Management Accounting Report: Capricorn Wealth Management

This report provides a comprehensive overview of management accounting principles and their application within Capricorn Wealth Management. It begins with an introduction to management accounting, differentiating it from financial accounting and exploring various accounting systems like price optimization, cost accounting, inventory management, and job costing. The report then delves into different management accounting reporting methods, including budget reports, cost managerial accounting reports, and performance reports. It evaluates the benefits of various management accounting systems and emphasizes the integration of management accounting systems and reporting within an organization's processes. The report further examines cost analysis techniques, preparing income statements using both absorption costing and marginal costing methods, and interpreting the results. The report also discusses the advantages and disadvantages of different planning tools used for budgetary control and how organizations adapt management accounting systems to address financial problems, ultimately leading to sustainable success. The report concludes by highlighting the importance of management accounting in decision-making and organizational planning.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENT
INTRODUCTION.........................................................................................................................3
TASK 1...........................................................................................................................................3
P1. Management accounting and its different types of system...................................................3
P2. Explain different method of management accounting reporting..........................................4
M1. Evaluation of benefits of various management accounting systems....................................5
D1 Management accounting system and management accounting reporting are integrated with
organisation process.....................................................................................................................6
TASK 2...........................................................................................................................................6
P3 .Appropriate techniques of cost analysis to prepare an income statement.............................6
M2. Management accounting techniques and financial reporting documents..........................10
D2. Financial reports which applies to interpret many business activities................................10
TASK 3.........................................................................................................................................11
P4. Advantages and disadvantages of different types of planning tools used for budgetary
control........................................................................................................................................11
M3. Usage of different planning tools for preparing and forecasting budgets..........................13
TASK 4.........................................................................................................................................14
P5. Organisations are adapting management accounting systems to respond to financial
problems....................................................................................................................................14
M4. Management accounting in response to financial problems can lead organisation to
sustainable success.....................................................................................................................15
D3.Various planning tools to resolve financial problems.........................................................16
CONCLUSION............................................................................................................................16
REFRENCES...............................................................................................................................17

INTRODUCTION
Management accounting is also called as managerial accounting or cost accounting. It is
the procedure of analysing business cost and operations for designing internal financial records,
reports and accounts which will help manager in decision making process for accomplishing
their goals and objectives. In simple term it can be said that, management accounting is use for
internal decision making of organisation (Ward, 2012). Financial and non-financial both kind of
information utilise for making report as well as there is no specific time duration for preparing
and using managerial reports. An organisation can use respective report when they required
without any restrictions. Apart from this, management accounting system is differ from financial
accounting because it help only in internal aspects of business. In this report, Capricorn Wealth
management Company is selected which was established in 2008 and its office is at
Hammersmith London, United Kingdom. Respective organisation provide wealth and financial
advice to their clients and offer several financial products and services, loans, mortgage products
and so on.
This report will going to discuss about the concept of management accounting along with
types and benefits. Moreover, going to focus on several accounting techniques as well as
managerial reports with their advantages and disadvantage. In the end, ways will be discussed
which utilise for overcoming from financial issues by effective implementation of several
accounting techniques.
TASK 1
P1. Management accounting and its different types of system.
Management accounting is type of accounting system which provide assistance in
management of organisations internal parts. It is helpful in making managerial report that is
required within association for designing their important policies and also in making internal
decisions (DRURY, 2013). Along with this, for an organisation it is not mandatory to maintain
respective accounting system it is totally depended on requirement. There are several types of
accounting system explanation of these are as follows :- Price optimisation system – It is an system which provide framework to organisation for
identifying price of goods and services which is suitable for both company and their
customer's. With the assistance of price optimisation system reaction of customer's at

different price level has been analysed. Generally main motive of this accounting system
is to provide factors that will assist is setting price. Capricorn Wealth Management
Limited utilise respective system for setting price of goods and services which is
advantageous for company as well as their customers. Cost accounting system – It is an accounting system which is helpful in determining the
cost of products including all the cost such as fixed as well as variable. Capricorn Wealth
Management Limited organisation utilise cost accounting system for checking out the
cost of several financial goods or services (Wickramasinghe and Alawattage, 2012).
Thus, it will assist in focusing on those services and products which are beneficial for
organisation. Inventory management system – It is one of the most important accounting system
within the organisation because it is related to tracking status of goods as well as services.
With the assistance of inventory management system association is able to identify
availability of products and services. Capricorn Wealth Management Limited implement
respective accounting system with the motive of tracking their product and services. For
instance, Company want to check clarification of mortgage loan's then in this process
inventory management system help in checking.
 Job costing system – It is the system which involve the procedure of accumulating
information related to the cost of production. Job costing system is suitable for the
companies who are offering variety of products and services. Capricorn Wealth
Management Limited is an firm which serving several financial services and products so
for them it is necessary to make estimation of each individual unit cost. Thus, respective
system help in analysing the cost of different financial goods and services along with
customer reaction at various price level.
P2. Explain different method of management accounting reporting.
There are several types of accounting report which is necessary for company but
management accounting have their play important role in relation of internal management of
business (Otley, 2016). This will assist manager of Capricorn Wealth Management Limited in
taking important decision and also framing strategies. Management accounting report involve

