Management Accounting Report: Essentra Packaging Analysis & Financials

This report delves into management accounting principles, exploring various tools and techniques used to analyze organizational activities and collect relevant financial information. The report focuses on Essentra Packaging, a manufacturing firm, examining the application of management accounting, cost techniques, and planning tools. It covers essential aspects like inventory management, price optimization, and job costing systems. The report provides an in-depth analysis of cost techniques such as marginal and absorption costing, including income statement preparation. It also evaluates the merits and demerits of different planning tools and analyzes how organizations adapt accounting approaches to resolve financial problems. The analysis includes an examination of management accounting's role in achieving long-term business success, and the application of planning tools to address financial challenges. The report provides detailed financial data and reports, offering insights into financial performance and decision-making.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management accounting and essentials of different types of management accounting
system.....................................................................................................................................3
P2 Various methods of management accounting reporting....................................................5
M1 different types of system and benefits.............................................................................5
D1 Management Accounting system report within the organisational process.....................6
TASK 2............................................................................................................................................6
P3 Cost techniques and prepare income statement to calculate cost......................................6
M2 Different management accounting tools..........................................................................7
D2 Financial reports that apply and interpretation of data.....................................................7
TASK 3............................................................................................................................................8
P4 Merits and demerits of various types of planning tool......................................................8
TASK 4............................................................................................................................................9
P5 A critical analysis of how organisation have adapted different accounting approach in
resolving financial problem by management.........................................................................9
M4 Managing accounting system for achieving long term success of business..................11
D3 Planning tool for financial problem................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is a tool which is used to analysis organisational activity with
different tools and techniques with help in collecting relevant information. (Chiarini and
Vagnoni 2015). It is a systematic information which is used for collecting data and information
in an effective manner. Financial decisions-making which aid to planning, controlling
formulation of plans and policies in order to achieve organisational objective. Essentra
packaging which is a manufacturing firm deals in tear tapes and many more, is selected in this
project in which it is been discussed about the concept of management accounting, cost
techniques which is beneficial for company and advantages and disadvantages of planning tool.
TASK 1
P1 Management accounting and essentials of different types of management accounting system
This management accounting tool is a process which describe various activities which is
done to analyse and collect information in terms of monetary (Harrison and Lock 2017). There
are different advantages of accounting which aid in decisions making and also control over
business financial functions. With management accounting system, Essentra packaging can
effectively work in proper manner to achieve organisational goals. This is important for a
company to consider accounting management to their operation for effective planning and
achieve higher growth. It is important for Essentra packaging to use management accounting as a
tool to manage their operations and their related costs so that effective business decisions can be
taken by the manages of this company. Some of the characteristics of MA are been mentioned
below: Study on causes and effects relationships: Financial accounting system which is been
prepared to know profit and loss, so under management accounting system it causes
effects relationship between variables and profitability of business.
 Management accounting in organisation is important tool which is used to analyse
financial stability of organisation in an effective manner.
Management accounting systems are analysed below:
Inventory management system: In organisation there are two main important function
that is manufacturing and production which manages inventory and stock and keeps tract on
organisational structure (Armitage, Webb and Glynn 2016). With the use of this system

inventory wastage can be reduced resulting in higher profit. To increase overall productivity,
company can work on this strategy to avoid less wastage and use optimum resources in effective
and appropriate manner. Some of ratio of inventory which will be help organisation in
impressive way.
 FIFO- (First in first out)
 LIFO- (Last in first out)
There are two main tools which are used by the organisation in day to day operation.
FIFO denotes when product is manufactured and it should be sold out first as earlier as possible
and LIFO denotes or means that after production when stock come last and goes first. The
company uses FIFO method which help to aid profit in effective manner. Essentra Packaging
uses FIFO method and the essential requirement of tis inventory management system are the re
order level, re order quantity, lead time etc. which needs to be taken care of by the management
of the company while implementing this management accounting system.
Price optimisation system: This Model are mathematical programs that calculate demand
varies at different price levels. Price optimisation is use to determine how customer will respond
to different prices of its products and services through different channels. Essentra Packaging
which can increase their sales margin in effecting pricing strategy in different products. Through
this method which will aid to attain more profit company.
Job costing system: Job costing system is for assigning and accumulating manufacturing
costs of an individual unit of output. Company can perform operations by detailed information
which been carried out which aid to relate cost within an accounting period. More over with job
costing system, this company Essentra collects information which will assign job role according
to company roles and duties of employees. Through this system which will help to maintain cost
in effective way.
Difference between Financial Accounting and Management Accounting
Financial Accounting Management Accounting
 The main purpose of using this financial
accounting is in external company. The
accounting is used in internal company
to maintain rules and regulation
 Management accounting is different
from financial accounting. It includes
details of company's available cash, sales
revenue and current state of organisation

