Management Accounting Report: Evaluating Financial Systems and Reports

This report provides a comprehensive overview of management accounting, focusing on its systems, techniques, and practical applications within the context of ABC Ltd, a medium-sized manufacturing company. It begins by defining management accounting and its role in financial decision-making, followed by an examination of various management accounting systems such as cost accounting, price optimization, job costing, and inventory management systems. The report then delves into the different methods used in management accounting reports, including budget reports, performance reports, inventory management reports, and accounts receivable reports. It also explores the benefits of these systems, evaluating the integration between accounting systems, reports, and organizational processes. Furthermore, the report analyzes cost analysis techniques, planning tools, and their application in forecasting budgets. Finally, it compares how organizations solve financial problems using accounting systems, emphasizing the role of management accounting in achieving sustainable success. The report concludes with a summary of the key findings and insights, supported by relevant references.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting and accounting systems.................................................................1
P2. Methods in management accounting reports.........................................................................3
M1. Benefits of management accounting systems......................................................................5
D1. Evaluating integration between accounting systems as well as reports with organisational
processes......................................................................................................................................6
TASK 2............................................................................................................................................6
P3. Calculation of costs by using cost analysis techniques.........................................................6
M2. Usage of appropriate techniques in order to produce financial reporting documents........10
D2. Financial reports to interpret business operational activities..............................................11
TASK 3..........................................................................................................................................11
P4. Distinct Kinds of planning tools..........................................................................................11
M3. Planning tools with application in order to prepare as well as forecasting budgets...........15
TASK 4..........................................................................................................................................16
P5. Comparison showing the ways organisations solve financial problems with the use of
accounting systems....................................................................................................................16
M4. Responding of management accounting towards financial problems for sustainable
success........................................................................................................................................18
D3. Planning tools usage to respond towards solving financial problems so to lead the
organisation towards sustainable success..................................................................................18
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
Management accounting helps accountants to emphasise towards numerous events that
occurs in financial year while performing business activities (Bennett and James, 2017). By
using management accounting, financial department presents accounting information to
managers so that policies can be framed to attain main goals. Management Accounting performs
a main role in organisations now a days and thus stakeholders in the organisation need to know
how to generate and use excellent accounting information systems. It is used for assisting daily
operations along with performing managerial functions. It describes accounting techniques,
methods together with systems with ability as well as specialised information to minimise losses
addition to maximising profits. In today's company setting, company intends to monitor market
data that extends further than the price-based data supplied by traditional financial accounting
data from historical general ledger systems like Cost volume profit, budgetary control, cash
budget, marginal costing and absorption costing to make applicable management accounting
reports for informed decision making. To develop understanding about management accounting,
selected organisation ABC limited which is a medium sized manufacturing company. To
promote their different departments require to understand of different business activities and
apply all the appropriate systems and reports. The present report involves information related
with management accounting together with its accounting systems, reports addition to
techniques. It further includes distinct planning tools and comparison between two organisations
in the manner accounting systems are adopted to respond towards financial problems.
TASK 1
P1. Management accounting and accounting systems.
Management accounting: The concept that comprises procedures to analyse costs as
well as activities in order to construct financial reports together with maintaining records that
aids in decision making to attain organisational goals is characterised to management accounting.
It is mainly used for keeping records, financial planning, analysing sales trends, performance
management, controlling expenses and to make decisions (Brewer, Garrison and Noreen, 2015).
In context to ABC Ltd Company, managers uses it for systematic management planning together
with formulating strategic decisions.
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Management accounting systems: These are described to the systems that helps
managers to measure price level, observing statistical information and evaluating business
operations so to make decisions. These are confidential as well as aids to provide guidelines so
that overall efficiency and productivity are improved for betterment of an organisation. In ABC
Ltd Company, following management accounting systems are used to record and maintain
information related to actual performance of company. Detailed description of the systems are as
follows:
Cost accounting system: It is defined as the framework that is applied by accountants to
approximate cost of distinct products for purpose of profitability analysis, controlling costs
addition to inventory valuation. It is a kind of accounting that helps production department of
ABC Ltd Company to analyse and identify cost that are associated with meal kit boxes so that
ices are set accordingly to attain profitability (Busco and Quattrone, 2015). The system is
essentially required at the company as to reduce costs, controlling materials, recording
production transactions as well as maintaining profitable status.
Price optimisation system: With the use of mathematical analysis, price optimisation
system is used to determine perception of market towards prices of organisational products.
Under the system, administrators of ABC Ltd Company carefully understands customer
perceptions in order to set appropriate prices for distinct meal boxes that results in generating
more revenue. The essential requirement of the system is to determine prices that results in
maximising operating profits. This system mainly applied by the organisation to set effective
price structure in which price provide products to the customers. It helps to understand the
perception of customer regarding to different price of the products.
