Unit 5: Management Accounting Systems and Techniques Report Analysis

This report provides a thorough examination of management accounting practices, focusing on Capital Joinery Ltd. It explores essential management accounting systems, including price optimization, inventory management (FIFO), and cost accounting, detailing their applications and benefits within the organization. The report analyzes different types of management accounting reports such as account receivable, performance, and inventory management reports. It delves into cost calculation techniques like marginal and absorption costing, and interprets income statements based on these methods. Furthermore, it explains budgetary control and various planning tools such as cash budgets, comparing different businesses based on their use of management accounting systems to respond to financial issues. The report concludes with an assessment of how management accounting can lead businesses towards sustainable success, and provides a comparison of two businesses based on their use of these systems.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Discussing the management accounting along with all the essential requirements of all its
systems.........................................................................................................................................1
P2 Different types of management accounting reports generated by the companies..................2
M1 Application and its many benefits of different management accounting systems................3
D1 Evaluation of the integration of management accounting reporting as well as systems in
organisational procedures............................................................................................................3
TASK 2............................................................................................................................................4
P3 Calculation of costs with the help of different techniques.....................................................4
M2 Application of various techniques of management accounting.............................................7
D2 Interpretation of income statement........................................................................................7
TASK 3............................................................................................................................................7
P4 Explanation of budgetary control and different planning tools that are used in the
organisation..................................................................................................................................7
M3 Assessment of use of various planning tools used for forecasting and preparing budget.....9
TASK 4............................................................................................................................................9
P5 Comparing different businesses on the basis of use of management accounting systems to
respond financial issues...............................................................................................................9
M4 Assessment of how management accounting can lead businesses towards sustainable
success........................................................................................................................................11
D3 Assessment of use of planning tools to respond finance related problems..........................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is a tool which is required to be focused by all the businesses as
it may result in formulation of all the internal records in systematic manner. In order to keep
detailed information of all the internal activities of business it is essential for the managers to be
focused with it (Aresu, Rombi and Cardia, 2019). Present report is based upon Capital Joinery
which is a medium sized organisation and selling different types of joinery which includes doors,
windows etc. This assignment covering many topics like various types of management
accounting reports, systems, techniques, budgetary control and planning tools used in it etc.
Apart from this, two different organisations are compared on the basis of using of different
management accounting systems in this assignment.
TASK 1
P1 Discussing the management accounting along with all the essential requirements of all its
systems
In all the organisations specific procedure to analyse the internal performance is used and
it is known as management accounting. In Capital Joinery Ltd. the managers are also focused
with the use of it so that they can enhance the possibility of attainment of all the long term
business goals and objectives (Biglari and Haidari, 2019). There are many types of systems that
are used within the organisation for the purpose of carrying out all the operations in systematic
manner. Discussion of all of them along with their essential requirements in context of the
organisation are as follows:
Price optimisation system: It is focused with assessment of best suitable price for the
items sold by the organisation so that requirements of clients could be met and business
objectives could be attained. In Capital Joinery it is used by the management for the purpose of
assuring proper pricing of all the goods that are sold by it to the clients so that profits could be
generated.
Essential requirement: It is very important for the organisation as it helps to analyse the
required information while trying to set right prices for all the joineries that are sold by Capital
Joinery in the market.
Inventory management system: It is basically used by such businesses that are focused
with manufacturing or production related activities. In Capital Joinery it is used by the managers
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so that they can keep proper details regarding the availability of goods that are required to
perform all the operations. There are three different types of it that are LIFO, FIFO and AVCO.
LIFO is last in first out in which the entities use the goods for operations that are bought recently
(CHAN, 2020). FIFO is first in first out in which the businesses us all the items for production
that were purchased earlier. AVCO is also an inventory management system in which the goods
are used for business activities on the basis of average cost. From all of them, FIFO is used in
Capital Joinery so that the managers can utilise the items properly.
Essential requirements: It is essentially required for the enterprise because with the help
of it managers will be able to perform well all the activities and functions properly on the basis
of predetermined organisational structure. It will also facilitate the attainment of the business
goals.
Cost accounting system: Under this system, managers try to determine cost of all the
operations that are carried out by the organisation. In Capital Joinery it is used for the purpose of
keeping detailed information of all the costs and reduce possibility of increased expenses for
future so that the overspending of funds could be ignored.
Essential requirement: It is very important for the businesses because when the
management style used by the managers will be definite then it will help them to inspire the staff
members to be focused with reduction in the cost.
P2 Different types of management accounting reports generated by the companies
In all the entities different types of reports are generated to keep detailed information of
all the expenses that resulting from business operations (Iredele, Tankiso and Adelowotan,
2020). The procedure which is focused for their formulation is known as management
accounting reporting. The management teams in Capital Joinery are focused with the use of
different reports so that effective decisions for attaining all the long term goals could be
formulated. Various types of reports that are generated within the company are described
underneath:
Account receivable report: It is mainly formulated for keeping details of all the debtors
so that actual receivables for future could be determined. In Capital Joinery the managers are
using it to analyse the amount which is outstanding by the clients who bought the joineries on
credit. It is beneficial for the enterprise because by using it owed amount by all the clients could
be determined.
