Management Accounting Report: Financial Analysis for SWE (Semester 1)

This report provides a comprehensive analysis of management accounting practices for Small White Elephant (SWE). It begins with an introduction to management accounting and its systems, including cost accounting, inventory management, job costing, and price optimization. The report then delves into various management accounting reports such as job cost reports, inventory management reports, operating budget reports, accounts receivable aging reports, and performance reports. A key section focuses on the income statement for SWE, comparing absorption and marginal costing systems. The report also examines planning tools used for budgetary control within SWE and explores how the company is adopting management accounting systems to address financial issues. The conclusion summarizes the key findings and recommendations, supported by references to relevant academic sources.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and systems for Small White Elephant (SWE).........................1
P2 Explain various methods used for management accounting reporting.............................3
TASK 2............................................................................................................................................5
P2 Income statement for SWE...............................................................................................5
TASK 3............................................................................................................................................7
P4 Planning tools used for budgetary control within SWE....................................................7
TASK 4..........................................................................................................................................10
P5 How SWE is adopting management accounting system to face the financial issues......10
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting officer has its own value in SWE that manage the financial
issues and resources effectively. This will help business to improve their operational activities.
The report covers the essential management requirements and different management accounting
system. Management accounting reports are also assessed in this report with income statement
for SWE using absorption and marginal costing system. Different types of planning tools to
control the budget and manage the financial issues will be discussed in this report. Management
accounting officer characteristic to solve the financial problems and help management towards
their decisions also assessed in this report effectively.
TASK 1
P1 Management accounting and systems for Small White Elephant (SWE)
MANAGEMENT ACCOUNTING
Management accounting is very useful for SWE that it helps them to manage their
internal and external transactions effectively. It is also known as managerial and cost accounting.
Management accounting is used for analysing business cost and operations which will help
management accountant officer to prepare internal and external financial reports, decision-
making process and record for accounting effectively. It also helps in preparing financial and
costing data to covert it into useful information for the officer at SWE. This also helps in
achieving better control and planning towards business operations.
ACCOUNTING SYSTEM
Management accounting system provides useful data to the officer to use and manage the
business resources to facilitate the firm effectively (Ab Rahman, Hassan and Said 2015). The
wider management information system also provides useful data to meet the requirements of
management in terms of short and long decision-making. It involves the cost of products, goods,
services, data to manage operations and planning.
Cost accounting system: Cost accounting system helps officers to evaluate the cost of products
and services, business resources and units and cost of different departments effectively. This will
help officers to manage and control the cost within budget at SWE effectively. Management
accounting officer can also make effective planning and strategies to control the various business

operations effectively. Cost accounting system is applied on retailers, manufacturers,
government departments and sole proprietorships efficiently.
 Cost accounting system helps officers to determine the cost of products and services
offered by SWE.
 The system also helps in evaluating selling price of the product and service.
 It also analyses the profitability of business which helps in competing with others.
Inventory management system: Inventory such as products, resources, finished goods, raw
materials and work in progress comes in inventory management. The inventory management
system is a plan or policy from which officers can manage and control the inventory levels
effectively (Campanale and Cinquini, 2016). This will help them to determine the stock
availability, what level of stock should be managed and quality or quantity which organisation
should order to complete its operational activities effectively. The inventory cost is also known
as holding or carrying costs such as facilities, insurance, taxes, utilities and cost of capital. This
will also include the purchase quantity of products and services, transportation costs and shortage
costs such as finished goods, raw materials and work in progress effectively.
 Inventory management system protect against uncertainties and also raw material
shortage.
 The system supports strategic plans and policies and also helps in taking advantage of
economy scale effectively.
Job costing system: Job costing system is a procedure of accumulation and cost recording. Job
costing system identifies the job or group of people from which the cost can be collected and
managed effectively. Job costing system is useful for those businesses where the production of a
product or service is undertaken for a special or specific requirement of customer effectively and
efficiently (Chenhall and Moers 2015). In addition to this, each order given by the customers
takes short period to complete.
 Job costing system helps officers to control the cost make planning accordingly and
finally to take decisions.
 It also helps to calculate or determine the selling price of a product and evaluate the profit
and loss effectively.
 Complete the specific order in minimum time.

