Management Accounting: A Literature Review

This assignment presents a literature review on the subject of management accounting. It delves into various aspects of the field, examining influential research papers, academic journals, and online resources. The review covers topics such as the contingency theory of management accounting, environmental management accounting, human resource accounting, and the factors driving change in management accounting practices. The goal is to synthesize existing knowledge and provide a comprehensive understanding of current trends and developments in management accounting.

Management Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................2
TASK 1 ..........................................................................................................................................2
P1 Management accounting and its types...................................................................................2
P2 Different methods for management accounting report..........................................................3
M1 & D1 Advantages and application of management accounting system with integration of
management accounting reporting in an organisation................................................................4
TASK 2............................................................................................................................................5
P3 & M2 Cost per unit and income statements as per marginal and absorption costing............5
D2 Interpretation of financial report of Dell...............................................................................7
TASK 3............................................................................................................................................7
P4 Advantages and disadvantages of different type of planning tools which are used for
budgetary control........................................................................................................................7
M3 Use of different planning tools and their application in preparation and forecasting
budgets in the context of Dell.....................................................................................................9
D3 Evaluation of how planning tools respond appropriately to solving problems in the context
of Dell..........................................................................................................................................9
TASK 4 .........................................................................................................................................10
P5 Comparison between Dell and Lenovo................................................................................10
M4 Analysis of how management accounting can assist in facing financial problems and to
attain sustainable development.................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is all about management and control of funds that are available
with a firm in order to attain some quality in terms of return by the employment of those
available funds. In this report several concepts and facts has been mentioned on the basis of the
case study of Dell through which reader can get acknowledged of various techniques of
budgetary control on the other hand reader can get a brief information about management
accounting and how it works. Entity is an American privately managed and owned company
which has its headquarter situated at Rock, Texas of United States. It deals in computer
technology further it is a multinational company. Founder of company was Michael Dell and
through his and its management's good managing skills it has been marked in the list of largest
technological corporation of the world.
TASK 1
P1 Management accounting and its types
It is a mix of financial and cost accounting systems. Through this system user can collect,
analyse, measure and properly execute its working so that they can attain their goals and
objectives. This will help an entity to take decisions in order to create policies and to maintain
daily businesses. Through this an accountant can analyse the market and its elements which may
affect the financial position of cited entity. Because proper maintenance of funds is necessary
otherwise cost associated with such funds will start making adverse impact over firm. There are
various management accounting systems some of them are mentioned below:
Inventory management system: It is a systematic process of transfer of good and services to
the company’s location. A business organization is required to manage their stock in a manner
which can deliver of products on the right time which can increase the customer satisfaction
level in an effective manner. The main aim of such system is to understand the concept of
inventory which can help to minimise the operational cost and increase the effectiveness of the
company so that it can increase the profit and revenue which is a sole aim for each and every
business firm.
Job costing system: It is a systematic monitoring system where a company monitor its overall
cost and keep track of all expenses in an effective manner. This approach helps to understand the
manufacturing cost and divide these cost in the various overhead such as direct cost, indirect
cost, variable cost, labour cost etc. This is one of the significant in which company can estimate

their overall cost for a product so that they can control various elements such as raw materials,
labour hour and other aspect in order to utilize these resources in an effective manner.
Price optimization system: A business is operating their business in order to earn profit and
reduction in the cost associated with the product and services. In the context of Dell required to
use various aspects of price optimization so that they can sustain their revenue by their operation.
In this way, a firm is tries to reduced its product cost so that they can attract large number of
customers in order to meet their short and long term targets.
Cost accounting system: This system used by the various manufacturing units where they tract
and record all cost associated with the product or services. In this way, there are different types
of elements which required to record the expenses so that they can keep such record for their
future references.
P2 Different methods for management accounting report
There are various methods for reporting and these are as follows:
Performance report: This is one of the significant reporting where a company is required to
organize the overall aspects. It is related with the evaluating the performance level of a company
on regular basis so that corrective measures will be made in the near future. For instance, cited
firm is required to examine the current performance so that business organization can attain their
targets in an effective manner.
Inventory control report: This reporting is related with the measuring and tracking of stock
level of a company on regular basis. The main motive of this type of report is to control wastage
of materials. Inventory control one of the complicated task for each and every business
organization which required manage their stock level at the optimum cost. This is significant for
a company is to understand the overall concept and make increase efficiency in an effective
manner.
Job costing report: This report contains the various information and detail for a particular job in
order to calculate cost per unit for a job. It is essential for a company is to prepare such report
which can make financial decision making more effective.
Budget: This is one of the most critical part of reporting which related with the estimation of
overall cost of a project or task. A business organization is required to prepare a report where
they identify different types of cost associated with the project so that they can control their

