Management Accounting Report: Types, Methods, and Planning Tools

This report on management accounting begins with an introduction to the subject, defining it as the process of providing financial information to managers for effective decision-making, with a focus on Oshodi plc, a fruit juice producer. It explores different types of management accounting systems, including price optimization, cost accounting, inventory management, and job costing. The report then details various management accounting reporting methods like budgeting, inventory management, and accounts receivable. It highlights the benefits of these systems and their applications within an organization. The report also integrates management accounting systems with reporting and then examines costing methods, including marginal and absorption costing, with example income statements. The report covers the concept of cost, and the application of different costing methods, providing a comprehensive overview of management accounting principles and their practical application within a business context.

MANAGEMENT
ACCOUNTING

Table of Content

INTRODUCTION
Management accounting can be defined as a process of providing financial information to
the managers. It works as a process of providing financial information or resources for managers
to make effective decisions. Financial department are responsible of an organisation to formulate
effective process of management accounting. This is mandatory for each corporation to make
effective decisions in corporation. Management accounting leads an organisation to use
statistical data for making accurate decisions. The chosen organisation for this task is Oshodi plc
which is specialised for producing JOJO that is fruit juice and it is available in most of the
countries in all over globe (John Wiley and et. al., 2016). Moreover, the report focuses on
management accounting and its types. Along with this it highlights on different methods of
management accounting reporting. Advantages and disadvantages of different planning tools will
also be discuss in this report. At last management accounting system will be discus that is used
by organisation for responding towards financial problems.
TASK 1
P1
Management accounting is a process of preparing financial reports of management and
accounts that provides accurate and better information which is required by managers. In context
of Oshodi plc it leads them to make appropriate long term as well as short term decisions.
Further, with the implementation of management accounting financial department of corporation
is able to formulate monthly, weekly and quarterly reports. Management accounting is the
application of professional skills and knowledge in preparation of financial and accounting
information in order to formulate policies and rules for performing different operations of firm.
Types of management accounting system
Price optimisation system
Price optimisation system is a process of raising the price of organisational products or
services. The main intention of price optimisation system is to calculate impact of price on
demand or sale of goods (Flamholtz, 2012). For Oshodi plc it is an effective management
accounting system because it helps them to calculate the price of producing goods. This act helps
management to decide the price of its goods that leads them to increase their profits. Their are
different factors are present in organisation due to which it is difficult for Oshodi plc to decide

the prices of it products. The business's of corporation is focus on price optimisation for their
business's to decide price structure of its products. It assist customer's or influence customer's to
purchase price of its products as they are available at reasonable price.
Cost accounting system
Cost accounting system or costing system is a framework that is used by corporation for
estimating the prices of its products. This helps them to analysis the profits and valuation of its
asset in order to control their cost. Oshodi plc manufactures various types of juice in market
Therefore it is mandatory for them to analysis those products which provides more benefits to
them. This results production of demanded products will be increased due to which it is easy to
earn more amount of profits (Järvinen, 2016).
Inventory management system
Inventory management refers to a process of ordering and storing raw-materials and
resources of organisation. The main agenda of inventory management is to arrange raw-materials
in order to complete the process of production in systematic manner. Organisation such as
Oshodi plc are performing their operations at global level. So it is complex for them to manage
and balance required inventory for completion of their work with more efficiency. Just in time,
materials requirement planning are some of the example of inventory management that helps
them to earn more amount of profits.
Job costing system
Job costing system is used by an organisation for identifying and calculating
manufacturing or producing cost of a particular unit and single output. The job costing system is
most effective tool for Oshodi plc because they produce and offers several types of products. So
job costing system is used as all products are different from each other and manufactured at a
different cost. In order to implement job costing system effectively in organisation management
calculates direct cost, overheads and raw-materials charges for identifying accurate prices of its
product units.
P2
In present scenario there are large number of organisation are competing with each other
at global level. To gain competitive advantage it is essential for them to implement effective
methods of management accounting reporting. This act leads them to increase their profits and to