Price optimising system: Price optimising system is a process of changing the price of products
and services according to the sensitivity of customers or clients effectively. This will allow SWE
to know the sensitivity of clients and make changes in prices accordingly which will help them to
increase their profitability level effectively. Price optimising system is based on customer’s
feedbacks and comments from which an organisation make changes in their products and
services price to meet the sensitivity of clients efficiently.
 Price optimising system provides benefits for the firm in terms of their profitability by
keeping the retentions of customers at same level effectively.
 It also helps to determine the profitability level which is based on existing customers to
make changes in their products and services accordingly and effectively.
P2 Explain various methods used for management accounting reporting
MANAGEMENT ACCOUNTING REPORTS
Reports from management accounting helps management accounting officers to make
effective decision-making regarding to the business operations, which is vital to the firms
operational activities (Cooper, Ezzamel and Qu, 2017). This will also help them to provide some
useful information about different business activities and operations such as financial, which will
help them to make decisions positively and effectively. Such management accounting reports
provides information about financial or non financial activities which helps officers to make
effective and efficient decisions for the firm.
 Job cost reports: Job cost reports helps officers in terms of showing the cost incurred for
a particular work or project effectively. Such reports are combined with the revenue
estimates that the SWE can identify their profitability efficiently. These reports also help
management to focus on those areas which increasing the profitability and production
effectively instead of wasting time and money for various works with law margin of
profits. Job costing reports also helps officers to analyse the various costs while the work
is in progress. This will help management to manage and control areas which wasting
time and money for them before the cost gets out of their hands.
 Inventory management reports: Inventory management reports are useful for
businesses with physical inventory. This will help them to manage and control the
inventory monitor levels, which helps to evaluate the levels to be managed, quantity

which organisation should order and the stock which should be replenished effectively
and efficiently. Unit overhead costs, inventory waste and labour costs comes under the
inventory management reports (Dutta, Lawson and Marcinko, 2015). Organisation can
compare various assemblies to evaluate the development and rewards for the best
performances in departments effectively.
 Operating budget report: Operating budget reports helps SWE to evaluate the
departments performances from which officers are able to monitor and control the costs
of operations effectively. Such reports are also useful to provide rewards and incentives
for the best employees performing in their individual works. This will help officers to
manage the cost under the budget of firm operations.
 Accounts receivable ageing reports: Account receivable ageing reports helps
management accounting officers to manage and control the cash flows in regard to credits
which is offered to the clients and customers efficiently. Such reports are also known as a
critical tool which breaks down the customer balance by the time they owned the firm.
Such reports also involve separate columns for invoice which are 36,60 or 90 days late.
This will help officers to collect the problems effectively. Organisation should tighten
their plans and policies for credits, if the customers are unable to pay their balances. Time
to time management of account receivable ageing reports also helps officers to collect
department information to overlook its previous debts effectively.
 Performance reports: Performance reports helps management accounting officers to
evaluate and access the performance of products and services of departments, groups,
operating markets and market segmentation effectively (Fullerton, Kennedy and
Widener, 2014). It will also help officers to determine the profitability analysis for
market segments, products and services from which they are able to raise their profits and
benefits efficiently. Performance reports also helps organisation to look over the
performance of different departments and employees so that they can make changes and
improve their performances individually and effectively. SWE can make corrective
measurement in order to control the costs which will help them to bring efficiencies in
the operational activities effectively.

Thus, management accounting reports helps business as well as officers to collect all the
information and data related to different departments and employees to make effective decisions
for business operational activities. Officers can make effective strategies and plans to increase
their profitability and production while managing the employees work at work place effectively
and efficiently. This will also help them to manage the various costs under the budget and leads
towards accomplishing desired objectives and goals effectively.
TASK 2
P2 Income statement for SWE