proposed cost. In this approach financial manager must divide its projected cost by evaluating
the overall expenses so that they can attain its long term goals in an effective manner.
M1 & D1 Advantages and application of management accounting system with integration of
management accounting reporting in an organisation
There are several advantages which can be experienced by Dell and its management
while utilizing techniques of management accounting system. Such advantages are mentioned
below : Improved Efficiency : It can be helpful in improving efficiency of an entity. Improving
efficiency can be termed as increasing productivity and profitability of a company. This
system is scientific in nature hence management can rely over the results which they get
out of it. Profit Maximization : It helps a firm to maximize its profitability. As effective decisions
can be made by through better accounting system. Profitability is the ultimate aim of any
organisation. Better decision making and execution of plans made under such decisions
can allow a company like Dell to grow faster and to gain a better margin over its products
and services to maximize its profit. Simplification of Financial Statements : Managerial decisions which are taken in a
systematic way or as per techniques by managers of Dell can be very easy. Simplification
here means to simply the technical things hence through such techniques managers can
easily simplify complex facts in the financial reports.
 Control On Cash Flow : cash and its moment in various operations should be controlled
by cited entity as this will ensure proper utilization of available cash with an entity. Dell
can properly maintain cash flow in operating activity they can get exact measurement that
how much they should employ on operating, investing and financing activities.
There are certain application of management accounting system and these are as follows : Record Keeping : it can be used by cited entity to record its business transactions. And
the result which an entity get due to change in financial position can be measured through
book keeping. In it financial effect which can happen through future projects of cited
entity can. Through it financial goals of an entity can be recorded and internal reports of

can be prepared by management accountant in an easy format so that stakeholders can
easily understand these reports. Planning and Controlling : Collection of cash and maintenance of stock are made
through this system. Further these techniques can be utilized in order to control various
expenses.
 Decision Making : Management accounting system can be applied in decision making
further through it profitability of a product can be evaluated.
Integration of management accounting reporting in Dell
Management accounting and reporting can be integrated in order to get better results and
to accomplish goals and objectives. Better execution of plans which are framed to get better
output from process which are carried on by management can be possible through it. Dell and its
management can make effective reports on financial statements which depicts better information
which assist stakeholder to take their decisions. Reporting should be clear and it should contain
material information that can effect managerial decisions and decisions made by owners or
shareholders.
M1
An effective management accounting system application helps to reduce operational expenses of
Dell corporation. There are various activities which irrelevant for the company can be
determined by such system and provide a long term success in the longer run. Management
accounting system plan all expenses in advanced which can be removing other expenditure in
effective manner.
D1
Preparation of report is very significant for an enterprise and its required various information.
There are variety of data should be collected from different sources and must be analysed in an
effective manner to present a report more appropriate. Therefore, Dell having its own different
data which can help to make their decision quickly and effectively.
TASK 2
P3 Cost per unit and income statements as per marginal and absorption costing
There are various tools and techniques which can be used by the cited firm and prepare their
income statement in a more suitable manner. These are:

