Management Accounting Report: RL Maynard UK Construction Firm

This report provides a comprehensive analysis of management accounting practices within RL Maynard, a UK-based construction firm. It begins with an overview of management accounting, its essential systems, and their requirements, including tax accounting, financial planning, cost accounting, standard costing, and statistical techniques. The report then delves into various management accounting reports utilized by RL Maynard, such as cost reports, payroll reports, variance reports, and performance reports, highlighting their significance in assessing financial performance. Furthermore, the report demonstrates the computation of net income and total expenses using both marginal and absorption costing methods, comparing their outcomes and explaining the differences. Finally, the report explores the advantages and disadvantages of budgetary control and discusses management accounting systems that help overcome business constraints. This analysis provides valuable insights into the application of management accounting principles in the construction industry, offering practical solutions for financial challenges.

MANAGEMENT
ACCOUNTING

1

INTRODUCTION
Accounting is important process which takes integral role in each and every kind of
business entity for assessing level of performance in the industry. In the accounting there are
mainly two kinds of systems comes into consideration which are like as management and
financial. These both the accounting methods are helpful for the internal and external
stakeholders respectively. At the workplace of the firm management accounting is supportive
for making any kind of business decisions. The current study is analysed on the basis of RL
Maynard entity which having national presence in construction segment of the UK. The reader
able to understand approaches and systems of management accounting which require for the
business to make solution of several financial constraints with the help of current report. In
addition to this, the study emphasizes on marginal and absorption approach or method of the
costing by which management able to assess net profit at the financial period ending. Beside this,
the study explains about those planning tools which help in the budgetary control along with its
advantages and demerits. Through ending part of the report reader can know those management
accounting systems which support to overcome business constraints related to the financials.
TASK 1
P1 Discussion about management accounting and essential requirements of its different systems
and approaches
Management accounting is the process at which the different plans are to be framed by
which the company able to increase its performance in the industry. The plan which is prepared
is to be properly implemented and execute at the workplace and various financial and non
financial goals and aims are to be met. In the corporations, there are several decisions has to
made at the different levels like and top, middle and lower. At this all the level strategic,
operational and technical decisions are to be made using management accounting because it
gives each and every information of such levels and processes. There are numerous functions are
having an important place in the firm such as production, marketing, human resource, research
and development (Harris and Durden, 2012). To theses all the functions and departments
decision of fund allocation are to be taken by managers using management accounting systems.
When the company of construction industry adopt management accounting then it can take those
decisions which are takes place on daily, monthly, yearly basis. If talking about the decision
making processes then the managers are highly supported in terms of taking pricing decisions.
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Through management accounting total expenses of constructing whole building are assessed and
on the basis of it selling price of building are to be ascertained up to the highest extent.
In the other concept, there management accounting supports to the construction business for
segregate overall firm in several departments, products, functions, divisions etc. In context to
this, the management accounting supports to the business for divide in proper responsibility
centres such as cost, investment, profit, expense etc. By this all the responsibility centres the RL
Maynard can determine that business in up to which level able to generate and earn profit.
Further, by this it can know that how much amount needs to put in the investment avenue and
what will be the outcome and return of that after completing investment years. There are
different number of systems supports and helps to the RL Maynard which are like as tax, cost,
decision making accounting, financial planning, standard costing, statistical tools and techniques
etc (Leitner, 2013). Furthermore, such kinds of management accounting systems along with their
potential requirements are analysed as below:
 Tax accounting: It is one of the best and significant systems of the management accounting
in which those all the revenue and incomes are to be calculated on which taxation amount is
imposes by the income tax department. In case the RL Maynard entity not able to give
amount and sum of money of the tax then authority body can sue upon it. Because taxation
is key rule of every firm and they needs to follow it. By adopting and executing the tax
accounting system at the working environment the manager can pay the tax on time by
which any kind of problems will not occur at there. Financial planning: While comes into existence in the market most of the business entities
has main motive is to earn profit and maximize it in the future financial years. For achieving
and meeting the respective objective the RL Maynard firm has to make very sound and
effectual financial plan which is one of the significant system of the management
accounting. When the company make financial plan with high features and soundly then can
easily fulfil the objective of maximizing profit and margin in the construction sector
(Cokins, 2013). In the finance and accounting department the financial plan is the best
technique and plays key role to achieve goals and purpose of financial aspects.
 Cost accounting: The method and system under which various expenses which associated in
the business process are recorded is identified and called cost accounting. In this, costs are
recorded and presented on the basis of product, department, division, process, branch etc.
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Such kinds of all the expenses are to be compared and analyse with the predetermined as
well as agreed data and expenditures. After making comparison between the predetermined
as well as actual data the management easily identify that which are the responsible factors
is there due to which gap among such data occurs.
