Management Accounting Information for Financial Decisions in Tourism

This report delves into the application of management accounting information within the travel and tourism sector, focusing on its role in financial decision-making. It highlights various types of management accounting information, including income statements, balance sheets, cash flow statements, budgeting, variance analysis, and trend analysis. The report elucidates how these tools aid in evaluating financial performance, controlling costs, and forecasting future outcomes. It emphasizes the use of financial statements for assessing profitability and cash flows, capital budgeting for long-term investment planning, variance analysis for identifying deviations from budgeted results, and forecasting for anticipating future performance. The report references academic sources to support its analysis of sustainable funding policies and the application of management accounting practices.

Finance and Funding in Travel
and Tourism
TASK 2

2.1 Different types of management accounting
information
• Income statement/Profitability statement
• Balance sheet/Statement of financial position
• Statement of cash flow
• Budgeting
• Variance analysis
• Trend analysis

Income statement
• Summarize results of trading functions
• Income and expenditures
• Profitability: Gross profit, EBIT and net profit
• Accrual accounting concept provides current year results only
• Accounting equation:
• Net Profit = Total turnover – total expenditures

Balance sheet
• Summarized details about shareholder’s equity, assets and
liabilities
• Prepared at the end of the year
• Solvency, liquidity and efficiency
• Accounting equation:
Assets = Liabilities + Owner’s equity

Statement of cash flow
• Cash incoming and its disposal
• Follow cash concept of accounting
• Activities: Operating, Financing and investing
• Useful to know cash management efficiency
• Accounting equation:
Net cash flow = Cash Inflow – Cash Outflow

Budgeting planning and controlling
• Summarizes quantitative projections as a result of future
business transactions
• Determining MEP’s income and expenditures for future
• Helpful to devise decisive & prudent decisions i.e. cost control
measures, resource allocation, sale maximization and others
• Techniques: Zero-based budgeting and Activity based
budgeting

Variance analysis
• Deviation between managerial forecast and actual financial
results
• Favorable and unfavorable
• Example: Material price variance
• Material usage variance
• Labor rate variance
• Labor usage variance
• Overhead variance

Trend analysis
• Performance analysis
• Comparison of current year’s result against base year or
preceding year

2.2 Use of management accounting information as a decision
making tool
It is a managerial tool that helps business in running
their operations in more effective manner by providing
relevant information for future economic decision
making appropriately and timely.
In order to implement favourable packages as per
the expectations of customers, as well as profit
expectations of company, management accounting
information will help provide relevant required
information to Merlin Entertainment plc.

Continued...
 This system includes number of techniques and
methods like costing and budgeting. With the use of
these techniques, management will be able to control
cost of their activities.
 For operating business profitably, various accounting
tools can also be used by Merlin to evaluate the
economic ability of its functions that will ultimately
help the company in taking decisions.

Financial statements
 The system of management accounting information, provides
assistance for the making and evaluation of financial statements.
This will help management in taking decisions regarding
financial performance, profit and loss and cash flows.
 This includes statement of financial position that evaluates the
growth and financial performance of the company.
 Income statement is also included in financial statements, this
evaluates the overall expenses and revenues of company.
 Information regarding flow of cash is also provided with cash
flow statement under financial statements.

Capital Budgeting
 This is also known as investment appraisal.
 This refers to a process of planning regarding the
determination of long term investments of an organisation
such as purchase of new plants and machinery.
 Marlin can use this process to rank by evaluating potential
investments and expenditures of a material amount.
 This technique considers the future cash flows from
investment along with considering time value of money and
facilitates decision making.