retain their business's for longer period in organisation. Some methods of management
accounting reporting is mention as follow:
Budgeting report
Budgeting is an essential tool for organisation which is used by management to create
effective plan for spending their money. The creation of expenses helps an organisation to
determines the estimated prices of products which is required to complete their operations
effectively. With formulation of effective budgeting programmes it is easy for Oshodi plc to
control their expenses by managing their money to complete their work effectively. For them it is
essential to make effective budgets for completion of their work in minimum expenses that
impacts on the cost of organisation (Bui and De Villiers, 2017).
Inventory management report
In order to understand the better health of a particular business's it is essential to manage
the inventory of an organisation. This determines that it helps a business's to increase their
inventory by reducing the unnecessary activities to produce a good effectively. Example- Oshodi
plc calculates the prices of its products by item fill rate, inventory accuracy and inventory
turnover. This results that it is easy for organisation to deliver their products within specified
time period. Whereas, on other perspective it is also helps to save the cost by managing their
expenses. Like they reduces expenses of storing their inventory through minimising order for
performing their work.
Account receivable report
Account receivable report works as a periodic table which categories a corporation
organisational reports that is useful for collect information from invoice. This is used to recover
debts which increases aid them to raise funds from organisation. The main function of account
receivable report its to determine financial health of its customer's. Debtors are those which
purchase products from customer's a long time ago. This is essential for them for determining
prices that need to be recover from organisation. Further account receivable works as an
effective management tool that indicates several plans to overcome from several risk factors due
to which financial aspects of organisation is impacted.

Benefits of management accounting system and its application within the organisation
Their are several accounting tools exist in market that provides several benefits to
organisation. Some of the major benefits that is accomplish by financial department of Oshodi
plc are mention as follow:
Types of management
accounting system
Benefits Evaluation of benefits in
context of organisation
Inventory management system The major benefit which is
achieved by implementing
inventory management is to
find out exact requirement of
raw-materials and other
resources in order to produce
their goods effectively.
In context of Oshodi plc it is
easy for them to manufacture
their products with more
efficiency. Like with this
execution of inventory system
it is easy for production
department to manufacture
their goods in appropriate
manner.
Price optimisation system Their are several benefits is
obtained by cost accounting
system. First is related with
their price and other it is easy
for organisation to reduces the
waste that is achieved by them
to complete their work in
minimum time period through
cutting down unnecessary
activities.
For oshodi plc it is easy for
organisation to decide the
prices of their products with
executing price optimisation
system in organisation. As it
helps them to decide prices of
its products through
monitoring all essential
aspects. It results reasonable
prices are decide to complete
their work.
Job costing system This system is beneficial for
organisation for managing the
prices of different products
which is manufactured by
On other for manufacturing
products this method is more
beneficial. As it leads them to
delegate prices of all its

them. This is used to eliminate
unnecessary activities for
organisation.
products significantly to all the
departments in systematic and
sequential manner.
Cost accounting system Cost accounting system leads
an organisation to calculate the
cost of all operations which are
performed by them. It includes
functional as well as
operational function which
leads organisation to estimate
their profits for longer period.
The cost accounting system
leads the financial department
of organisation to complete
their work with more
efficiency. Their are several
benefits are achieved by them
through monitoring regular
expenses which is used by
organisation. It results this is
easy for them to maintain their
cost by managing and
controlling their several task.
Integration of management accounting system and reporting
Management accounting and reporting both are essential function of an organisation.
With implementation of both this activities it is easy for Oshodi plc to make effective decisions
that leads them to achieve high position in the industry. Like budget reporting and cost
accounting system both are inter-relate with each other due to which productivity of organisation
is enhanced (Bennett and James, 2017). On other side cost accounting report and system are
inter-related with each other which is beneficial for identify the actual cost of their products or
services.
TASK 2
P3
Cost
The term cost refers to an amount which is received and paid by an individual or corporation to
perform a operation. It is a monetary value that incurred to sold different goods in the market.
Cost undertakes monetary evaluation of resources, materials, risk, time and many more which is
engage in organisation for completion of their work effectively. Further there are two methods

which is marginal costing and absorption costing are implemented to prepare an income
statement.
Marginal costing
Marginal costing is the method of accounting which includes variable as well as fixed
cost to complete their work with more efficiency and effectiveness. In the method of marginal
costing variable cost are charged. Whereas, fixed cost are written off against contribution which
is done in aggregate manner (Lindholm, Laine and Suomala, 2017).
Absorption costing
Absorption costing method is included in organisation for capturing all types of cost that
are related with manufacturing of products and services. Further, method of absorption costing
consider all types of cost whether fixed or variable. Along with this absorption costing is the one
that provides accurate data related to the inventory.

