Management Accounting Report - Unit 5: Excite Entertainment Analysis

This report provides a comprehensive overview of management accounting, focusing on various systems and their applications. It explores cost accounting, job costing, and inventory management systems, detailing their essential requirements and benefits. The report also examines different management accounting reporting methods, including budget, cost, execution, inventory, manufacturing, job costing, and accounts receivable reports, highlighting how these reports aid in decision-making. Furthermore, the report delves into how management accounting tools, such as benchmarking, key performance indicators (KPIs), and the balanced scorecard, assist in resolving financial problems. The report uses a case study on Excite Entertainment to demonstrate these concepts, providing practical insights into how management accounting contributes to effective financial management.

MANAGEMENT ACCOUNTING

TABLE OF CONTENTS
P1 Explain management accounting systems and essential requirements of different management
accounting systems......................................................................................................................................3
P2 Different methods used for management accounting reporting..............................................................5
P5 Explaining how management accounting tools help in resolving financial problems.............................7
REFERENCES..............................................................................................................................................10

P1 Explain management accounting systems and essential requirements of
different management accounting systems
Management accounting is the one of the common branch of accounting which is widely
used by the business firms to control cost of production in the business. Varied approaches are
available in the mentioned discipline that can be used to curb cost elevation in the business.
Through management accounting close eye is kept on the costing of the product and on time
strict actions are taken to control it. By doing so profit is increased in the business. Varied sort of
management accounting systems are given below.
 Cost accounting systems: It is the system used by the corporate that manufacture only
one specific product or there is no specific portfolio of the products. Under this system
accounting for varied stage of production of specific product is done. Time to time
manager obtains report and on that basis it makes decisions about unit’s number that need
to be produced at the workplace. Through managers come to know areas where cost is
high and urgent actions are needed to control circumstances (Pavlatos and Kostakis,
2015). Thus, it can be assumed that cost accounting system have due importance for the
firm. Marginal and absorption costing methods are used by the managers to compute
overall cost of the products. In marginal cost only variable expenses are taken into
account. On other hand, in absorption costing both fixed and variable expenses are taken
into account to compute cost of product. Job costing system: Job costing is the system under which for more than one product
accounting is done. Under this system for each product calculation of cost is done
individually For example a company manufacture plastic and chairs then in that case
accounting for both will be done differently so that cost of each can be estimated in
proper manner. Entire record is kept separately for the product line in Excite
entertainment. Thus, managers get better overview of overall cost structure. Job costing
system is widely used by the business firms. Like cost accounting system in this one also
time to time varied reports are prepared which greatly assist managers in making day to
day business decisions. Thus, it can be state that job costing system have due importance
for the business firms.

 Inventory management system: Inventory management system is used by all size of
firms whether they are short, medium or large size firms. This is because in this system
facts are stored that contain information about number of times raw material ordered and
its price etc. On the basis of all relevant information material manager determine quantity
of raw material that need to be ordered (Coad, Jack and Kholeif, A. 2015). Availability of
entire facts prevents accumulation of unused quantity of raw material at workplace.
Hence, due to such kind of benefits inventory management system is widely adopted by
all size of business firms. Just in time is the common inventory management system
approach. Under this method when material is going to end and reach bottleneck level
fresh order for purchase of raw material is placed. Inventory management techniques are
given below. LIFO: It is the method which is employed to measure COGS. Under this method most
recent produced items cost is first computed in COGS (What is LIFO., 2019). FIFO: It stand for first in and first out, under this method in asset management in which
asset produced first are sold first. In respect to tax FIFO assume that assets with old cost
is included in the income statement COGS. It can be said that both approaches are
different from each other. Weighted average: It is used for inventory valuation and in this weighted average amount
is used to calculate amount that goes to COGS and inventory. In this approach COGS is
divided by units available to sale.
There is difference between management accounting and financial accounting. One of the
major differences between both is that in case of management accounting cost in respect to
production related records are maintained. On other hand, in case of financial accounting
entire business expenses are recorded and analyzed. This is the one of the major difference
between both sorts of accounting.
Financial accounting Management accounting
Legal requirements In case of financial
accounting accountant have
to follow GAPP and IFRS.
In case of management
accounting one has to follow
common procedure not
regulated by anybody.