From the above analysis, it can be concluded that the absorption costing system creates
9300 net profit and 9600 for marginal costing system. Thus, it can be said that both methods are
showing different results in terms 9300 and 9600 of net profit amount. The marginal costing
system provides sales and deduct cost of production which is 11200 and closing stock of 1600. in
addition to this, the production overhead 100 will be deducted and production cost will be added
to the sales 11,500 and the net profit will be 9600. in the same process of absorption where the
cost of production and variable cost is added for the deduction in sales which produced 9300 net
profit for the firm. The process for finding net income is various from each other that marginal
cost system only take variable cost for computing overall cost and accounting for products
effectively (Hasanli and Jamali, 2016). Apart from this absorption costing system is very
different from marginal cost system that it takes all the variables costs to determine the
accounting of products. Thus, there is mirror difference between these two but the results are in
big variations effectively and efficiently. Before evaluating marginal and absorption costing
method it is very important to understand variable expenses, semi variable expenses and fixed
expenses for the firm. Fixed expenses are those expenses which remain same and unchanged for
the business such as the employees, managers, officers salary is fixed expenses for the firm.
Variable expenses are different in nature that it changes consistently and also never remain same
for the SWE. Semi-variable expenses are very different from these both that its one part remains
same and another changes accordingly and consistently. Variable expenses are created by the

business with high investments. It is very important for the officer to select the best one for
accounting and better calculation. Both methods are crucial for the firm in different manner and
condition. Absorption costing system is assist with fixed expenses. This can said that purchase of
fixed assets for the firm is not necessary and required that it affects financially and entire process
of production effectively. Even the fixed assets is not directly considered by marginal costing
system for production in SWE. Both methods have their own importance and also useful for the
firm while taking different aspects and generating net income effectively (Hirsch, Seubert and
Sohn, 2015). Absorption costing system helps officers to determine the profitability gained by
the firm using both expenses effectively. Thus, there are few negative elements associated with
these two approaches but both are useful for the firm to reduce the expenses and raising its
profits effectively. It also helps management to make effective decision-making regarding the
activities and operations for generating profits and production.
TASK 3
P4 Planning tools used for budgetary control within SWE
Budgeting control is a formulation of strategies and plans which controls the costs of
different resources and activities for present and future in numerical terms effectively and
efficiently. SWE should manage and control its budget for divisions, units, resources, financial
activities, departments etc. Budgetary control process is managed within a year in terms of
financial activities. Budgetary control helps organisation and officers to make a coordination
with resources which helps them to determine the standards required to control the whole system
effectively (Kastberg and Siverbo, 2016). It also helps to provide unambiguous and clear
guideline for business expectations and resources effectively and efficiently. Budgetary control
also helps to measure the performances of employees, and managers as well as units from which
the cost can be managed and use of resources will be effective within SWE.
FINANCIAL BUDGET
Financial budget describes the expectations of the firm for improving and developing
cash revenues for future certainties and how the firm will make plans and strategies to use this a
benefit effectively. Cash can be generated from sale of assets, sales revenue, loans, insurance of
stock, such activities. On the other side cash will be deducted from purchase of new assets,

paying dividends and expenses, repaying debts etc. Such things affect the financial activities
within SWE effectively.
 Cash budget: Cash budget is a forecast of cash receipts. Budgeting for cash is important
for SWE to manage and control the incoming and outgoing cash activities into monthly,
weekly or can be daily periods effectively. This will help officers to ensure that the cash
budget is meeting its current obligations. This will also help to determine the availability
of excess cash in the firm effectively.
 Capital expenditure budget: Capital expenditure budget is also a financial budget
which focuses upon assets of SWE such as new plants, machinery and lands. Business
acquires such things with long term bonds or securities effectively. Capital expenditure is
associated with large investments that officers pay a close attention towards it.
 Balance sheet budget: BCB helps to enhance the balance sheet of business if the budgets
are meeting their requirements. This will also help officers to serve the controlling which
ensures that the budget is meshed properly.
OPERATING BUDGET
 Sales and revenue budget: Sales and revenue budget focus on the income which a
business receives from its operational activities. It is very crucial for the officers that they
can determine the financial position of the firm in future effectively.
 Expense budget: Expense budget helps officers to determine the anticipated expenses in
a specific time effectively. It will also help them to be prepare for future expenses
effectively and efficiently.
 Project budget: Project budget defines the difference between sales and expenses
effectively (Kotas, 2014). In respect to this, if the anticipated profits are small, then some
actions are necessary to raise the revenue and sales budget and to control the expenses
efficiently.
FIXED AND VARIABLE BUDGETS
 Fixed cost: Fixed cost describes the fix expenses. Managers, officers and employees
salary is the best example for fixed cost in business effectively. Such things can be
incurred in operational activities as well (Krishnan and Joshi, 2017).

