UK College: Management Accounting Report on Financial Problem Solving

This report delves into the realm of management accounting, exploring its core principles and practical applications within the context of a business scenario, specifically focusing on "Lets Grow Ltd." The report begins by defining management accounting and its systems, highlighting various types such as job costing, inventory management, sales control, and investment controlling systems. It then elucidates the benefits of implementing such systems, including improved planning, control, and coordination of business activities. The report further examines different types of management accounting reports, such as debtor analysis, break-even analysis, master budget, and inventory control reports, emphasizing their significance in providing critical financial insights for decision-making. A key component of the report is the creation and analysis of a cash budget for Lets Grow Ltd over a six-month period, demonstrating the fluctuating sales, expenses, and cash flow dynamics. The report also explores tools for addressing financial problems, including cash flow management and planning tools, and analyzes how management accounting integrates with management accounting systems to support organizational success. The report concludes by comparing the ways organizations adopt management accounting systems and emphasizing the importance of sustainable financial strategies.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
P1 Different type of Management accounting System...............................................................3
M1 Benefit of using management accounting system................................................................4
P2 Different type of management Accounting report.................................................................5
D1 Critically evaluate how management accounting is integrated with Management
accounting system.......................................................................................................................7
LO2..................................................................................................................................................7
P3 Cash budget for the 6 months ending August 2020...............................................................7
LO3..................................................................................................................................................8
P4 Tools that can be used for facing financial problems............................................................8
M3 Analysing the use of planning tools...................................................................................10
LO 4...............................................................................................................................................10
P5 Compare the way organization used to adopt management accounting system..................10
M4 & D4Analyse how responding to financial problem can lead to organization in sustainable
success.......................................................................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting (MA) is mainly concerned with the planning and implementing
the organizational strategies in respect to the financial information which is being collected from
the financial department. It is differs from financial accounting because it takes into account both
monetary and non-monetary information. It is used by the internal management team for taking
improved and better business decisions. This report, presents about the various MA techniques
and systems which can be used by the organization in dealing with various financial problems.
LO 1
P1 Different type of Management accounting System
Management Accounting is refer to a process which looks at providing financial
information and resources to the manager in the organization to help them in making variety of
decision in the firm. It is generally used by the internal team of organization for making variety
of decision in an organization.
Financial Accounting is generally used by both internal and external parties, whereas
management accounting is used by only internal team in the firm. Financial accounting is
generally performed and achieved overall goal of business. At the same time Management
accounting is performed to improve day to day activity of business (Ax and Greve,2017).
Management Accounting System
Management accounting system is generally refer to variety of internal system which is
generally used by manager in the organization to make variety of the decision in an organization.
Management accounting system is generally used in organization to make variety of different
type of operational decision on the basis of critical information provide by different system.
Different type of management accounting system are as follows:
Job Costing system: Job costing system is the system which used to provide different
information about the different type of costs which is associated with specific type of service or
production cost. This information is generally require in firm to submit the cost information. Job
cost are generally drive by taking and considering three different element which is linked with
the job that is tracking Labour, Tracking material and tracking different overhead which is
related to the different specific job in the organization.

Inventory management system: Inventory management system in the combination of
technology and process in the organization which used to oversees the monitoring and
maintenance of different type of companies product. These products can be companies assets,
raw material and supplies of finished or unfinished product in an organization. Inventory
management system in the organization used to help the company in Improving the cash flow,
betters reporting and forecasting capability of the company, also it used to reduced the amount of
the labour cost which are generally invested by the company (Chenhall and Moers, 2015).
Sales Control System: Sales Control system is the system which is generally used in the
organization to make sure that different sales team are performing the different activity in the
right direction. Also, these system in the organization used to help the company in maintaining
good sort of the control over different sales activity of the organization.
Investment controlling system: Investment controlling system is the system which used
to perform the monitoring function in the organization in the context of investment and portfolio
management in the organization. This system in organization used to help the company in
managing the different investment of the company in better way, as it used to give the idea about
the current investment position of the business and on the basis of same manager in the firm used
to make variety of different type of decision in long run.
M1 Benefit of using management accounting system
Management accounting system generally helps the company in planning variety of the
future activity in the organization. As manager generally used to interlink the variety of the
information from variety of the internal system and on the basis of the same used to make variety
of plan in the organization (Hald and Thrane, 2016). Controlling is another important benefit
which is brought by management accounting system, as this system in the organization used to
help the owner in understanding the different information easily and control variety of activity.
Also, different information which is collected from management accounting system used to help
the company in coordinating variety of the activity of the business in the long run.
Importance of having reliable and timely information
It is very important for all the organization in having a reliable and updated information
to make variety of different decision in organization. Reason behind the same is identified that

updated information generally helps the company in making the variety of the decision more
efficiently in the organization. Another reason behind having reliable information is that it used
to improve the efficiency of variety of the different activity which are generally planned in the
organization.
P2 Different type of management Accounting report
Management Accounting report
Management Accounting report are different type of reports in the organization which is
generally used to provide the different numerical information about the different element of the
company. There are many different type of management accounting report, some of the
management accounting reports are as follows:
Debtor Analysis report: Debtor analysis report is the report which used to present the list
of the customer that used to owe a good amount of payment to our business. Also, this report of
the company used to define the pay back period of all the debtor of the company, which means
that how much time organization has to wait till debtor will be clearing his all debt.
Importance
These report in the organization used to help the company in planning the different
follow up activity in regards of clearing all the debt. Another important benefit of Debtor
analysis report is that it used to help the manager in understanding current as well future position
of the business. On the basis of same different decision in regards of managing companies
position is being made in the organization (Mack. and Goretzki, 2017).
Break even Report: Break even report is the report which used to determine the point for
the company where organization used to reach at the position of no profit no lose. This report of
the company used to explain the amount of the sales which organization has to perform any of
the cases to see a good amount of the profit from the same. Generally in the organization,
manager used to make the variety of the decision in context of sales of the company by looking
at the break even analysis.
Importance
This report in the organization used to help the company in determining the different
impact on profit of the company in the long run (Messner, 2016). Not only that it used to help the

company in fixing the relationship as it used to help the company in finding out change in the
profit of the company at the time of change in the price of the company product in the long run.
Break even report in the organization also used to help the company in determining different
prices of the product as well.
Master Budget report: It is the type of budgetary report which used to explains the
variety of the companies functional area, also it used to explain the variety of the information in
relation in the financial statement, cash forecast and financial plan in the organization. Main
characteristic of this type of the report is that it used to compile of almost all the small budget in
the organization and turns all the small budget into the overall budget of the organization.
Importance
This report generally help the company in getting more adverse knowledge about the
budget of the company, which eventually help the company at the time of making variety of the
decision in the long run. At the same time these report used to also help the manager in the
organization in getting information regarding the financial stability and position of the company.
Inventory control report: Inventory control report of the company used to explain the
amount of the inventory which is there in the organization and amount of the inventory which
will be require the company to carry out different operation of the organization. Inventory here
stands for both completed product and semi completed product of the company (Mills, 2018).
Importance
This report of the organization used to help the management in fixing up the reorder point
of the organization very easily. Also, it used to help the company in improving the level of
delivery of different product of the company in the market, as organization used to get ready for
the future uncertainty as well.
Management accounting system and management accounting report generally used to share
a positive relationship, as management accounting report generally used to provide the factual
information whereas management accounting system in the market used to provide the
qualitative information. Manager in the organization generally used to use both the information
together in the organization to make the variety of the different type of the decision in the
organization in the long run.

D1 Critically evaluate how management accounting is integrated with Management accounting
system
Management accounting report generally used to provide the general records about variety
of the different sort of the issue in the numerical form. At the same time Management accounting
system generally passes on the qualitative data regards the same. Generally both of them are
depended upon each other. All the decision in the organization which is taken by scholar is taken
by considering both of them together in the market.
LO2
P3 Cash budget for the 6 months ending August 2020
Cash budget
Particulars March April May June July August
Sales (in the same month) 30000 36000 24000 28000 32000 34000
Sales (Received in the
following month) 96000 120000 144000 96000 112000 128000
Total sales 126000 156000 168000 124000 144000 162000
Purchases 50000 50000 70000 80000 90000 100000
Wages 30000 30000 30000 30000 30000 30000
Rent 12000 12000
Depreciation 2000 2000 2000 2000 2000 2000
Variable overheads 10000 15000 18000 12000 14000 16000
Fixed overheads 30000 30000 30000 30000 30000 30000
Total expenses 134000 127000 150000 166000 166000 178000
Cash surplus/Deficit -8000 29000 18000 -42000 -22000 -16000
Opening cash balance 20000 12000 41000 59000 17000 -5000
Closing cash balance 12000 41000 59000 17000 -5000 -21000
Analysis and interpretation:
It can be seen that the sales of the Lets Grow Ltd has been very fluctuating in May it was
reduced to $24000 and then in the last three months it started rising and raised to $34000 in

August. The closing balance at the month end has positive for the first four months which then
become negative in last 2 months. The main reason for the negative balances is the increase in
the expenses of the organization. The major hike was in the respect to payment made to the
suppliers for the purchases.
LO3
P4 Tools that can be used for facing financial problems
Planning tools which can be used by Lets Grow Ltd for reducing the amount of financial
risk and problems which are stated below.
Cash budget
The cash budget is the statement which is used for projecting the sources and the
application of the funds in the future date. It helps in analysing whether the business entity is
having sufficient cash to carry out its operational business activities (Foster, 2017). In case, the
company is not having sufficient cash then the management looks for additional sources for fund
procurement.
Advantages:
 It assists the management in focussing on the significant areas where the cost is incurring
more in order to reduce the same so that funds can be effectively managed and
unnecessary expenses can be avoided.
 It identifies the potential deficit in the budget which makes the organization aware of it so
that timely and corrective actions can be undertaken. It communicates the actual financial position of the business in terms of liquidity and also
it is very easy to prepare and understand, thus, anyone having interest in the budget can
have a look at the cash inflows and outflows.
Disadvantages:
 The budget limits the spending of the organization and may cause distortion. It is not
equated to the profits of the organization.
 It also considers many unreliable sources of cash inflows such as security deposits, sale
of capital assets which are not the regular or ongoing sources of revenue.
 The cash budget can be easily manipulated, for instance, making a large amount of
payment at the end of the period might give a misleading result.

Capital budget
This budget is prepared which consists of the forecasted capital receipts and capital
expenditures for an organization (Srithongrung and Kriz, 2019). It includes expenditures in
respect to the acquisition of the capital assets such as land, machinery and also investment in
securities etc. The receipts include the amount raised from public, borrowings by the government
or by selling the treasury bills. It is prepared after all the other budgets are prepared especially
the cash budget.
Advantages:
 It is mainly prepared in respect to the long term opportunities whose tenure is over 1
year.
 The provides the exact figure within which the capital expenditure is required to be
incurred. While preparing budget, it carries out complete analysis to with respect of the
expenditure which is required to be incurred along with the amount of fund available to
meet the needs.
Disadvantages:
 This budget is not useful for short term investment opportunities.
 It is very rigid in nature, that means once the budget is prepared the changes cannot be
made into it.
 In case, there is a slight error in preparing budget, it will cause the big problem to the
business operation and may incur additional losses.
Flexible budget
Under this budget, the flexibility is provided with respect to the changes in the level of
activity. It is more sophisticated in comparison to the capital budget which is very static (Arnold
and Artz, 2019). Because of its feature of flexibility, it can be the changes can be made in it very
easily with respect to the change in the level of activities along with the variation in the costs.
Advantages:
 It will help the management in making changes in the budget in case there is an increase
in the expenses in the middle of the period.
 The flexible budget will assist the management in determining the sales, costs and profits
at various level of production capacities.

 The biggest advantage of this budget is that it provides assistance to the management in
determining the production level in the various markets under varied business conditions. It also helps in reclassifying the budgeted costs at different levels along with the sales so
that the management of the organization can identify the areas of profit and thus take
decisions accordingly.
Disadvantages:
 For preparing this budget requires skilled and knowledgeable employees and there is a
lack of it in the industry which makes it difficult for companies to use it.
 It is completely based on the books of accounts and if it is not prepared correctly then the
final outcome of the budget may also vary.
 It also depends upon the factors of production on which the management has no control
leading to inaccurate predictions.
M3 Analysing the use of planning tools
With the use of these planning tools will result in better forecasting and budgeting. the
flexible budgeting system will help in effectively managing the budget of the organization and
implementing control in the organization because of changing market conditions.
LO 4
P5 Compare the way organization used to adopt management accounting system
There are many different type of tools which is used to solve the variety of the issue related
to financial problem. Some of the managerial accounting system which are used to solve the
financial problem of the company.
Benchmarking: Benchmarking is the process in firm which generally used to look at
comparing the current performance of the company with the actually set up standard in the past.
This is the tool in which organization used to set up the different standard in the past and on the
basis of the same different activity are performed to achieve the same (Otley, 2016). This
generally help the company in measuring the effectiveness of different activity which are
performed in the organization. One of the biggest benefit of using Benchmarking as compare to
the other tool is that it used to provide the guideline as any other tool does not used to provide
any of the guideline.

Variance Analysis: Variance analysis at the same time generally looks at finding out the
gape between the current operation of the business and end goal which organization is looking to
achieve. After finding out the variance organization used to take the variety of the action in the
organization to reduce the variance in the same. One of the biggest benefit of using same over
other is that it used to help the company in giving the idea about the issue which is prevailing in
the organization and help the company in finding out the way through which different financial
problem can be overcome in the organization.
Financial governance: it is another type of tool which is being adopted by the
organization for the purpose of collecting, managing and monitoring variety of the financial
information of the company. It is the process in which organization used to tracks the variety of
the financial transaction of the company and on the basis of same used to find out the problem
and make the variety of the step to overcome the same in the long run.
Many organization also adopt variety of the management system in the organization to overcome
the financial problem of the company. Example of two companies are as follows:
Let's Grow limited KEF limited
Let's Grow limited in the organization
generally adopts the Job costing system to
overcome the variety of the financial issue of
the company. Organization generally used to
check the current cost related to the different
job of company and try to figure out the best
combination of the job in the organization,
which help the company in overcoming variety
of financial problem.
KEF limited at the same time uses inventory
management system in the organization to
overcome the variety of financial problem in
the long run. In this system the organization
generally used to go through the variety of
inventory possessing report on continues basis
in the organization and on the basis of the same
used to make different decision in the
organization (Maskell and et.al., 2016).

M4 & D4Analyse how responding to financial problem can lead to organization in sustainable
success
Management accounting generally help the company in getting aware about the variety of
the different impact which can be seen by the organization in the future scenario. This help the
company in responding the financial problem in better way as organization in general can make
the variety of the decision to overcome the problem in the current scenario as well as
safeguarding the same in future scenario as well.
Planning tool in the organization also used to help the company in understanding the
variety of the different sort of the issue and aspect of the issue in the better way and on the basis
of the same in the organization there are variety of the alternate plan are generally drafted to
overcome the issue related to the financial problems which may be arises in the future.
CONCLUSION
After going through the report it can be concluded that there are many different type of
management accounting system that is inventory management system and job costing system.
After that report concludes the different type of management accounting report and interrelation
between both. After that the report concludes the cost of the company under different technique.
It also concludes the advantage and disadvantage of planning tool. In the end the report
concludes the comparison of how different organization are adopting management accounting
system.