Deloitte: Management Accounting Report for Excite Entertainment Ltd.

This report offers a detailed examination of management accounting principles and practices, focusing on the context of Excite Entertainment Ltd., a client of Deloitte. It begins by differentiating management accounting from financial accounting and explores various accounting systems such as cost accounting, inventory management, and job costing, highlighting their benefits. The report then delves into managerial accounting reports, including budget reports, accounts receivable reports, performance reports, and cost reports, emphasizing the importance of accurate and relevant data. It also covers the application of marginal and absorption costing methods, comparing their impact on profit calculation and product costing. Furthermore, the report discusses budgetary control as a planning tool and examines the pros and cons of different planning tools. Finally, it analyzes different accounting measurement systems and their adoption by organizations, including the calculation of the break-even point for Excite Entertainment Ltd., providing a comprehensive overview of management accounting techniques and their practical application.

MANAGEMENT
ACCOUNTING

INTRODUCTION
Management accounting is the process to enhance quality operation of the business with
the help of making different management decision in the organization (Cooper, Ezzamel and Qu,
2017). In this, process accountants of the organization are provided with different internal
information about the company and different decision are made in the organization. Deloitte, is a
multinational professional services network, which is one of the "Big Four" accounting
organizations. Excite Entertainment Ltd. is a client of this consultancy firm which is seeking
consultancy services for the analysis of their available growth opportunities. Excite
Entertainment Ltd. was incorporated on 03 January 1995. It is classified as Non-govt company.
This report highlights about management accounting and difference of same with financial
accounting. After which the report highlights different type of accounting system and benefit
brought by them in the organization. After that the report highlights the importance of presenting
accurate data and different type of management accounting report. Report than goes to highlight
calculation of cost with the help of marginal and absorption cost. Report also highlights different
type of budgetary planning tool and pros and cons of same. In the end the report highlights the
different type of Accounting measurement system and different way different organization used
to adopt the same. Also calculation of breakeven point for cited organization.
SCENARIO 1
Section A: Understanding of management accounting systems
Management accounting is the process of analysing different type of business cost and
internal report of an organization to be used by manager of an organization for making different
decision in an organization.
Difference between Management and Financial Accounting
Management accounting is the form of the accounting which looks at providing good
source of internal information about the business to manager in the organization, so that manager
can take different decision in an organization (Schaltegger and Burritt, 2017).
Financial accounting whereas is a specialized branch of accounting which used to keeps
track on different financial transaction of an organization. :
Basis Management Accounting Financial accounting
Aggregation Management accounting used Financial accounting at the

to study operation of the
business at more detailed level.
Such as profit by product,
product line and geographic
region.
same time used to study the
operation of business as a
whole. As they used to depend
on the result of entire business.
Reporting focus Management accounting used
to consider operational report
of an organization. The report
which are generally distributed
within a company.
Financial accounting at the
same time looks at creation of
financial statement, which are
distributed both within and
outside organization.
Timing Management accounting used
to issue the reports in the
organization more frequently,
depending upon the
requirement or need of
information for the manager.
Financial accounting reports
are generally issued following
the end of an accounting
period.
Standard Management accounting used
to not compile with any of the
standard, when information is
compiled for internal
consumption (Rikhardsson,
2017).
Financial accounting at the
time has to compile with
various accounting standards.
Accounting System and their benefit
Accounting system is the tool which is generally adopted in an organization to organize
different financial information in organization. This system generally keeps track on different
expenses, income and activities (Management accounting system, 2016). Some of Accounting
System are as follows:
Cost Accounting System: Cost Accounting system is a system which is generally used
by an organization to known the cost incurred by an organization to carry out different operation

of business. Cost Accounting system used to look at both type of cost i.e. Direct cost and
Standard cost (Ax and Greve, 2017). Direct cost is price which is directly tied to production and
Standard cost is different estimation which are made regarding cost of process, resource and item
used in manufacturing enterprises. This system is required in Excite Entertainment to have idea
of real time situation of organizational cost.
Benefit
Cost Accounting system provide crucial support to Excite Entertainment is improving the
efficiency of a business. As this system provided information to organization, which looks to
reduce different cost of a company, in long run of business. Also, it helps business in optimum
usage of resources.
Inventory Management System: Inventory management system is the process or system
usage to see the monitoring and maintenance of different sort of stocked products in an
organization. Inventory management system is required in Excite entertainment to track progress
level of different services of the organization.
Benefit
Inventory management system in the organization helps the organization in minimizing
the inventory cost of company, which eventually help the company in maximizing sales and
profit of an organization. Also, it helps organization in managing variety of Inventory
management task in Excite entertainment.
Job costing system: Job costing system is the process of gathering or collecting different
information related to different type of cost which is associated with a specific production or
service job. This is required in Excite Entertainment to track variety of cost of materials used
during different carrying out different job (Nørreklit, ed., 2017).
Benefit
Job costing system help the organization in planning about future and making different
plan in the organization. As with the help of information provided by job costing system
organization is able to ascertain need of specific job in the future as well.
Section B: Methods used for Management Accounting Reporting
Managerial accounting reports can be defined as different resources or internal resources
which are taken as a basis for the purpose of planning, regulating, decision-making and
measuring the different performance of an organization. This reports are continuously generated