both monetary as well as non-monetary informations. Respective organisation prepare several
type of reports are as follows :- Budget report – It is an internal report which is not share with outsiders and budget
report assist in comparing estimated with actual performance. Along with this, it also aids
in designing future policies as well as strategies for association. Moreover, budget
estimate income and expenses for specific time period and respective firm will follow
this in accomplishing their goals and objectives. Cost managerial accounting report – It is an accounting report which provide
framework for checking profit and loss from several activities. Cost managerial
accounting report assist in calculating all the expenditure before selling of product and
after that compare with the income from selling (Fullerton, Kennedy and Widener, 2014).
Thus, if expenses are more then income it will be loss for company whereas, expenses are
less then income it will be profit. Although, Capricorn Wealth Management Limited
utilise cost managerial accounting report with the motive of analysing profit and loss as
well as also for making future policies.
 Performance report – In simple term it can be said that, performance report is that which
utilise for measuring the performance of something. In relation of management
accounting, performance report simply means judgement the performance of staff
members well as organisation for accomplishing predetermined goals (Otley And
Emmanuel, 2013). It decrease the level of complexity for deciding which personnel is
eligible for rewards and who don't. Capricorn Wealth Management Limited apply this
report in their working for analysing performance of company as well as their employees.
Moreover, it will assist manager of respective firm in checking the performance of each
and every individual activity.
M1. Evaluation of benefits of various management accounting systems.
Advantages of Job costing system -
 Job costing provide an basis for estimating cost of similar job that will be taken in future. It provide detail analysis the cost of material, overhead and labour for every job as and
when needed.
Advantages of cost accounting system -

 Cost accounting system assist in finding out the reason behind high cost in the procedure
of goods and services offering. Through this organisation can make cost estimate of products and services which offering
by them.
Advantages of price optimisation system -
 It provide framework through which company can analyse reaction of customers at
different price level (Maas, Schaltegger and Crutzen, 2016). Price optimisation system assist organisation in identifying the level of price that will be
beneficial for company as well as customer both.
Advantages of inventory management system -
 This management system is beneficial in tracking status of several goods and services.
 Inventory management system assists in saving time and cost.
D1 Management accounting system and management accounting reporting are integrated with
organisation process
In respect of an organization management accounting reporting that include accounting
system is very important and necessary. This is so because both of them are linked each other
such as if an organization want to develop managerial report. For management accounting
system appropriate data as well as information is necessary. In their is absence of respective
thing then companies didn’t able to develop report and also can’t take appropriate decision for
further activities (Kotas, 2014). In respect of Capricorn Wealth Management Limited they
develop various management report through adopting different accounting techniques and tools.
Along with this it will minimise or reduce complexity of preparing accounting report of a
company.
Distinction between management and financial accounting
Basis Management accounting Financial accounting
Definitions This is the system which
facilitates appropriate data to
the managers in order to
formulate plans, strategies as
well as policies for
It is an accounting system
which concentrates on
financial statement preparation
for providing finanacial data to
interested parties.

performing business
effectually.
Objectives It gives financial data to
externals.
It aids management to plan as
well as make decisions to
facilitates elaborated data on
many matters.
Format Its format is specified. In this there is not specified
format.
TASK 2
P3 .Appropriate techniques of cost analysis to prepare an income statement
Absorption costs – It is the methods which calculate cost of manufacturing by including
both fixed as well as variable cost. This is needed for external financial reporting and for income
tax also.
Marginal costing – It is the cost of one additional unit of output and concept of marginal
cost is use for determining the optimum production quantity for association, where it cost fewer
amounts in production of additional unit.
Income statement by using absorption costing method:
Particular Amount
Sales (25*10000)
Less- Cost of goods sold
Gross profit
Less- Selling and manufacturing overhead
Net profit
250000
140000
110000
60000
50000

Working Notes*
Calculation of sales (25*10000) - 250000
Calculation of cost of goods sold - 140000
(Direct material+ direct labour+ Variable manufacturing overhead+ Fixed manufacturing
overhead: 50000+30000+20000+40000)
Calculation of selling and manufacturing expenses - 60000
(Variable selling and manufacturing overhead+ Fixed selling and manufacturing overhead:
30000+30000)
Income statement by using marginal costing method:
Particular Amount
Sales
Less: Marginal cost of sales
Contribution
Less: Fixed cost
Net income
250000
130000
120000
70000
50000
Working Notes*-
Calculation of marginal cost of sales - 130000
(Direct material+ direct labour+ Variable manufacturing overhead+ Variable selling and
administration expenses: 50000+30000+20000+30000)
Calculation of fixed cost - 70000
(Fixed manufacturing overhead+ fixed selling and administration expenses: 40000+30000)
Interpretation- After going through the above numerical, it has been identified that in
both of the costing method organisation is getting equal net income. Thus, in the absorption
method net income is of 50000 whereas, same in marginal costing also.
Income statement by absorption costing method (When 5000 units sold)
Particular Amount
Sales (5000*25) 125000