account payable and receivable.
 It covers all financial related data inside
an organisation.
 It involves non-financial form of
information based on qualitative
improvisation.
 Liabilities on companies is prepared in
form of financial accounts
 In management accounts no legal rules
are applicable while preparing.
P2 Various methods of management accounting reporting
Different types of management accounting which aid to record information related to
financial growth. To increase productivity of organisation. Management accounting which
necessary to be made by finance department for evaluating and increasing production level of
company (Otley 2016).
Budget report: This report is made for accounting of the year of company managers of
company which uses this kind of report for comparison of actual report as well as budget in
accounting. This report is used to manage expenses and other cost of company which is going to
occur during the year. For every company budget is necessary, in context to Essentra packing
manger operations which need to make budget to analyse financial part effectively.
Cost report: Another report which is being aid to estimate cost in manufacturing and
production process. This cost report will improve and leads to higher growth and increase in
production level. Additional benefit is that it gives assurance to activities which is conducted
during time span of company management. In context to Essentra packing company cost report
will able to cost in better and discipline manner, also which leads to higher profit.
Profitability report: This report is a management accounting document which is
developed by an organisation to record its gained sales revenues in a year and spend expenses in
a year. This report can help Essentra packaging to determine the net profitability which they have
earned by operating in a year
Performance report: This report analysis and evaluates the performance of all the
employees and processes of the organisation. By developing this report, Essentra packaging can
compare the budgeted or standard performance with the actual performance and then work out
the variances.

M1 different types of system and benefits
Inventory management system: The major benefit behind this system is have record of
all inventory which is within organisational structure which offers different products and services
to consumer according to demand and need. Inventory tool which is important element for
growth of company. Essentra Packing which need to adopt this system to control over inventory
because it is a manufacturing company so proper inventory management is necessary to avoid
wastage of resource.
Cost Accounting system: Cost is important tool of making business development in
effective manner more over accounting is such way which will lead to higher growth.
In context to Essentra packing using this management accounting tool will able to manage cost
in appropriate way. (Appelbaum Kogan Vasarhelyi and Yan 2017)
Price optimisation system: The system which is increases company customer base with
assistance of fair price in appropriate manner. Company which need to work upon this matter.
Essentra packing can adopt this system in to their organisation to avoid price fluctuations and
can be able to set a standard pricing.
Job costing system: The activity which will evaluate different activities and which need
to maintained in effective manner so that company achieve its goals and objective in impressive
way. Through this system Essentra packing will help to achieve objective in effective manner.
Essentra packing can use this system to produce homogeneous products with the view to mitigate
wastage of cost.
D1 Management Accounting system report within the organisational process
Management accounting system which involves preparing and providing timely financial
and statistical information to business mangers so that short term objectives can be achieved in
effective manner. This is important parameter to analyse company growth and to evaluate
financial position of company in a competitive market. Essentra packing need to adopt
management accounting system report in their company through which manager of this company
can tract their product information design according to marketing trend. Cost accounting system
is used to develop cost accounting report which is integrated to ascertain cost of manufacturing
operation of Essentra packaging company in effective way.

TASK 2
P3 Cost techniques and prepare income statement to calculate cost
Income statements using own data:
Income statement using Marginal costing
March April
Units Amount Amount Units Amount Amount
Sales @ 50 10000 500000 12000 600000
Less: Cost of sales
Opening stock @ 25 2000 50000
Variable cost of production @ 25 12000 300000 10000 250000
Less: Closing stock @ 25 2000 50000
250000 300000
Variable selling overhead 50000 60000
Total variable cost of sales 300000 360000
Contribution 200000 240000
Fixed overheads:
Production 99000 99000
Selling 14000 14000
Administration 26000 139000 26000 139000
Net profit 61000 101000
Income statement using Absorption costing
November December
Units Amount Amount Units Amount Amount
Sales @ 50 10000 500000 12000 600000
Less: Cost of sales
Opening stock @ 34 2000 68000
Variable cost of production @ 34 12000 408000 10000 340000

