Management Accounting: Methods, Benefits, and Application

5 Management accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
P 1. Developing effective set of understanding associated with the management accounting
system..........................................................................................................................................1
P 2. Examining the different methods related with the management accounting reporting.......2
M 1. Examining the benefits of MA systems and its application in the company......................3
Critically examining how MA systems as well as MA reporting is integrated in an
organisational process.................................................................................................................4
LO2..................................................................................................................................................4
P3 Determining costs using the cost analysis techniques...........................................................4
LO3..................................................................................................................................................8
P4 Advantages and disadvantages of planning tools used for budgetary...................................8
LO4................................................................................................................................................10
P5 Organisations adapting management accounting systems to respond to financial problems
...................................................................................................................................................10
M4.............................................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
APPENDIX....................................................................................................................................14

INTRODUCTION
Management accounting (MA) is linked with the internal set of system which the company
uses in order to evaluate and also measure the process for the management within the
organization. It is significant in providing critical set of information and leads to better
operational decision making (Kesumawati and et.al., 2019). The present study will focus on
developing effective set of understanding associated with the management accounting system.
This study also examines the different methods related with the management accounting system.
The study also focuses on calculating costs to use appropriate business techniques related with
cost analysis in order to create an income statement by utilizing the marginal as well as
absorption costing approach. Furthermore, the study also determine the advantages as well as
drawbacks of various planning tools for the purpose of budgetary control. Lastly it will
demonstrate and compare ways where organization can adapt to the MA systems in order to
answer to the financial problems. The present study focuses on the Capital Joinery Ltd. This is a
medium sized organization where they focus on making variety set of joinery, made to measure
doors and windows, etc.
LO 1
P 1. Developing effective set of understanding associated with the management accounting
system.
Management accounting is considered to be as the internal process to prepare reports of the
business operations in order to help managers take long-term as well as short-term decisions.
Management accounting is significant because it is useful in pursuing business goals and identify
measures and interpret the results thereof. It is useful for the integration of management
accounting within the organization because it aids the management and performance to control
various set of functions (Efendi and Kusuma, 2021). Management accounting system is an
internal process which is useful in providing critical set of information for the business decision
making.
Origin of the management accounting is that it has geniuses from financial accounting but
it is still distinct from the functions and roles associated with financial accounting. The key role
of the management accounting is to organise, analyse and observe the functions and operations
of the business and take necessary decision on a timely manner. The basic principle of the
management accounting is that information must be relevant and valuable. Another major
1

principle of the management accounting is that, there must be maintenance of credibility of the
data and value must be estimated.
Key primary difference associated with the MA and financial accounting is that the MA
is presented to the internal committee of the company. In contrast to it, financial accounting has
been prepared for the external set of audience or stakeholders (Shevelev, Sheveleva and
Gvozdev, 2017). Management accounting is useful in providing information and complete
analysis to the managers to give insight of the company which helps in better decision making.
Financial accounting focuses on gaining financial information and complete analyses is given to
the people outside of the company. Cost-volume- profit analysis: This accounting system mainly looks at the major impact
that the varied number of cost as well as the volume has upon the operating profit. Job costing system: It is the key prominent process through which it is useful in
accumulating information about the cost linked with the specific job. It helps in allocating
cost and take necessary decision. Cost accounting system: This is also referred to as a product costing system where the
specific set of framework has been used by the organization in estimating the cost of the
products and carry out profitability analysis. It is useful in controlling cost and attain
economies of scale. Inventory management system: This is the relevant process to track the products across
the entire set of supply chain, purchase to production towards the end of sales. This helps
in managing multiple locations, preventing stock outs and also ensure proper record
keeping.
 Price optimization system: It is relevant in calculating how the specific demand tends to
vary at varied degree of price levels. It is useful in managing price and is crucial for the
profitability of company by understanding the price sensitivity concept.
P 2. Examining the different methods related with the management accounting reporting.
Management accounting reporting is useful in producing relevant set of reports which are
relevant for the internal stakeholders of the company. It is useful in monitoring the progress of
the company and also monitor the business performance with greater relevance and accuracy.
This leads to better set of decision making.
2