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Role of Financial Government In Management Accounting of KPMG

University: University of Bristol

  • Unit No: 5
  • Level: Post Graduate/University
  • Pages: 19 / Words 4706
  • Paper Type: Assignment
  • Course Code: H/508/0489
  • Downloads: 67
Question :

This assessment will cover following questions:

  • Determine the use of planning tools which is used in management accounting of the KPMG organisation.
  • Make comparison in ways in which KPMG organisation could use management accounting in order to respond financial problems.
  • KPMG organisation is a leading financial services business advisory company. What are the range of management accounting techniques.
  • Generate an in-depth understanding of management accounting systems.
Answer :
Organization Selected : KPMG

INTRODUCTION

The concept of management accounting is concern with those technique which enable and organisation to analyse and evaluate its capability to achieve pre defined goal or objective in an efficacious manner. However, for maintaining the finance and operational activities of an establishment in a smooth, the role of management accounting is regraded as an important element. This is because, it aid managers to examine the internal financial situation and also lead them to make best strategic decision in order to improve the overall performance of company in an amended way (Mueller, 2018). In regard of this report, KPMG organisation has been considered which is a reputed accountancy enterprise in worlds who offer various kinds of services to different clients such as Excite Entertainment Ltd. However, this company operate its business function in leisure and entertainment industry. This report covers the content regrading management system, different reporting methods, developing income statement by implying marginal and absorption technique of costing. Furthermore, determining the role of financial governance and analysing the benchmarking in management accounting for responding financial problems effectively.

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TASK 1

P1 MA systems and the requirements of various type of MA systems

Management Accounting: The aspect of management accounting has been recognised as an essential component in every form of organisation. This is because, it is concern with those technique or procedure which comprises determining business cost, measuring, identifying, analysing, interpreting and communicating the required information to managers as well as help them to make best possible decisions for enhancing market share of firm. In relation to Excite Entertainment Ltd, its managers make an initiative to understand the concept of management accounting to evaluate their potentiality and also to measure their performance. Due to which, company can monitor whether they are on the right track or not as well as can take corrective course of action for enriching financial performance in an improved mode (Jovanović and Dragija, 2018).

Financial Accounting: This determinant is relate with the recording structure that is utilise by every small and medium type of organisation to prepare final statement of account for determining the financial status of company. In context of Excite Entertainment Ltd, with the application of financial accounting, it enable them to analyse whether their managerial and operations functions are acquiring profit or loss. Due to which, it motive them to make alternative ways for enlarging the profitability and productivity ratio of an organisation in a better way (Gull and et. al., 2018).

(a) Difference between management and financial accounting:

Basis

Management accounting

Financial accounting

Meaning

This is related with accounting system which provides relevant information to managers in order to make strategies, policies and plan for completing task and making profits.

This is an accounting system in which manager focuses on preparation of financial statement in order to get financial information and make decision accordingly.

Information

This accounting is providing monetary and non monetary information which helps to attain business goals.

This provides monetary information means which are related to money in order to complete goals.

Objectives

The objective of management accounting is to provide assistance to managers in making decision by getting all information and matters.

The main object of financial accounting is to provide financial information to outsiders so they can make decision regarding investment and profitability.

Publishing and auditing

There is no special requirement of published and audited by statutory auditors.

It required to be published and audited by statutory auditors who have special knowledge and experience.

(b) Cost accounting system –

This can be consider as product costing system which is used by business firms to estimate the cost of their products and services. This is mainly profitability analysis, inventory valuation and cost control method which helps business organisation to get higher profits by getting accurate cost of products and services. In context to Excite entertainment, management are using cost accounting system to estimate the cost of their products which are providing by organisation (Pavlatos and Kostakis, 2018). Moreover, this helps to estimate the closing value of raw material, finished goods and other inventory in order to make financial statement. This covers standard and direct costing which is defined as:

Direct costing: This is a simple form of cost analysis which involves variable costs to make strategic decision. It does not involve fixed cost which remains associated in time period at the time incurring cost.

Standard costing: This is accounting system which is used by management to identify the difference between actual cost and the cost which have occurred for actual goods produced.

(c) Inventory management system -

This is a tool which is used by business industry to track the goods, are getting prepared by management across business's supply chain. This approach uses to source, store and sell the inventory by management in order to evaluate effectively and increasing profitability. In context to Excite entertainment Ltd., management are using inventory management system which helps to maintain the internal control over stock, safeguarding from theft and damage, using purchase order for tracking inventory moment etc. By using this managers of organisation enable to evaluate the level of inventory and good which are having in business organisation. Moreover, it helps to lace the order of goods by knowing about quantity of products (Pelz, 2018).

