Management Accounting Report: Systems, Methods, and Budgeting

This report delves into the realm of management accounting, focusing on its definition, methods, and benefits, alongside the essential requirements of management accounting systems. It examines various management accounting systems, including cost accounting and inventory management, and explores diverse reporting methods such as inventory management reports and account receivable reports. The report integrates these systems within an organizational context, using Jupiter plc as a case study. It further analyzes marginal and absorption costing methods, discusses planning tools for budgetary control, and compares the use of accounting systems in resolving financial issues across different organizations. The report culminates in an evaluation of planning tools for addressing financial challenges and ensuring sustainable organizational success, offering a comprehensive overview of management accounting principles and practices.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Definition, methods and benefit of management accounting with the essential requirement of
management accounting systems...........................................................................................1
Different management accounting systems............................................................................2
Different methods of management accounting reporting.......................................................3
Integration of management accounting systems in organisational process............................4
TASK 2............................................................................................................................................5
Marginal costing.....................................................................................................................5
Absorption costing..................................................................................................................5
TASK 3............................................................................................................................................6
Different planning tool used for budgetary control with their advantages and disadvantages6
Types of budget techniques....................................................................................................8
TASK 4............................................................................................................................................8
Comparison with other organisation about use of accounting system in resolving financial
issues.......................................................................................................................................8
Analysis and evaluation of planning tool to deal with financial issues................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management refers to the organising and managing the different work process in an
organisation whereas accounts refers to the storage of data of the financials and non financials
statements of the company and employees. Management accounting is the process of providing
financial and non-financial data to the managers for taking important decisions regarding the
organisation. The taken company in this assignment report is Jupiter plc which is a fund
management group based in United Kingdom. This report will discuss the management
accounting , its methods, benefits, requirements and integration with the organisation. A wide
range of management accounting techniques along with financial data of a new product has also
been discussed. This report will further discuss the different types of budgets and their
advantages and disadvantages along with the use of various tools and techniques for preparing
the budget. Evaluation of planning tools for suitable accounting for solving the financials
problems has also been done. In the end, comparison of organisations adapting to management
accounting systems for responding to the financial problems has been given. Evaluation and
analysis of planning tools for sustainable success of the organisation has been also discussed.
TASK 1
Definition, methods and benefit of management accounting with the essential requirement of
management accounting systems.
Management accounting: Management accounting refers to the process of integrating
financials and non financials for providing it to the managers and the management of an
organisation in order to take proper decisions for the betterment of the company (Amidu, Effah
and Abor, 2011). It plays a essential role in providing the data and information to the
management of the corporation. Scope of management accounting is very broad due to involving
huge amount of data of the specified organisation.
it is crucial for Jupiter plc to create a well management accounting system for
determining the financial status of various departments of the company. It enable the company to
hold their financial position in the market by taking suitable measures to correct the deviations
identified by the management through management accounting.
Difference between management and financial accounting:
Basis of comparison Management accounting Financial accounting
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Meaning It is a process of making
management reports for
conveying the necessary
information to the managers for
making suitable policies for the
company.
It involves maintaining financial
statements like Profit & Loss, Balance
sheet etc. for identifying the financial
position of the organisation.
Users It is done according to the
internal stakeholders of the
organisation.
It is done according to the external
stakeholders of the organisation
Objective It helps in determining the costs
involved in taking decisions.
It helps in evaluating the financial
statements of organisation to
determine its financial strength.
Different management accounting systems
Management accounting systems are the necessary tools and methods for any
organisation to identify the information of management and accounts of various departments for
taking effective and important decisions. Various types of management accounting systems are
given below:
Cost accounting system: This system is helpful for managers to identify the costs
involved in the various departments and process in order to prepare appropriate budget for future
This system will help the management of Jupiter plc to record, categorise and estimate the cost
of their operations for achieving more profit and revenue. This system is segmented in 3 types
which are normal, direct and standard costs. Jupiter plc is organising various timepass and
entertainment activities (Callahan, Stetz and Brooks, 2011). So, this system is helpful for
determining the cost and budget for executing such activities for minimising the costs and
increased profit. The types of costs are given below:
Direct cost: This cost is inconsistent and often fluctuates according to the trends and
changes in the market. This price is completely attributed for producing the products and
services.
