Management Accounting System and Techniques Report for Capital Joinery

This report provides a comprehensive analysis of management accounting systems and techniques, focusing on Capital Joinery Ltd. It explores various types of management accounting systems, including cost-accounting and inventory management systems, and their application within an organization. The report also delves into different methods for management accounting reporting, such as budgetary reports and performance management reports, and their significance. Furthermore, it examines cost analysis techniques to prepare an income statement, including variable and fixed costs, cost-volume-profit analysis, and marginal costing. Additionally, the report discusses planning tools and their advantages and disadvantages, along with their applications for forecasting and budgeting. Finally, it addresses how organizations adapt management accounting systems in response to financial problems, analyzing how planning tools help in solving these issues and leading to sustainable success. The report is a valuable resource for understanding the practical application of management accounting principles.

MANAGEMENT
ACCOUNTING
SYSTEM AND
TECHNIQUES

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Management accounting and different types of management accounting systems:..............1
P2: Different methods for management accounting reporting:....................................................3
M1: Benefits of management accounting system and their application within an organisation: 7
D1: How management accounting system and management accounting reports are integrated
within an organisation:.................................................................................................................8
TASK 2............................................................................................................................................8
P3: Techniques of cost analysis to prepare an income statement:...............................................8
M2: Range of management accounting techniques for financial reporting:..............................10
D2: Explanation of financial reports in range of business activities:........................................10
TASK 3..........................................................................................................................................10
P4: Different types of planning tool and their advantages or disadvantages:............................10
M3: Planning tools and their applications for forecasting and preparing budget:.....................12
TASK 4..........................................................................................................................................12
P5: How organisations are adapting management accounting systems in respond to financial
problems:....................................................................................................................................12
M4: Analyse financial problems in management accounting can lead organisation to
sustainable success:....................................................................................................................14
D3: How planning tools helps in to solving financial problems:...............................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is an internal system that provides critical information to firm's
management so that it can used in operations decision making. Organisations uses it to measure
and evaluate its performance according to information. It involves preparation of financial
reports, decision making and activities within an organisation. Company which is selected for
this report is Capital joinery Ltd. It is firm that specialised in windows, doors and stairs. It was
founded in 2008, situated in London UK (Vetrov and 2017). This report covers various topics
such as requirement of different types of management accounting systems, method for used
management accounting reports and different cost techniques to prepare an income statement.
Apart from this it also covers different planning tools and their advantages or disadvantages and
the ways in which organisations adapting management accounting system to respond to financial
problems.
TASK 1
P1: Management accounting and different types of management accounting systems:
Management accounting is refers to preparation of business reports that helps
management to generate its business operations and helps in short term and long term decision
making. It helps in planning, managing, measuring, evaluating and interpreting information to
managers.
Management accounting system is an internal system of any firm that an organisation
used to measure and evaluate its operations or activities for the management of the entity. In
context to Capital joinery Ltd., management team of the firm uses this system to evaluate firm's
operations so that it can achieve its goals or objective in efficient manner. It provides an insight
towards organisations decisions that helps managers to take corrective actions. It also provide
financial health and statical information assist by strong software that supports an organisations
decision making. It divides overall business unit into different departments on the basis of
production and functions so that it will be easy for Capital joinery to evaluate its performance.
Management accounting principles that company used are influence, relevance, value and
trust. Influence means it provides an insight that is influential, Relevance it gives relevant
information, value is analysed and in context to trust is it generates trust by providing overview
and relevance information.
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Basis Financial Accounting Management accounting
Information mainly used for Information is use for external
parties of firm. External parties
such as shareholders,
customers etc (Upping, and
Oliver, 2016). Capital joinery
used it to show its business
position to shareholders.
Information is used by internal
parties. Internal parties
includes supervisors or
managers, employees who is
working in operations etc. the
firm is used it for internal
decision making.
Purpose of information To record the financial
performance of the period and
past performance of the
business for external parties.
It provides planning,
evaluating and controlling
process for the firm.
On the basis of time It is based on historical data.
Such as profit and loss
accounts, balance sheet and
cash flows. Capital Joinery
used on the basis of past
performance revenues and
expenses.
It used for future decisions.
Basically, includes firm's
operations and activities. Firm
used its for future decision
making for effective outcomes.
Area specialised The reports prepares on the
entire business.
It focuses on specific areas of
the firm. Area can be specified
by on the basis of function,
activities etc.
