Management Accounting Research Trends

This assignment examines a variety of scholarly articles on contemporary management accounting research. The provided list of sources delves into areas such as environmental management accounting, the impact of cloud technology, the role of management accounting departments in municipal administrations, and the influence of economic crises on accounting practices. Students are tasked with analyzing these diverse perspectives to understand the evolving landscape of management accounting.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
P.1 Essential requirements of management accounting system .................................................1
P.2 Different methods used for management reporting system .................................................3
TASK 2............................................................................................................................................5
P.3 Calculate costs using different techniques of cost analysis to prepare an income statement
of marginal and absorption ........................................................................................................5
TASK 3 ...........................................................................................................................................7
P.4. Advantages and disadvantages of planning tools for budgetary control.............................7
TASK 4 ...........................................................................................................................................9
P.5 Comparison in methods of firms in adopting management accounting systems to solve
financial problems .....................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is the system which consists of different accounts, records and
other relevant data which is helpful for the managers and thus they can take important decisions.
This also helps the managers to evaluate these statements so that they can create plan and
policies for the future (Song, Wang and Cen, 2015). It also helps them to have knowledge about
the expenses and profits so that they can create contingency plans and policies regarding the
costs and revenues. They can also do the forecasting of future and improve their performance by
comparing actual with standard data. Report discusses about Taj Stores which is a retail firm. It
is founded in 1936. Company is a grocery store and sells good quality of food such as fruits,
vegetables etc. To the customers. Project explains about the management accounting and
essential requirements of this system as well as different methods for management accounting
reporting. Assignment deals with the costs using appropriate system to prepare income statement
using marginal and absorption costs. Report discusses about the advantages and disadvantages of
different types of planning tools used for budgetary control and methods of comparison of
organisation to adopt accounting system so that they can respond to financial problems.
TASK 1
P.1 Essential requirements of management accounting system
Management accounting is the system in which relevant and useful information related to
expenses and profits are provided to managers. It is done so that they can take relevant decisions
related to budget and can also forecast regarding the future. This is also crucial so that they can
communicate relevant information to the employees. Different essential requirements of
management accounting system of Taj Stores are as follows-
Inventory management system – Through this system, there is no overstocking and
under - stocking of the inventory. Management can easily handle all the goods which are stored
in the warehouse. Manager can maintain right quality of the products in the warehouse. Hence,
there is no wastage of the materials and the stock. It prevents under - stocking of goods. So, the
products are easily available to the customers in time. Management accounting helps the
manager in maintaining good balance between the demand and supply of the products. Through
this it increases the satisfaction level of customers (Strauss, Kristandl, and Quinn, 2015). It also
prevents the problem of overstocking of goods; thus, there is no wastage of materials and stock.
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Through management accounting system manager can create accounts and records of inventory
and can also store goods in a proper manner. They can also have statements of goods which are
to be transposed to different shops (Subramaniam and Watson, 2016). So hence it decreases the
ordering and carrying costs of the vehicles which transports the inventory from one place to
another. Thus it helps the managers to reduce the extra costs which can be incurred in the
transportation purpose and goods are also easily available to all consumers in proper time and at
proper place. Hence it increases the happiness level of all users.
Price optimization – In this price is too decided in such a manner so that it is suitable for
the company as well as to the buyer. For example sometimes firm, sets the higher price which is
too expensive for the buyers and thus they do not purchase the products. Hence the organisation
can incur huge losses. There is another situation that firm sets the lower prices so that customers
can be satisfied. But customers can easily pay higher price for all the items. Hence, in such a
case, company cannot earn more profits and can incur huge losses. To prevent both cases,
organisation has to set such a price which is appropriate for the company as well as to the buyer.
This is important so that organisation can earn mote profits and as well as it increases the
satisfaction level of all consumers.
Job costing – It is a method in which management accounting officer can have full
knowledge of all the costs. Thus, they can have information and records of all the costs such as
overhead, material and labour. Hence, it can reduce these costs in the business. Manager can
invest money in those jobs through which they can earn more profits. Through management
accounting information it helps all managers to maintain records and statements of all the jobs.
