Management Accounting: Costing, Budgeting, and System Adoption

This report provides a detailed analysis of management accounting systems, focusing on cost analysis, costing techniques, and budgetary control methods. It discusses different types of management accounting systems, including cost management, inventory management, and price optimizing systems, and explores various methods used for management accounting reporting, such as performance reporting, cost accounting reports, inventory management reports, and job costing reports. The report also illustrates cost calculation using different costing techniques and examines budgetary control tools, including master budgets, operating budgets, cash budgets, and financial budgets, highlighting their advantages and disadvantages. Furthermore, it includes a comparison of how organizations are adopting management accounting systems, using Capital Joinery Ltd as a case study. This document, contributed by a student and available on Desklib, serves as a valuable resource for understanding management accounting principles and practices.

Management
Accounting

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Part 1................................................................................................................................................1
Task 1...............................................................................................................................................1
P1. Discuss the Management Accounting System......................................................................1
P2. Different methods used for management accounting reporting............................................3
Task 2...............................................................................................................................................5
P3. Calculation of cost using different costing techniques..........................................................5
Task 3...............................................................................................................................................5
P4. Tools and budgetary control along with advantages and disadvantages...............................5
Task 4...............................................................................................................................................8
P5.Comparision on how the organization are adopting management accounting system...........8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management Accounting is the process of preparing reports about business operations
that helps managers make short-term and long-term decisions. It helps a business pursue its
having goals to identifying, measuring, analysing to communicates information to managers
(Allain, Lemaire and Lux, 2021). Strategic decision-making power through which organizations
can gain stability in market. It also assists the external stakeholder to be more effectively in
determining the actual financial status of an organization's efficiency. The primary aim of
preparing management accounting is that help to holding back to maintain structure of company.
The company is selected Capital Joinery Ltd is an medium sized standard enterprise where they
incline render better financial services as well as dealing with furniture goods better gaining of
competitive advantages against competitors (Alvarez, Bello and Vazquez, 2021). They
guarantees that their furniture must be trendy according to the current needs and requirements of
the customers.
As per the report, the important topics are following with discussion on the different types of
management accounting system, a variety of methods used in accounting reports and preparing
income statement by analysing the cost analysis with various types of cost. They are preparing of
income statement along with the merits and demerits, methods of planning tools that can be used
to control budgets, and comparison between the two organizations related to the financial
problems they are facing and solutions to them.
MAIN BODY.
Part 1
Task 1.
P1. Discuss the Management Accounting System
Financial Accounting: It is an effective reporting division that leads ti maintain leads for
business transciation in the organization (Balstad and Berg., 2020). It is depicted for suitable
paymemt reported and reflected quarterly to consider financial statements, including
income, balance sheets, etc.
Management Accounting: It is a type of methodology that managers use to measure
specific operation for the company. It tend to undertake effective collection of data from
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several department by effectively reviewing to undertake decision by managers. In the
perspective of Capital Joinery Ltd, several accounting systems have beenfital for managers
that create develop effective strategies considering to get success within prominent
activities.
Difference Between Management and Financial Accounting
Management Accounting Financial Accounting
It assists managers to make effective and
profitable decisions making for an
organization.
It provide information that is in monetary as
well as non monetary terms.
It helps management analyze the actual
financial position of an organization through
preparing within annual financial records.
It facilitates proper details of an organization
in terms of financial statement basis like
profit and loss, balance sheet etc.
There are various management accounting systems are as following below:
Cost Management System: According to this method effectively opted by the suppliers to
measure the suitable cost of the product within other concerning functions. For this, the
manager needs to decide the company's overall spending, which is useful for the effective
cost (Becker, Pedell and Pfaff., 2021). In relation to capital Joinery Ltd, their manager trends
to follows a suitable program that leads to offers with various benefits in terms of having an
effective company development strategy.
Inventory management system: This system depicts maintaining records of current level
of inventory with an organisation that helps meet customer needs and wants. In the
perspective of Capital Joinery Ltd is use to maintain better relationships with new clients
and reality loyalty of existing customers by maintaining with a better sufficient level pre
ordered product can be delivered on time without dealy in time. Furthermore, it consists of
different types, which include LIFO, FIFO and AVCO. The term LIFO means the received
inventory that used in manufacturing activities. FIFO means the product and services
purchased earlier will be used at first production house activities. About AVCO is referred at
an average cost which is distributed based on produced. The management team of Capital
Joinery Ltd is handling to collect important information about the inventories.
