Management Accounting and Various Management Accounting Systems

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
LO 1.................................................................................................................................................3
P1 Management Accounting and various management accounting systems..............................3
P2 Methods used for managerial accounting reporting...............................................................6
P3 Marginal and absorption costing............................................................................................8
M2..............................................................................................................................................10
LO 3...............................................................................................................................................10
Use of planning tool in context of management accounting.....................................................10
M 3) Use of different planning tools.........................................................................................13
LO 4...............................................................................................................................................13
The ways in which companies use management accounting methods......................................13
M 4) How responding to financial problems lead success of business.....................................15
CONCLUSION..............................................................................................................................16
REFERENCES................................................................................................................................1
APPENDIX......................................................................................................................................3

INTRODUCTION
Management Accounting is an extremely important concept in any organisation that is
operating and assists in the overall decision-making as well as the planning in the organisation.
Management Accounting helps in simplifying the process through which the company conducts
tis daily operations and take decisions related to the financing of the company. In the present
report, the concept of management accounting along with financial accounting and various
management accounting systems have been discussed in this report. This report will also analyse
the concept of marginal and absorption costing method and the various advantages as well as
disadvantages of the budgetary control tools will be identified and discussed in this report.
Lastly, this report will also identify the manner in which different organisations are adapting to
the management accounting systems and a comparison will be made.
MAIN BODY
LO 1
P1 Management Accounting and various management accounting systems
Management Accounting can be defined as that process or technique which assists the
managers and accountants of a company in determining what is the operational cost that is
incurred in carrying out the entire business activities (Honggowati and et.al., 2017). IMA defines
management accounting as a profession through which the management of the company gets
assistance in the decision making process as well as in planning the resource requirement for the
company. The major purposes behind incorporating management accounting in Corus, a
company under Tata Steel Europe involve: Planning: Management Accounting helps in analysing the current information that is
available and predicts the future trends that assist in planning for the future. They plan for
the future needs and formulate budgets and strategies that would assist in increasing the
profitability of the company. Decision-Making: The decision making of the managers regarding various management
accounting tools is based on the data that has been collected in the management
accounting analysis. This assists the managers in taking appropriate decisions that
simplify the decision making process.

 Controlling: The plans that have been implemented in the company after proper
evaluation and data analysis are regularly monitored where the mangers evaluate what is
going right and what is going wrong, whether the budgets formulated are being achieved
and what are the reasons behind deviations if there are any (Mills, 2018).
However, Financial Accounting and Management Accounting are two different areas of
accounting that are similar but are differentiated by a fine line. Financial Accounting is related
to preparing financial reports that are usually prepared for presenting to external parties or
stakeholders that are interested in the business activities and the profits or losses earned by the
business. There are certain points based on which a distinction can be made between
management accounting norms and financial accounting norms:
MANAGEMENT ACCOUNTING FINANCIAL ACCOUNTING
This is done usually for the internal
management and for facilitating the operation
of organisation.
This is done for external parties so that they
can be interested in the organisational function
and invest in it.
It is not a statutory requirement to prepare
management accounting budgets (Mack and
Goretzki, 2017).
It is a statutory requirement to prepare financial
accounting statements.
Management accounting usually relates to a
particular products for particular segment of
the entire organisations.
Financial accounts are prepared for the entire
organisation and incorporate al the activities.
These are prepared as per the convenience of
the internal management of the company.
These are prepared between a fixed time
periods which is usually one year as
determined by the statutory requirements.
Management accounting is usually related to
increasing the efficiency of the operational
activities carried out in the company.
Financial Accounting is related to the
increasing the profitability and presentability of
the entire business so that investments can be
invited.
There are various methods and tools incorporated under management accounting systems
and these can be categorised in a following manner:
Inventory Management System: The inventory management system can be defined as
the one which keeps a check on the input and output of the inventory in the organisation and