UNIT 18 REPORTING TO

MANAGEMENT
Structure
18.0 Objectives
18.1 Introduction
18.2 Concept of Management Reporting
18.3 Objectives of Reporting
18.4 Reporting Needs at Different Managerial Levels
18.5 Types of Reports
18.6 Modes of Reporting
18.7 Essentials of Successful Reporting (Guiding Principles)
18.8 Let Us Sum Up
18.9 Key Words
18.10 Answers to Check Your Progress
18.11 Terminal Questions

18.0 OBJECTIVES
After studying this unit, you should be able to :
! understand the report for the specific purpose;
! follow the pattern of reports and apply these to your decisions;
! prepare good reports;
! know the needs of the reports; and
! use the reports for data base.

18.1 INTRODUCTION
The purpose of reporting is to provide the information needed by the concerned party.
The value of information is determined by how the information meets the needs of the
users. This information creates an atmosphere for internal decision makers. The
communication of the information between two or more parties through reports is
known as reporting. Report is the essence of the management information system.
Report is a statement containing facts and if they contain accounting information and
data they are called accounting reports. So, report may be known as process of
providing accounting information to those who needs to make decisions. Report may
be for the past, present and for the future developments. In this unit you will study
about the objectives of reporting, need of reporting at different managerial levels, types
and modes of reporting and essentials of a successful reporting.

18.2 CONCEPT OF MANAGEMENT REPORTING

Reporting can be defined as communication of statements with related information
between the two parties. The process of providing information to the management is
88 known as management reporting. These reports are provided to the various levels of
management on regular basis to keep the management abreast about the effectiveness Reporting to
of their respective responsibility. Reporting is an important function of the management Management
accountant as the efficient and smooth working of the business depends upon the good
reporting. The effectiveness of reporting to management to a large extent depends
upon the form and timing of its presentation. The process of reporting to management
is concerned with proper selection of financial and operating data, arranging
information in a proper form, analysing and interpreting the data and then reporting it to
the management through an appropriate method.

18.3 OBJECTIVES OF REPORTING

Main objectives of reporting can be divided under the following heads:

Accounting reports consist of financial statistics. Management cannot analyse all

significant facts regarding its business especially in case of large scale production
where the business operations are more complex in nature. Accounting reports helps
to get full information about the its entire operative activity of the firm.

i) Providing accounting information: Accounting reports consist of financial

statistics. Management may not analyse all significant facts regarding its business
operations especially in case of large scale production where the business
operations are more complex in nature. Accounting reports help to get full
information about its entire operative activity of the firm. Thus important
objective of the reporting is to provide accounting information to operating and top
level management in accurate form in understandable brief manner.

ii) To take right decision: To help the management in taking the right decisions
with suitable statements provided by the management accountant.

iii) Acceptability of the decision by all: Reporting leads to motivate people,

increases efficiency and boosting the morale of the people engaged in the various
aspects of the work of the enterprise.

iv) Maximizing the profits: To achieve this ultimate goal of any business reporting
at the right time, at right place to the right person in right manner becomes an
essential feature.

v) For better control: Abnormal events can be checked in time by obtaining the
necessary information in respect of each operating activity. Control through
reports become effective as compared to personal investigations.

18.4 REPORTING NEEDS AT DIFFERENT

MANAGERIAL LEVELS
Reporting is the lifeline of the organization. It helps in planning and control and works
as a media of communication and stimulates corrective action. Accounting system
becomes useless, if the business has no system of reporting because all decisions are
normally based on reporting system.