Less: Closing stock @ 34 2000 68000
340000 408000
Gross profit 160000 192000
Adjustment for over / under
absorption of overheads 9000 9000
169000 183000
Fixed overheads:
Variable selling overhead 50000 60000
Fixed selling overhead 14000 14000
Fixed Administration overhead 26000 90000 26000 100000
Net profit 79000 83000
Cost techniques are methods which controls over cost and control and aid in decision
making hence major functions is that it aid in decisions making, negotiation and prise appraisal
and more over assess in purchasing performance. Cost techniques which are been discussed
below:
Marginal Costing: The cost which includes labour, material and fixed cost, selling cost,
overheads and administration expense. Moreover, it states that it is a charging variable expenses
in all over business development and with the help of accounting techniques organisation which
can able to increase the efficiency of employees as well as of organisation. This is a cost which is
been taken into the proper manner and goals which is to be in form of different achievements.
Marginal cost which reflects company profit margin and efficiency which has to be considered
by manger in appropriate way. Labours and overheads which is to proper manner hence variables
and overheads which has been added in marginal cost with direct marginal expenses. This is
accounting techniques which is used to increase net benefits which determine it in period of
bookkeeping. The formula which is mentioned is to calculate marginal cost which is under:
[Marginal Cost= Direct Labour+ Variable overheads +Direct expenses +Direct material]
Absorption costing: This costing is used for costing the strategy in terms of
bookkeeping and for administration. Organisation which is working effectively which leads to
development of business. Moreover, fixed cost and variable cost, compensation and cost of
material which will increase the costing (Alsharari, Dixon and Youssef 2015). This cost which

helps in making strategies to overcome the crises which involved in the business. This cost is
majorly focusing on such cost which can be absorbed and some of technical tools which need to
be taken in consideration by the mangers of company. Hence this cost is made for affecting
which is directly or indirectly in accurate manner and hence this a form which is been generated
in such way that is applicable in organisation. The bookkeeping is a way of accounts which has
to be seen in appropriate way. Absorption which is not only taken in to the company
achievement but due to which goals are to be achieved.
M2 Different management accounting tools
In present scenario organisation which aid to take benefits with respect to decision
making and cost method will help to improve the work in effective manner. The management
techniques which is used by manger in different form and tools which need to aid information in
proper manner (Azudin and Mansor 2018) The use of marginal profit which is calculated for cost
term production and operational work which is taken take while working in organisation. The
advantages with regard to manager is that it suitable in working of production as well as
operation in proper manner. Hence working with regard to variances in cost which need to
treated in both methods which will change in net earnings figure for a year. The solution is that
attaining right solution which affective in nature.
D2 Financial reports that apply and interpretation of data
Financial reports which includes major three accounts that is balance sheet, cash flow and
revenue statements. With the help of these financial reports organisation of business which can
work effective in the organisation and which showcase financial strength of company. Above
mentioned table it results to net profit with different method which has been mentioned in report.
The marginal cost is a tool which is to be taken into consideration that fixes cost at periodical
form. If it has been seen that cost is absorbed, then for that it is important to produce particular
goods. It has been evaluated that in May month profit is 1050 Euros and in June profit is 4750
Euros with absorption of costing. It is essential that for manger needs to schedule resources with
the concern of organisation and along with that cost and along with revenue which is required in
different projects in side business operations.

TASK 3
P4 Merits and demerits of various types of planning tool
Budget is an important tool for an organisation it is set of outline related to financial
statements and planning which going to be occurred during the year. Hence, this company is
need accomplish their work in effective and estimated time period. In company of Essentra,
manger take advantages of budget to control over expenses. It has been mentioned about some of
advantages and disadvantages:
Fixed Budget: This budget does not change in any of the conditions and budgets which
is estimated actual funds which required for achieving goals and increasing sales margins.
(Spraakman Grady Askarany and Akroyd 2015). This budgetary tool of fixed budgeting can
control the budget by bringing rigidity so that no expenses can fluctuate as per the supplied or
demanded goods.
Merits of Fixed Budget
 Fixed budget which allows a business to measure both short- term and long term budgets
in effective manner.
 In the fixed budget cost are largely fixed so that expenses don not change as revenue
fluctuate.
Demerits of Fixed Budget
 One of the big problem of fixed budget is that it does not account for life's which are
unpredictable events. For example, fixed bills such as mortgage, car payments, variable
expenses are unpredictable which will ultimately exceed budget stress.
 Fixed budget is one of the draft which is based on specific criteria without any provision
for any changes at any point during the period of time covered by the budget.
Flexible Budgets: A flexible Budget means adjustment with changes in volume or
activity. Hence flexible budget which includes a variable rate per unit of activity instead of one
fixed total amount. This planning tool controls the budget of Essentra packaging by allowing
them to make rectifications in their budgeted amount according to the changing and fluctuating
costs and units of the goods.
Merits of flexible budget which is estimated for evaluating in effective manner. The
industry which manger need to allocate funds in each activity of business. Demerits is a type of
budget which have to critically analysed by mangers in achieving goals of organisation. So more

