Management Accounting Report: Analyzing Airdri Limited Financials, HND

This report analyzes the application of management accounting principles within the context of Airdri Limited, a manufacturing company. It begins with an introduction to management accounting, its requirements, and the significance of various management accounting reports, including inventory management, cost, and accounts receivable reports. The report then delves into cost analysis techniques, comparing marginal and absorption costing methods. Further, it explores the benefits and limitations of planning tools like production budgets, cash budgets, and master budgets. The report concludes by examining how companies adapt management accounting systems to address financial problems, using KPIs to improve financial performance and decision-making. The report is structured to provide a comprehensive overview of management accounting practices and their impact on business operations.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1 Management accounting and its essential requirement....................................................................3
P2. Management Accounting Reports.....................................................................................................4
TASK 2..........................................................................................................................................................5
TASK 3..........................................................................................................................................................6
P4. Benefits and limitation of planning tools of budgetary control.........................................................6
TASK 4..........................................................................................................................................................8
P5 How companies are adapting management accounting system for responding financial problems..8
CONCLUSION.............................................................................................................................................10
REFERENCES..............................................................................................................................................11

INTRODUCTION
Administration is classified into two parts: managerial and administration, both of which are
critical to managing an organisation and establishing good decisions. It is important for
organizations to comprehend how to develop and profit in a tough climate. It has become
necessary for employers to employ a management accounting system and generate reports that
will assist them in operating and running their businesses efficiently. This can assist in making
sound business judgments (Cokins and Căpușneanu, 2020). This report based on the Airdri
Limited company. It is manufacturing organisation that provides services in dryers and others
things. In this report consist of different types of accounting systems and reports to analysis the
performance in depth manner. Along with apply various techniques to take right decision in
regard financial activities. Moreover, apply different types of planning tools to predict future
things. At the end identify various financial problems that resolve by the MA techniques and
apply appropriate system.
TASK 1
P1 Management accounting and its essential requirement
Management accounting is described as the act of giving financial data and resources to
businesses in order to help them make better business decisions and increase profitability.
Developing, arranging, coordinating, and regulating operations are all examples of management.
And accounting is keeping relevant documentation of accounting, banking details, and statistics
in connection to a firm so that all operations can be carried out efficiently and earnings may be
increased.
Inventory management system: This system is described as the ordering, storing, and
earning from items sold to consumers by a commercial organisation. This can aid in the
operation of a firm by reducing unnecessary orders and managing good result. Airdri Ltd need
apply inventory control to maintain inventories and make orders for raw materials and products
so that purchasing orders can be fulfilled and the organization can run smoothly. Since every
company wants to satisfy its consumers by fulfilling orders as quickly and operating constantly,
employing an inventory control may assist boost profit margins (Cannon and et.al, 2020).

Price optimization system: The contemplating element is price determining that is major
aim of company therefore price optimization system is utilized by firms for the order to
determine the suitable charge of consumer items. This is necessary for Airdri Ltd to assess
operational prices and set proper costs for their commodities and operations in effort to engage
buyers and keep successful commercial productivity in a dynamic commercial environment.
Cost accounting system: This is a system architecture that businesses use to predict
product costs and keep their profits in check. Because the company provides a range of products,
cost estimate is critical for making future business decisions and boosting revenue. This is
necessary for Airdri Ltd to assess the profitability and services so that they may plan their
operations effectively. If you have a thorough understanding of accounting and historical data,
you can make cost estimates that are accurate and help you operate your firm more efficiently.
P2. Management Accounting Reports.
Management Accounting Report: MA is a broad concept that stresses knowledge
sharing; therefore summaries are critical components of it. It presents a variety of important
reports that are also related to the systems described above. This information should also be used
by Airdri Ltd to appropriately modify such systems. The following are many important reports
related to MA:
Inventory management report: It is important to monitor and inventory levels as
thoroughly and quickly as possible in order to properly run a business. Using and preparing a
stock control report is one way to do otherwise. A trustworthy, speed, and suitable inventory
management analysis may assist users in determining patterns, recognizing weaknesses and
strengths, and correcting errors and preventing inventory waste. Managers may use this
information to enhance profitability while lowering needless expenses. This, in the instance of
Airdri Ltd, allows the management team to watch inventory levels and reduce inventory costs
and waste (Tauringana, 2020) (Hacioglu, 2020).
Cost Report: This report serves as a basic need for industrial companies such as Airdri Ltd
to control their costs incurred. This analysis essentially reflects a thorough sub categorization of
various expenses, as well as several categories such as department-specific costs, process-
specific costs, activity-specific costs, and so on. This analysis may be used by Airdri Ltd to