by the management of organization throughout the year. Some managerial accounting report are
as follows:
Budget Report: This report is used by internal management of Excite Entertainment to
compare the actual performance of the company with the pre-described budget of an
organization. The reason behind the same is to have idea about is to find out the deviation in an
organization. This report in organization used to be developed in the organization departmental
wise, which helps company in getting separate information about the performance of all
department.
This report generally helps the managerial accountant in planning the different future
activity in the organization. As with the help of Budget report manager used to make different
decision in the company to reduce the gap between the actual performance and anticipated
budget. This report also helps the company in ascertaining which expenditure level is high or low
in the organization.
Account Receivable: Account Receivable report is the report which used to showcase all
the invoices which are unpaid and also shows the duration for which they have been outstanding
for the business (Lachmann, Trapp and Trapp, 2017). This report is used by Excite entertainment
in identifying the average age of receivable and potential loses for client.
This report helps company in estimating the future situation of the organization, as it
helps organization in estimating the bad debts expenses to the business. Also, Account receivable
report help organization in identifying and touching all the slow payer client on time. This report
also help manager in knowing the payment of client for specific period. This helps company in
finding out the different issue related to collection process of Excite Entertainment Ltd.
Performance Report: Performance report used to show the performance of every
employee in the end of every term. It used to define the activity or task perform by an employee
or organization in certain period of time.
Performance report generally help the organization in focusing on the overall and big
objective of an organization. This report eventually helps the manager at Excite Entertainment in
focusing on building a good workforce in the company. As it helps of Performance report
organization is able to measure, control and monitor workforce in the organization. Also it helps
the manager at Excite entertainment in planning different recruitment activity for the future.

Cost Report: Cost report is financial report which used to defines the different type of
cost which has been incurred to produce goods or services in an organization. This report shows
all the type of the cost which has been incurred such as direct cost, indirect cost, standard cost
etc.
This report used to work as a basis of management accountant in Excite entertainment in
making different decision in the organization to reduce the amount of the cost incurred by
organization in production process of an organization. This report also works as a basis for
manager to plan future production activity of an organization.
Information presented should be accurate, relevant to the user, reliable
It is very important for all the organization to have an accurate and reliable information to
carry out management accounting functions in the organization. The reason behind the same is
that accurate data help organization in getting good base to make different decision in the
organization. Non accuracy of data may laid to delay in decision-making in the organization or
false decision-making in the organization. Another reason for having relevant data, is that it gets
difficult for manger in the organization in deciding which data is good for the organization to
make decision on the basis of the same. Also, not having good sort of accurate and relevant data
may impact the efficiency of decision-making in the organization, as quality of decision-making
in the organization used to fall in the organization.
Integration
Management accounting system is interlinked with the different accounting reports of Excite
Entertainment Ltd. as management accounting report used to provide quantitative and qualitative
information and as management accounting managerial accounting system encompasses the
processes companies install to control and plan operations combination of both of this help
Excite entertainment in making variety of different decision in the organization.
SCENARIO 2
Calculation as Per Marginal and Absorption Costing
Absorption Costing
Absorption costing system which generally used to calculate the cost incurred in
producing product of organization, by considering all indirect and direct cost in accounts. In this
type of costing system cost of finished good includes direct materials, direct labour, variable
etc.

Marginal Costing
Marginal accounting system which used to consider variable cost are charged against the
cost unit. It eventually means that attainable marginal cost effect the profit at the time of changes
in the volume of output produced (Hiebl and Richter, 2018). This is the concept of marginal
costing which is mainly based on the behaviour of the cost which varies with the volume of
production.