over company need to work on this matter. Mangers of company which need to allocate in
effective manner to reduce loss. Company need to influence some of changes which need to be
taken into consideration in amount to which mangers have to implement some of changes which
will lead to growth of business in proper way. The merit of using this flexible budget in company
which helps to evaluate in proper manner. The demerit of using this budget by company will
critically manages in achieving goals and objective.
Variance Analysis: This is a planning tool which helps in controlling the budgets which
are prepared by the company. Using this tool, management of Essentra packaging can identify
the variance in their budgeted costs and actual costs and then make efforts to control budgets so
that the variance can be reduced.
Merit of this planning tool is that it assists in developing effective plans and strategies
for next accounting year. Demerit of this planning tool is that it requires additional management
accountants who can analyse the variance between the standard and actual elements.
TASK 4
P5 A critical analysis of how organisation have adapted different accounting approach in
resolving financial problem by management.
At early stage, each organisation faces some problems while growing or expanding
business at any market place. Some firm indulges in financial crises due to wrong planning of
funds in operating business activities. In recent business environment, most of the managers have
to develop cordial relationship with stakeholders, in maintaining accurate balance for the flow of
financial liquidity in an organisation. Some of the financial problems might occur due to
incorrect planning, more incurred expenses, ineffective quality staff and unsatisfied investor
withdrawing funds from firm. Thereafter, resulting in decline of business in competitive market
in any industries. When talking about Essentra Packaging, the firm are currently facing some
funds relating problem like lack of cash flow, low practise of accounting and unnecessary
expenditure on manufacturing of tear tapes.
Unnecessary Expenditure: Due to incorrect planning, supervisors have allocated
inappropriate funds on different business activities, which have not given desired output to the
organisation. These kinds of strategies used by managers in their decision have impacted in

supplying less funds for conducting task that are required for achieving short term objectives of
the organisation.
Lack of cash flow: If the financial budget is not structured properly, it will have huge
influence on operating routine business activities in an organisation. This type of financial
problem was faced by firm due to unhealthy relation with stakeholders. Thereafter there was
inaccurate supply of funds in an organisation.
These financial problem have major influence on profitability and productivity of both
employee and organisation in a specific industry. As employee are the one who gets affected
from drastic decision taken by management of any organisation. As it is said to every problem
there are some alternative solution that are effectively utilised for performing any task in
company. In regards to Essentra Packaging, the manager has use some method like financial
governance, benchmarking and key performance analysis for solving financial problem which
they are facing in growing business. These methods are briefly mentioned below:
Financial Governance: The financial governance is described as set of framework of
guidelines and policies that are designed to systematically manage accurate financial record of
any organisation. In context with Essentra Packaging, the supervisor could critically planned
strategies for recording financial statements in accounting software that are taking place in an
organisation. It is also help finance leaders in controlling the inflow and outflow of funds, having
a check on all financial transaction and securing this information with effective authentications.
Through financial governance which will able to set proper guidelines with effective final goal.
(Sledgianowski Gomaa and Tan, 2017).
Benchmarking: This technique involves comparison of the performance of business with
competitor, in order to sustain and grow the business in competitive market. When talking about
Essentra Packaging, the manager could set standards while allocating funds in completing
different activities at the time. So that incurred expenses could generate some revenue for
growing the business. Through this techniques proper benchmark can be set and can be resolved
while which will help to allocate fund in different activities.
Key Performance Indicator: It is a tool used for assessing the performance of business
while grabbing successful growth of business in cut throat competitions. KPI shows the accurate
result to leader and accordingly they forecast and plan strategies to gain competitive advantages.
The managers could utilise this technique for improving the quality of product and services.