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Standard cost: It is the process of replacing the desired cost with the actual cost in the
accounts and records. Management then analyse the variations or gaps among the expected and
actual cost (Drury, 2013).
Benefit: It is helpful for the Jupiter plc to prepare an effective budget for future
operations of business on the basis of cost of previous year for reducing the chances of wastage
of money in-order to increase the profit.
Inventory management system: This system is related with the analysis and measures
which are used for non financial inventories which are used in the corporations. It Includes two
types of system which are periodic and perpetual system. Periodic system is used for recording
the transactions of inventories on monthly or weekly basis. Perpetual system is used for updating
the managers after the product is purchased or sold. Jupiter plc is following methods such as
FIFO and LIFO analysis which gives updates to the managers regarding the available resources.
Benefit: It is helpful for maintaining the inventory during the booking time for the ease
of customers. It is also helpful for maintaining trust and loyalty of customers.
Job costing system: This system helps in identifying the costs and expenses assigned to
produce a product or service for identifying their expected profits in the market. Costs is consist
of efforts, resources, time and workers which are used for the completion of various process of
an organisation. These includes two types of system which are batch and process costing. The
managers of Jupiter plc are using this system for the costs which are invested for providing the
products and services to the consumers and calculate the necessary cost of workers and
production accordingly.
Benefit: This is helpful for determining the total cost of worker's job which will assist the
manager to take necessary decision regarding the allocation of resources and expenses required
for doing the work.
Different methods of management accounting reporting
Every organisation has the need to follow the management accounting and to maintain
the reports of various types of data and information related to the cost and budget of various
departments in an organisation. These reports must be managed by the managers for every
quarter for determining the financial position of organisation (Grabel, 2018). So, the
management of Jupiter plc also needs to maintain such reports for expanding their business to
large scale. These reporting systems includes performance report, account receivable report,
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inventory management report etc. These reports are essential for managers to take important
decision regarding the investments and the budget. These types of reports are discussed below:
Inventory management report: Such reports contain reliable and important information
and data regarding the stocks of the organisation. It assist the management of Jupiter plc in
managing the stocks movements and reviewing the current stocks of the company using time and
location of inventory movements. Various methods and techniques which are used by the Jupiter
plc are Just-in-time, EOQ, and Turnover ratio. Jupiter plc is providing entertainment activities to
workers and hence it is necessary for managers of the company to manages these reports
effectively and efficiently (Griffin, 2017).
Account receivable report: Such reports consists the data of unpaid customer bills and
unused memos which helps the management in recovering these pending transactions in the
certain time period. It also helps the management to identify the unpaid customers and recover
the amount in due time. The management of Jupiter plc needs to maintain these reports for
managing their financial stability by collecting these pending bills. This is also helpful in
implementing new policies for taking credit in order to avoid more pending dues.
Batch costing report: These reports are necessary for management in order to track the
expenses and costs of performing job and duties by the workers. It involves various categories
like material cost, labour cost, production overheads etc. These reports will help the Jupiter plc
manager's to analyse and control the total cost of entertainment activities for obtaining
sustainability and success in the market.
Integration of management accounting systems in organisational process
Jupiter plc is using management accounting system and reporting for providing data and
information of financials to the various shareholder and investor. The link between reporting and
management system in an organisation process is called as integrated accounting system.
Performance reports, inventory management report, account receivable report etc. are the some
reports which are useful for the Jupiter plc. To analyse the information regarding the actual
position of company at present time. For example, inventory management system and reporting
helps the managers in managing the inventory for the production process. Other example is
performance report which includes the performance of employees. It is helpful for the managers
to increase the performance of workers by providing training and development programmes for
successfully executing the activities of organisation (Johnson, 2013).
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TASK 2
Cost: It is the amount which is for the production of a specific product or services with a
clear aim to gain maximum profit. It includes various elements like efforts, employees, time etc.
who are valuable for the production of various products and services.
The management of Jupiter plc needs to prepare an effective budget for the company in
order to assign costs and expenses to every department and track their results based on the cost
assigned for determining the total profitability. There are various types of costs methods
including marginal and absorption cost method which helps the management of company for
determining the total profitability of the organisation.
Marginal costing
It is the cost or expenses invested by the organisation for producing extra units of
products and services. These extra units can be supposed by net cost invseted in that extra unit of
product. It concentrate on only variable cost for identifying the total sales through which the
profit is calculated in the company (Nixon, and Burns, 2012). This variable cost method consist
of direct material and labour involved, selling price etc. The major aim for using this method is
to enhance the profitableness of the organisation.