After going through the calculation with the help of both marginal and absorption cost, it
has been interpreted that the profit ascertain with the help of absorption cost is £35000 and with
the help of the marginal costing is £29000. This helps in understanding that absorption costing is
much better form of ascertaining the cost as compare to the marginal costing. Looking at product
cost per unit, it has been derived 6 with the help of marginal costing and 10 as per absorption
costing.
Using Absorption costing will help organization in identify importance of fixed cost as
well in the production of product in the organization, which will help company in getting more
relevant solution. As this system shows low level of fluctuation in net profit. On the same note,
organizational may also choose to have marginal costing in an organization, as it will help
company in saving time to prepare accounts as it used to save the time of organization, as it is
less complicated technique and will also help the company in fixing the selling price in an
organization.
SCENARIO 3
Part A: Planning tools used in management accounting
Budgetary Control is a system in the organization which looks at ensuring that
organizational actual revenues and expenditure adhere with the financial plan in the organization.
In simple words, it can be said that budgetary control is the process which looks at finding out
the result of budgeted figure within the actual performance. There are many different type of
planning tool which is used by Excite Entertainment Ltd. In the process of budgetary control in
an organization. Some of the planning tool are as follows:
Zero Based Budgeting: This is the type of budgeting tool in which organization used to
start preparing budget by taking zero as a basis and every function in the organization are
analysed on the basis of the need and cost in the organization (Azudin and Mansor, 2018). In this
budget nothing is carried forward by the organization from the previous year budget.
This budget planning tool will be effective for Excite Entertainment as this planning tool
used to justify all the expenses for each new period, this helps company in focusing on the
current function of an organization.
Advantages

Zero based budgeting helps organization in efficient allocation of resources in the
organization, the reason behind the same is that organization is having better idea about
resources availability. As this planning tool is based upon the needs and benefits. This approach
also helps the organization in improving the level of communication and coordination between
variety of the department in the organization. Also help in eliminating wastage of resources and
up-to data operations in the organization.
Disadvantages
Zero based budgeting is time-consuming process, as it does not carry forward any of the
expenses it gets difficult for manager in the organization in defining the necessary expenditure in
the organization. Also, this budgeting tool requires a good amount of human power as well as
knowledge for manager to adopt zero based budgeting in the organization.
Cash Flow Budgeting: It is the type of budget planning tool which used to estimate all
cash receipt and expenditure which may occur in the organization during a prescribed period.
This planning tool generally help the organization in assessing the availability of cash resources
in an organization (Leotta, Rizza and Ruggeri, 2017). This planning tool is based on some sort of
assumption about future expenditure and sales & Future forecast of accounts receivable
collection.
This planning tool will not be that effective for Excite Entertainment as this planning tool
is based on variety of the assumption for future, any wrong assumption may create different
challenge in the organization.
Advantages
Cash flow budgeting help organization in forecasting the better future budget of an
organization. As manager in the organization is having better idea about cash availability in the
organization. On the basis of the same manager in the organization used to plan different activity
in the organization. Also cash Flow budgeting help organization help manager in straying in
touch with reality in the organization. As cash flow budget help organization in having better
idea about the situation through which organization is going from.
Disadvantages
Biggest drawback of drawing cash flow budgeting is that it used to create a danger of
theft in an organization. As any leakage of information regarding cash resources of organization
to any interested party, may increases the chances of theft in the organization. It also reduces the

spending power of the organization, there are many transactions in the business life cycle which
cannot be completed in the cash form.
Production Budget: Production budget is another planning tool, this planning tool used
to calculate the amount of the product which need to be produce by the organization in coming
period. This number is certainly derived from combination of sales forecast and planned amount
of finished good requires in the organization. This planning tool is generally presented on
quarterly basis, big organization also used to prepare production budget on monthly basis as
well.
This planning tool will be effective in the organization as with the help of production
budget, organization will find it easy to manage different resources in the organization
efficiently.
Advantages
Production budget help organization in maintaining optimum level of balance between
the sales and inventory position of the company, this eventually help the organization in getting
good guideline to perform different activity in the organization, as production budget used to
bring good sort of clarity in the organization. Also, production plan help organization in
optimum utilization of the resources, as manager is having better idea about number of product
need to produce in the organization and used to invest resources accordingly for the same.
Disadvantages
Production plan used to consume good amount of time resource of company, as it
requires lots of efforts from the management of the company. As before deciding the amount of
product to be produce in the organization. Manager in the organization has to go through variety
of forecast and reports of management (Schaltegger, 2018). Also, as production budget in the
organization is prepared on the basis of different type of estimation, it eventually increases the
chances of impacting the quality of decision-making in the organization.
Operating Budget: Operating budget is the planning tool which used to forecast revenue
and expenditure for one or more future periods. This budget used to separate the different
expenditure or revenue into variety of different categories.
This planning tool will be effective in Excite Entertainment, at the same time it is
somewhat risky in nature as well. Reason behind the same is that this tool also used to forecast
future activity in an organization.