Different types of management accounting systems: There are various types of
accounting system that are:
Cost-accounting system: This is a management accounting system used by firms to
estimate its value for products to know about the profitability of the firm, inventory valuation
and cost controlling. Capital Joinery Ltd. Used this for setting its pricing strategy to analyse
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profitability of firm. It is helpful to identify where the firm is spending its money and from where
it earn. It leads to analyse and report for improvement of internal cost control and efficiency.
Essential requirements: For the cost accounting system the actual costs occurs by the
different manufacturing activities are required. The information is requires for managers and
operational level employees in order to short term and long term decision-making.
Inventory management system: This is a system for tracking inventory levels, sales and
orders. In Capital Joinery Ltd., the firm used in it's production sector for create a work order and
analysis of raw material requirement. It helps firm for knowing its position regarding inventory
so that it helps its producers to know about the orders.
Essential requirements: This requires for stock level information such as sales orders,
storage costs etc. The managers and higher authorities are required for it in order to maintaining
costs of production for setting prices. It helps organisations for maintaining its cots for higher
probability.
Job-costing system: Job costing is refers to analysis of procedure of company where job
is different and performed according to consumers demand (Wahyuni and Triatmanto, 2020).
The firm is used this system for analysing firm's operations according to consumers demand so
that it can control it by time. In context to Capital Joinery firm used it for analyse its procedure
according to users wants.
Essential requirements: It is required information such as how consumers demand
affects by firms pricing strategy. It is required by higher level authorities for managing firms
operations and sales. It helps organisation by setting prices in such manner so that it can satisfied
customers and helps to maintain firms probability.
Price-optimising system: This is a customer oriented system that utilization of
mathematical process to know different prices firm's products and services through various
channels. Capital Joinery used this system to know customers willingness to pay for its products
or services. It helps firm to set optimum price for its products or service so that it can achieve its
objective and maximize its profits.
Essential requirements: Firm collecting information related to the costs involves in its
goods and services. It is required by higher authorities for short term and long term decision
making. It helps it to managing profits and controlling higher expensive activities.
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P2: Different methods for management accounting reporting:
Management Accounting Reports: It compiles information gained through financial
accounting of business. It is used to identify, measure, analyse, interpret and communicate
financial status of an organization to its manager. Motive of preparing such reports is to achieve
organization's set goals (Speckbacher, 2017). It can be done by assessing and informing
company's decision makers which will ultimately guide them is preparing efficient plans for
business operations. Different types of management accounting reports and importance of
preparing these reports for Capital Joinery Ltd. are discussed below:
Budgetary report: It is prepared to analyse how business manages its funding. It is an
estimation of revenues and expenditure of business. Capital Joinery Ltd. Should prepare this
report to investigate whether its estimated financial projections match with its actual
performance. By analysis such reports company can keep track of its expenditures which will
encourage business managers to increase savings which can be further utilised for firm's
expansion plan.
Inventory management report: This report is composed to examine about inventory stock
of business. Firm should prepare it to monitor its inventory status on regular basis. It prevents
any kind of stock outs, ensures management of safety stocks, and encourages record keeping and
results in on-time ordering of stock. It will also reduce extra maintenance expenses that firm will
bear on ordering more than required inventory.
Performance management report: Progress of employees of organization is reported and
measured by formulating this report. It is a worthwhile report which Capital Joinery Ltd. should
prepare to keep track of performance of their workforce (Imionescu and Bica, 2016). It will
ensure aligning of their performance with strategic goals of organization to increase profitability
and smooth functioning. Key improvement areas can also be identified by composing such
reports.
Account receivable report: It contains record of receivables of business. Capital Joinery
Ltd. Can prepare this report to ensure that debtors had paid their invoices on time. This will
reduce probability of bad debts. It will also verify smooth cash flow in firm to avoid hinders in
business operations.
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M1: Benefits of management accounting system and their application within an organisation:
It is a process of providing financial resources or data to manager for decision making. It
is generally conduct by internally team, in this statistical data is used for a better decision. In the
Capital joinery limited, this system helps in increase efficiency of the firm by better operation
and compare the performance with their competitor (Schaltegger, 2018). Company can
maximise their profitability. Apart from these manager simplify the financial statement for
taking managerial decision. It also help in controlling the cash flow so that there is no misuse of
money is done. Through this organization run effectively in a productive manner.
D1: How management accounting system and management accounting reports are integrated
within an organisation:
Management accounting systems and reports are used in an organization to keep track
about financial status of business (Posch, 2017). It will provide key insights to managers which
will enhance their decision making and efficient functioning of Capital Joinery Ltd.'s business
operations.