Need of reporting differs at different management levels. This also differs to the user
community also. There are three levels of management and the reports can be
classified according to the needs as follows:

1) Top-Level Management Reports

2) Middle Level Management Reports

3) Lower Level Management Reports 89

Cost Volume Profit 1) Top Management Reports
Analysis
At this level reports are concerned with the following matters:
l For determining the aims of the enterprise;
l For formulation of policies and plans;
l For delegation of responsibility in successful manner to executives for the best
utlization of resources; and
l For formulating special significant plans.
It can be assumed that top brass of the business only needs reports for cost and
operational control. The report submitted to the level should be brief or we can call
it a summarized statement, which provides an overall view on the subject. Previously
these reports used to be submitted within the time framework. The time framework
may be monthly, quarterly or yearly. With the use of information technology and the
real time accounting, the whole time framework has been changed and now these
can be made available online.
Reports to top level management consist of the following:
a) Reports to the Board of Directors
b) Reports to the Chief Finance Officer
c) Reports to the Chief Production officer, and
d) Reports to the Chief Executive Marketing and Sales .
Let us study these reports in brief.
a) Reports to the Board of Directors : Generally, following reports are to be
submitted to the Board of Directors and the Chief Executive Officer (C.E.O.):
i) Different budgets,
ii) Machine utilization statement
iii) Work force utilization statement
iv) Cost analysis statement
v) Fund flow statement
vi) Cash flow statement, and
vii) Balance sheet and income statement
b) Reports to the Chief Finance Officer : Following reports are to be
submitted to the Chief Finance Officer (C.F.O.) :
i) Cash flow statement,
ii) Funds flow statement,
iii) Abstract of receipts and payments and
iv) Report regarding any special problem such as make or buy,
replacement of old assets or any other.
c) Reports to the Chief Production Officer: Following reports are to be
submitted to the Chief Production Officer (C.P.O.) :
i) Cost analysis statement
ii) Machine utilization report
iii) Work force utilization statement
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 iv) Materials statement, Reporting to
Management
v) Production statement showing budgeted and actual with variance and
vi) Overheads cost statement
d) Report to the Chief Executive Marketing and Sales : Following reports
are to be submitted to the Chief Executive Marketing and Sales:
i) Sales summary
ii) Reports on credit collection
iii) Reports of orders received and executed and outstanding orders
iv) Report on stock of finished goods
2) Middle Level Management Reports
The middle level management consists of the heads of various departments. The
reports at this level should show the efficiency and cost data relating to different
departments. At this level execution of plans formulated by the top management
is worked out and all the managers in each department are concerned with this.
It is also the function of middle level management to coordinate different
activities of different departments. The reports at middle level management
consists of the following:
a) Report to the General Manager : The following Reports are to be submitted
to the General Manager :
i) Administration budget,
ii) Cash and capital budget,
iii) Salaries statement of staff and
iv) Research and development budget
b) Report to the Finance Manager : The reports to be submitted to the Finance
Manager are:
i) Funds flow statement
ii) Cash flow statement
iii) Cash and bank reports
iv) Debtor’s collection period reports
v) Average payment period reports
c) Reports to the Purchase Manager : The following reports are to be
submitted to the Purchase Manager:
i) Stock level of raw material,
ii) Use of raw material,
iii) Raw material budget and actual purchases, and
iv) Budgeted cost and actual cost of purchases
d) Reports to the Works Manager : The reports submitted to the Works
Manager are:
i) Production cost report
ii) Raw material budget and actual consumption
iii) Production budget and actual production
iv) Idle time report
v) Idle capacity report
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Cost Volume Profit e) Reports to the Sales and Marketing Managers : The following reports
Analysis are to be submitted to the Sales and Marketing Manager:
i) Report of budgeted and actual sales,
ii) Report of orders booked and executed,
iii) Statement of sales ,
iv) Finished goods stock position and
v) Position of collections and debtors.
With modernization and adoption of computers in the business house, the
reporting period has been reduced tremendously and the data are ready at
hand and these can be used to prepare reports instantly. Middle level
management is connected on line with the computers within the organization,
so preparation of reports has become easy.
3) Lower Level Management Reports
At this level foremen and supervisors are concerned at the floor and they
prepare their reports physically without any expert opinion. They are
concerned with the daily work and they infuse a certain amount of
competitive spirit among the workers by comparing the output per man per
hour in a similar job. These reports include the following factors:
i) Workers efficiency report,
ii) Daily production report,
iii) Workers utilization report and
iv) Scrap report
v) Over-time report
vi) Material spoilage report
vii) Accident report etc.