Format of presentation In financial accounting
format of presentation is
fixed for financial
statements.
In case of management
accounting no fix, format is
followed.
Area of coverage Financial accounting
indicates performance of the
business firm at upper level
(The difference between
financial and managerial
accounting. 2019).
Management accounting
indicate performance of the
firm at ground, root or basic
level.
Type of data In case of financial
accounting operating and on
operating expenses, income
and assets as well as liability
and cash flow related data
are available.
In case of management
accounting only cost related
data is considered.
P2 Different methods used for management accounting reporting
Managers in order to make decisions need some important facts. These facts are available
in the reports which laid down basis of decision making process in the business. Varied sort of
management account reporting are given below.
 Budget report: This report contains information about expenses that are incurred in the
business and projected value of varied elements of the budget. Actual expenses are
compared with projected value and on that basis, it is determined whether firm performs
better or worse at Excite entertainment. This is one of the major benefit of budget report
for the firms. If budget report will be prepared on time then in that case on time manager
will be able to make decisions Cost report: In this report varied expenses are given and their comparison with previous
month’s value is done. This reflects whether over expenses are made or same is under

control. Cost control strategy is formed if manager think that extra expenses are made by
the business firm. If cost report will be prepared then in that case on time manager will be
able to make cost control related decisions. Execution report: In the execution report progress made on performance of varied
activities is determined. On viewing report manager comes to know about tasks that have
pending status and not completed till the date (Wouters and Kirchberger, 2015). On other
hand, manager also gets information about tasks that are started but not completed till the
time. Thus, on basis of input received from execution report manager prepare plan for
resource utilization in the business. If accounting system will be sound and information
will be available on time then in that case manager will take decision to change plan or to
do additional work in case any mishap happened. Inventory report: It is the report in which inventory related information is available. On
basis of available facts manager at Excite entertainment decide whether raw material is
used effectively. On basis of such kind of assumption inventory manager decide whether
to place order for purchase of raw material. If inventory accounting system will be good
and facts will be available on time then in that situation department head will take
decision to delay purchase of inventory or to promptly place order for raw material. Manufacturing report: This report indicates number of units that are produced till the
time number of units that need to manufacture in the upcoming time period. Report also
reflects at end of the month the difference between actual and projected units.
Accordingly, production plan is prepared for next month. If production accounting
system will be excellent and evidences will be available on time then in that case
production manager will take decision to increase production on time. By doing demand
can be meet in proper manner. Job costing report: Under this report expenses incurred on varied product lines are
recorded and areas where higher amount of expenses made are identified. Accordingly,
manager prepare plan to control expenses in the business (Strauss, Kristandl .and Quinn,
2015). If accounting system will be efficient and sufficient facts will be available on time
then in that scenario line manager will take decision to increase production on time in
specific product line or on time it can take decision to control expenses in same. Such
kind of thing lead to cost control and meeting of demand inn the business.

 Account receivable report: It is another report under which account receivables are given
in the report. Varied sort of information about account receivable are given in the report
like time period on which account receivable must be converted in to cash, time period by
which receivable date passed etc. Overall it can be said that account receivable report
assist managers in managing account receivable in the business. If accounting system is
good and information available on time then in that case manager can take decision when
to pay to creditors and when not.
P5 Explaining how management accounting tools help in resolving financial
problems
Table 1BEP and number of units to be produced to earn profit of 90000
Fixed cost 120000
Sales price per unit 40
Variable cost per unit 10
BEP 4000
Assumption
4000 Units are produced
Units 7000
Sales 280000
Expenses
Variable expenses 70000
Fixed cost 120000
Toal expenses 190000
Profit 90000
In order to achieve profit of £90000 firm must sold 7000 units. Breakeven point is
achieved at 4000 units. Means that firm need to produce 3000 units more in its business to gain
profit of £90000.