determine the expenses of creating dryers. The information in this report would be used by
management to reduce expenses and increase profit margins.
Accounts Receivable report: Accounts receivables are the amounts due to an organisation
by businesses for items sold on a credit terms. Accounts receivables are typically handled by
ordering supplies and shipping or wirelessly distributing them to clients in most business
organizations. In return, the customer must pay within a certain time frame known as cost limits.
Accounts receivable age report generates a list of accounts receivables based on credit limits and
ageing that is, how long they have been unpaid. A really report will assist Airdri Ltd in detecting
difficulties as soon as they arise and preventing major issues with account receivables collections
from regarding the date (Endenich and Trapp, 2020).
TASK 2
Usage of the techniques of cost analysis
Cost: This is the amount of money spent by a company on the research and manufacture
of goods & services. In other respects, cost is the amount of cash that buyers must spend when
purchasing anything that can assist a firm optimizes its success.
Marginal costing: This is calculated by a costing approach in which variable costs are
applied to unit costs and fixed costs are assessed for the time and wiped off fully towards
participation. This may aid in the management of a corporation's processes and outcomes, as well
as the proper organisation of all activities.
Marginal Costing
Sales Revenue @ selling price/unit
(40*60000)
240000
0
Marginal cost of Sales
Direct material @ unit cost (10*60000) 600000
Direct labor @ unit cost (6*60000) 360000
Variable manufacturing @ unit cost (2 *
60000) 120000
Variable selling @ unit cost (4*60000) 240000
132000
0
Contribution
108000
0

Fixed manufacturing overhead 180000
Fixed admin overhead 50,000 230,000
Profit 850,000
Absorption costing: This is a method of costing that shows that all production costs have been
internalized by the quantity manufactured. This emphasizes on fixed and variable costs, which
may aid in job management and corporate operations.
Absorption Costing
Sales Revenue @ selling price/unit
(40*60000) 240000
Direct material @ unit cost (10*60000) 600000
Direct labor @ unit cost (6*60000) 360000
Variable manufacturing @ unit cost (2 *
60000) 120000
Variable selling @ unit cost (4*60000) 240000
Fixed manufacturing overhead 180000
150000
0
Contribution 900000
Fixed admin overhead 50,000 50,000
Profit 850,000
TASK 3
P4. Benefits and limitation of planning tools of budgetary control.
A variety of financial practices and procedures are used in various sorts of business
enterprises with the goal of effective campaign of different types of activities. Budgetary
management is one of the most important approaches used when forecasting future financial
activity.
Budgetary control is a method for ensuring that the plan is going up in a manner that the
most comprehensive financial goals can be implemented. It's a method for assessing variances by