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Price optimizing system: This system facilitates providing information about the client's
actual perception towards better pricing policy framed through an organisation in which the
manager makes easy to bring new pricing policy to retain employees.
Job order costing system: This system facilitates to providing information about the actual
cost incurred in manufacturing each and every unit within an organization. It guides an
organization in keeping a record of total cost, making it easy for managers to estimate the
profit where it provides better returns on the maximum amount of investment. This will
make easy for manager Capital Joinery Ltd to producing better finances to manufacture
items of furniture which include more cost and give less return after selling to the customer
P2. Different methods used for management accounting reporting.
Management Accounting reporting: It is an activity of recording business transactions that
facilitates management in making profitability decisions for an organization's future growth
and success. This reporting system includes cost accounting report, inventory management
reports etc (Berg and Madsen., 2020). The management of Capital Joinery Ltd must require
making their report to analyze the financial situation in the market.
Types of managerial accounting report:
Performance reporting: It is part of the communication management plan by collecting the
information which is related to work performance analyze it, creating report of sending them
stakeholder respective. Performance reporting improves customer insight by determining on the
best sales opportunities. It also develops visibility of the business partner activities and enhances
better purchasing behavior. Along with this report, employees of Capital Joinery Ltd need to
understand the customer requirements. In which manger once understood customer needs and
wants, they would easily provide them product and services. Apart from it, employees require
training and development to perform better in an organization to effectively gain more positive
outcomes. Through performance, reporting generates real-time information about the business
performance and helps set realistic targets for the workers that are achievable where employee's
efforts in the right areas. In this management focuses on employee's efforts to leads increase
better productivity and profitability.
Cost Accounting Report: The report offers a summary of all cost of manufactured articles,
including raw material cost, overhead labour where they added that are taken deliberation. The
report offers managers of Capital Joinery Ltd the capacity to realise the cost of prices of items
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versus in selling prices. Profit Margins are estimated and monitored through an accounting report
so that it can give clarity of overall production went in the procurement of the articles.
Also, Inventory waste, hourly labour waste costs and overhead costs are the part of these
report. For the optimization of resource among all departments where these reports provide an
exact understanding of all expenses. Through cost accounting report is also help to Capital
Joinery Ltd to make a difference between variable cost and fixed costs to fix prices in different
scenarios. The control over material and restocking of material is also done with helps of cost
accounting reports.
Inventory management report: An inventory report is a summary of items belonging to
the business , industry, or organisation. It shows overall the costs associated with obtaining,
holding, transporting inventory and ensuring inventory stock in its proper condition to sell
(Chaudhry and Amir., 2020). The assorting of an Inventory management system is to help
company trend to identify weaknesses and strengths and fill gaps and inefficiencies. It has
become vital for the survival of an organization to have a good control over inventory; otherwise,
the company can lose their control over the profits.
Job Costing Report: This reporting is the process of coding and allocating project
expenses to track the financial and profitability. The job cost is divided into following categories:
 Labour Cost.
 Material Cost.
 Sub Contractor Cost. Etc.
The proper format depends on how much job-costing levels were used in estimate. For instance,
for smaller jobs, total for material and labor with subcontracts are sufficient. Capital Joinery Ltd
assorts this job costing reports and with provide clarity of gross profit margins (FUADAH.,. and
ARISMAN., 2020). This helps to customize job costing reports and clear gross profit goals
where a company is driven to answer questions.
Task 2.
P3. Illustrate the calculation of cost using different costing techniques.
Cost: This is defined the value of amount which is invested in operating differnet business
activities. The amount includes various aspect such as time, efforts etc. In the perspective of
Capital Joinery Ltd, they are engaged in manufacturing furniture and products that they
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manufacture products to analyse their real prices better. As the cost includes two types such as
direct and indirect cost. Through direct cost which relates with manufacturing of furniture type
of products and services. While, indirect cost the process of manufacturing activities indirectly
manner.
