Management Accounting Report: Finance and Funding in TTM (Coursework)

This report examines finance and funding within the Travel and Tourism Management (TTM) industry, focusing on the application of management accounting principles. It details various types of management accounting information, including cost allocation reports, budgets, and forecasting techniques, highlighting their relevance to companies like Merlin Entertainment plc. The report explores cost allocation methods such as job costing, process costing, and activity-based costing. It also covers different budget types (master, standard, flexible) and forecasting methods (decision trees, NPV calculations, cash flow forecasting, and sales forecasting). Furthermore, the report analyzes how management accounting information supports decision-making, encompassing investment decisions, policy development, capital structure analysis, and pricing strategies. The conclusion emphasizes the value of implementing management accounting information to enhance organizational performance and achieve goals within the TTM sector.

Finance and funding in TTM
TASK 2

P2.1 Types of management accounting
information
Introduction: Management Accounting is the function of internal business that is
responsible for collecting and reporting financial information for the internal uses of
the organisation.
 This information is often related to the direct cost of services and products that are sold
to customers. Management accounting information is necessary for companies in order
to determine the efficiency and effectiveness of organisational operations.
 It also helps in determining the level of profits earned based on the assets that are used
to produce consumer products and services.
 This information is specific for all the owners and managers that need to review the
information for the purpose of decision-making.
REFERENCES:
Hall, M., 2010. Accounting information and managerial work. Accounting, Organizations and Society,
35(3).pp.301-315.

CONTD…
Types of Management Accounting Information that can be used for travel and tourism
industry are:
 Cost allocation reports
 Budgets
 Forecasting
Other management accounting information:
 Activity Management
 Internal auditing
 Tax accounting
 Financial accounting:
 Income statement
 Balance sheet (Statement of financial position)
 Cash flow statement (Statement of cash-flows)

CONTD…
Cost Allocation reports:
 It is the primary function of management accounting. This report is prepared by the
accountants to show the allocation of capital amount to all the types of economic
resources.
 This report is also prepared to show how the business will be allocating its economic
resource costs to its goods and services. Common cost allocation method includes:
Job costing :
This method of costing records the cost of manufacturing and not the cost of process.
This type of costing is generally not popular in service industries like Merlin Entertainment
plc.
REFERENCES:
Hall, J. A., 2012. Accounting information systems. Cengage Learning.
Malmi, T. and Granlund, M., 2009. In search of management accounting theory. European Accounting
Review. 18(3). pp.597-620.

CONTD…
Process Costing:
 It is the method of assigning the cost to unit of production to those companies
producing large quantity of homogeneous products.
 Merlin Enterprises plc provides services that are homogeneous in nature and therefore
it can use process costing technique.
Activity Based Costing :
 It is also known as Activity based management. This system is expensive and difficult
to operate and manage in small businesses.
 But this is more popular in service industries like Merlin Entertainment plc.
 Activity based costing eliminates unnecessary business operations that in turns helps in
saving cost.
 This method requires high understanding therefore, high skilled professionals are
needed to operate this method.

CONTD…
Budgets: They are often prepared by management accountants to determine the volume of
money a business should spend on its business activities. Budgets are prepared to set
certain business expenditures to ensure the company is not over utilizing its financial
resources.
 Most common types of budgets used in management accounting are:
 Master Budgets : includes all financial expenditures of the company
 Standard budgets : specifically related to the production process of company
 Flexible Budgets : specifically related to the production process of company
other types of budgets:
 Operating budget
 Cash flow budget
 Financial budget
 Static budget
Merlin Entertainment plc may use master budgets as its fixed expenses are relatively
high.

CONTD…
Forecasting : It is an important function of management accounting. Under this
management accountants prepare economic forecasts. The forecasts are made to
determine the expected sale of goods and services to customers in specific market
situations. Forecasting information helped the management in making decisions
regarding increase of production or expansion of business operations.
 Common forecasting reports includes:
 Decision Trees
 Net present Value calculations
 Other statistical and forecasting methods.
Management of Merlin can use this technique in forecasting future events and packages
can be prepared accordingly.
REFERENCES:
Grabski, S. V., Leech, S. A. and Schmidt, P. J., 2011. A review of ERP research: A future agenda for
accounting information systems. Journal of information systems. 25(1). pp.37-78.

CONTD…
Other types of forecasting includes:
 Cash flow forecasting: Under cash flow forecasting, management forecasts future inflow
and outflow of cash from the organisation.
 Sales forecasting: Sales forecasting helps management in preparing budgets for sales
revenue for a accounting period
Conclusion: Various types of management accounting can be used by Merlin entertainment
plc. These will help the company in preparing budgets, various accounting report and will
also help in identifying variations in actual and budgeted results.

P2.2 Use of Management
Accounting information in
decision making
Introduction: Management accounting information is not compulsory in accounting
regulation but that does not mean that the information is not useful. Small business
owners faces countless of decisions in their day to day business activities.
Management accounting information helps in providing data driven information to
these decisions. This can improve decision making over the period of long run.
 The management accounting information helps the management in comparing the
trends over the years. This enables the management in making decisions regarding the
causes of negative changes in trends.
 Management uses management accounting information in forecasting the future
business activities. Through this management is intended to prepare plans for future
uncertainties.

CONTD…
 The information of management accounting also enable the management in making
decisions regarding investments. The information allows the management in
determining the areas and the limit of investments a company can make. For example
management of Merlin with the help of management accounting information can take
decision regarding purchasing of more land for rides and theme parks.
 Use of management accounting system will help in forecasting the future trends
through management can prepare various policies accordingly.
 The management accounting information provides the management the information
about capital structure of the company. Through help of various ratios, it enables the
management to know whether the company needs top raise the capital or not. And
through what sources company need to raise capital.
REFERENCES:
Collier, P. M., 2015. Accounting for managers: Interpreting accounting information for decision making.
John Wiley & Sons.
DRURY, C. M., 2013. Management and cost accounting. Springer.

CONTD…
 The use of management accounting information can also be taken to determine whether
the company need to produce more products and services. The Merlin company can use
this information in order to determine in what kind of services it is lacking behind and
reasons for the same. You need to give some specific examples from Merlin wherever
necessary
 The most important use of management accounting information is in meeting the
organizational goals and objectives. It provides the information related to all the
financial activities of the organization Merlin can identify that whether the activities of
the company are towards the achievement of its organizational goals and objectives
through this information.
 Management accounting information also helps in setting the price of different products
and services.
 Through this, management can take decisions regarding which activities would be
beneficial to be outsource.
REFERENCES:
Hall, M., 2010. Accounting information and managerial work. Accounting, Organizations and Society, 35(3).
pp.301-315.
Schaltegger, S. and Burritt, R. L., 2010. Sustainability accounting for companies: Catchphrase or decision
support for business leaders?. Journal of World Business, 45(4). pp.375-384.

CONTD…
Conclusion: Different tools and techniques of management
accounting information has different advantages to the
organisation. This increases the need of implementing
management accounting information in Merlin
Entertainment plc.