Absorption costing: This is one of the most suitable approach where a company is required to
include all types of costing such as direct and indirect. There are following calculation which can
be managed
Income Statements as per Absorption Costing
NET INCOME AS PER ABSORPTION COSTING: £ £
Sales 66000 74000
less:
Cost of Production 66700 42900
less: closing stock 10261.6 2600
Gross Profit -10961.6 28500
LESS:
Fixed and variable cost:
Fixed Admin & selling cost -5200 -5200
NET INCOME AS PER ABSORPTION COSTING: -16161.6 23300
Marginal costing:
Income statement as Marginal Costing
Quarter 1 Quarter 2
PARTICULARS £ £
Sales 66000 74000
less:
Cost of Production -50700 -50700
less:closing stock 7800 2600
net cost of production -42900 -48100
Contribution 23100 25900
less:
fixed manufacturing overheads -16000 -16000
Fixed Admin & selling cost -5200 -5200
NET INCOME AS PER MARGINAL COST 17900 4700

M2
D2 Interpretation of financial report of Dell
As per above statements if company opts for absorption costing technique then they will
have a loss of 660000 but if they opt for marginal costing technique then there will be no profit
and there will be no loss. Variable cost affects the profit as well as in marginal costing when
variable expenses 1600000 has been deducted out of total sales 2700000 then there will be
contribution of 1100000. When fixed cost has been deducted out of it i.e. 1100000, then there
will be a situation of no profit and no loss.
TASK 3
P4 Advantages and disadvantages of different type of planning tools which are used for
budgetary control
Budgetary control can be used by an entity for forecasting about its future projects. It is a
detailed process which includes research and analysis to find the facts which may affect business
operations. Other than this it also includes planning and implementation of plan for
accomplishment of goals and objectives. Through budgetary control Dell and its management
team can allot the funds to several projects as per their requirement and this also eliminate over
trading. As company will only purchase the required quantity of material. There are certain
advantages and disadvantages of Budgetary control which are mentioned below:
Advantages
 Goal and objectives can be easily achieved through the budgetary control techniques.
 Management can set their goals and they can frame certain effective strategies in order
to achieve those goals.
 Better execution and implementation of strategies is possible when there are
quantitative targets and employees of Dell can give their maximum efforts in order to
increase productivity and profitability.
 Personal development of labour is possible when leaders put target against them which
are prepared through the techniques of budgetary control as they are reliable and
attainable. Financial sources can be exploited perfectly to get maximum possible returns. As
management accountant can easily frame such strategies and they can take certain

decisions which allows them to allot funds on those project which can provide
maximum returns to them.
Disadvantages
 Lack of flexibility is there. As targets which are set by top managerial personnels of
Dell cannot be questioned in order make them friendly and attainable. Hence there is
less flexibility in budgetary control techniques. Employee heads and the supervisors of different process of Dell can misuse these
techniques by showing high expenses so that in case the expenses goes high still there
will be no negative variance in expenses.
Various types of Budget
Master Budget: A master budget is containing various components such as sales, production,
purchase, income and expenditure and so on. It is a type of financial statement which having a
set of format. This is important for a company is to make a budget for their future transaction so
that they can plan their activities accordingly.
Zero based Budgeting: In this type of budget where a company is required to make a budget
from starting point. The finance manager is required to estimate the overall budget on the basis
of actual cost rather than previous year cost.
Cash flow budget: Liquid management is one of the significant for a company in order to
estimate their cash and expenditure which is very crucial. A cash flow budget is related with
calculating all project cost flow of a company so that they can maintain its position in terms of
financial aspects.
M3 Use of different planning tools and their application in preparation and forecasting budgets in
the context of Dell
There are various planning tools which can be utilized by an entity and its management to
prepare budget in order to maintain its resources. Planning and forecasting is all about analysing
future projects hence through techniques and planning tools various planning tools which can are
used by Dell and its management during formation of budget is mentioned below:
 Variance Analysis: Variance analysis is used in order to check and analyse the difference
between standard and actual price, quantity and output. Through this planning tool
management can investigate the reason for the variances and they can eliminate those
reasons so that they can get maximum output. For example, as per above mentioned data