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Performance report: In most of the businesses this report is generated by the managers
to keep detailed information about performance of company as well as the workforce so that
strategies for future could be formulated (Kumarasinghe and Haleem, 2020). The managers of
Capital Joinery are also generating it so that they can analyse that the enterprise is able to
maintain its performance or not. The main advantage of it for the organisation is that it help to
determining that the employees are performing effectively or not so that bonuses could be paid
to them accordingly in order to perform well.
Inventory management report: It could be defined as a report which is generated by the
businesses for the purpose of keeping detailed information of stock used to perform all the
operations. It is also used in Capital Joinery by the managers as it can help them to determine
availability of stock for carrying out all the future operations. It is advantageous for the
enterprise because by using it, the entity will be able to keep sufficient goods for meeting
expectations of clients.
M1 Application and its many benefits of different management accounting systems
There are many types of management accounting systems that are used by Capital
Joinery to support the business. Application along with benefits of them is as follows:
Price optimisation system: It is basically done by managers of Capital Joinery for the
purpose of setting appropriate prices for all the items that are sold by it in the market so that it
can attain benefit of retention of the customers.
Cost accounting system: It is applied in Capital Joinery as it can facilitate the managers
to determine the costs that are related to different activities of business so that corrective actions
to control them could be taken.
Inventory management system: The management of Capital Joinery is using it as it
beneficial for the organisation to determine that it is having sufficient goods to meet all the
business goals or not.
D1 Evaluation of the integration of management accounting reporting as well as systems in
organisational procedures
In Capital Joinery the managers are using various types of reports and systems which are
supporting the organisational procedures (Le, Nguyen and Phan, 2019). Account receivable
report is used to formulate credit policies as it helps to determine actual outstanding amount of
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clients. Price optimisation system is used to set effective prices for all the items that are sold in
the market so that clients could be retained for long run.
TASK 2
P3 Calculation of costs with the help of different techniques
Marginal costing: This states that costing technique where marginal cost that is variable is used
to charged to units of cost, while fixed cost is completely against the contribution. It concern
with impliyimhg the additional cost includes in producing extra unit in output. It sums up direct
material, Direct labour, Direct Expenses and Variable overheads (Lebedev, 2019). Capital
Joinery Ltd is using this costing in order to determine the price and valuation of stock and it also
helps in identifying the profitability. It is useful in cost ascertainment and effective decision
making in organisation so that it assist in analysing in production level and overall company' s
profit. This is also special techniques and maintaining the quality of product and services in
manufacturing process.
Marginal costing:
Absorption costing: Absorption costing: It is also called full absorption costing, where it
is also counted in managerial decision and include all cost that is associated with
manufacturing the product (Napitupulu, 2020). It helps in allocating fixed overhead cost to
each unit it produces in period. It aims in fixed overhead cost to product whether or not it
was sold in period and this costing is including in ending of inventory that carried out into
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next period. Capital Joinery Ltd is using this costing techniques to ensure more accurate
and clear accounting for ending inventory because expenses associated to this costing is
linked with full cost inventory that come into hand (Phornlaphatrachakorn, 2019). This
aims in higher net income compared to other costing methods because fixed cost are spread
across all units that used to manufactured.
Reconciliation statement:
Material variances:
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LIFO (Last in first out):
AVCO (Average Cost):
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M2 Application of various techniques of management accounting
Standard costing: Refereed as expected cost that is use sometime in place of actual cost.
Variances are recorded to show the differences in amount of actual cost and expected cost. The
main reason for using standard costing is that it helps in finding out the cost when there are
number of application.
Historical costing: Concern with measuring the value used in accounting in which value
of asset on balance sheet is ascertain at its original cost (Radu and MIHÄ, 2020). Company is
using this to ascertain total amount spent on purchasing the assets and identifying the opportunity
cost in past and it consider current market value of asset and ignores inflation and time value.
D2 Interpretation of income statement
By analysing the results of marginal and absorption costing it has been determined that
both the techniques are resulting in same profits which are 6500 for May and 3375 for June. The
enterprise can use any of the techniques for determination of profits as both of them are resulting
in same profits for business.
TASK 3
P4 Explanation of budgetary control and different planning tools that are used in the organisation
Budget is refers to estimation of all revenue and expenses over specific period of time
that helps in re- evaluation on periodically basis. Capital Joinery Ltd is also making the budget as
it is impossible to carry out the further activities and function without making budget. Budgetary
control refers to comparisons of actual budget and expected budget that helps in measuring and
take corrective actions. Company is using this capital budgetory control to ascertain many
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activities for further activities and facilitates in proper functioning in organisation. Some
planning tools are
Cash budget: concern with dealing with cash related activity and make plan on the basis
of expected cash receipts and disbursement and it include cash inflows and outflows of revenue
collected, expenses and receipts of loans and payment (Souza and Gasparetto, 2020). Capital
Joinery Ltd is using this budget to regulate and monitoring certain cash related transaction and
assist in evaluating the cash position in business organisation.