Thus, they can easily control all the costs of all the jobs. Hence, they can create plans and
strategies regarding the future investment. As a result, they can earn more revenues and can
increase the market share. They can also guide other employees to invest in those activities and
jobs which help in earning more revenues. Hence, the staff members perform all activities in an
efficient manner. Therefore, firm can easily earn more profits. Through this, it can also maintain
good image in the market and give strong competition to other firms.
Cost accounting – It is method in which manager have records of all the costs related to
all project, products and other items (Wagenhofer, 2016). Through this system they can reduce
the expenses related to material, labour and overhead. They can also reduce the costs related to
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manufacturing and production costs. Hence manager can maintain records and statements by
performing future planning and forecasting. Hence they can invest in those projects in which
minimum cost involved and through which they can earn more profits. It helps in reducing per
unit costs related to production on manufacturing and other expenses related to the business.
Thus, it also helps the manager to create plans and policies related to further investment in the
future (Watson, 2015). Hence, they can reduce the overall costs of all projects, processes and
methods. So, all activities and tasks run successfully and smoothly. This also helps them in
increasing the production as well as the sales. It also helps in increasing the customer satisfaction
and happiness. In this way, they can earn more revenues and easily expand their operations on a
large scale. This helps them in maintaining strong competitive edge over other firms.
P.2 Different methods used for management reporting system
Reports are prepared so that managers can have full knowledge of management
accounting information and the records. It helps the managers to compare the actual with
standard performance (Armitage, Webb and Glynn, 2016). Hence the different methods of
management accounting reporting which is used by the Taj stores are -
Account receivable report – This report helps in giving information related to the
debtors. So hence managers can have full knowledge of the debtors through which company has
to receive money. Thus it can have knowledge of all records and other statements regarding the
number of debtors and the amount which company has to receive from them. It also helps the
managers to give warning regrading receiving of the money. Hence they can easily recover
money from the debtors. This helps all managers to reduce the bad debts of company. So they
can easily recover the dues and they can invest this money on all important investment areas.
This helps the company in increasing their revenues and market share. As a result it can
maintain competitive edge on other companies.
Account payable reporting – Through this report, company can easily have knowledge
and information related to providing money to the creditors who are the suppliers of the
company. It helps the managers in keeping and maintaining records of all suppliers and the
payment which is paid to them (AZIMI, RAJABI, and MAHMOUD, 2016). So hence they can
easily pay the remaining amount to all the creditors and can maintain good relationship with the
supplier. Through, this they can easily and rapidly transfer all goods to all customers. This helps
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in increasing the satisfaction level of all customers (Bobryshev, and et. al., 2015). It also helps
the company in decreasing the extra expenses incurred in other activities as they pay all the due
amount to creditors in appropriate time. So hence they can earn more profits and can easily
expand the business.
Budget reporting – Budget reporting helps the company in knowing the expenses and
profits of company related to a financial year. Thus they can easily reduce the extra costs in all
the activities and tasks of company. It also helps the manger in comparing actual and the
standard performance of the records. Thus firm can take corrective actions to improve those
mistakes. Through this company can easily reduce the costs in all operational activities and tasks.
Budget report also helps the Taj stores company to create future plans and policies related to
investment in those activities which helps in reducing the costs of business and can increase the
profits. Hence firm can easily accomplish the objectives. Manager can also give guidance to all
employees to invest in profitable activities. It also helps the manager in reducing the confusion
related to creation of plans and policies which deals with investment in all tasks. Hence company
can earn more profits.
Inventory control reporting – This report helps in providable the information related to
the EOQ which means optimum quantity of products kept by the company. Hence it can easily
reduce the ordering and carrying costs of the business. This report depicts the problem of
overstocking and under- stocking of the goods. Taj stores is small firm so hence they have to
reduce this problem so that they can survive in the market. Hence through this report they can
maintain goods in right quantity and it also reduces the under -stocking and overstocking
problem. Hence firm can earn more profits.