Management tools to large extent assist business firm in solving its financial problem. In
the business with passage of time many new problems come in existence and it is very important
to solve them at fast pace so as to minimize loss in the business. In order to solve these problems
multiple techniques are used like benchmarking, key performance indicators, balance scorecard
and financial governance.
 Benchmarking: In this approach values are fixed for the activity and if actual value goes
beyond that specific number performance is considered as good or bad. In respect to
expenses mostly benchmarks are determined. Expenses cover certain percentage of sales
and under relevant approach amount as standard is computed by charging specific
percentage on sales. Thereafter, actual value of the variable is compared with determine
threshold number and in this way performance is accessed (Pavlatos, 2015). On
identification of problem corrective actions are taken to solve the problem. Key performance indicators: Key performance indicators are also known as KPI which
is one of the important tool that is used for performance measurement by the business
firms. Under this method for varied variables varied threshold levels are determined and
by comparing actual values with these levels performance of the firm are evaluated and it
is identified whether performance is good or bad. In order to prepare key performance
indicators varied tools like Tableau are used by the firms. In these tools through
visualizations in better way any scenario can be show by the manager to the senior officer
for decision making purpose. Balance scorecard: It is method that is used to improve business operations. This method
is also used to provide feedback to the managers in respect to making business decisions.
Whatever information gathered in the business is analyzed in the balance scorecard from
four points of views which are learning and growth, business processes, customer
perspectives and financial data. It can be said that on basis of obtained information from
balance scorecard manager identify improvement that comes in the business operations
and way in which it benefits customers or satisfy their needs. In other words, it can be
said that balance scorecard reflects areas where business processes is not doing well and
negative image that customers have about firm due to inefficient performance of the
process (Bobryshev. and et.al., 2015). Thus, it can be said that relevant approach assists
managers in improving business operations.

 Financial governance: Financial governance refers to the ways in which facts are
collected, managed, monitor and control financial information in the entire accounting
system. It basically indicates tracking of data performance management and compliance
with rules and regulations. In the accounting system of Excite there is compliance system
inherit in it where rules are prepared (Financial governance., 2019). In these rules
procedures are given of way in which transactions must be recorded in the business.
Multiple layers are prepared where senior officers verify financial information and ensure
that right values are included in the accounting software. This ensure that any sort of
corruption is not done at the workplace and in fair manner accounting is done. Benefits of
compliance is that financial statements show accurate information which assist managers
and other stakeholders to make decisions. In case anyone does not comply with any rules
and regulations then in that serious action is taken against that individual like termination
etc.

REFERENCES
Books and journal
Bobryshev, A. N. and et.al., 2015. The Concept of Management Accounting in Crisis
Conditions. Journal of Advanced Research in Law and Economics. 6(3 (13)). 520.
Coad, A., Jack, L.and Kholeif, A. O. R. 2015. Structuration theory: reflections on its further
potential for management accounting research. Qualitative Research in Accounting and
Management. 12(2). 153-171.
Pavlatos, O. 2015. An empirical investigation of strategic management accounting in
hotels. International Journal of Contemporary Hospitality Management. 27(5). 756-767.
Pavlatos, O.and Kostakis, H. 2015. Management accounting practices before and during
economic crisis: Evidence from Greece. Advances in accounting. 31(1). 150-164.
Strauss, E., Kristandl, G.and Quinn, M. 2015. The effects of cloud technology on management
accounting and decision-making. Management and Financial Accounting Report. 10(6).
Wouters, M.and Kirchberger, M. A. 2015. Customer value propositions as interorganizational
management accounting to support customer collaboration. Industrial Marketing
Management. 46. 54-67.
Online
Financial governance., 2019. [Online]. Available through:<
https://www.tagetik.com/en/glossary/financial-governance#.XcvuJtUzbIU>.
The difference between financial and managerial accounting. 2019. [Online]. Available
through:< https://www.accountingtools.com/articles/what-is-the-difference-between-financial-
and-managerial-acco.html>.
What is LIFO., 2019. [Online]. Available through:< https://www.accountingcoach.com/blog/what-
is-lifo>.