Management Accounting and its Essential Requirements

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Explain management accounting and its essential requirements............................................1
P2. Explain different methods used for management accounting reporting................................3
TASK 2............................................................................................................................................4
P3 Calculate costs using appropriate techniques of cost analysis...............................................4
TASK 3..........................................................................................................................................11
P4 Planning tools used for budgetary control with advantages and disadvantage....................11
TASK 4..........................................................................................................................................14
P5 Management accounting system...........................................................................................14
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Management accounting is the provision of financial and non financial decision making
information for managers (Lambovska, Rajnoha and Dobrovič, 2019). It is an accounting
practice different from financial accounting as it includes both monetary as well as non monetary
factors into consideration. Reports produced out of different management accounting systems
provides information whenever and wherever required. This information is used by management
to determine variances from the planned targets and to take necessary corrective steps.
This report has been made on UCK Furnitures that manufactures desk. The report is
categorized into three parts. First part covers information about management accounting systems
and their integration within organisational processes. Second part covers application of a range
of management accounting techniques using given sets of data. The last part covers the use of
planning tools by management accounting to respond to financial problems in organisation.
TASK 1
P1 Explain management accounting and its essential requirements
Management accounting is the practice of identifying, measuring, analysing, interpreting
and communicating financial information to managers for the pursuit of an organisation's goals.
It is also called managerial accounting (Henttu-Aho, 2018). Within UCK Furnitures, It is aimed
to use internally by managers only to make well informed business decisions while financial
accounting is aimed at providing financial information to both internal and external stakeholders.
Basis for comparison Management Accounting Financial Accounting
Purpose and user It is used for internal decision
making purpose only by
management
It is used by both internal and
external stakeholders to take
their relevant decisions
Regulation It is not under regulation of
any law or statute.
It is governed by standard
laws, rules and regulations by
different authorities.
Audit It is not subjected to any kind
of audit or external
investigation.
It is subjected to multiple
audits such as tax audits,
corporate audit, etc.
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Contents It includes both financial and
non-financial information.
It is only concerned with
financial information.
UCK Furnitures can also adopt management accounting techniques to know if they
require any strategic changes to suit the current market situation such as changes in pricing,
location, marketing, etc. It can help them find shortcomings and plan better for the better future
of the company. The study of management accounting are interlinked with each segment of
business and department of organisation. A few of the most common management accounting
systems are as below:
 Cost accounting system – It is an accounting system designed for manufacturers that
tracks the flow of inventory continually through the various stages of production.
Material flow cost accounting is a powerful tool when it comes to the identification of
resource inefficiencies in production systems. This accounting system is beneficial for
companies to address those areas in which company's expenses are higher. The main
purpose is to identify unwanted expenses and cut them so that revenues can increase.
In UCK Furnitures, essential requirement of this accounting system is to provide
information about costs of different activities company is undertaking. This can help managers
determine whether or not they are cost economical company. It will help them determine
variances in different activities. They can decide on cost cutting on high cost consuming
activities or might feel need to pump more resources in some activities which can earn them
more profit by a little effort by the management.
 Inventory management system – It is a discipline primarily about specifying the shape
and placement of stored goods. Information about raw material procured, finished goods,
remaining stock is recorded on regular basis (Oyebode, 2018). Various approaches such
as FIFO, LIFO, etc. to record inventories.
Essential requirement of the mentioned ssystem in UCK Furniture is that it help
managers to know the information related to their inventory turnover, daily consumption of raw
material, finished goods and the goods left in stock. Since, the company deals in perishable
products, it is essential to follow First in First Out(FIFO) method so that wastage is minimised.
Inventories should be ordered with Just-in-time approach so that storage cost can be minimised
and freshness of the product is guaranteed.
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