comparing forecasts to actual outcomes. Finally, it includes a large variety of project planning,
each of which has its own importance and limitations. Such planning tools are characterised in
the following way in relation to Airdri Ltd:
Production budget: For an acceptable accounting strategy, a production budget offers
sets of quantity manufactured throughout a timeframe. This is an important financial strategy that
may assist a company by giving precise raw resource data. Without the need for a proper
production budget, firms will struggle to give enough information about how much goods will be
supplied and what services are accessible. The accountants, like that of Airdri Ltd, creates an
approximation because then their general manager may ensure that the changes and make
sensible judgments about the flow and transformation of goods and the creation of new goods
(Kachouri, Salhi and Jarboui, 2020). The following are some of the benefits and drawbacks of
this spending plan:
Advantage: It standardizes processing; this helps to reduce manufacturing costs. The actual
inventory of items is getting too much to handle. It's because it includes an appraisal of the
needed raw resources, which helps administrators make better decisions. Their administration,
for illustration, takes remedial actions in Airdri Ltd, such as acquiring a large amount of fresh
raw material for manufacturing.
Disadvantage: One of the most significant disadvantages of a production budget for a business
is that it requires more money and time. Businesses, like the previous firm, are dealing with an
issue of increased time and expenditure in creating this budgeting. Smaller firms are unable to
use it in their financial planning because of this problem.
Cash Budget: Organizations produce it so that they may receive a forecast of aggregate
cash receipts and disbursements for a particular amount of time, which would be usually a year.
The sales and direct debit paperwork for a certain amount of time will be used to create the cash
projection. This is a research of financial outflows and inflows over a certain timeframe. The
business plan forecasts the organizations' likely sales and costs. In other cases, if the benefits
outweigh the income, effective monetary limits are imposed. Since there is surplus, expenditure
is below earnings, therefore the decision of how to use it is taken. The administrators of Airdri

Ltd may utilise this budgeting to attain their intended goals while also managing their cash levels
without hassles or concerns. This plan has the following advantages and disadvantages:
Advantage: Businesses can utilize a Cash Budget to keep their liquidity levels in check. This is
a benefit to Airdri Ltd's executives. Companies can leverage a cash budget to ensure long - term
the required degree of performance and quality in their company's business (Liahmad and et.al,
2021).
Disadvantage: A Cash Budget cannot provide firms the mobility they need in their financial
processes, which may be a negative for businesses like Airdri Ltd. It's a time-consuming and
expensive process. As a result, not all company should be able it. For a firm like Airdri Ltd, this
is also a drawback.
Master budget: The firm's Master Budget outlines the group's profitability goals for the
planning horizon, which really is usually a year, and is presented in a form of projected financial
reports (O'Brien and Stone, 2020).
Advantage: Master Budget can assist businesses in preparing detailed predictions for multiple
agencies. As a result, Airdri Ltd has a competitive edge. Master Budgets assist companies in
achieving their targeted goals and objectives while avoiding issues and concerns. As a result,
Airdri Ltd's executives get an edge.
Disadvantage: Master Budget may be a drawback for businesses since it does not always offer
precise results, putting a firm at a deficit. A master budget can cause problems for an
organisation because it lacks the mobility it requires (Almaqtari and et.al, 2021).
TASK 4
P5 How companies are adapting management accounting system for responding financial
problems
Financial Problem: It describes a situation in which companies are confronted with
restrictions and hence are unable to reach the required level of targets and strategies. Airdri Ltd,
like other businesses, is experiencing financial difficulties. It has a money troubles with high
expenditures as a result of poor overhead management. This has an impact on the company's
profitability.

KPI: Key Performance Indicators (KPIs) might be both financial and non-financial in character.
They may be used by companies to predict productivity and correct any discrepancies or
variations that may exist. KPIs may be used by Airdri Ltd's management to tackle the money
issue of high settlement. This issue can be handled with KPIs since efficiency can be evaluated
and unnecessary expenses can be quickly detected, allowing for easy reduction.
Benchmarking: It is a strategy through which economic norms are established inside companies
so that the objectives may be met in the future. It is used by the management of Airdri Ltd to
tackle the monetary issues of poor expenditures. The problem may be readily handled by
establishing the quality requirements, ensuring that the aims and goals are met (Göx and
Hemmer, 2020).
Financial governance: Financial governance alludes to the many sorts of procedures used by
companies to ensure that budgetary responsibility is maintained. The administration of Airdri Ltd
may easily handle the economic issues of poor expenditures by employing its strategies.
Comparison of organizations-
Basis Tesco Sainsbury’s
Financial
Problem
Tesco is facing financial
difficulties as a result of stock
mishandling.
Sainsbury's is experiencing
economic difficulties as a result of
poor work order administration.
Management
Accounting
System Used
Tesco can use Inventory
Management System.
Sainsbury’s can use Job Costing
System.
Application of
the system
It may be utilised by the company
to address the issue of inventory
mismanagement by keeping an
accurate documentation of stock
outflows and inflows, which will
assure quality and productivity
(Oskouei and Sureshjani, 2020).
It may be used by an organisation
to ensure that it can address the
issue of work order mishandling
by maintaining and retaining a
complete record of all requests
and assuring that they are
completed properly even without
difficulties and complications.