 Variable cost: It depends on the scope of operational activities in SWE. The best
example for variable cost is the raw materials purchased by the firm.
ADVANTAGE AND DISADVANTAGE OF BUDGETARY CONTROL
ADVANTAGE DISADVANTAGE
Budgetary control coordinate SWE activities in
various departments effectively.
Budgetary control occurs a major problem if it
is used mechanically and rigidly.
It helps to convert strategies and plans into
actions efficiently.
Lack of participation can demotivate
employees in the firm.
Budgetary control provides a good evidence of
SWE operations and activities.
Budgetary control can also cause perceptions
of inequality.
It helps to develop the communications
between employees at workplace.
Increase competition for resources and politics
effectively.
Budgetary control justify and clarify all the
aspects to improve the resource's allocation.
Rigidly and mechanically budget can reduce
the initiatives and innovations at lower level
effectively.
Budgetary control is a natural complement for
plans and strategies (Malmmose, 2015).
Budgetary control consumes time and may
change the flexibility of developing plans and
strategies.
EFFECTIVE BUDGETARY CONTROL
An effective budgetary control can help management accounting officers to remove the
financial problems and use resources effectively in business operational activities. The key for
successful budgeting is setting an appropriate standard, divisions to make and defend their own
budgets and top management support. Users participation also helps officers to make an effective
budget which helps to control the lower level activities and provide useful information to
officers.
PORTER'S FIVE FORCES ANALYSIS FOR FINANCIAL POSITION
 Threats of new entrance: Threats of new entrance determine the entrance of new
businesses in the market that the competition will be tough for SWE for the same market.

It is very important for SWE to create high barriers which will help it to prevent other
firms in the market easily (Malmmose, 2015). This can be only done by effective
budgetary control and managing the cost to raise its profitability.
 Bargaining power of suppliers: Suppliers have strong power for bargaining with
customers that they can provide low quality products with high prices effectively. This
will affect the business profits and they have to pay more for their materials. The SWE
should manage its budget for such situation that they can purchase materials for their
operations. They should also try to manage the suppliers bargaining power to reduce the
cost of raw materials (Mikes and Morhart, 2017).
 Bargaining power of buyers: Customers also have the power of bargaining that they can
demand high products and services with low prices effectively. This will also affect the
profitability that business should try to manage its cost of products and quality
effectively.
 Threats of substitutes: There are so many firm try to expand their businesses in the
market and sometimes for the same product. Customers can easily find the substitute
products and services which affect the revenues of SWE effectively and efficiently. Thus,
business should try to manage their products and services in unique way which will help
them to target their customers and increase their profitability effectively (Van der Stede,
2016). This will also help them to make their financial position strong and effective.
 Rivalry among existing competitors: The force describes the business profitability and
competitiveness among other firms in the same market effectively. The SWE should try
to improve and develop its customer loyalty and growth which will help it to compete
other in the market efficiently and also make an effective goodwill.
TASK 4
P5 How SWE is adopting management accounting system to face the financial issues
FINANCIAL ISSUES
Any business has its own lives that they become successful only after completing
challenges and solving problems effectively. Financial problem is one of them and also the major
one for any kind of business. Financial problems will reduce the revenues and capital of SWE