Advantages: Cash budget are it helps in avoiding debt that will help the company to
control it on time and could use in emergency situation. It helps in maintaining the efficiency
that tells the company to look after other financial resources and tools and assist in eliminating
waste and from budget. It will be useful for Capital Jouinery Ltd to stay in-touch with real
situation and able to look into financial statement like bills and every obligation and expenditure
that company make.
Disadvantages: Cash budget is it could create danger to company when it comes to theft
as cash is easiest asset that could steal easily as it is easy to trace the cash movements of
organisation. It also limit the spending power of Capital Joinery Ltd,as it clearly set the
restriction that company can not other than that.
Master budget: It is overall budget that include all lower level budget in operating budget
and financial budget and helps in strategic plan that forms in organisation. Capital Joinery Ltd is
using this budget that assist in financial budgeting to empower planning and control ion business
organisation.
Advantages: It facilitates the company to study all the budget at one place and in capsule
form where all functional budget is available at similar report. IT also helps in cross-verification
of information given in master budget and making in decision so that overall estimated profit
could be achieved objective in organisation. It also helps in foresting the Capital Joinery Ltd
budget to provide meaningful information.
Disadvantages: Some demerits of this budget is it leads to lack of specification in budget
as it comprises all types of budget at one place so it become difficult to evaluate and determining
actual amount. Another demerits is it become difficult to update it when there is any changes in
any of part of budget. It is quite huge in numbers and figures so it does not provide this facility to
read it thoroughly and could make any changes in budget.
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M3 Assessment of use of various planning tools used for forecasting and preparing budget
Budget are already known for their forecasting and used in making anu decision making
in organisation. Cash budget and Master budget both helps in forecasting and maintaining the
whole budget and every activities and function (adan and Teuteberg, 2019). As in Cash
facilitates the Capital Joinery Ltd able to make estimation of cash related transaction and could
able to direct future planning and strategies that were formulating in company. Master Budget
consist all major budget that helps in making decision making in organisation and aims to
provide all necessary information at one place so that company is able to forecast the action and
future activities and functions.
TASK 4
P5 Comparing different businesses on the basis of use of management accounting systems to
respond financial issues
Financial issues could be described as the issues that are faced by the entities when they
are not having sufficient funding for operating business. Capital Joinery is also facing some of
the finance related issues and all of them are described below:
Late payments from debtors: It is one of the main problem which is faced by Capital
Joinery because when the clients will make late payments then it may leave negative impact
upon availability of funds for all the operations. Due to this, the entity is not able to maintain it
liquidity and carry out all the operations.
Unplanned expenses: All the expenses that may take place in future suddenly are known
as unplanned expenses. This problem is also faced by Capital Joinery because when the expenses
will take place suddenly then the managers will have to use funds which are reserved for other
activities. Due to this, the possibility of lack of funds may take place.
In order to identify and resolve the problems different types of management accounting
techniques are used. Discussion of all of them is as follows:
Benchmarking: It could be described as a technique that is used to comparing
organisation’s policies with competitors. By using it Capital Joinery can identify the problem of
late payments by clients as it will guide to find defaults in credit policies.
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KPI: It is a performance measurement metric which is used by businesses to find the
financial issues in business. With the help of it, Capital Joinery can identify the issue of
unplanned expenses as it helps to find causes of same.
Financial governance: It is set of governmental policies that are required to be followed
by businesses to formulate reports (Ye, 2019). It could be used by Capital Joinery for the purpose
of finding solutions for all the financial issues such as late payments from clients and sudden
expenses by guiding the management to formulate the reports properly.
Balance score card: It is a performance measurement tool that is used to keep track
record of execution of different activities by staff. With the help of it, financial issues could be
resolved as it helps to guide all the employees to perform their jobs properly and carry out
operations in systematic manner to ignore financial challenges.
Management
accounting
techniques
Tesco Sainsbury
Benchmarking Benchmarking could be used by the
organisation to dealing with the
financial problem of late payments by
clients as by using it credit policies of
other businesses could be compared
and modified accordingly.
With the help of this technique the
enterprise can find ways to deal with
financial issue of such as improper
funding for operations.
KPI Tesco can use KPI to deal with the
financial issue of sudden expenses as
it helps to find ways to control such
issues.
By using KPI the success and failure
of all the procedures that related to
financial issues could be determined
and possibility of problems could be
reduced.
Balance score
card
The managers are using this
technique of management accounting
to deal with the financial problem of
lower profits because of lack of
employee engagement. With the help
of it, information about their
It is used in the company so that the
weak financial performance of the
enterprise could be improved so that
all the long term objectives could be
attained.
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