Performance reporting – This report helps in evaluating the performance of all
employees in a better manner. Thus managers can monitor the performance and can provide
suggestions to all staff members. As if employee is not performing well and do not give good
results then company motivates them and gives them extra benefits and gifts so that they can
perform well in the firm. Through this report manager cannot make flaws and errors while
evaluating the performance of all staff members (Chenhall, and Moers, 2015). This also helps the
manager to give suggestions so that employees can improve their performance. As a result all
staff members can give good outcomes and firm can earn more profits. Thus they can increase
the market share and can easily widens their operations on a larger scale.
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Job cost reporting - This report helps in analysing of different expenses and profits
related to various jobs (Henri, Boiral and Roy, 2016). This helps the manager in determining the
costs of different jobs and hence they can take corrective plans and policies to control and reduce
the costs. Manager can create future plans and strategies so that they can invest in those activities
which helps in reducing the costs and which can give maximum profits. They can also supervise
all employees to invest in profitable activities and tasks. This also helps the manager in reducing
the extra expenses related to all process and methods in various jobs. Hence they can invest this
money on all important activities. Thus company can earn more revenues and can expand their
operations in less time.
TASK 2
P.3 Calculate costs using different techniques of cost analysis to prepare an income statement of
marginal and absorption
Management accounting helps in reducing the costs of the business. There are different
tools through which organization can reduce the costs and increase the profits. Techniques used
by Taj company are -
Marginal costing – The extra expenses incurred in producing the items of all the
products is known as marginal costing. It can be calculated by calculating the difference
between fixed cost and variable costs . It do not take into consideration the fixed cost in the
business. Through this approach it is said that fixed costs are not distributed in all the activities
but they can be received in appropriate time so that company do not have pressure to calculate
the fixed costs. Main objective of this approach is that all units of product can be sold in the
market and the selling of all products can be same at all the levels. It is completed different from
all the other approaches used by the company .
Absorption costing – In this approach all the costs sold in a particular year can be sold
in next financial year. All the expenses such as direct labour,direct expenses and direct materials
are included in this approach (Cleary, 2015) . It shows the correct and rational amount of profits
of the company. There is a situation in which goods are not sold in this year thus they can be
transferred into next year. Hence they can be treated in next financial year (Hirsch, Nitzl, and
Schauß, 2015.). The fixed costs which is included in this approach are distributed in all items of
products.
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Here are mentioned the major differences between these types of costing used by Taj stores
company:
Comparison between Marginal Costing & Absorption Costing
Absorption costing Marginal costing
As per the absorption costing, the cost of Taj
enterprise can be investigated as the whole
amount is utilised in the time production.
According to this, marginal costing is one of
effective method which are valued due to
process of production.
Major advantage of this costing is it optimise
cost of each unit can be reduced with other
additional units.
Per unit contribution will bot be altered with
extra products units.
This is linked with organisation for costing and
planning for longer time period.
This is based on the short-term designing or
planning through high administration and
management.
Absorption methods is not effective preferred
for process of decision making.
Mainly organisation utilise this techniques for
creating more significant decision for the sited
company.
Reporting framework's external aspects forms
the sustainability of whole organisations and
their systems.
This is associated with system of internal
reporting for upcoming profitability and
growth of enterprise.
Computation of Net profit by using marginal costing
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
Less:
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Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
Calculation through
using absorption costing
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2 - 7800
Closing stock: 100*13 - 1300 -6500
Contribution 11000
Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
Total Profit / Loss 7500
Interpretation:
As per the above mentioned calculated report the cost which has been summed up by
using absorption costing methods is 7500 i.e. 300 less than Marginal costing techniques i.e.
7800. The reason behind these changes is absorption costing undertakes both fixed and variable
sales overheads where on the other side, marginal cost only use the variable costs despite of
using both. Hence, sum of marginal costing techniques is more appropriate and suitable for
company in terms of benefits than absorption costing (Whittington, 2016) . Marginal costing is
more preferred and effective methods that can be optimised by an organisation for achieving
their desired outcome.