TASK 2
P3: Techniques of cost analysis to prepare an income statement:
Cost: Monitory value of business expenses or spendings on production and selling of its
products and services is termed as 'cost'. It can be categorized in mainly three types which are
described below:
Variable cost: These costs are effected by the change in level of output in production. In
context to Capital Joinery Ltd., these are the variable costs incurred- cost of raw materials
purchased for producing windows, stairs, and doors or wages of labour employed in business,
etc.
Fixed cost: These costs have no effect of output level of firm. It includes, cost of
machinery and equipment purchased, land or building cost etc.
Semi variable cost: It consists components of both fixed and variable costs. These costs
fixed till certain level of production and becomes variable when it exceeds. For example,
commissions.
Cost analysis: Categorizing, studying and analysing cost incurred in business is defined
as 'cost analysis (ewo, Ajibolade and Obazee, 2019)'.
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Cost volume profit: it evaluates impact of volume and cost on operating profit of Capital
Joinery Ltd.
Flexible budgeting: On current level of output when revenue and expenditure of
business is forecasted, it is defined as 'flexible budgeting'.
Cost variances: It is difference between actual and estimated cost of an organization.
Absorption and marginal costing: Marginal cost indicates cost per additional unit of
production. It is a variable cost. On the contrary absorption cost is a total cost that involves both
fixed and variable cost.
Inventory cost: It refers to overall cost of products and services, not only the cost of
manufacturing but also refers to cost of keeping goods such as warehouse cost and maintaining
cost. It includes price from the manufacturing to delivered to customers. Inventory cost can be
divide into three parts such as order cost, carrying cost and shortage cost. Capital joinery used
this to recover its all over cost and maximise its profits ( Ojua, 2016).
Ordering costs: This cost refers to paying cost by customer that involves order cost,
delivery product cost and stock inventory. Capital joinery splits inventory into two parts:
 The cost of ordering process itself: It involves the cost of producing products as fixed
cost and independent of the number of unit cost.
 The inbound logistics costs: The cost is related to transportation and delivery of the
product that is variable in nature.
Carrying costs: Carrying cost of inventory is refers keeping cost or holding cost of
products in the warehouse. It includes warehouse cost such as rent, wages, opportunity cost,
insurance etc.
Shortage costs: It refers that cost that are occurs when a firm runs out of stock. In Capital
joinery firm faces this problem in reference to less stock availability in order to customers
demand. In this situation customers place orders but firm has not sufficient stock in their
warehouse or procedure.
Reducing in inventory cost leads to cost benefits to firm and probability maximisation of
the firm. Although it affects the pricing strategy of the firm (uhu and 2017). It helps in reducing
waste, improve supply chain management, demand forecasting, shorten the product life cycle or
distribution channel. It helps firm to maintain its warehousing cost and transportation cost. In
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context to Capital joinery Ltd. Reducing inventory cost will help firm for cost benefits and
maximising its profits.
Information should be reliable so that it cannot refers to mismanagement in the firm regarding its
performance. Correct information give a right path to firm for operating its activities in effective
manner. Right information is helps management team in decision making for the future purpose.
A strategic information system leads to success for long term in the firm.
Marginal costing:
Absorption costing:
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Reconciliation statement:
Working notes;
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LIFO (last in First Out):
DATE
RECEIP
T issue
balanc
e
quantity
unit
cost
amoun
t
quantit
y
unit
cost
amoun
t
quantit
y
unit
cost amount
01/06/20 balance 10 35 350
01/06/09 15 38 570 15 38 570
01/06/15 12 38 456 3 38 114
10 35 350
01/06/20 10 32 320 3 38 114
10 35 350
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10 32 320
01/06/23 10 32 320 3 38 114
10 35 350
01/06/27 3 35 105 3 38 114
7 35 245
01/06/30 2 35 70 3 38 114
5 35 175
27 951 8 289
AVCO (Average cost):
M2: Range of management accounting techniques for financial reporting:
Normal and standard costing: Normal cost refers to actual cost occur for the raw
materials and labour. Standard cost refers to predetermined cost for the product. Capital Joinery
used it for comparing actual price against its pre described price.
Activity based costing: It is a costing method that identify all costing during production
of goods or services. It includes cost of each activity and operational cost for producing product
or service (Macchia, 2019.). In context to Capital Joinery Ltd., firm includes its overall cost
occurring at the tine of production. It helps firm to know actual price for its products for deciding
the value of the product or services.
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