Management Accounting and its Significance in Decision Making

MANAGEMENT
ACCOUNTING

INTRODUCTION...........................................................................................................................3
P1. Explaining MA and significance of its systems....................................................................3
P2. Describing different techniques that are been used for reporting under MA........................4
M1. Evaluating advantages and application of MA systems.......................................................5
P3. Computing cost and preparing income statement by applying different MA tools..............5
P4. Explaining benefits and limitations of different planning tools............................................5
M3. Analyzing uses and the application of different budgetary control tools.............................8
P5. Comparing and contrasting the ways in which an entity adapt MA systems in responding
towards the financial problem.....................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Management accounting is concerned with the study of providing financial information
and resources to the business managers in decision making. Management accounting can be used
only by the internal members of the company as it focuses on improving the efficiency and
effectiveness of the employees of the Creams Ltd so that they can achieve the desired goals and
objectives. The major objective of management accounting is to use statistical information so
that the managers can take better decision in regard to success of the company. Creams Limited
is a confectionery company that manufactures and sells ice creams, doughnuts and waffles. The
current study will focus on the use of management accounting in the working of Creams Limited
and also various tools and techniques used by management accounting to ensure smooth working
of a company.
P1. Explaining MA and significance of its systems
MA is defined as the practice of facilitating financial information and the resources to
managers in the process of decision making. It is only been used by an internal team of the
company and it is the only things that differs MA from that of financial accounting. In this
practice, financial information and the reports like invoice, final report etc is been shared by the
finance department to management team of an entity. The main purpose of management
accenting is making use of statistical information and taking better or accurate decisions,
controlling an entity, development and the activities of the business. On the other hand financial
accounting is referred as presentation and recording of an information for the benefit of different
stakeholders of an enterprise. However, MA is seen as the presentation of the financial data and
the business activities for an internal management of the firm. There are various systems of MA
that plays a crucial role in managing the activities of an enterprise in an effective way that are as
follows-
Cost accounting system- It is the system that is used by anCreams Ltd in estimating cost
of the products for making profitability analysis, valuation of an inventory and controlling cost.
This system is critical for the company as it helps in estimating product cost for analyzing that
whether the process is generating profits or not (Ghasemiand et.al., 2016). It is very essential in

understanding cash flow along with assessing the profitable and non-profitable products for an
entity. It helps the managers in keeping a check on the raw materials at each and every stage of
the production. It enables the management of company in lowering down the cost incurred in
business operations by way of identifying or controlling the relevant items. Moreover, this
system provides detailed information with regards cost incurred by the company and helps in
keeping better control on the cost.
Job costing system- It means the system that includes process of accumulating an
information regarding costs attached with particular production or the service job. It plays an
essential role in the Creams Ltd as it submit an information in relation to cost for the customers
under the contract where cost are been reimbursed (Amran, 2020). This information is useful in
determining accuracy of an estimating system of the company that helps in quoting price which
allows for gaining a reasonable profit. The information provided by this system could also be
used for assigning inventory cost in manufacturing the goods. This system presents information
relating to the cost incurred in each and every production unit or job. It enables managers in the
reviving the cost setting up best prices so that profits can be gained.
Inventory management system- It refers to combination of the processes, technology and
the procedures which oversee maintenance and monitoring of the stock. This system helps in
managing and maintaining optimum level of stock within the business. It helps in keeping the
business more and more organized and also assists the managers in tracking the level or flow of
inventory from business premises to the customer in an entire supply chain. It prevents an
inventory in being overflowed by just keeping sufficient inventory in stock. This helps in
minimizing amount of an unused inventory along with it improves relationship with the vendors.
It represents the information relating to stock level within the premises of an entity and also
helps in making optimum use of inventory so that less cost and wastage is resulted.
Price optimization system- This MA system involves using of the mathematical analysis
in order to determine the way in which customers would respond to different prices for their
products and the services by way of different channels (Wen and Mao, 2019). This system plays
a significant role in determining prices that company would best meet its goals like maximization
of profits. It helps the managers in setting up the suitable prices that is affordable to customers as
well as profitable for anCreams Ltd. It is the system that facilitates appropriate information in