Income statement using Absorption costing
November December
Units Amount Amount Units Amount
Amoun
t
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
Working Notes:
Fixed production overhead absorption rate 99000/11000 9
Full production cost for one unit to be used in stock valuation
is: 29
Variable cost 25
Fixed production overhead 4
Calculation of over/ under absorption of fixed production overheads
Production
Overhead
absorbed per
unit
Total
overhead
absorbed
Overhead
incurred
Over (Under)
absorption
Units Amount Amount Amount Amount

Novemb
er 12000 9 108000 99000 9000
Decemb
er 10000 9 90000 99000 -9000
Interpretation- The above table represent that both costing methods provides different
results. Along with this while calculating them there are different results will outcome.
Example- Their is difference between opening and closing stock. For this Oshodi, absorption
method provides favourable results for corporation as compare to marginal costing method.
Techniques of management accounting along with financial reporting documents
For making effective decisions the manager of Oshodi plc easily formulate effective
decisions that are related with management accounting technique and reporting. Both of this
techniques is used by organisation for implementing and formulating effective budgets for
organisation. Further both of this techniques is used by organisation to enhance the financial
position in order to deal with competitors through completing their work in appropriate manner
(Maas and et. al., 2016).
TASK 3
P4)
The advantages and disadvantages of various kind of planning tools of budgetary control
adopted by Oshodi Plc are discussed as follows:
Budget: It is the backbone of every organization which helps the company to run the
business smoothly. Being financially stable is important to grow Oshodi Plc effectively and
efficiently. There are numerous sources through which funds can be gathered such as, financial
institution, banks, relatives, friends etc. By gathering cash amount from this sources deficiency
of money can be manged. It is prepared by the organization in order to estimate the income and
expenses which might occur in the future. Budget is framed for a specific time period symbolize
financial loss and gain within one year.
Budgetary control- This is defined as a tool that assist Oshodi Plc to supervise and
handle cost and other business activities. Whereas, it is the process of examining computing and
actual outcomes in order to figure out the deviations. By continuously studying the required

changes budgetary control execution can be done easily. It ultimately results in best outcomes
which is a plus mark for company in cut throat competitive world.
The various type of planning tools of budgetary control are explained as follows:
Cash budget: This aid the business to make an approximation about the cash inflow and
outflow for a particular time period. The main aim of set up this budget is to ascertain the
financial position of the organization that business is going in the right direction or not. The
benefits and drawbacks of cash budget is discussed as follows:
Advantages Disadvantages
 Cash budget aid organisation to bring
down their debts ratio. This is possible
because it allows the institution to
consume the cash only where they are
needed.
 On the financial health of the business
It creates great efforts to establish
easier communication.
 It aid business association to be stable
in terms of money as there is seasonal
fluctuations in sales and expenditure.
 Non-monetary resources is not included
because business administration is not
able to record all the transactions
carried outs.
 There is lack of flexibility and are more
rigid in nature. Due to which
organization can not modify number
one they have get into.
 This directly limit spending power.
Many hotel do not accept a reservation
without debit or credit card number.
Master budget: The integration of all small budget within the business is known as
master budget. Oshodi Plc adopts this budget as it keep all important and confidential data and
documents in one place (Mokhtar, Jusoh and Zulkifli, 2016). It directly or indirectly helps them
to perform business related activities in set time period.
Advantages Disadvantages
 All the information is stored in one
place due to which organization can
save their time and money. It raises
productivity and profitability ratio at a
tremendous scale.
 Various budgets are involved within so
it is not easy to update and understand
master budget. It creates confusion and
misunderstanding while examining the
budget.

 By evaluating all activities of business
firm is able to bring down their extra
cost and turn them into in the
profitable activity. It helps the
enterprise to gain competitive
advantages in intense market place.
 Business administration is unable to
specify any activity in proper manner as
all the activities of every department has
recorded in this budget.
Flexible budget: As compare to static budget flexible budget can easily be change to the
situations occurring in the open market place. Below are mentioned some of the positive and
negative side of flexible budget.
Advantages Disadvantages
 In this budget number can change
according to the requirements. It make
the functioning of the administration
easy.
 Flexible budget is cost effective budget
in nature because it is helpful to react
adverse situation. By this company is
able to overcome any kind of obstacles.
 Flexible budget showcase the variance
but does not explain the main reason
behind the variances taking place .
 It also represent the unfavourable
condition which have negative impact
on the customers and investors.
Examine the use of different planning tools
Master budget , flexible budget and cash budget are categorized into numerous planning
tools. They are beneficial for the companies growth and development in cut throat competitive
world. Budgets furnish necessary information to organization related to to their monetary
resources investments so that they can take right decision in context of capital. Example, if
Oshodi Plc formulate the cash budget effectively and efficiently then business administration
will be able to find the actual cash inflow and outflow took place in the organization . However,
if cash inflow is less then cash outflow then necessary steps can be taken to improve the
organization balance ratio of cash outflow and inflow (Renz and Herman, eds., 2016).