CONCLUSION
The conclusion drawn from the aforementioned research is that management accounting
benefits businesses by assisting managers in making choices. Firms may expect financial savings
as a result of its use since it allows them to optimize processes and activities, resulting in long-
term success and the acquisition of a strategic advantage over competitors, allowing them to stay
ahead of the competition in the market. When utilized correctly, it provides a better degree of
effectiveness and efficiency, which would be extremely beneficial to management in achieving
their long-term goals. As a result, management accountants may ensure that suitable procedures
and processes are used to ensure that the firm's efficiency goals are satisfied. There are numerous
systems in it that are beneficial for management, and different sorts of procedures for
management accounting reporting may be employed. The appropriate approaches and procedures
may be used to determine costs. The planning methods for budgetary control have both
advantages and downsides. To deal with their financial difficulties, businesses are implementing
management accounting systems.

REFERENCES
Books and Journal
Cokins, G. and Căpușneanu, S., 2020. Management accounting: The sustainable strategy map
and its associated sustainability balanced scorecard. In Management accounting
standards for sustainable business practices (pp. 1-26). IGI Global.
Cannon, J. N. and et.al, 2020. The effect of international takeover laws on corporate resource
adjustments: Market discipline and/or managerial myopia?. Journal of International
Business Studies. 51(9). pp.1443-1477.
Tauringana, V., 2020. Sustainability reporting adoption in developing countries: Managerial
perception-based determinants evidence from Uganda. Journal of Accounting in
Emerging Economies.
Hacioglu, U., 2020. Digital business strategies in blockchain ecosystems. Springer International
Publishing, DOI. 10. pp.978-3.
Endenich, C. and Trapp, R., 2020. Ethical implications of management accounting and control:
A systematic review of the contributions from the Journal of Business Ethics. Journal of
business ethics. 163(2). pp.309-328.
Kachouri, M., Salhi, B. and Jarboui, A., 2020. The impact of gender diversity on the relationship
between managerial entrenchment and corporate social responsibility: Evidence from UK
companies. Journal of Global Responsibility.
Liahmad, L. and et.al, 2021. Financial Factors and Non-Financial to Financial Distress Insurance
Companies That Listed in Indonesia Stock Exchange. Budapest International Research
and Critics Institute (BIRCI-Journal): Humanities and Social Sciences. 4(1). pp.1305-
1312.
Almaqtari, F. A. and et.al, 2021. Impact of corporate governance mechanisms on financial
reporting quality: a study of Indian GAAP and Indian Accounting Standards. Problems
and Perspectives in Management. 18(4). p.1.
Göx, R. F. and Hemmer, T., 2020. On the relation between managerial power and CEO
pay. Journal of Accounting and Economics. 69(2-3). p.101300.
Oskouei, Z. H. and Sureshjani, Z. H., 2020. Studying the relationship between managerial ability
and real earnings management in economic and financial crisis conditions. International
Journal of Finance & Economics.
O'Brien, A. D. and Stone, D. N., 2020. Yes, You Can Import, Analyze, and Create Dashboards
and Storyboards in Tableau! The GBI Case. Journal of Emerging Technologies in
Accounting. 17(1). pp.21-31.