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TASK 3
P.4. Advantages and disadvantages of planning tools for budgetary control
Budgetary control system are very necessary in the organization. There are different
planning tools which are used by the firm so that they can control the costs in an efficient and
effective manner and thus they can increase the profits. Every tool has its own merits and
limitations. Hence planning tools used for budgetary control used by Taj stores company are-
Master budget – It is the budget which helps in providing information related to
allocation of funds (HOSEINI and GHOLAMI, 2018). Funds are distributed to all different team
in the company. It also helps the company in determining the expenses as it also gives
information related to various extra costs. Through this firm can easily accomplish the long term
objectives. In this firm do not focuses on short term targets they only focuses on long term
objectives (Marelli, A., 2015). It takes a lot of time and costs as it is involved in planning of all
the expenses which is to be allocated. The advantages and disadvantages of master budget are -
Advantages – As each team have information related to funds which are to allocated on
different activities so hence they can perform their work efficiently and effectively. It also
prevents confusion and chaos in all departments as they have full data regarding allocation of
money on all tasks. Thus it helps in maintaining coordination and co-operation between all
sections of the departments.
Disadvantages – It takes huge costs and time while creating the budget. This budget is
not flexible so it cannot be changed according to time and changing conditions. Hence firm
cannot do proper planning of allocation of funds which are to be distributed to different teams
and thus they cannot distribute the money in different activities. This also takes huge costs of
company in making of budget so hence it leads to weakening of financial position of the firm.
Cash budget – This budget helps in providing the information related to the cash which
is available in the firm and the cash which is allocated in various activities. Thus company has
records and information related to the liquid assets through which it can make its financial
position stronger than other firms. Through this, firm can easily distribute the money to other
stakeholders of firm and thus company can manage the funds in efficient and effective manner.
Advantages and disadvantages of cash budget are -
Advantages – By creating the cash budget company can easily manage the cash in an
effective and efficient manner. They can have knowledge and information regarding the amount
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of money which is to be received from the debtors so hence firm can easily reduce the amount of
bad debts. This helps the company in running the business in smooth and successful manner.
Thus the firm can earn more profits and can increase the market share in minimum time.
Disadvantages – Company cannot create the future plans and policies if it do not have
knowledge regarding the previous year budget. Hence they cannot predict the amount of cash
which is needed in future and for other purposes. As a result the activities and tasks cannot run
properly (EBRAHIMI, and MOGHADASPOUR, 2015). Hence company cannot manage the
cash properly in the business.
Operating budget – Company creates the budget so that it can have knowledge about the
expenses and income of operating activities in a particular year (Otley, 2015). It determines the
income, costs of production and administration activities. Thus manager can make future plans
and policies of future years. Hence they can easily control the costs. This budget also consists of
the sales budget which helps in determining sales of a particular year.Manager can also
determine operating expenses such as costs of raw material which is variable costs and the fixed
costs of the items such as rent etc. Through this it can reduce the variable costs of business.
Advantages and disadvantages are -
Advantages – By creating this budget, company can control the irrelevant expenses in the
business. As company can determine the expenses in various operating activities so hence it can
easily reduce the unnecessary expenses in the business. Hence it can earn more profits and can
easily widens the operations on larger scale.
Disadvantages – By creating this budget, manager cannot determine the expenses and
income on other activities except operating tasks. So hence they cannot earn profits through
other tasks. Sometimes manager modify this budget so hence workers cannot understand the
changes in budget. Hence employees cannot perform efficiently as they do not have proper
information.
TASK 4
P.5 Comparison in methods of firms in adopting management accounting systems to solve
financial problems
There are different financial problems which can occur in the company. Financial
problems faced by Taj stores company are-
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Bad debts - Company has given huge amount of loan to debtors so hence they cannot
make payment to the firm. As a result there is creation of bad debts in the company. So firm
cannot invest this money on important activities. Thus it cannot run smoothly and successfully.
Changes in working capital – It is due to changes in assets and liabilities in the
company (Pavlatos, and Kostakis, 2015). For example if in a financial year there is reduction of
liabilities and increase in assets then firm can make more use of cash and hence as a result there
is reduction in cash flow of the business.
Decreasing sales – There is decreasing in sales as there are many bad debts in the
company. It is also due to increasing of variable expenses in the firm. As a result there is
reduction of sales in the firm which reduces the profits (Revellino and Mouritsen, 2015).
Comparison of 2 companies in solving financial problems are-
Taj Stores Unicorn grocery
 Company uses approaches which are
traditional. So hence it can solve
limited financial problems and it is
limited in approach.