Cost Analysis: It refers to the process of measuring the benefits received due to different
actions so that overall productivity goals can be accomplished.
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Task 3.
P4. Tools and budgetary control along with advantages and disadvantages.
Budget: Budget refers to an estimation of expenses and revenue over a specified period
of time. Governments, individuals and businesses majorly use this.
There are majorly four types of budget and it is defined into following manner:
Master Budget: Master budget is the kind of budget produced by the company's various
functional areas and is the aggregation of all lower-level budgets. It also includes budgeted
financial statements, cash forecast and financing plan.
 Advantages: This kind of budget are given in capsule form and also available in one
report. Master budget gives an overall estimated profit of the organisation.
 Disadvantages: Master budget lacks in terms of specificity and also it is difficult to
update (Gunarathne and Lee,, 2021). While preparing master budget, in order to achieve
set targets and earn compensation employees might estimate high expenses and low sales.
Operating budget: Operating budget can be defined as it is a kind of detailed projection
of what a company expects its revenue and expenses will be over a period of time. To show
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expected activity during the following year, companies usually formulate operating budgets near
the end of the year.
 Advantages: Operating budget helps in terms of where money is flowing and gives an
idea about what to buy in the new year and where to cut in terms of reducing expenses
and costs. Operating budget supports in terms of enabling better investments.
 Disadvantages: This kind of budget only considers financial outcomes and also act as in
terms of rigid decision making.
Cash budget: A cash budget refers to an estimation of cash flows of a business over a
specified period of time. This kind of budget could be prepared for weekly, monthly, quarterly or
annual period of time.
Advantages: Cash budget allows to arrange extra funding such as bank overdraft and also gives
opportunity to business to plan ahead. Cash budget also help in terms of regulating expenses.
Disadvantages: Cash budget limits the spending power of businesses and also it creates danger
of theft. Cash is the easiest asset to steal because it can be easily traced. Cash budget also limits
the ability to build a credit profile.
Financial budget: Financial budget refers to that kind of budget which estimates the
firms cash budget, capital expenditures and balance sheet line items. Such as assets, liabilities
and owner's investment.
 Advantages: Financial budget will provide financial awareness of spendings and
earnings of the business. It also provides business opportunities that can help market and
expand the business.
 Disadvantages: For planning this kind of budget it requires time on a larger scale. If
targets cannot be achieved within a period of time then it blames for outcomes as well.
Financial budget act as gaming the system and it can be serious problem which requires
considerable oversight to eliminate.
The implication of budget: It will helps to effective communication as well as coordination
among their workers and optimum resources are properly utilized within an organization because
they are focused on actual budget rather than estimated figures.
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Pricing strategy: To fix the prices of goods and services, a company uses several kinds of
pricing strategies. Some of considered as below:
 Penetration: This company focuses on setting minimum prices at the initial phase,
marketed to their customer.
 Premium: In this prices are high as they are the ones who approach high-quality
products to provide customers for a high level of satisfaction need.
Ways through which prices are determined: To identify the prices of analysis in perspective
of market situation is required to know the competitor's strategies such as other competitors of
Capital Joinery Ltd.
Supply-demand consideration: This is based on the certain market condition that are
required to measure by Capital Joinery Ltd to attain better competitive advantages and success.
Pest Analysis
According to this framework, the tool is analyzed to provide external and internal factors of
information to provide the company in terms of Political, Economic, Technological, social,
environmental, and Legal (Hutahayan., 2020). All these six-factor plays a vital role in generating
business in a competitive marketplace.
Political Due to fluctuation of governmental policies or unstable political
conditions can create better impact on Capital Joining Ltd while
formulating strategies.
Economical By having fluctuation inflation as well as deflation rates to affect Capital
Joinery Ltd. Customer purchasing power effectively. Thus, recession
and inflation are the main reasons to create major drawbacks and
directly impact business growth.
Social Conclusion: there are timely the taste and preferences of people change
that can reduce the Capital Joinery Ltd product and services in the
market. With this, the team of Capital Joinery Ltd can make strategy to
approach customers based on demographic factors such as age, gender,
income basis etc.
Technological To get competitive advantages, a company where it requires to
emphasized on the latest technologies. Artificial Intelligence plays an
important role to flexible handle to gain positive outcomes.
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