18.5 TYPES OF REPORTS

Reports can be classified in various ways in which the different reports are presented
to the management such as :
1) Users Reports
2) Reports Based on Information
3) Reports Based on Nature
4) Functional Classification of Reports
Let us study each of them in brief.
1) Users Reports
Depending upon users, reports can be classified as follows :
i) Internal Users Report
ii) Special Reports
iii) Routine Reports
iv) Management Level Reports
v) External Users Reports
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 Reports can be prepared according to the users. They can be: Reporting to
Management
i) Internal Users: Reports, which are prepared for the use of different levels
of management and for the use of the employees are known as the reports for
internal users. These are not public documents. These reports are aimed to
different levels of management.
ii) Special Reports: These reports play a vital part in decision-making. They
are prepared for specific reasons. While preparing this type of report the problem
under study should be clearly be defined and understood and effect of cost and
income should be considered. Comparison of cost of study and estimation of
cost and income relating to the problem should also be considered. These
reports can be prepared for any of the problems relating to : i) market analysis
ii) Make or buy decisions iii) Problems of raw material iv) Technological
changes v) labour problems vi) Cost reduction schemes or any other problems
as discussed in Unit 18 of this course.
iii) Routine Reports: These are only control reports and they are required only
when a control system exists. These are prepared daily as per scheduled time
regarding activities. Production operation reports, cost reports, research and
development reports, various budget reports, utilization of man, machine and
material reports, report regarding customer default, sales and distribution report,
administration reports, income statement and balance sheet and cash flow
statement are included in this classification.
iv) Management Level Reports: Main classification of these reports have
been provided while describing the reporting needs at different management
levels at 18.3.3.
v) Reports for External Users: These reports are prepared for the external
users who have interest in the enterprise. They are the shareholders,
debenture holders, creditors, bankers, other financial institutions, stock
exchange and the Government. They may be interested in knowing the
financial position, progress made, future-plans and growth of the company.
While preparing these reports, the information regarding the interest of all
the external users should be taken into consideration. For example, the
profit and loss account and balance sheet are prepared every year and these
statements are to be filed with the Registrar of Companies and also stock
exchange authorities.
2) Reports Based on Information
There are two types of information reports. They are : i) Operating Reports,
and ii) Financial Reports.
i) Operating Reports: These reports convey the information regarding the
operations of the business at different functional levels. These reports are
used to review and control the total production and to improve the inter-
departmental efficiency. Operating reports can further be classified as
information reports and the control reports.
l Information Reports: The reports prepared for this purpose should be
simple and clear in respect of various operating activities. These reports
are of three types, viz., trend reports, analytical reports and activity report.
In trend reports, comparative information is provided over a period
regarding the direction or trend of different activities. Analytical reports
are based on the horizontal comparison of results. This provides information
in an analytical manner about comparison of different activities for a
particular period. When reports are prepared for any particular activity
of the business then they are known as activity reports. Segment reports
are also information reports. 93
Cost Volume Profit l Control Reports : These reports are prepared to help the managers
Analysis in controlling the operations of the business. Various responsibility
centers are established in every business to have an effective control.
To know the performance of each responsibility center reports are
prepared for them. First important aspect regarding the performance
of the center manager and the other is concerned with the economic
performance of the center towards the goal or the business, are the
main features of these reports. These reports can be current control
reports or they can be summary control reports. Summary control
reports can be master summary control reports or these can be
subsidiary summary control reports.
ii) Financial Reports : Financial reports differ from control or information
reports. They are necessary to know the success or failure of the
management’s responsibility to shareholders through the accounting. These
reports can be of two types viz., dynamic financial reports and static
financial reports. Dynamic financial reports show the changes took place
during the year in the financial position of the business. These reports
include report of financial change, financial control reports and effective use
of funds reports. Static financial reports provide the information regarding
the position of assets and liabilities. They include balance sheet and certain
additional statements for individual items of the balance sheet.
3) Reports Based on Nature
There are three types of reports based on nature:
i) Enterprise Reports : These are the reports, which give a detailed
description of the various operating activities and financial position of the
business. They are generally meant for the external users i.e. bankers,
financial institutions, shareholders and government authorities. They are
generally regular and include annual accounts, directors’ reports, auditors
report. It is obligatory under Companies Act to furnish these reports.
ii) Control Reports : These reports have already been discussed under the
head reports based on information.
iii) Investigative Reports : These reports are specially prepared only when
to investigate a particular problem. These types of reports contain findings
and suggestions to solve the problem. These reports are helpful in taking a
decision on a particular problem.
4) Functional Classification of Reports
These reports are normally for the particular function or for a particular department
or for joint activity. They are also of two types:
i) Individual Activity Report : Report is prepared for the individual activity
of a single department working under the supervision of one executive is
known as individual activity report.
ii) Joint Activity Report : This report is prepared when joint efforts are
made in performing the activity. When the details are necessary then they
should be included in appendix. Then the results of all the joint activities are
considered under the supervision of the main supervisor.