Absorption costing
This cost is the all fixed and variable cost which are used for executing the business
operations and activities. It is also called as the full cost method as it includes both variable and
fixed cost for calculating the total profit of the company. It is a more reliable and effective
method with comparison to the marginal costing because of inclusion of both fixed and variable
cost for doing the activities and operations of the business.
(a) Marginal costing
Calculation of net profit by using marginal costing method
Particulars Amount
Sales revenue = ( No. of goods sold * selling price = 50 * 16000) 800000
Marginal Cost of goods sold: 560000
Production = ( Marginal cost per unit * Produced units= 35*18000) 630000
closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 2000) 70000
Contribution 240000
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Fixed cost 100000
Net profit 140000
Absorption costing
Computation of net income by using absorption costing method
Particulars Amount
Sales = (Price of selling * no. of units sold = 50 * 16000 ) 800000
Cost of goods sold- 560000
Production = ( Marginal cost per unit * Produced units= 35 * 18000) 630000
closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 2000) 70000
Gross profit 240000
Less – under absorb fixed production cost 10000
Net profit/ operating income 230000
(B) After the changes of production units and closing units so there is no changes coming in
marginal costing but in absorption costing profit amount will be change.
Calculation of net profit by using marginal costing method
Particulars Amount
Sales revenue = ( No. of goods sold * selling price = 50 * 16000) 800000
Marginal Cost of goods sold: 560000
Production = ( Marginal cost per unit * Produced units= 35*19000) 665000
closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 3000) 105000
Contribution 240000
Fixed cost 100000
Net profit 140000
Computation of net income by using absorption costing method
Particulars Amount
Sales = (Price of selling * no. of units sold = 16000 * 50) 800000
Cost of goods sold- 560000
Production = ( Marginal cost per unit * Produced units= 35*19000) 665000
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closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 3000) 105000
Gross profit 240000
Less – under absorb fixed production cost 5000
Net profit/ operating income 235000
TASK 3
Different planning tool used for budgetary control with their advantages and disadvantages
Budget: It is the estimated expense and costs of utilising the resources for a future time
period. It states the costs assigned for executing the various business operations after analysis of
previous year's cost.
Budgetary control: It is the process of comparing the actual results with the budgeted
figures for determining whether the plans are followed accordingly or not. It helps the company
in identifying the variations in performance for taking necessary measures ro eliminate the
variation in future (Quinn, 2011).
So, it is very crucial for the management of Jupiter plc to make their own budgetary
control process for ensuring that the plans are followed accordingly for achieving the desired
result in given time period. There are different planning tools used for controlling budgets as
discussed below:
Forecasting tools: This is a very effective tool used by companies to estimate the future
trends using analysis of past and present trends. This tool is more effective and reliable as the
data is collected from both internal and external departments.
Advantage: It provides the maximum opportunities for creating the values in each and
every worker of the organisation.
Disadvantage: It is not easy to predict the future properly due to the qualitative nature of
future.
Contingency tools: It is normally used for evaluating the performance of the business.
This is done for analysing the risk which are effecting the profitability of the company. Well
organised contingency tools are used for analysing the risk in order to deal with them effectively.
Advantage: It helps the workers to take important decisions and it also remains constant
in every problems and issues which arises at the planning time.
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Disadvantage: This tool is costly and time consuming to implement in activities of
company.
Scenario planning: It is called as systematic planning techniques which are used by
many organisations for the flexibility in the long term planning. It is necessary for organisations
to adopt this tool for getting better and improved outcomes and results (Renz, 2016).
Advantage: It is an important tool for determining the uncertainties which are effecting
the performance and profit of the company.
Disadvantage: Future is not easy to predict due to the various issues of alternatives and
variables.
Types of budget techniques
Budget is an important aspect for any organisation in order to perform well in a market.
sales budget is a standard measurement of income and profit of the company. Various types of
budgets are described below:
Production budget: Production budget is made based on the sales budget. Such type of
budget involves allotting the cost of manufacture and production of products and services of the
company. The production budget is segmented into various budgets such as Material, labour,
R&D budget and equipment budget.
