Management Accounting: Types, Reporting, and Budgetary Control

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
P1 Explicate management accounting and their types...........................................................1
P2 Explicate methods for management accounting reporting................................................4
LO2..................................................................................................................................................6
P3 Calculation of cost for preparation of income statement by utilisation of absorption as well
as marginal costs.....................................................................................................................6
LO3................................................................................................................................................10
P4 Explicate merits and demerits of various kinds of planning tools within budgetary control.
..............................................................................................................................................10
LO4................................................................................................................................................14
P5 Comparison of ways in which organisations opt for management accounting systems with
respect to financial problems................................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is defined as process of identification , measurement, analysis,
interpretation as well as communication of information to managers for pursuit of goals of
organisation (Aldehayyat and Maan, 2013). This aids management to formulate decisions as
well as inform them about business operation metrics. It is liable for handling of margin analysis
for assessment of profits and also involves calculation of contribution margin for identification
of unit volume at which business gross sales becomes identical to total expenditure. To
understand concept of management accounting Stitchland Ltd is taken into consideration those
deals within manufacturing of clothes but there finances are being handled out by Bright Star.
This report will contain details about management accounting along with diverse kinds of
systems. Apart from this, diverse methods of management accounting reporting have been
explicated and cost analysis with respect to absorption & marginal costs have been calculated.
Furthermore, various types of planning tools have been discussed and comparison has been made
for adapting to management accounting systems for responding to financial problems.
LO1.
P1 Explicate management accounting and their types.
The application of techniques, professional knowledge along with concepts within
preparation of accounting information in such a way that it assists management to formulate
policies and plans for managing operations of organisations as well as development of decisions
is known as management accounting (Anandarajan, Anandarajan and Srinivasan, 2012). This
will assist Stitchland Ltd to analyse performance of firm by speculation of strategies, making
comparisons, forecasting, budgeting and various others. Basically, it denotes presentation of
information associated with accounting for development of policies by adopting management as
well as aids within everyday operations. Stitchland Ltd can utilise these systems for furnishing
their operations with respect to manufacturing.
The systems that involves within internal systems and are being utilised by firms for
measuring as well as evaluating their performance is known as management accounting
system. Stitchland Ltd by making use of this can reach out their all the deparments and make
sure that operations are being carried out in an affirmative manner (Christ and Burritt, 2013).
Objective of this types of systems is to furnish suitable information to managers by which they
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can formulate their decisions within efficacious way. Therefore, Stitchland Ltd must utilise
accounting systems as this tool includes both financial as well as non-financial information
which assists in management of business.
There is enhanced significance of combination of various accounting systems in a
firm. Stitchland Ltd can make use accounting systems as per their requirements. Like, they can
make use of cost accounting system for management of inventory in an efficacious way. In
addition to this by opting for price optimisation systems Stitchland Ltd will be able to render
framework for identification of prices (Cohen and Karatzimas, 2013). It denotes on the basis of
needs of organisation these systems can be used as each have their own importance as well as
usage.
Origin and principles of management accounting
According to the analysis, management accounting was given by England at the time of
industrial revolution. It includes execution of different activities by which financial problems can
be improvised. The major principles of management accounting involves influence and building
up of trust in context of orientation of organisation.
Divergence among Management & Financial Accounting:
Basis Management Accounting Financial Accounting
Aim They aims to assists management to
develop business decisions.
It aims at furnishing rendering
information to outer parties. They can
be customers, investors, creditors, etc.
as it will assist them within
formulation of decisions (Cooper,
2017) .
Governing
principles
There do not exists standard basis
for preparation of management
accounting statements, they are
formulated with respect to needs of
management team.
The statements are formulated on the
basis of GAAP (Generally Accepted
Accounting Principles). They
comprises of less or more features.
Reporting
beneficiaries
Reports that are build under this are
significant for CEO, promoters,
Financial accounting is developed for
external users, they can be suppliers,
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