18.6 MODES OF REPORTING

There are three modes of reporting:, 1) Written 2) Graphic, and 3) Oral. These
reports are further divided as follows :
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 Modes of Reporting Reporting to
Management
Written Graphic Oral

1. Financial Statements 1. Charts 1. Group meetings

2. Tabulated Information 2. Diagram and Pictures 2. Conferences and
Conferences and Individual talks
3. Graphs
Individual Talks
3. Accounting Ratios

1) Written Reports : Written reports are prepared in the different forms to provide
information. These are as follows:

l Financial Statements: These statements provide the information regarding

the data of actual performance with budgeted figures and comparative
statements containing information over a period.

l Tabulated Information: Information related with expenditure, production,

sales and distribution is furnished in the form of tables so that the data can
easily be analyzed.

l Accounting Ratios: Accounting ratios play a vital role for the

interpretation of accounting and financial statements. Different liquidity
ratios, profitability ratios, efficiency ratios and capital structure ratios may be
used for this purpose

2) Graphic Reporting: Graphic reporting is very common in these days to present

information to the management. These reports can be submitted in the form of
graphs, diagram, pictures and charts. They are prepared when quick action is
needed.

The common charts and diagrams usually included in a report are :

i) Line Graphs : To show, for example, cumulative actual sales against

budget and/or against previous year’s actuals;

ii) Bar Charts : Generally used for showing comparison of month-wise sales
and expenses – budgeted and actuals;

iii) Pie Charts : Commonly used to show in a circular diagram the distribution
of the total sales revenue among costs, profits as also the total costs among
the different constituent elements.

3) Oral Reporting : Oral reporting may take place in the form of (1) Group
meeting, (2) Conferences, and (3) Individual talks. These oral meetings cannot be
part of important decisions, but they furnish a common platform to discuss the
problems genuinely. For decision- making the written reports have a upper hand
over all types of reports.

18.7 ESSENTIALS OF SUCCESSFUL REPORTING

(GUIDING PRINCIPLES)
Business report is a media of communication that contains factual, correct and clear
information and it should be able to add to the knowledge of the recipient. It should be
easy to understand the problem of the event reported to him. Accounting reports
become ideal if they follow the following guidelines: 95
Cost Volume Profit 1) Content and the shape : While making a draft of the report the following heads
Analysis should be kept in mind:
1.1 Suitable title : Title should be short and suitable to the content.
1.2 Time : It should give time and the person for whom it is prepared.
1.3 Facts : Report should contain facts and not the opinions.
1.4 Totals : Where statistics are required, only relevant data should be provided
and details may be given in appendix.
1.5 Objectives : Contents should serve the purpose for which it is prepared.
1.6 Synchronize : The contents should be in logical sequence.
2) Precise : Report should not be lengthy. It should be precise, specific and concise.
It should not contain irrelevant matter. If details are necessary then they should
be included in appendix.
3) Accuracy : The information provided in the reports should be accurate.
4) Comparable : It should be prepared in such a manner that comparison with past
and predetermined standards can be made.
5) Simple : Report should be simple and should not contain any ambiguity.
6) Timeliness : Reports should be prepared and presented in time, so that decisions
can be taken promptly and further deviations checked.
7) Consistency : For comparison consistency is necessary. Uniform system of
collection, classification and presentation of the information should be followed.
8) Attractiveness : The report should be eye-catching in the sense that it does not
go unheeded by the users.
9) Jargon : All technical jargon should be avoided as for possible since the reader
may not understand these and, therefore, may become hostile to even the spirit of
the report.
10) Highlighting Deviations : Report should highlight the variations and trouble
spots which are significant to the organisation.
11) Assumptions : Assumptions used in the preparation of reports should be stated
neatly, precisely and separately.
12) Effective Communication : Report that communicates effectively to all levels
of management stimulates action and influence decisions. Detailed planning,
codification and timely processing of data are the essential requisites for effective
reporting.
13) Figures and data : These should be presented is a tabular form preferably in
annexure at the end of the report.

Check Your Progress

1) Define reporting to management.

................................................................................................................................

................................................................................................................................

96 ................................................................................................................................
2) Explain any two objectives of reporting. Reporting to
Management
................................................................................................................................
................................................................................................................................
................................................................................................................................
3) What is control report?
................................................................................................................................
................................................................................................................................
................................................................................................................................
4) What are the types of reports, which are required by the middle level of
management? Name any five.
1. ................................................... 3 ................................... 5 ...............................
2. ................................................... 4 ...................................
5) What are the different modes of reporting?
................................................................................................................................
................................................................................................................................
................................................................................................................................

18.8 LET US SUM UP

One should be very clear about the objective of the report before preparing it. He
should be able to clearly define and understand the problem for which the report is
going to be presented. Needs of report differs at different management levels. So this
should be decided that which level of management will use the particular report. Mode
of reporting is also important regarding the presentation. Report will be a users report
or information report or any other type of report. Certain guiding principles such as
brief, sequencing, consistency, comparability, timeliness, accuracy, attractiveness,
simplicity, shape and contents are very important and these should be taken into mind
while preparing a report.

18.9 KEY WORDS

Static Financial Report : Providing information about the position of assets and
liabilities of the concern.
Graphic Reports : Information supplied in the form of Charts, Diagrams, Pictures
etc.
Reporting : Providing information to the person concerned.
Dynamic Financial Report : The information regarding the change that took place in
the position of assets and liabilities of a firm
Operating Reports : Information regarding the operating of a business at different
functional levels
Accuracy: correct, right
Consistency: Uniformity
Synchronize: Clear sequence
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Cost Volume Profit
Analysis 18.10 ANSWERS TO CHECK YOUR PROGRESS
4) Names of five reports:
1. Administrative Budget
2. Funds Flow Statement
3. Cash Flow Statement
4. Stock Level of Raw Material
5. Production Cost Report
5) Modes of Reporting:
1. Written: Financial Statements
Tabulated Information
Accounting Ratios
2. Graphic: Charts
Diagram and Pictures
Graphs
3. Oral: Group Meetings
Conferences and Individual Talks

18.11 TERMINAL QUESTIONS

1) What do you mean by accounting reports? What are the different types of
reports for internal use? Discuss each of them.
2) What are the special reports? What matters may be covered by the special
reports?
3) Describe the reporting needs of different levels of management and how a
system of reporting can satisfy it?
4) What are the essentials of a good report? Describe.
5) Explain the different types of the reports that are used in an enterprise
6) “Accounting Reports are a matter of necessity for the management and not a
matter of convenience” Discuss.

Note: These questions will help you to understand the unit better. Try to write
answers for them. But do not submit your answers to the University.
These are for your practice only.

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