Cash budget: Cash budget is the projection of cash flows of the various opeartions of a
business which comes in and flows out in a particular period of time. Cash budget helps the
company to determine whether the cash flows are handled accordingly or not. This budget also
helps to determine whether the organisation has enough budget to continue its processes and
operations (Song, Wang and Zhu, 2018).
Financial Budget: A financial budget represents the company's strategy for managing
their asset, cash flows, cost and expenses, income etc. Financial budget is useful for determining
the financial strengths and position of the company in the market. It is also helpful for managing
the different budgets of various departments to carry out their operations efficiently.
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TASK 4
Comparison with other organisation about use of accounting system in resolving financial issues
It can be seen that financial issues and problems of an organisation can heavily effects its
operations and growth in the market. There are various financial issues which can influence the
sustainability and growth of the organisation. Some of these risks and issues in Jupiter plc are
discussed below:
Financial or capital risk: It is the main risk associated with the finance sector which
heavily impacts the activities of the Jupiter plc. It can highly effect the overall growth and
efficiency of the firm.
High cost of capital: It is also an important factor which effects the growth and
efficiency of employees and of organisation(Tsai and et. al., 2013). It is also known as the rate
of return which can be achieved by putting the money in long term investments with the risk
available. This high cost can be reduced by implementing suitable strategies and policies for
reducing the production and other costs.
Failure in achievement of expected results: During the accounting session, it can be
seen that management of each and every firm has suitable decisions and business plans for
executing the activities of future business operations for achieving the goals in an efficient and
effective manner for getting the expected results. The CEO of Jupiter plc is not very aware
regarding the effective decision making process which brings financial instabilities for the
company (Vanderbeck, 2012). To prevent these financial problems, Organisation needs to recruit
a consultant whose work is to develop the suitable and reliable strategies and policies, prepare a
budget plan, and complete the activities for getting the desired results towards the desired goals.
It has been analysed that if management takes any wrong steps then it will effect the company in
facing the various financial issue and problems. Hence, it is must for Jupiter plc to determine
every single aspect which is related to the failures and to overcome these issues in arising again
in future. The consultant said to management of Jupiter plc to adopt the financial governance
and KPI as the financial tools for preventing these issues in future. Financial governance is
explained below:
Financial Governance: It is a very effective tool which is necessary for organisations to
collect, manage, monitor and control the financial data of the company. It is helpful for Jupiter
plc to track the money transactions, managing and controlling the performance, compliance,
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operations etc. It is consist of various strategies and policies which are used by the Jupiter plc
for managing their reliable and accurate data of business and employees. By this, the fianacial
position and stability of the company can be determined which will help the management to take
suitable measures for the identified deviations and variations which are causing the financial
problems for the company in the market (Weygandt, Kimmel and Kieso, 2015). By using the
cost accounting, management of Jupiter plc can determine the total cost required for executing
the operations of the business so that the profitability of the company can be predicted. Inventory
management system is also useful for the company to maintain appropriate stocks of inventory
during the advanced bookings of clients which in results will enhance the revenue and profit of
the company and these increased revenue and profit can be utilised in the time of loss.
KPI (Key performance indicators): This process is useful for dealing the various
problems of future by analysing the present and past data of problems. Implementation of new
policies and strategies should be done on the basis of time period of the desired target or goals.
Management of Jupiter plc must adopt this measure for performing their operations in a better
manner for achieving the sustainability and profit in the market (Windolph and Moeller, 2012) .
Analysis and evaluation of planning tool to deal with financial issues
The financial problem of an organisation can be solved by using the different accounting
tools like Financial Governance. It is necessary for the management of Jupiter plc to implement
the management accounting tools and techniques for the future growth and profit of the
company. Through these methods the future problem related with finance can be eliminated for
preparing a effective and proper budget for the betterment of the company.
Manager of Jupiter plc should needs to use various planning tool for controlling the
budget of operations like forecasting, contingency and scenario tool. Contingency tool is useful
for regulating the risk of the business which can arise in the company and influence the
functioning of various process and of company(Zimmerman and Yahya-Zadeh, 2011).
Forecasting tool is essential for management to predict the future uncertainties and prepare a
suitable way for performing the activities. Whereas scenario tool is necessary for managers for
estimation and prediction of the different scenarios and cases which can negatively effects the
performance and profit of the organisation.
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