 The company uses lean accounting
system to solve financial problems.
Through this they can evaluate the
mistakes which repeat in all tasks.
 SMART technique can be used in this
company. Hence the firm can solve the
problems in an effective manner.
 Governance technique can be used to
solve problems which reduces the
losses and can increase the profits of
business.
 They use the KPI so that they can solve
all financial problems. Through this it
can increase the profits and reduce
losses.
 Operational control devices can be used
so that they can solve all operational
tasks at each level.
There are various techniques through which financial problems can be solved. They are -
 KPI – This is the tool through which firm can easily achieve objectives. For this purpose
they have set SMART term. First is the smart which means firm has set goal that is to
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increase the sales by 25%. This is specific for the firm. Secondly it can be relevant for
firm which means it can be comparable with other years so that they can easily
accomplish them. Third is the attainable for all employees so hence objective is such
which is easily achievable by staff members. Fourth is the relevant goal which is
meaningful to all employees (Schaltegger and Burritt, 2017). . Lastly is time bound
which mean employees can achieve this in suitable time.
 Benchmarking – It means the standard which is set by company in all activities. For
example firm have set a standard that all employees perform all activities in such a
manner which help in reducing 10% expenses on all activities. Through this, it can solve
all issues of firm. All employees can perform well as particular standards are set for
them. Hence it results in improving the performance of all employees. Thus it directly
solves all financial problems related to operational activities. So it results improving the
financial performance of the company.
 Financial governance – In this method firm have to to follow the regulations so that it
can fulfil all needs of stakeholders. Firm have to follow rules of government so that all
activities can run in fair manner (Renz, and Herman, 2016). Hence all activities and tasks
runs in efficient and effective manner. It can maintain good and positive image in front of
all uses and in market. Thus it results in increasing the goodwill and status of company.
 Inventory control reporting – This report helps in maintaining optimum quantity of
goods. Manager can have full knowledge regarding the incentive so hence they can
reduce the problem of under stocking or over stocking of goods. Hence it reduces all
financial problems related to operational activities. Thus company can perform well in
the firm. Hence it results in increasing the satisfaction of all the customers. Thus firm
can earn more profits and can increase the market share.
CONCLUSION
As per the above report, it can be summarised that management accounting can be
defined as one of effective techniques and tools which is assisting enterprises in maintaining and
managing everyday operations of business. This projects has evaluated the need of information
management system within a company. This report also evaluate different costing, reporting and
accounting system and methods assisting a firm in effective functioning of their business.
Furthermore, this covers the financials measures and issues in order to control the problems and
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issues that emerge within organisation. There are major two costing system which can be used
for effective statement methods i.e. absorption and marginal costing which can help in achieving
the best outcome.
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REFERENCES
Books and Journals
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by small and medium‐sized enterprises: a field study of Canadian and Australian
practice. Accounting Perspectives. 15(1). pp.31-69.
AZIMI, Y. M., RAJABI, M. and MAHMOUD, D. Z., 2016. The Study of Productivity and Cost
Leadership and Differentiation Strategy Effect on Bankruptcy Risk.
Bobryshev, A. N. and et. al., 2015. The Concept of Management Accounting in Crisis
Conditions. Journal of Advanced Research in Law and Economics. 6(3 (13)). p.520.
Chenhall, R. H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, Organizations and
Society. 47. pp.1-13.
Cleary, P., 2015. An empirical investigation of the impact of management accounting on
structural capital and business performance. Journal of Intellectual Capital, 16(3),
pp.566-586.
EBRAHIMI, K. A. and MOGHADASPOUR, H., 2015. THE PRESENTATION OF THE
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within German municipal administrations. Financial Accountability &
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Performance Evaluation. 11(1). pp.14-47.
Otley, D., 2015. in Management Control. Critical Perspectives in Management Control. p.27.
Pavlatos, O. and Kostakis, H., 2015. Management accounting practices before and during
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Renz, D. O. and Herman, R. D. eds., 2016. The Jossey-Bass handbook of nonprofit leadership
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Revellino, S. and Mouritsen, J., 2015. Accounting as an engine: The performativity of calculative
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