(d) Job costing system -

This system is consider as cost allocation method which is used by companies to make custom products and segregate the expenses which occurred in business organisation. This helps to get the accurate cost for each department and make right decisions. This system is uses by management of Excite entertainment Ltd for keeping track record of all jobs which performed by specific client in order to deliver quality of products and services. This involves vital range of cost that are as measured:

  • Contract costing – This mean cost of product is linked with customer's specific contract which need to be complete in fixed period of time.
  • Service costing – This type of cost is uses in business organisation in order to provide services. Such as Excite entertainment is using services costing because it provides event organising services that increases productivity.
  • Batch costing - It can be consider as costing which is used to assign the batch of unit cost in order to make right decisions (Aureli and et. al., 2019).

M1 Benefits of MAS:

Cost accounting system: By using this Excite entertainment get information which activity is profitable and which one not that helps to increase the profitability. This helps management to define the profit and losses on periodical basis which is important for organisation. Moreover, it helps to control over material and supply of goods and services which increases organisational effectiveness.

Inventory management system: This is effective system which give many advantages to business organisation as it helps to achieve efficiency and productivity in operations. Excite entertainment uses this to minimise the inventory cost by tracking which helps to maximize sale and profitability. This make customer happy by fast selling of products which fills the needs of customers and increasing profitability (Tytenko, 2018).

Job costing system: This benefited to Excite Entertainment by cost ascertaining at different stage of completing the jobs. In this managers can easily estimate the cost of job on the basis of past information in job costing. Moreover, this is used to generate the profits from each job which helps to maintain good performance (El Guindy and Basuony, 2018).

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TASK 2

P2: Explain different methods used for the management accounting reporting.

The managerial accounting is a practice of analysing and interpreting the financial information to increase the organisation profits and reduces the cost of the organisation. It is method of making well informed decision by the managers in the organisation. Their are various different report which helps in making sound decision for earning profits in the organisation. a.)Some of the reports are discussed as follows:

Budget report: This report is very critical for the company as it helps in measuring the companies performance for different period of time. Every organisation makes different types of budget to understand the performance as a department wise. It is made on the bases of past experience and to analysis the unforeseen circumstance in the company so that cost cutting can be done. In other words, budget report consider as internal report that provide information regarding estimated and budgeted projections in order to get actual performance in certain period of time. The management of Excite Entertainment are preparing budget reports in order to get financial goals which is based on estimates and future projects that provides actual financial performance of business corporation. By using this report managers are estimating actual cost and compared with budgeted numbers which helps to make profits (Ng, 2018).

Account Receivable Aging reports: This report is important for maintaining the cash flow management in the organisation which uses credit business for performing the given activities. This report shows the customer outstanding balance for the given time period. The aging report helps in detecting the loopholes in the collection methods. The management of Excite Entertainment company are using this report to keep records of its unpaid customers and receive payment from them that helps to run business effectively (Peysakhova and Anyushenkova, 2018). This report give a list of unpaid customer invoices and credit memos which are unused by certain date. The management are maintaining their balance sheet and payment by keeping records of all customers and maintain the profitability.

Job cost report: Under this report, it involve the cost of material,labour and overhead for a particular task. This report is a excellent tool for reducing the cost of the job and enhance the productivity of the overall job. Here cost associated with a particular venture is estimated in comparison of the revenue generated from such ventures. This is another reporting method that uses by management in order to keep ongoing supervision on material and labour and overhead effectively. In context to Excite Entertainment, management are using Job cost reports for ongoing supervision in order to get good financial results. In this, management ensures that jobs are done effectively by making financial reports and profitability (Thapayom, 2019).

Inventory and manufacturing report: This report involve the cost of inventory laying in the store, in the production process so that overall cost of the activities are under control of the manager. Here various different manufacturing report are compared to know the performance of different departments and evaluated on the ground of effective cost management in the organisation. This report is used by management of Excite entertainment to evaluate the stock level of business organisation and make profitability. In this, management get information about how much stock are available in ware house and which is finished that helps to place the order to raw material and finished goods accordingly. This report is prepared to make financial statement which increases usefulness for actual investors and potential customers.

b.) Information presented should be accurate, reliable, relevant and up to date

It is important for organisation to present accurate, reliable, relevant, timely and up to date information that can help to attain the business goals by completing target. If information are not accurate, relevant and up to date then it become difficult for organisation to make right business decision and complete their targets. For instance, the managers of Excite entertainment organisation are presenting appropriate, useful, relevant and up to date information on time to time basis which helps to make the business decision effectively and quickly respond to organisational events which complete the goals of business organisation.

(c.) Management accounting system and reporting are integrated with organisational processes

From the discussion it has critically evaluated that in Excite Entertainment, management accounting system and accounting reports are integrated as inventory management system helps to prepare inventory report which is used to track the inventory effectively and place order to good in order to run their business. Cost accounting system is used to prepare costing reports which gives information about cost which are using by organisation and remove the unnecessary cost which are running in business practices. Moreover, job costing system helps management of Excite Entertainment to divide the cost in to separate batch so profits can be made at higher range. In absence of such system, it become difficult for organisation to prepare reports and make financial decision (Nguyen and et. al., 2019). 

Task 2

P3 Calculation of cost by using appropriate techniques and income statement by marginal and absorption costing

Marginal costing – This technique is consider as calculation of profit by making change in units then production is also get changed. In this, management of Excite entertainment organisation write off all fixed cost which occurred in organisation.

Advantages of marginal costing covers:

  • It helps to maintain the long term stability in order to increase the volume of production.
  • This determine the profitability and pricing of a product which is providing by organisation.
  • This states production planning by discovering the profit changes with level of output and cost profit analysis.
  • This is used to differentiate the cost of fixing the selling price of demanded products in different market. 

Disadvantages:

  • It is challenging technique in dividing the fixed and variable cost.
  • This method does not provide explanation for incremental production as well as sales.
  • This considers as all cost are variable and it vary in case of new plans and machinery are introduced by management.

Calculation of profit by marginal costing

Absorption costing – This is also a calculation technique which is used to get the absorption cost by absorbing all expenses. In this, all cost are gathered by management and make a clear decision.

Advantages of absorption costing

  • This is useful to fixed the cost and pricing of products which helps to maintain the sale of organisation.
  • By using this organisation can get truthful profits at the time of generating sales.
  • It reveals unproductive and resourceful employment by determining under absorption and over absorption overhead which make profits.

Disadvantages:

  • This method depends on output level which make difficulties for comparison and cost cost control.
  • Through this organisation leads less authentic product cost because it is random method of cost portion out.
  • It make difficulties for Excites entertainment to create flexible budget.

Calculation of profit by absorption costing

TASK 3

P4 Explaining various types of planning tools used in budgetary control along with their advantages and disadvantages

Budget is a financial plan which is generated by all the organisations to meet the long term business goals by performing all the operations in the allocated funds (Thien, 2019). In Excite Entertainment Ltd mangers use different types of budgets so that they can meet the long term business requirements. In order to control the overspending of all of them budgetary control is focused by the management. For this purpose managers also use some planning tools which are compared in the following table on the basis of their advantages, disadvantages and definition:

Basis

Sales budget

Production Budget

Cash flow budget

Definition

It is based upon sales projections which are made by managers to meet expectations of customers. With the help of it management will be able to analyse that which department needed how much funds to operate.

This budget is formulated by the business entities for the purpose of keeping detailed information of all the product lines which are manufactured by the company. The key elements which are recorded in it are direct labour, material etc.

It is an estimation of al the cash payments and receipts which are analysed by the management for the purpose of determining liquidity of the organisation.

Application or usage

It is used in Excite Entertainment Ltd for the purpose of utilising all the resources appropriately and meeting the desired revenues. It is made on monthly, quarterly or yearly basis.

Managers of Excite Entertainment Ltd use it for the purpose of recording information of different types of leisure and entertainment services which are offered by it to all its clients.

In Excite Entertainment Ltd it is used by managers to analyse the total cash which could be acquired by them in upcoming period. It is also created on yearly, quarterly and monthly basis.

Advantages

With the help of it managers can keep the expenses under control which is beneficial to enhance profits.

It facilitates management to reveal the the areas which are required to be strengthen.

Production budget benefits the company by facilitating the managers to record and forecast production related expenses for future.

It is also beneficial in determining material losses due to shrinkage.

It is beneficial for the organisation to determine the available resources which could be used to carry out operations.

Only cash receipts and payments are recorded in it and all the debts are ignored.

Disadvantages

This budget is not able to forecast the future trends ef

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