Less- Cost of goods sold:
Direct material- 50000
Direct labour- 30000
Variable manufacturing overhead- 20000
Fixed manufacturing overhead- 40000
Gross loss
Less- Selling and manufacturing overhead
Fixed selling and manufacturing overhead- 30000
Variable selling and manufacturing overhead-30000
Net loss
140000
(15000)
60000
(75000)
Income statement by marginal costing method ( When 5000 units sold)
Particular Amount
Sales(25*5000)
Less- Marginal cost of sales:
Direct material- 50000
Direct labour- 30000
Variable manufacturing overhead- 20000
Variable selling and administration expenses- 30000
Contribution
Less- Fixed cost:
Fixed manufacturing overhead- 40000
Fixed selling and administration expenses- 30000
Net loss
125000
130000
(5000)
70000
(75000)
Interpretation- After going through the above given number, it has been examine that
company is getting loss from both of the costing method. Thus, by using absorption method, net
loss is 75000 and in marginal costing also same loss is occurring i.e., 75000.

Financial reporting document with labour and material variances:
Budgeted Actual Variance
Units 1000 1100 100(F)
Hours 3000 3400 400(A)
Units per hour 3 3.09 0.09(F)
Labour 15000 17680 2680(A)
Labour rate per unit 15 16.07 1.07(A)
Labour rate per hour 5 5.2 0.2(A)
Actual
Units 1000
Material used Kg 2200
Actual Material cost 20900
Material cost per kg 9.5
Material cost per unit 20.9
Budgeted material cost per unit of the product 2kg at £10/kg
Budgeted material cost per kg ( £ 10/2) 5
Budgeted Material cost 11000
Variance (Actual- budgeted) 9900(A)

M2. Management accounting techniques and financial reporting documents
Techniques of management accounting are essential for creating financial report and
statement. There are various types of techniques and tools through which financial documents
can be develop such as balance sheet, profit and loss and so on. This is so because it provides all
the necessary information and data for developing financial statement. In respect of Capricorn
Wealth Management Limited develop financial statement through different tools and techniques
of accounting.
D2. Financial reports which applies to interpret many business activities
Financial report defined as all activities of a business in manner which can be understand
easily. It is possible to check financial position of company by using various techniques like
balance sheet, profit and loss statements and many more (Hiebl, 2014). Basically, this used by a
company in order to identify proper financial performance of company as well as external
parties. In context of Capricorn Wealth Management Limited they develop various financial
reports in order to check and understand its financial position such as income statements, profit
and loss statement and many more.
Apply PEST analysis to the financial position of an organisation
Pest analysis is conducted by Capricorn wealth management limited to know about their
financial positions:
Political: The political conditions is favourable to the Capricorn Wealth Management
Limited then there should be stability in their financial positions.
Economic: various factors focus on problems such as minimum wages, exchange rates
and so on. So, Capricorn Wealth Management Limited have to view all these issues seriously in
order to maintain their financial position.
Social: This factors consider growth rate of population, distribution of age, career
attitudes and so on. These are crucial demographic attributes for investor to measure the
characteristics of customers as well as these factors assist to determine the Capricorn Wealth
Management Limited to invest into.
Technology: As technology is becoming advance day by day so they provides various
systems, software etc. in respect of financial data. This allows Capricorn Wealth Management
Limited to plan a manner for scaling their growth assure levels of cost effectual production.

TASK 3
P4. Advantages and disadvantages of different types of planning tools used for budgetary control
Budgetary control is regarded as tool or techniques which are used in helping formulation of
future financial performance and analysing goals through past budgets. Such technique is used
by manager in order to control and monitor financial operations and cost of accounting period.
The controls plays an effective role to organisation as it aid senior level manager for managing
and operating performance of operations in effective manner which leads to chances of making
maximum profits (Schaltegger, Gibassier and Zvezdov, 2013). These tools help in providing
estimation for incomes and expenses to firm for financial period and financial position in
competitive world. The manager of Capricorn Wealth Management Limited should considers
different factors for setting non financial and financial targets in order to coordinate and control
various financial activities among multiple departments. There are different kinds of planning
tools used for budgetary control along with advantage and disadvantage which are described
below:
Flexible Budget- It is techniques that assist in making various changes in budgets which
can be occurred at time. Such budget is used by all types of organisations as budgetary control.
This planning measure helps in estimation of expenses and revenues that is based on current
outputs. Such budgets are used for evaluating success and failure areas in operations of past
performance during financial year (Herzig, Schaltegger and Burritt, 2012). The manager of
Capricorn Wealth Management Limited should prepare budget for all types of operations that
varies from each other or variable in nature. When there is change in any activity then such
changes can be adopted easily. There are some advantage and disadvantages of flexible
budgetary control which are given below:
Advantages- The advantage of flexible budget are as follows:
 These budgets help in providing accurate and authenticate outcomes as it covers different
types of activities separately.
 This budgetary control helps in bringing coordination among different activities in
Capricorn Wealth Management Limited.
Disadvantages- The disadvantages of flexible budgets are given below: