Management Accounting System and Techniques

Assignment
Management Accounting
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Table of content
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
LO1: Explanation of the management accounting system..............................................................3
P1: Essential requirements of the different types of management accounting system....................3
P2: Methods of management accounting system.............................................................................4
Task 2...............................................................................................................................................5
LO2: Application of the Management accounting techniques........................................................5
P3: Preparation of the income statement by using the marginal and absorption costs....................5
Task 3...............................................................................................................................................8
LO3: Use of different planning tools in the management accounting system.................................8
P4: Explanation of the advantages and disadvantages of using the different types of planning
tools used for budgetary control......................................................................................................8
LO4: The process that should be followed by organisations to use the management accounting
system to respond the financial problems........................................................................................9
P5: The process that should be followed by the organisation to adapt management accounting
system to resolve the financial problems.........................................................................................9
Conclusion.....................................................................................................................................10
Bibliography..................................................................................................................................11
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Introduction
Accountability is a vital part of the business organisations. Organisations do different business
activities to survive in the industry. Therefore, organisations have to invest a lot of money to do
the business activities in an efficient manner. Organisations also have to adopt an accountability
process to calculate the expenses made in the business activities and keep the record of expenses
that will be used by the auditor to prepare the financial statement of the company (Fullerton et al.
2014, p. 420). Organisations have to calculate the cost of the business activities in an efficient
manner to minimize the cost of the organisations and maximize the profit of the organisation.
Organisation basically does their business activities for achieving different objectives but wealth
and profit maximization. Organisations can easily achieve the profit maximization objectives by
using the management accounting. Organisations prepare the budget for the business activities
by using past experiences and techniques of the management accounting. The preparation of
budgets provide organisations a detail information about the cost and income of a particular
business activity in the organisation. The following study will discuss about the application of
management accounting in the organisation to prepare such budgets for the business activities in
the organisations and the role of management accounting behind the success of the organisations.
Task 1
LO1: Explanation of the management accounting system
P1: Essential requirements of the different types of management accounting
system
Management accounting system played a vital role in the financial management department of
the organisations. Management accounting is a process by which organisations prepare the
sources of the capital to invest in the business activity, analyze the cost areas of the business
activity in which organisations have to invest the resources properly and communicate different
ideas that help the decision makers of the organisation to makes some effective decisions
towards the different aspects business activities (Otley and Emmanuel, 2013, p. 225).
Management accounting system is a combination of accounting, finance and management
therefore, this system provide relevant information associated with such activities in the
organisation. The skills and techniques of the management accountant not only keep the account
of the different business activities but also provide advice to the managers of about the
implication of different financial measures in the activities, take some major decisions in the
activity, formulation of different business strategies in the organisation to monitoring the risk and
maintain a sustainable success of the organisations. Organisations have to understand the scope
of the management accounting system to understand the requirements of this system in the
organization (Cooper et al. 2017, p. 455).
A) Management accounting system provide some relevant information about the status of
national and global economy that help the organisation not only to prepare some effective
financial strategy to finance the activities but also help to prepare the marketing and resource
management strategies to run the business activities of organisation successfully.
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B) Management accounting system also help the organisation to manage the performance of the
business activities by providing some relevant information associated with the performance of
the business activities. Management accounting measure the performance of the activities based
on the financial performance therefore, organisation can get a clear vision about the financial
performance of different aspects of the business activities in details (Ax, and Greve, 2017, p.65).
C) As management accounting provides different information about the national and global
economy therefore, the organisation can get a clear view about the risk associated with such
business activities. Management accounting also provide some tools and techniques to manage
such risk associated with the business activities.
P2: Methods of management accounting system
The all above scope of the management accounting system help the organisation to understand
the importance of the management accounting in the organisation. The study also provides a
brief information about the requirements of the management accounting to the organisation. The
importances of the management accounting system in the organisations are as follows:
A) Management accounting system provides clear information about the different sources of
capital that can be used by the organisation to meet the requirements of capital for doing the
business activities (Wagenhofer, 2016, p.115). Management accounting also help the
organisation by preparing different financial statements that will be used by the organisation to
attract the investors for the different capital market. Management accounting also provide some
measures to the organisation that can be used to satisfy the investors and attract more investors to
increase the capital of the organisations. Continuous flow of capital in the organisation help to do
the business activities without any interruptions for the supply of raw materials, power and other
essential resources in the business activities
B) Management accounting also help the organisation by providing relevant information about
the different aspects of cost associated with the business activities. Based on such information
management accounting system develop some budget for the business activities of the
organization (Van der Stede, 2016 p.101). Organisation gets a clear idea about the cost of the
activity and the amount of revenue generated from the activity. Management accountant also
provide some measures to minimize the cost of the activities and maximize the revenues
generated from the business activities. The minimization of cost and the maximization of
revenues help the organisation to maximize the profit and wealth of the company.
C) Management accounting analyzes the different aspects of cost associated with the business
activities in details and tries to get some vital information about the performance of the activities.
While the performance of the business activities are not well at this situation management
accounting try to identify the problems in the system of the activities for which the performance
of the activity suffering. Management accounting also try to create some solutions to do the
business activities in an efficient manner. Management accountant have to communicate with the
organisations for providing all such relevant information associated with business activities and
provide some effective measures to apply the solutions in the activity to solve the problems.
D) Management accounting also analyze the different aspects associated with the global and
national environment for the organisation. The detail analysis of the information associated with
the environment provides a brief knowledge about the changes in the economy, politically,
socially and technologically (Northcott, 2014, p.114). Such analyses help the organisation to
avoid the risk associated with the environmental factors. Management accounting is also analysis
the development of technological environment to get the information about the new cost
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