Management Accounting Systems and Techniques

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
P1 Management accounting and different types of management accounting systems...............3
P2 Methods of management accounting reporting......................................................................4
M1 Benefits of management accounting systems and their application.....................................5
D1 Integration of management accounting systems and reports in organisational processes....6
LO 2.................................................................................................................................................6
P3 Techniques of cost analysis using marginal and absorption costs.........................................6
M2 Application of management accounting techniques...........................................................15
D2 Application and interpretation of financial reports.............................................................15
TASK 3..........................................................................................................................................15
P4 : Advantages and disadvantages of different types of planning tools .................................15
M3 : Analysis of different planning tool...................................................................................16
TASK 4..........................................................................................................................................17
P5 : Comparison of how organisations are adopting management accounting systems to
respond to financial problems...................................................................................................17
M4 : Analysis of management accounting and financial problems..........................................18
D3 : Evaluation of how planning tools can solve accounting issues........................................18
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INTRODUCTION
Management accounting is related to gathering, analysing and reporting financial
information about the operations and finances of a business to help the managers in their
decision-making process. These reports are prepared to be used internally by the managers and
not external stakeholders. Management accounting can help in managing and controlling the
expenses so that profitability of organisation increases. In this report various management
accounting systems, principles and techniques will be discussed. Further how financial problems
can be solved using management accounting will be discussed in relation to Airdri Ltd. which is
located in Technology House, UK and deals in manufacture of hand dryer which are recognised
for their reliability and low energy consumption. Planning tools for budgetary control will also
be discussed in this report.
LO 1
P1 Management accounting and different types of management accounting systems
According to the Institute of Management Accounts (IMA) : “Management accounting
involves planning, decision-making and providing financial reports to assist management in the
formulation and effective implementation of an organisation's strategy”.
The key functions of management accounting are discussed below : Provide data : It helps in gathering information related to all the functions of a business
which can help managers in planning, organising, controlling and decision-making
(Yeshmin and Hossan2011). Analyses and interprets data : The data is analysed and interpreted so that reports and
statements can be made to help managers in important decision making. Serves as a means of communication : Management accounting is responsible for
communicating the information gathered and analysed to the various departments so that
their activities can be coordinated and integrated to reach common goals.
 Facilitates accounts control : The accounts of the business can be managed to control
unnecessary expenses of the business (Agrawal, 2018).
Some management accounting systems are discussed below :
 Financial accounting system : The purpose of this system is to maintain financial
accounts of a business by collecting financial records i.e. any transaction which debits or

credits the account balance so that financial statements can be made. These financial
statements needs to be audited annually which helps in determining the position of a
business. The income statements are made so that profits and losses can be evaluated and
methods of controlling and managing losses can be formulated. The financial accounting
system helps in determining the financial position of business in market and the assets it
has along with its liabilities which helps investors in gaining a complete view about
company.
 Cost accounting system : It is a framework used in businesses to estimate the accurate
cost of their products so that profits can be analysed, inventory can be managed and costs
can be controlled. This help the companies in controlling costs at various stages of
production so that the wastages can be managed and costs can be reduced (Baiman,
2014). This system helps in analysing the cost of company for the analysis of
profitability, inventory valuation and cost control. It is important to estimate the correct
cost associated with production of products and services so that total profits can be
analysed.
 Management accounting system : This system helps the organisation in measuring and
evaluating the processes so that accurate and timely financial and statistical information
can be given to mangers to help them in decision making. The reports and statements
prepared based on the financial activities of an organisation can help in taking monetary
decisions and managing the expenses of business. This system determines the internal
systems that are used by company in order to measure and evaluate its processes for
managing the organisation. Also this system help in generating appropriate financial
statements so that stakeholders can analyse their interests associated with company.
 Tax accounting system : This system focuses on managing taxes of the company by
following rules and regulations governed by the Internal Revenue Code to prepare their
tax returns. This system helps in calculating accurate amount of tax that is due to the
government so that its intervention can be prevented in the company activities. Also it is
important to follow the tax regulations while preparing tax returns so that deductions and
other rebates can be gained which help in increasing the profits of business and also the
correct amount of due tax can be calculated.