 Standard costing: The element and system at where the data and expenses of the
manufacturing goods and services are determined at the previous level that it will be comes
into existence is identified as standard costing. On the basis of standard costing method the
management of chosen entity will be able to know that how much resources will be require
for generate money in order to reduce the standard and predetermined expenses. Moreover,
the standard tool or technique require for the company in order to analyse business
performance by comparing with the actual costing which will be associate with the firm
(Moser, 2012).
 Statistical techniques: In context to the management accounting another is statistical
techniques in which various kinds of problems are to be easily and properly resolved at the
working environment. At the workplace of RL Maynard there are several constraints arises
which are removed by using statistical techniques. Furthermore, different methods of the
respective tool of management accounting are like as regression, least square, quality control
ways etc. which support to resolve and remove those obstacles which hinder smooth
management of the firm.
P2 Discussing various kinds of the reports which are supportive for RL Maynard Limited in
management accounting reporting
At the workplace of RL Maynard business organisation there are several numbers of
reports plays an integral role for analysing that in profitable or non profitable direction the firm
performing. In the firm if there are any kinds of problems occurs related to the financials then
management can assess that which are the responsible elements and aspects. In context to
management accounting reporting different small kinds of accounts and reports are framed by
the managers. Such kinds of reports and accounts are prepared on daily basis, quarterly, monthly,
half yearly or yearly basis. It highly helps to small business entities and entrepreneurs to assess
that its overall performance in context to the financial in the construction segment of UK
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(Scapens, 2012). Further, reports which are adopted and then prepared by the current business
are elaborated as below: Cost report: The report of costing prepares on daily and weekly basis also for knowing
total expenses which incur to build a particular building or bungalows. In the respective
type of the report the company is highly supportive to analyse expense like as raw
materials for construct a building. Another costs such as purchasing of the raw materials,
salary to the employees, wages to the labours, charges to the engineers and architects etc.
Apart from this another indirect expenses just like insurance premium, taxation amount,
depreciation etc. These all the costs treated in books of profit and loss statements and
then can determine using base of sales and revenue. Such all the expenses are subtracted
from the sales and then amount which remains is analysed as profit or loss. Payroll report: Payroll is the element in which those expenses are included which are
paid to employees and members of the organisation. In the firm there are employees
gives their duties in different functions of business like as human resource,
manufacturing, finance, information technology etc. With these all the workers various
kinds of associated which are such as remuneration, salary, bonus amount, labour
charges, insurance premium paid behalf of employees, allowances etc (Zoni, Dossi and
Morelli, 2012). Apart from such all the expenses other included in payroll report are like
as payments, leave balances, financial rewards and various benefits given in terms of
monetary etc. By summing up these all the expenses the firm can determine that on the
employees there are how many expenses incur. Variance report: On the basis of the respective type of report the company can assess
performance of it in the industry of construction in UK. At the current management
accounting report there are two data are to be compared and analysed just like forecasted
and predetermined as well as actual. By comparing and analysing these both the values
the management of selected entity can determine those factors which are accountable to
make the gap or not achieve the targets. Furthermore, it is the report which prepares by
most of the firm because it is too much supportive to assess the performance in the
segment of business.
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 Performance report: When talking about other reports apart from above analysed then
company can measure performance of the employees up to greater extent. To assess and
know that in which level or trend like upward or downwards employees are give
performance to the firm several types of criterias are available in the management
accounting reporting. On the basis of using benchmarking system firm can provide the
particular task to the employees (Quinn and Jackson, 2014). When they achieve task and
work which is given to them on or before specified time duration then company
determine that performance of the workers is better and profitable. In addition to this, by
the management accounting reporting such as performance RL Maynard derive efficient
and productivity of the individuals at the working environment. On the basis of
performance of members of the firm various bonuses, appreciations, rewards are
provided to them. Hence, it can be said that it is one of the best and supportive report for
analyse business performance.
TASK 2
P3 Computing net income along with total expenses on the basis of marginal and absorption
techniques
For formulating the income statement there are several types of methods are to be
adopted and executed at the workplace. In the current scenario the RL Maynard implement two
types of methods like as marginal or variable as well as absorption. Furthermore, by using these
both the methods the profit and loss statement is prepared as below:
Using absorption costing preparation of income statement:
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Using marginal costing preparation of income statement:
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Findings and analysis
On the basis of aforementioned profit and loss statements it can be ascertained that total
net margin of profit (NP) of the company is different while calculating using marginal and
absorption both the methods. As per the marginal tool of costing the management earns and
generates net income and amount of this is worth of 9300 GBP. It can be analysed from
absorption tool is that net profit generated through this is worth of 9600 GBP. Reason for
occurring such difference is using and adopting different costs and expenditures by different
methods.
Difference of marginal and absorption method of costing
There are several kinds of tools and methods are available for analyse and calculate cost
of the constructing a building and on the basis of it profit and loss whatever generates are to be
shown. In the current case study the RL Maynard business uses two tools just like marginal and
absorption costing and then account of margin or profit and loss is formulated up to better level.
There are key difference among such mentioned methods is relating to the costing and
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expenditures. The method in which costing amount to build a property is lower when compare
with another is marginal because of consisting only variable type of expenses. While at the
absorption method there are all the costs associated with the business of RL Maynard whether
direct or indirect are comes into the consideration (Pant, 2016). Both the tools of costing are
based on the different assumptions and then the account of profit and loss is to be made and
framed. When talking about the only marginal kind of costing way then at here all the products
and items or building which are build are needs to sold within the accounting year while
preparing income statement. Furthermore, other assumption of the marginal costing is that
selling price of each and every building or using must be remain same and constant in whole
accounting year. If prices of the selling are change and fluctuate then it is not possible to use
marginal method for prepare income statement. It supports to the company for assessing internal
business decisions and the amount of profit is to be count and use as contribution margin at the
year ending.
Apart from marginal costing, absorption tool of the costing differs from it due to using
the level of costing and expenses. On the basis of the absorption costing the management of RL
Maynard can determine and measure value of the inventory as well as costing (Kokubu and
Kitada, 2015). As the name indicates absorb it uses costing of the all the function of the
organisation ans company. Furthermore, due to the current and particular reason the net profit
goes down and describes real or facts and figures at the year ending. In the business or corporate
world the companies use absorption costing often because of providing accurate and final data
and on the basis of internal as well as external both the decisions are easily taken. While talking
about the selling price then it is not necessary that it must remain constant. In accordance to this
condition if price goes up or down then also the firm can determine actual condition in terms of
profit and margin. Apart from this, final value of the overall statement is to be considered as net
income or net margin at the end of a fiscal year.
TASK 3
P4 Different planning tools along with merits and demerits
While making and preparing schedule or plan of any business and financial activity then
there are many types of techniques and tools are available which supports to the management for
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prepare the potential plan (Grunewald, Syrbe and Bastian, 2014). Several planning tools as well
as methods are describes as below:
Budget: In the planning tools there are budget is one of the effective tool which is highly
supportive to make the overall plan of financials. In this cost, sales, level of outputs and
production, incomes, expenses etc. are to be predetermined and on the basis of this plan are to be
made. There are many types of the budget statements are generated and made by the
management of RL Maynard and supports to know standard output and expenses both for the
next month. Apart from this the budgets are prepared for monthly, quarterly, half yearly or yearly
basis and in accordance to such all further actions are taken. The budget has different positive
and negative aspects which are analysed as below:
Cash budget
Advantages and drawbacks
Budget is the planning tool which support to the firm in order to maintain, manage and
improve business performance by utilizing the financial and other resources in adequate and
optimum manner. By implementing the respective planning tool the firm able to provide
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financial resources and raw to the every department of RL Maynard in effectual and adequate
way which is the most effective for it. By assessing and adopting cash budget the firm able to
coordinate all the business activities as well as establish effectual relations among all the
activities and then plan prepares for further period (AbdulHussien and Hamza, 2012). Every
company seeks towards minimise and reduce the costs and then maximize the profit. Moreover,
the budget helps and support to the RL Maynard in this condition and then achieve the financial
aims, purposes of the entity.
In opposite to several advantages, budget has different drawbacks which are such as it is
subjective or on the basis of estimations and when the manager is not able to estimate the data in
appropriate way then overall plan for the further year affects in the negative manner up to some
extent. Another drawback is that it takes very long and more time for prepare and due to which
the plan of financials is not prepare on time. Due to having nature of more time consuming
method the RL Maynard cannot take and prepare schedule for the next month and quarter or year
in the effective way.
