Concept of Management Accounting: PDF

MANAGEMENT AND
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Concept of Management Accounting and requirement of its different systems...................1
P2. Various Methods used for Management Accounting Reporting...........................................3
TASK 2............................................................................................................................................5
P3. Ascertainment of Costs using appropriate cost analysis techniques.....................................5
.........................................................................................................................................................8
TASK 3............................................................................................................................................8
P4. Advantages and Disadvantages of different planning tools used in Budgetary Control.......8
TASK 4..........................................................................................................................................13
P5. Assessing how businesses are adapting MAS to respond to financial problems................13
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management Accounting helps in the analysis of accounting information in order to
communicate important results to both internal as well as external stakeholders of a business
(Bracci and Maran, 2012). For the successful completion of this report, Assael Architecture Ltd.
has been chosen in order to analyse the practices of management accounting in a critical manner.
Assael is a medium-sized manufacturing firm which was established by John Assael in 1994 and
is based out of Putney, UK. In addition to this, the given report also aims to provide a detailed
account of various types of management accounting systems as well as reports. It also
emphasizes on the various types of budgets, budgetary control as well as preparation of such
budgets using a wide variety of cases.
TASK 1
P1. Concept of Management Accounting and requirement of its different systems
Management accounting is a procedure of controlling , managing and evaluating the
organisational performance that helps to measure the internal control system of an organisation.
Assael Architecture Ltd uses management accounting process to betterment of the business
strategies related to decision making and financial planning .
Key functions of management accounting system:
Function of the management accounting system includes present the modified data to
evaluate the result through various techniques. It includes analysis and interpretation of relevant
data as ratio analysis or trend analysis to reckon the company growth and market valuation
(DRURY, 2013). Assael Architects Ltd is prepared the accounting statements such as fund flow
statements, cash flow statement, capital budgeting to facilitates the better control of the integral
parts of management. Modified and interpreted information are useful to management for taking
quality decision and strategic planning in management accounting. Assael company uses the
qualitative information for recognise the policy formulation, employees efficiency, detailed
business strategies.
 Financial accounting system:
Financial accounting is a branch of accounting that records the business transaction over a
specific time period. It is the process of recording, summarizing of the business operations. This
system aims to prepare a financial report or financial statement such as an income statement or
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balance sheet from the business operation. Accounting information system is a process of
retrieving,storing, collecting, reporting the financial data by accountant, consultant and business
analysts. These financial reports can be used by the internal management or external parties such
as investors, creditors, suppliers. For example investor uses the financial statement to know
profit of the company or its market valuation. Also, Internal control is a process in auditing to
affirm the operational effectiveness of the financial reporting. Internal control system of auditing
is scrutinization the relevant data checking whether it follow rules and regulation or compliance
the laws or not (Hilton and Platt, 2013). Auditing is a systematic or independent examination of
books of accounting and auditor conduct the official inspection of financial statement which are
made during the accounting period .Auditor examined the document and vouchers of the
business activities to determined that financial information are true or not.
 Cost accounting system: It is the framework that helps in estimating cost of products for
evaluation of inventory, profitability analysis and cost control. The main requirement of
this system is to estimating accurate cost for make the business operations profitable.
Product-based costing is all about allocating direct and indirect expenses to individual
units of finished product. Productivity-based costing is a more complex system that
assigns costs to activity centres rather than the products 's cost. It assigns costs to
particular overhead activities then assigns costs to products. An activity-based costing
(ABC) system ascertains the relationship between overhead activities and manufactured
products. It specifies that allocating the cost through cost driver and add on value to its
product indirectly. For example – indirect expenses of a business , rent of the office is
allocating or distributing on the basis of the floor area space (Kaplan and Atkinson,
2015).
 Management accounting system: Management accounting is a process that involves
decision making, business planning and performance management of the internal
stakeholders of an organisation. Decision support system is an information system that
supports to management in decision making activities. Profit management is business
activity that shows the income ahead of expenses and cost.
 Tax accounting System: Tax accounting is a process of accounting methods that focused
on taxes. Tax accounting is governed by the Internal Revenue Code that represent the
specific rules of companies and individuals must follow when filing the tax returns. But
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