Management Accounting Systems and Methodologies

Management
Accounting

Table of Contents
TASK 1..........................................................................................................................................................3
P1. Management accounting systems.....................................................................................................3
P2 Different methodologies used in management accounting reporting................................................4
TASK 2..........................................................................................................................................................4
P3 Calculations of costs using appropriate techniques to prepare income statement............................4
TASK 3........................................................................................................................................................12
P4 Advantage and disadvantage of different types of planning tools used for budgetary control........12
TASK 4........................................................................................................................................................13
P5 Compare how organisations are adapting management accounting systems to respond to financial
problems...............................................................................................................................................13
CONCLUSION.............................................................................................................................................14
REFERENCES..............................................................................................................................................15

INTRODUCTION
Management accounting is the set of Management and accounts that help to know about business and it's
transactions. It is used to maintain the proper accounts with organization. The main purpose of
Management accounting is to give true and fair vies for increasing the profits in a firm (Bloomfield,
2015). To understand the importance of Management accounting Mazars has been taken that provides
consultants services to different companies and help to make correct business decision. Airdri Ltd is one
of its client which get suggestions to run a business and the report is based on this organization. This
report will cover different topics like management accounting system, reports and planning tools that can
be used to control the budget in a company. Moreover, report will discusses about financial problem
which can be occur in an organization while using system.
TASK 1
P1. Management accounting systems
Management accounting system is the systematics process of identifying and making business decision
within organization. It is helpful for all company by maintaining the proper records and transaction in
entire company. Management accounting comprehends various methods and concepts which are
necessary for set up a business with controlling the business activities. It help to evaluate the data and
interpretation in order to make profitable company. Moreover, it gives financial and non-financial
information that help to take right action. Such as Airdri is the hand drier manufacturer company which is
using different types of management accounting system for making right business decision
(Abdelmoneim Mohamed and Jones, 2014). The different types of management accounting system
are follows by Airdri company that are:
Inventory management system: This is a system which is used to keeping records of inventory like raw
material, finished goods or unfinished goods. This is mainly used in manufacturing company to maintain
the records of stock which are available in a organization. It helps in stock forecasting, automatic
reordering, , materials tracking inventory alerts and many more for keeping records within organization. It
is essential required in Airdri as it help to keep and maintain the records of inventory
(Bagautdinova,Kundakchyan and Malakhov,2013). The manager of Airdri track the inventory and
make further decision for placing next order. It considers various method to use the stock like:
LIFO: It means last in first out which can be used by company to sell the products.
FIFO: It mean sell first in first out that can be used by company to sell the first ordered products.
Average: It means combination of price and units produced to sell the products within organization.
Job costing system: This means a specific contract, assignment or work which is needed to complete as
per customer’s requirement. This is the form of particular order costing which help to ascertain
the cost of individuals or jobs. It is required to maintain the records of specific jobs or contracts.
The manager of Airdri Ltd are using this system to make estimation of individual unit cost or
assignment in order to deliver hand driers. The essential requirement of such system in Airdri is
that it contains specialized rules which are applicable to all types of jobs and helps in estimation
of costs for ascertaining the jobs (Collis and Hussey, 2017).

Cost accounting system: This system is used to estimate the cost of products and services for the
valuation of stock, analyzing the cost and maintaining the profitability. It is very important for
organization to maintain the cost of organization as well as products. It is essential required for
Airdri and other organization to manage the cost in order to increase the profitability. The
manager of Airdri uses such system to is to estimate as well as record the costs like variable cost
and fixed cost (Demski, 2013).
P2 Different methodologies used in management accounting reporting
Management accounting reports means reports which are prepared by the manager of the organization in
order to make business decision. The main purpose of this reports is to give the inside
information which is received through financial accounting. In Airdri, managers prepares
different types of reports which is described below:
Inventory Management Report: Inventory means goods which is manufactured by organization
in order to sale the products and services. the main aim of preparing this report is to generate more
income with the help to preparing inventory management reports. In Airdri, managers prepare these
reports by containing all information which relates to maintenance and recording of inventory. Managers
also maintains proper records of inventory by using advanced technology. Ths report help to maintain the
proper records of all stock such as raw material finished goods etc and prepare inventory reports
(Kanellou and Spathis, 2013).
Cost accounting report: This means a report that can be used to collect, classify, analysis and
reporting the data for ascertaining the cost of products and services. It helps to calculate the cost
efficiently and manage the cost within industry. In Airdri, managers prepares cost accounting reports for
allocating the cost in to various cost centers and maintaining the cost trend within company. This report is
useful to calculate the cost of products and help to make further business transactions (Maher, M. W.,
Stickney and Weil, 2012).
Performance Report: This report is prepared by managers to analysis the performance of
company as well as employees who help to accomplish the goals. It is mainly used for evaluating the
efficiency of industry and improve the performance that help to make profitable organization. In Airdri,
managers build such type of report that help to maintain the performance of activities and make
improvements as per requirement. Moreover, this report helps to control the cost and managing the
workforce in order to increase the productivity (Malinić and Todorović, 2012).
TASK 2
P3 Calculations of costs using appropriate techniques to prepare income statement
Marginal Costing: This is a costing method which can be used to know the profits of a organization. It
involves a systematic classification of expenses and cost a fixed and variable contribution per
unit.
Absorption Costing: This is another method that defines profits of the organization after analyzing the
cost. In this method, all overheads are relates with production or unit cost of products. Herein, no
classification of expenses is needed in fixed and variable cost (Bargate, 2012).