Management Accounting Systems and Methods of Budget Control

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Management Accounting and different systems of management accounting:............................3
Importance of Integration of management accounting system within an organisation:..............4
Management accounting reporting:.............................................................................................5
TASK 2............................................................................................................................................7
Assessment of costs though most considerable techniques for the purpose of income
statement:.....................................................................................................................................7
TASK 3..........................................................................................................................................12
Advantages and disadvantages of different types of planning tools used for budgetary control:
....................................................................................................................................................12
TASK 4..........................................................................................................................................15
Comparison of business entities applying management accounting systems for responding
different financial problems:.....................................................................................................15
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Management's decision and steps decides the future path of a business organisation, for
effective decision-making management accounting is essential. It is a process through which
vital information’s are generated and obtained by managerial personnel’s for taking business and
trade decisions (Ayadi, 2017). For improve understanding of aspects of management accounting
Aon consulting group is selected which provides services of consultancy to its clients related to
hospitality, retail etc. The report's objective is to provide a systematic definition of management
accounting and prerequisite of management accounting systems, approaches of management
accounting reporting, applications of planning tools along with benefits and disadvantages in
context of client company Grange Construction Materials, UK's medium size construction
material manufacture. Company is manufacturer and suppliers of construction material. This
report also contains computation of costs with the help of techniques of costs analysis and
comparative analysis of organisation using management accounting systems for responding
problems.
TASK 1
Management Accounting and different systems of management accounting:
In business framework, management accounting is defined as combination of more than
one functions and activities which assist in developing a structure that gives detailed and
essential financial information for business decision-making. It is provide information that deals
with the source and the use of the funds needed for running any business, and other qualitative
details that are relevant for the same objective. There are one or more management accounting
systems that provide an evenness in organisation's different tasks to achieve organisation's aim
effectively. For this purpose, different management accounting systems like job costing, cost
accounting, price minimisation or optimisation system, inventory management system etc. are
discussed below:
Inventory management system: Inventory in a business enterprise directly affects its
gross and net profit as it act as a most considerable factors in computation of net income. Grange
Construction Materials being a manufacture a recycler of construction material, always tries to
maintain inventories costs to control and increase their profit margin. Company has different
processes for recycling and manufacturing of products thus it is required for company to track

and ensure availability of raw material and other aggregates to provide continuity in
manufacturing processes (Stead and Stead, 2014).
Cost accounting system: Different expenditures are determining factors in assessment of
profit. Specially manufacturing concern such as Grange Construction Materials always tries to
reduce its expense per unit to achieve profitability situation. System of cost accounting mainly
used by entities to do a detailed cost analysis to ensure profitability by projecting expenses
related to different activities.
Price-optimisation System: System of price-optimisation develop and create a base of
maintaining product or services price which provide feasibility in accomplishing the strategy of
business entity. It includes functions related to analysis of relationship of demand and price of
services and products with an objective to set a price at certain level to achieve highest demand
(Warren, Reeve and Duchac, 2013). Grange Construction Materials adopts price-optimisation
system for minimising price of construction materials lower than its competitors to gain
competitive benefits.
Job costing system: Accounting and management of products and services which are
fully different by nature or in other factors, is difficult task but adoption of system of job costing
can provide smoothness in recording and managing task related to such products. In case of
manufacturing companies like Grange Construction Materials having different variety of
products this system is helpful. In respective company, accountants and managers classifies
products and units which are entirely different from all other product as specific tasks and jobs,
and then assign cost to such particular jobs.
Importance of Integration of management accounting system within an organisation:
A systematic integration of above described systems is required to achieve smoothness in
organisation's operations. These different systems boost the performance of company by
providing important information’s. For instance, cost accounting systems and inventory
management system help management in conducting different process within organisation like
inventory management, preparation of cost sheet, assessment of process cost etc. Such
integration can provide value addition in terms of operating efficiency and effectiveness.
Origin, role and principles of management accounting:
No universal theory about origin of management accounting although origin year of
word “Management Accounting” is 1960s. Management accounting is also deemed as cost