Management Accounting and Budgetary Control

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
P1. Explanation of management accounting together with essential requirements of different
types........................................................................................................................................1
P2. Different methods of management accounting reporting.................................................2
P3. Calculation of costs on the basis of marginal and absorption costing method................3
P4. Explanation of advantages and disadvantages of different types of planning tools of
budgetary control....................................................................................................................5
P5. Use specific examples for a comparison of organisations in the context with management
accounting systems.................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Management accounting is a branch of accounting which deals with managerial activities.
It is directly related to financial transactions but may have major impact in decision-making
related to such transactions (Commerford and et.al, 2016). Furthermore, it is used by the internal
management to take major decisions which can be implemented in the entity. The main purpose
of this is to help with proper administration of activities in a company. In this report, Rowlinson
Knitwear has been chosen which has its headquarter in United Kingdom. The assignment covers
explanation of management accounting along with essential requirements of different types,
different methods, application of marginal and absorption costing to calculate the costs,
advantages and disadvantages of types of planning tools for budgetary control and use of specific
examples for conducting comparison of management accounting systems.
P1. Explanation of management accounting together with essential requirements of different
types
Management accounting: It is a technique used by manager for the purpose of taking
decision by identifying, analysing, measuring and communicating essential financial
information. In other words it is a process of collecting essential financial information in order to
make plans and policies for the organisation. Management accounting also known as
“managerial accounting”. It is used by internal department of an organisation. The company use
various management accounting system in order to collecting necessary financial information of
each department of the company. These are the vital part of managerial accounting process,
theses system helps the organisation to record essential financial data of their daily basis
operational activities. Without using these system company never took decision regarding budget
policy risk assessment policy and investment policy. Essential requirements of management
accounting system are mention below:
Job costing system: This system is used to assigning cost to each product of the
company and then calculate and measuring cost of each order company receive free their
customer. Company use this system when their products are identical. Company make products
according to the demand of their customers (Cools, Stouthuysen and Van den Abbeele, 2017).
This system of managerial accounting helps in identifying market demand of customers and
useful in making and implementing decision of the company.
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Price optimizing system:It is an essential system of management accounting. Manager
use this this system for analysing pricing policies of their rivalry industries and then make price
policies according to the stage of life cycle of an product. At initial stage they use penetration
pricing policy,company offer discount at initial stage. At boom stage they use skimming price
policy. Company use this system for the purpose of optimum utilization of their resource prices.
Cost accounting system: Company use this system for measuring cost of manufacturing
products and then calculating profitability rate of the entity. Job and process costing are the part
of cost accounting system. Cost accounting system is the essential part of managerial accounting
system,manager uses this system in making policies identifying risk and built risk assessment
policies,controlling cost, reduce wastage of products (Kastberg and Siverbo, 2016). This system
also helps in performance appraisal method. Company use this system for analysing capabilities
of their workforce.
Inventory management system: It is a tool which use software and hardware devices
for the purpose of maintaining stock level of the organisation. Company uses various technique
like EOQ ,LIFO,FIFO methods for identifying requirements of the company. The manager use
ABC analysis,JIT analysis,for the purpose of controlling wastage of stock within the
organisation. Inventory management system are useful in order to achieve optimum utilization of
resources, it helps in enhancing capabilities of works, save time and cost of
organisation ,provides goods to customer at their prescribe time.
P2. Different methods of management accounting reporting
Manager use management accounting reports for the purpose of making business level
strategies, taking decision and measuring performance of their workforce. Following are the
methods manager uses for making management accounting reports:
Budget reports: In this method organisation use to built budget reports in order to
analysis their workforce performance. Budget report is based on the collection of provisos data.
In this method managers set a target which must be fulfilled in prescribe time limit. After that
managers identifying differences of set target and achieve target and then make policies to
reduce the gap of current and budget target.
Account receivable ageing report: This is the most vital method of management
accounting policies. Management department made rigid credit policies to their customers. This
report is made to maintain cash flow and liquidity of the business entity. Management
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