Management information system: In the firm there are different management oriented reports
are made and supports to the RL Maynard to take decisions for managing the firm in adequate
manner. In context to this, it shows those types of reports as well as informations by which
management of the firm become more smooth and proper. It is the tool of information processing
under which several management oriented reports and plans are prepared and schedules which is
the beneficial for the firm. In the construction industry there are different management decisions
taken by the managers which are such as design of the building, prices, kind raw materials,
quality of wooden etc (Hopper and Bui, 2016). Hence, it can be said that it is highly significant
technique for the company to make the financial and non financial plan. Apart from this, it has
various benefits and limitations which are shown as below:
Benefits and limitations
The management information system (MIS) is supportive for every level of the company
which is like as operation, strategic or tactical which is taken by lower, middle and upper level of
management. It helps to the firm in order to coordinate and make relations between all the
departments and functions of the firm which is necessity for RL Maynard. Higher and better the
relations among organisational functions is profitable and effectual for the company by which
objectives can be achieve in adequate manner. Further, for controlling and managing the
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business activities and budgeting there are data and financial transactions are required by the
management of RL Maynard. Through the MIS such kinds of financial data are assemble,
recorded, stores, analysed and evaluated for making further financial plan and control over the
budgeting appropriately.
Apart from benefits there are some drawbacks also which lead to hinder effectual control
of the budgetary using management information systems. Very key limitation and drawback of
the MIS is that it is the highly sensitive method in which the management requires and needs a
proper constant monitoring and controlling over the system (Hanks, 2017). In case, monitoring
of the data and the system is hamper then overall plan and control on the budgetary affects in
negative way. In context to limitations another is related to the typical and difficultness. When at
the working environment of RL Maynard MIS is used then budgeting of the respective system is
extremely and highly typical by which some employees cannot use it.
TASK 4
P5 Various systems of the management accounting which are used to combat financial shortfalls
within RL Maynard Limited company
When talking about the problems and obstacles at the workplace of chosen business firm
there are several constraints arises by which the firm not able to meet with those objectives
which are agreed by it. In context to this, there are numerous methods and approaches which
supports to RL Maynard business to know financial problems and ways to resolve it. With the
highly availability and adoption of such kinds of systems each and every business and financial
obstacles are removed from the workplace. These all the management accounting systems are
given or elaborated as below: Key performance indicators: One of the effectual and the best system of management
accounting which supports to RL Maynard firm is key performance indicators by which
business performance in terms of different sectors is to be determined. In accordance to
the KPIs the business entity assesses presentation of the firm in the construction industry.
In this there are many numbers of KPIs by which it can know that is there firm meet with
the objectives in adequate way or not. Further, it the measurement of an organisation
which demonstrates that how effectually and properly the firm and management meeting
with the main aims and purposes within the firm (Fadzil and Rababah, 2012). Several
tools of key performance indicators are like as quality, customer satisfaction,
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profitability, expenditures, costing, tine duration of meet the goals etc. Furthermore, in
accordance to the key performance indicators there are various techniques are available
and adopted which are like as balanced scorecard, 360 degree appraisal methods etc. By
such all the methods and techniques the firm able to know reasons, causes as well as
accountable aspects. When it can know these all things then level of the overall financial
plan becomes improve and then removed financial negative causes. Financial governance: Apart from the KPIs there are financial governance is the
framework which make various effectual rules and legislations for the accounts as well as
finance department. It is necessary for all the business and especially those which are
operates and working in the limited sector. Being a limited organisation the RL Maynard
has to implement all the frameworks and rules in appropriate manner. In addition to the
financial governance the businessman of selected firm make the rules by which financial
resources and process is to be secured within firm and industry up to higher and proper
level (Johnson, 2013). In this process the managers easily found that while implementing
such rules that which are the factors are there because of which the entity not able to meet
with the main goals settled by it at the initial level. Hence, it can be said that the financial
governance is the very significant as well as more supportive for improving financial
health along with reducing different problems of financials.
 Financial statement analysis: In the management accounting system of removing
financial problems there is financial statement analysis is also of the highly effective
source. Different statements and accounts which prepared in financial are like as income,
cash flow, financial position, shareholder’s equity and gains and disclosure or notes
which are used to analyse accounting treatment. According to the profit and loss account
and balance sheet profitability as well as liquidity condition of the RL Maynard is
analysed. By this appropriate situation of the business are analysed and then known
financial condition as well (Aksoylu and Aykan, 2013). On the basis of these all the
financial statements the management finds that it is how much able to meet the financial
obligations and enhance profit or market share.
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CONCLUSION
It has been ascertained from the current report of management accounting that it is the
most and highly helpful for the RL Maynard firm up to the higher and greater extent. There are
different kinds of methods and systems adopted by the respective company are like as cost, tax
accounting, financial planning, standard costing, techniques of the statistics etc. for assessing
various conditions of the business. Furthermore, there are several kinds of reports are used as
well as framed by the firm using different financial and accounting treatments or transactions at
the workplace and then supports to the management accounting reporting. It has been analysed
that through budget and management accounting system effectual and profitable plan is to be
made within RL Maynard. At the last it can be concluded that with the support of financial
governance, financial statement analysis and key performance indicators RL Maynard can
combat the financial constraints.
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