in task 2 there was a negative variance of quantity i.e. 1000 which simply means that
production department of Dell has used more quantity of material as compared to their
estimated quantity. So they can investigate those factors due to which quantity variance
is negative in order to eliminate it.
 Ratio Analysis: Ratio analysis is used for detailed analysis of the financial statements.
Ratios are mathematical formulas through which an organisation can get results out of
financial statements. Managerial team of Dell can use this planning tool to take various
decisions in order to grab various opportunities and to accomplish different managerial
decisions.
 Financial Analysis: An organisation can analyse financial statements to evaluate its
financial position and they can also have acknowledged of company financial position in
the market. Ratio analysis, cash flow analysis and fund flow analysis are some
techniques through which financial statements can be analysed.
There are various tools and approaches which help to make budget and forecast all expenses in
advanced. It ensured that all information must be communicated to all functional department in
order to implement can be achieved. With the help of such methods Dell can be set its product
price accordingly which is very significant for them.
D3 Evaluation of how planning tools respond appropriately to solving problems in the context of
Dell
Planning tools can be used for facing problems and to get out of them. Further these are
used to get better results through employing the budgetary techniques. Sustainable development
is necessary for organisation. Continuous development is necessary as when an organisation start
satisfying with the available results then they will stop making efforts for the betterment of their
organisational structure. Planning tools can be used for sustainable development as organisation
can make potential plans that can generate better results for the entity. Budgeted and planning
can be used for forecasting of future projects, for example they can estimate the total investment
which they need to invest in that project. Budgeting is a process which includes various steps it
starts from research and analysis of facts that can make impact over the organisational structure
of entity. After making research the organisation requires to make effective strategies and after
framing such strategies they need to implement them in the operations of Dell so that the specific
operations can generate better output with quality and less cost. Which means they can attain

various goals like customer satisfaction by providing them quality which they want and they can
gain profitability due to high profit margin and productivity due to effective and quality
production. Sustainable development is all about taking innovative steps in order to attain the
requirements of future without compromising the need of present. Better response of financial
resources can be gained if the these are maintained in accordance with the better planning andb
organising techniques.
TASK 4
P5 Comparison between Dell and Lenovo
There are following tools can be used by the cited firm in order to solving various financial
issues:
Key performance indicator: A business organization is required to review their overall
performance which is very significant. Key performance indicators are related with the milestone
which an enterprise compare their performance with the industry and take corrective measures so
that they can provide a consistent growth to their business.
Financial governance: It is related presenting a fair and clear financial position of a company in
front of various stakeholders. Financial governance is related with the providing relevant
information so the community and conduct an ethical business practices in an effective manner.
Every organisation reacts in different way against the financial problems. Lenovo and
Dell respond in different way against such issues. Hence the comparison of these companies are
mentioned below:
Dell Lenovo
 Management of Dell use ratio analysis
for analysing financial statements.
 It uses variance analysis for finding and
investigate the gap between the actual
and standard output so that they can
eliminate the factors which are causing
such gap .
 On the other hand, Lenovo and its
managerial team uses cash flow and
fund flow analysis for it.
 Lenovo uses traditional methods for
analysing the gap.
 It uses Zero base budgeting for
budgetary control.

M4 Analysis of how management accounting can assist in facing financial problems and to attain
sustainable development
Management accounting helps an entity to face problems and to achieve success and
sustainable development. It helps an entity to identify problems that is causing difficulties in
getting success in achievement of goals. It helps in preparation budgets it also coordinates in
Identification of small steps where goals can be achieved. Develop the plan to overcome with
financial problem. It also develops and determine financial priorities.
CONCLUSION
As per the facts and figures which are mentioned in this report it can be concluded that
management accounting can be helpful in management of funds which are available with the
organisation. In this report several techniques can be used for the maintenance of funds. Dell
uses several techniques which can be held responsible for the betterment of organisational
process. A comparison has been made in which the techniques used by Lenovo and Dell.
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