Management Accounting: Systems, Techniques, and Benefits

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1: Explanation of various management accounting and their system.......................................3
P2 Different method that can be used in management accounting reports..................................5
TASK2.............................................................................................................................................7
P3 Preparation of income statements using managerial accounting techniques..........................7
TASK3...........................................................................................................................................12
P4 Benefits and drawbacks of budgetary control techniques....................................................12
TASK4...........................................................................................................................................17
P5 Effect of management accounting technique in solving financial problems........................17
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................21

INTRODUCTION
Management accounting is terms as an activity of maintaining record of intrinsic
information about an organisation so that it makes easy for management to make a better and
profitable decisions for further growth and success of an organisation (Biondi, Gulluscio and et.
al., 2017). Keeping such report helps stakeholders such as customers, employees, shareholders
etc. to identify actual financial performance of an organisation so that they can decide whether to
stay with company or not. The present assignment report is based on Cream Ltd. Which is
engaged in provide wide range of products such as ice-cream, waffles, doughnuts etc. It is SME
operated in United Kingdom. The report explains the concepts of management accounting and its
systems and reporting. Along with this, use of different costing methods for the purpose of
calculations of net profit are also summarised under this report. The report also covers planning
tools to control budget and use of MA in resolving financial issues of an organisation.
TASK 1
P1: Explanation of various management accounting and their system
Management accounting: It is a branch of accounting in which transactions are
collected, measured and recorded for the purpose of taking essential financial decision. In other
words, it is a process of formulating managerial accounting policies with the use of accounting
data. Organization use this technique for optimum utilization of their resources by taking
effective decision. This tool of accounting is used by internal department of Cream Ltd..
Managers of Cream Ltd. uses different management accounting systems for the purpose of
taking necessary decisions. Success of plans and policies of internal department is depending on
how effectively their managers use management accounting system of their department
(Bromwich and Scapens, 2016)
Differences between management and financial accounting:
Basis Management accounting Financial accounting
Meaning It facilitate management to
make accurate profitable
decision and plans for
operating business more
effectively.
It mainly focuses on preparing
final accounts of business so as
to know their actual financial
stability in the market.

Compulsion It requires only when business
operations are not running
effectively.
It is compulsorily required for
company to prepare financial
statements so as to retain their
loyal stakeholders.
Prime motive Providing useful information
on various business matters so
as to make suitable plans and
policies.
To provide financial
information to interested
stakeholders.
Time frame Reports are prepared only if
there is requirement of
business
Annually
Types of management accounting system:
Job costing system: It is essential part of managerial amounting. Under job costing
system managers allocate cost of producing specific task products. Cost of each activity are
analysis and recorded in statements. These types of system is useful in those industries which
produced limited and specific products on demand of their customers. For example, producing
wide range of products such as ice-creams, waffles etc. by Cream Ltd., using such system helps
managers in allocating cost to different product according to the growth in their sales and
revenue(Eldenburg, Krishnan and Krishnan, 2017)
Price optimizing system: This system is applied by organizations to decide pricing rate
of their products. Managers decides price on the basis of analyzing entire market conditions.
They set price which gave satisfaction to customers and also provides financial gain to the
organization . Managers uses various strategies to set their price. Business organizations various
strategies of price like skimming, penetration and etc. They decide their price of product on the
basis of industrial life cycle product. In the context of Cream Ltd., identifying perception of
customers towards pricing policy of company, it makes easy for manager to make relevant
changes in their existing pricing policy which increases customer satisfaction level as revenue.
Cost accounting system: In management accounting tools cost accounting is also play
important role. Business organizations uses this system to analysis cost incurred in
manufacturing of products and then formulated polices which help in minimizing cost. This