Job costing system: Another accounting system is job costing system in which
manufacturing costs are allocated to individual jobs or specific product. It encompasses
procedures to accumulate information on costs associated with specific service or job. By using
job order costing, production managers of ABC Ltd company calculates profits by collecting
costs as well as controls operational efficiencies. The system helps in providing accurate
valuation in context to work in progress. The system is essentially required at company as to
accumulate reliable estimates about direct information labour, overhead addition to direct
material.
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Inventory management system: The system which is aggregation of barcode scanners,
technological devices, desktop software along with barcode printers in order to streamline
management of inventory at workplace. Using such system, the management of ABC Ltd
Company tracks inventory positions so to eliminate any overstock or under stock conditions. By
effectively tracking quantities across warehouses, managers are capable to make inventory
decisions in efficient manner. Such system is further classified into LIFO, FIFO together with
Weighted average methods. Essential requirements of the system at the company is to record,
manage and track inventory materials together with reducing shortages, improving timely
delivery as well as maintaining surplus stock (Charifzadeh and Taschner, 2017).
Thus, all the elaborated accounting systems are used by ABC Ltd Company managers as
to analyse performances and formulating strategies accordingly so to achieve higher profits.
P2. Methods in management accounting reports.
Management accounting reporting plays valuable function in protecting business and
analysing its performance. Such reports are prepared as per the requirements in the bookkeeping
period. These reports provides significant information about various transactions or activities
addition to making profits. It is crucial for management team to adopt appropriate methods for
preparation of distinct reports after analysing gains and expenditures made by company. In
context to ABC Ltd Company, distinct accounting reports are prepared by departmental heads
with the objective to track operational activities and recording them so to submit the same to top
managers. Certain methods that are adopted by departmental heads of selected company to
generate accounting reports are the following:
Budget reports: One of the fundamental report is budget report a it helps in
understanding as well as controlling costs so to measure business performances. Using budget
report, actual results are compared with pre established budget in order to determine the
expenses. Budgetary report is used by administrators to determine the use of monetary resources
in effective manner. The activities of ABC Ltd Company such as production, marketing and
sales are recorded in such report. By considering the budget reports, all the transactions are
performed within set budgetary amounts so that measuring performance becomes easy for
departmental heads and managers.
Performance reports: It is prepared with the aim to keep record of organisational
performances in distinct time frame. Using performance reports, managers of any entity provides
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bonus together with incentives to work force as per the efforts that are made by them towards
accomplishing business objectives (Cooper, 2017). It benefits administrators of Guosto Company
to analyse performances of employees and determine which individual is performing well
addition to which one not. High performers are awarded more where as under performers are
provided more training programs. Performance accounting reports provides in depth information
about business workings and its capacity.
Inventory management report: Organisations manufactures physical products and
inventory management reports plays important function in centralising data associated on
inventory costs or other overheads that are involved in providing raw material as well as
production processes. Such report is a customized report that involves information about
supplier, location and product. This report all over the information such as how much raw
material come in the firm and on which date and how much take for the manufacturing
procedure. So with the help of this report take detailed information about the raw material and
understand how to take help from this report. It provides detailed information how much material
remain in the warehouse and in which stage require more material for further procedure.
Account receivable report: The report that is used to record credit sales as well as
analysing due payments in the accounting period. It is generally opted by the entities that
performs operations in credit terms and record all credit transaction in systematic manner along
with date, creditors name and amount (Eterno and Silverman, 2017). Reason behind preparing
account receivable report at ABC Ltd company is to list out unused credit memos together with
unpaid customer invoices as to determine nature of invoices that are overdue for payments. It is
used by top management of the company to ascertain effectiveness of collection as well as credit
functions. Selected organisation uses accounting software system in order to reconfigure report
in context to distinct data ranges.
Thus, the above stated management accounting reports are used by administrators of
ABC Ltd Company in order to manage inventory, knowing performances, working within set
budget as well as recording details of unpaid customers. All these reports helps in maintaining
efficiency together with formulating appropriate decisions so to grab opportunities.
M1. Benefits of management accounting systems
Management accounting with benefits: There are defined the different benefits of the
particular system that help to conduct the business activities smoothly and easily take decision
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regarding to business. For this purpose require to understand the benefits of the system that
discussed below:
Systems Benefits
Job costing system  The system benefits the organisation to ascertain costs
associated with particular job or finished product. It
also helps in controlling costs through implementing
suitable steps.
 Job costing system provides advantages to ABC Ltd
Company managers by computing revenues that are
earned from specialised jobs through tracking
performances through controlling costs and to improve
profitability.
Cost accounting system  The system helps in measuring as well as improving
business efficiency, fixing prices, providing guidelines
to reduce costs, proper planning and expanding
production activities of the business (Farrell and
Gallagher, 2015).
 Using such system, administrators of ABC Ltd
Company reduces irrelevant costs as well as control on
expenditures in order to set appropriate prices for meal
boxes.