that the correct measurement and solution for financial problems is necessary. Here are some
financial problems are discussed which SWE faces during operational activities:
 Production and Profits: Cost of products, services, raw materials, and any other activity
which consumes cost (Mitter and Hiebl, 2017). Regular increasing cost can be a big
financial problem for the firm effectively. The cost reducing the profitability and also
Increasing cost for the firm can also reduce the chances of finding opportunities, which
may be a disadvantage for the firm. Cost can be managed by effective budgeting and
effective use of different resources.
 Funding: Every business want to expand their activities and operations in the market or
anywhere. It requires funding for any business expansion. Businesses faces problems
while dealing with financial activities with the lack of funding. This will prevent them to
purchase quality raw materials, machineries, tax payments etc. funding requires for all
the activities to be done effectively and efficiently (Feigenbaum A., 2017).
 Too many debts: So many debts can harm any business in any manner. High credit card
expenses, loans and interests can easily raise the financial budgeting issues effectively.
Too many debts also prevent banks to provide loan for expanding the business or for any
further activity (Tissot, 2017). These are in form of liabilities which can affect the
revenues and cash of firm effectively and efficiently.
 Poor financial management: Wrong and weak management for financial issues can
easily affect the business operational activities. Officers and managers are responsible for
managing financial activities and solving issues effectively. Output per member and
employees of the firm also affected by the poor financial management which increase the
negative perception in employees minds effectively.
 Budgeting problem: Financial problems affect the business budgetary control that
business usually spent more money on unnecessary resources from which they lose their
budget (Pan and Cao, 2016). Rigidly and mechanically budget can reduce the initiatives
and innovations at lower level effectively. Budgeting also affect the profitability and
production and decrease the growth level for the firm effectively.
MANAGEMENT ACCOUNTING TECHNIQUES OF MANAGER TO RESPOND
FINANCIAL-ISSUES IN BUSINESS

 Helpful in decision making: Management accounting officers are effective decision
makers that they can solve any financial problem and take decisions in difficult situations
as well. Officers helps management by providing them useful information about finance,
costs and different types of resources. This will help them to make effective decision-
making in order to reduce the financial issues effectively and efficiently.
 Key performance indicator (KPI): The methods is useful as well as important for the
firm in order to measure values which will help to demonstrate how company is working
towards the objectives and goals. This will help to assist the targets in order to become
success in the future. This will also help to manage the financial problems within firm.
 Benchmarking: Benchmarking is a process in which the company compares the present
data and results to another rising firm in the industries. This will help to measure the
position of the firm within the market and will also provide suggestions and ideas from
which the firm is able to meet its financial goals and targets effectively.
 Provides data not decisions: Management accounting officer provides useful
information and data for the management department. It's up to the management that how
they use and utilize those data to reduce the financial problems and issues effectively
with effective decision making.
 Selective nature: The characteristic of a management accounting officer in SWE that he
collects data and information which is useful and relevant for the organisation in order to
remove the financial problems effectively (RAHNAMAYE and ROSTAMI, 2015). This
will help management to acquire some importance information from which they can
make effective decision-making at workplace and remove the financial issues efficiently.
 Assist in achieving objectives: Management accounting officer not only provide useful
information to management but also helps in achieving organisations desired goals and
objectives from which they can accomplish their target to become successful effectively
and efficiently (Sofian, Tayles and Pike, 2017). Officer make report of business strengths
and weaknesses, operational and organisational activities from which management can
easily eliminate their financial issues and will increase the profitability and production
effectively.

 Think beyond: Management accounting officer has a vital thinking towards business
activities and operations. SWE MA officer relate the firm to the future opportunities and
certainties. This will help management to increase their opportunities for raising their
profits and production effectively. This will also help them to manage and control their
financial issues from which they are able to take advantages of their present and future
opportunities effectively and efficiently.
 Increase in efficiencies: Management accounting officer plays a vital role for increasing
organisation and employees efficiencies. There are so many competitors in the market
that SWE requires some effectiveness and efficiencies to compete others in the same
market simultaneously (Renz, 2016). It will also help management to increase their
efficiencies in different activities and operations which will also help them to reduce their
financial issues and increase their profits and production effectively and efficiently.
Thus, effective management accounting officer can help management and business to
reduce their financial issues with his characteristic and efficiencies effectively. Management also
acquire useful information that helps them to control unnecessary expenses which increase the
financial returns and help them to make effective decisions for different situations.
CONCLUSION
It can be concluded from the above report that management accounting officer is useful
for any kind of business in order to manage the financial problems and resources effectively.
Different types of management accounting systems help management and business to understand

the customers and their internal activities. Reports made by the management officer helps to
evaluate the performance through informations and data. Income statement for SWE to evaluate
the net income by absorption and marginal methods. Different types of planning tools helps
management to control and manage the budget. Budgetary control also reduce the chances of
cash flow and financial issues. Benefits of budget management help business to achieve their
financial goals. The characteristics of management accounting officer helps business to manage
their financial resources from which they can reduce the financial problems to raise the
profitability and production with effective decision-making effectively.

REFERENCES
Books and Journals