fixed cost for a particular period is wholly written off against
contribution. It is an additional cost that is incurred in producing an additional unit of an output.
Profit and loss statement as per absorption costing
Particulars Amt. Cost per unit Total Amount
Operating revenue 8000 15 120000
Cost of goods sold
(COGS)
80000
Gross or Net profit
(NP)
(120000-80000) 40000
Computation of per unit cost
Particulars Amount
Prime cost (PC) 4
Variable cost of production (VC) 2
Fixed cost of production (FC) 4

Total cost of production (TC) 10
Calculation of Cost of Goods Sold (COGS)-
Particulars Amt. Cost per unit Total Net amount
Opening stock 500 10 5000
Production 10000 10 100000
Closing stock 2500 10 25000
Cost of goods
sold= opening
stock +
purchases-
closing stock
80000
Profit statement as per Marginal costing-
Particulars Amt. Cost per unit Total Amount
Operating revenue
(OR)
8000 15 120000
Variable cost (VC) 48000
Contribution
(Operating revenue-
variable cost)
72000
Less: Fixed overhead
production cost
40000
Net profit (NP) 32000
Working note of calculation of COGS :
Particulars Amount Cost per unit Total amount

Stock at the beginning
of period.
500 6 3000
Add:
Purchases(production)
10000 6 60000
Less: Stock at the
ending of the period.
2500 6 15000
Cost of goods sold
(COGS)
48000
Calculating the per unit cost by employing marginal costing method-
Particulars Amount
Prime cost (PC) 4
Variable cost of production (VC) 2
Total cost of production (TC) 6
Interpretation- From the above analysis its has been assessed that profits evaluated by
employing of marginal and absorption costing resulted as 32000 & 40000. This shows that
absorption costing is better approach in comparison to marginal costing as it accounts for both
the cost fixed and variable that in turn reflects a clear and true picture of the profitability.
LO3.
P4. Evaluating benefits and the limitation of different planning tools that are been used for the
budgetary control
Cash budget- It means the budget or the plan of an expected cash disbursements and the
receipts during a period. Such cash inflows and the outflows involves the revenues, expenses,
loan payment and the receipts (Tucker and Schaltegger, 2016). In other words, it is reflected as
an estimated projection of an organization's cash position in future.
Advantages Disadvantages
It is tool that helps Excite Entertainment in
identifying that sufficient cash is available for
meeting the routine needs or obligations.
Cash budget might causes distortions as the
cash inflows does not matches with the profits.

It also helps in reviewing that a minimum level
of liquidity is maintained and the requirement
of the cash balances that is stipulated by an
internal regulations are been maintained in
appropriate manner.
These budgets seems to be susceptible towards
the manipulation. It restricts the cash flows for
the one period and inflates the cash flows for
an another period (Hiebl, 2018). Even in the
case of the operations of the firm are
experiencing the losses, postponing the payouts
may shows positive value of the cash flows.
This budget could be used for making plans so
that optimum use of the cash resources could
be made.
The biggest limitation of the cash budget is that
it includes estimations. It uses the one year
cash flows for allocating the cash for next
accounting year in which there doesn't exist
any guarantee that the level of cash flow or
revenue and the expenditure level remains as
same.
This planning tool tends to most useful as it
puts light towards the areas within which the
cash goes. It allows them in cutting down on
an unproductive expenses that brings financial
efficiency and improves a quality of the
financial decisions.
It does not present the true and accurate
presentation of the company's cash position.
Zero based budget- It refers to the budgeting method where all the expenses are been
justified for every new period (Van der Stede, 2017). It is the process that starts from the zero
base or scratch and each function within an enterprise is been analysed for its cost and the needs.
Advantages Disadvantages
As under this budget the resources are been
assigned or allocated on the basis of cost
benefit, this helps Excite Entertainment in
making better or effective use of its resources.
It is considered as the time consuming
procedure as it justifies all expenses from the
scratch. It also involves re-examination of all
the items from the grounds which requires