Inventory management system  Inventory management system minimises costs,
increasing information transparency, improves
delivery performances and improves business
negotiations.
 The system benefits management team of ABC Ltd
Company to maintain required stock levels and
recording detailed information about inventory usage
so that further purchase decisions are make before the
requirements of inventory.
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Price optimising system  Such system helps organisations to focus on sales,
managing elements along with customer perceptions.
It helps businessmen to find sweet pricing spot so that
they can maximise prices and motivates customers to
pay for the products (Fleischman and Parker, 2017).
 It benefits ABC Ltd Company to understand customer
perceptions addition to reactions of customers towards
set prices and accordingly framing future strategies.
D1. Evaluating integration between accounting systems as well as reports with organisational
processes.
Management accounting systems addition to reports are important for organisational
processes as they acts as guidances to work in effective manner so to attain objectives as per the
set criteria. Accounting system that are used by ABC Ltd Company encompasses inventory
management, job costing, cost accounting addition to price optimising system that benefits uin
numerous ways. In contrary, accounting reports delivers essential informations to carry forward
certain operations towards the path of attaining business targets and to frame decisions that
facilitates organisational procedures to achieve goals (Hoque, 2018). Using reports like
performance, account receivable, inventory management and budget, important aspects of the
company are analysed so to execute operations in smooth manner that benefits in achieving
organisational goals. Thus, accounting systems addition to reports are directly integrated with
procedures of ABC Ltd Company.
TASK 2
P3. Calculation of costs by using cost analysis techniques.
Cost refers to monetary valuation of materials, time, utilities, efforts and resources in
order to manufacture addition to delivering products. All the expenses incurred by company are
costs and is further classified as direct cost, variable costs and many more. In context to Galway
Plc, huge costs are spent by production team on acquiring raw materials, services, products as
well as equipments.
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Marginal costing: It is a technique in which additional costs are associated in producing
additional product component. The costing technique is adopted by managers of ABC Ltd to
analyse situations where break even point is equivalent to fixed costs. Its nature id dependent on
costs behaviours which vary with output volumes.
Absorption costing: Another technique to value inventory is absorption costing which
provides comprehensive addition to accurate view points related to actual costs associated with
producing final products (Ji, 2017). It is considered as conventional method to ascertain costs as
it involves variable together with fixed costs in processes, operations as well as products.
Absorption costing helps management team of ABC Ltd with mechanisms such as external
financial addition to income tax reporting.
a) Production cost per unit
Absorption Costing: £40 unit ( 10+20+5+100000/20000 = 40)
Direct material 10
Direct Labour 20
Variable overhead 5
Total fixed production
overhead cost
£100000
Use standard volume of 20000 units to absorb the fixed production overhead cost
Selling price = £50
Absorption cost = £40
Total production cost
Budget: Absorption costing technique
Production
cost Per Unit Total
£ £
Direct
Material 10 18000x10 180000
Direct 20 18000x20 360000
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Labour
Variable
Overhead 5 18000x5 90000
Fixed
Overhead 5 90000
40 18000x40 720000
BUDGETED COST OF
SALES
£
Cost of production 720000
Opening Inventory 0
Closing inventory -80000
COST OF SALES 640000
2. Apply appropriate techniques
Absorption costing: Actual profit or loss statement January 2019
PER UNIT TOTAL
£ £ £ £
SALES 50 800000
COST OF PRODUCTION
DM 10 180000
DL 20 360000
VOH 5 90000
FOH 5 90000
40 720000
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OPENING INVENTORY 0
CLOSING INVENTORY -80000
COST OF SALES -640000
STANDARD PROFIT 160000
ADJ. FOR UNDERABSORPTION -10000
BUDGETED PROFIT 150000
Absorption costing: Budgeted profit or loss statement January 2019
PER UNIT TOTAL
£ £ £ £
SALES 50 800000
COST OF PRODUCTION
DM 10 190000
DL 20 380000
VOH 5 95000
FOH 5 95000
40 760000
OPENING INVENTORY 0
CLOSING INVENTORY -120000
COST OF SALES 40 -640000
STANDARD PROFIT 10 160000
ADJ. FOR UNDERABSORPTION -5000
BUDGETED PROFIT 155000
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Marginal Costing: Actual Profit or Loss statement January 2019
PER UNIT TOTAL
£ £ £ £
SALES 50 800000
COST OF PRODUCTION
DM 10 190000
DL 20 380000
VOH 5 95000
FOH 35 665000
OPENING INVENTORY 0
CLOSING INVENTORY -105000
COST OF SALES 35 560000
CONTRIBUTION 15 240000
FOH PRODUCTION -100000
BUDGETED PROFIT 140000
Marginal Costing: Budgeted Profit or Loss statement January 2019
PER UNIT TOTAL
£ £ £ £
SALES 50 800000
COST OF PRODUCTION
DM 10 180000
DL 20 360000
VOH 5 90000
FOH 35 630000
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