Management Accounting and its Types

MANAGEMENT
ACCOUNTING

INTRODUCTION
The MA is a systematic process of managing the qualitative and quantitative data in form
of reports (Marr and Gray, 2012). The main purpose of this accounting system is to helping
companies in taking crucial decisions and making effective plans by providing a suitable
framework. Eventually, it is not essential for the organisations in compare to financial
accounting system. To understand about MA, a civil engineering company “O'Keefe
construction limited.” is selected. The organisation is located in London, UK and provides the
civil engineering services to their clients. Along with in the project report, understanding of
MAS and MA techniques for producing the financial reports are included. As well as pros and
cons of planning tools and way sort out monetary issues by help of management accounting
systems is also mentioned.
ACTIVITY 1
PART (A)
Management accounting and its types.
This is an accounting system which is aligned with the preparation of reports including
qualitative and qualitative data. These prepared reports are being used by managers in process of
corrective steps taken about allocating resources (Prencipe, Bar-Yosef and Dekker, 2014). One
of important thing that makes this accounting different from the other accounting is that it does
not includes any particular laws and accounting concepts. Like in respective company they apply
various types of MAS and some of these are demonstrated below such as:
 Price optimisation system- It is associated to providing a suitable framework for the
purpose of setting the price of products and services. Basically, this system is needed to
companies to satisfy the customers by selling the products and services at an effective
price. Overall, it is needed for allocating prices of products as per the cost and
considering a suitable amount of profit. Herein, the aspect of above organisation they are
applying this accounting system with an objective to set the estimated price of their
construction projects. Due to this they are able to communicate about total price of their
projects with their customers.
 Inventory management system- It is associated with the process of better management
about inventories by tracing quantity of raw material and prepared products(Proctor,

2012). Apart from it, this is beneficial in managing an effective balance between the need
and offering of stock. So the inventory management system's essential requirement is that
it is useful in taking decision about purchasing of materials and it is done as per given
information by this accounting system. For example, in above respective company, they
are using this accounting system for managing resources like concrete, cement, iron etc.
of their different construction projects.
 Cost accounting system-It is related to managing and reducing the cost of various kind of
activities. Without this, it can be tough to business entities to get complete information
for cost. Like in respective company it is beneficial for them because on basis of it they
estimate the overall cost of their construction project. As well as it helps them in
controlling the cost of their projects so that they can take benefit from the construction
project.
 Job costing system- This is associated to assigning cost of job to various types activities
in an effective manner. It is suitable for manufacturing and construction industries.
Along with this system is required to the managing job cost of various activities. This
accounting system consists three kind of information such as:
Direct material- It enables to trace the cost of material during completing any task or
activity (Brock, Hinings and Powell, 2014).
Direct labour- As well as this tracks the cost of labour that occurs in a particular job.
Overhead- Apart from it, this keeps record of different kind of overheads.
In above respective company O'Keefe construction limited which is operated in construction
projects and it is beneficial for them in assigning the cost of job of various kind of activities of
construction project.
Reports of the management accounting.
Under the MA reports, information regards to financial and non financial aspects is
included that is useful for decision making process. Organisations prepare various kind of reports
for the purpose of making competitive plans and strategies as per the information provided by
these reports. Such as in above company, they produce below mentioned reports that are as
follows:
 Inventory management reports- These are kind of reports that contains information about
the available inventories in the warehouses (Ruch and Taylor, 2015). As per this report

organisations, take decisions to purchase of raw material. These reports useful for
manufacturing and construction industries. Like in above company, they produce this
report for the purpose of manage their raw material of construction. Along with on the
basis of it, they purchase new material. Eventually, without this report it will be tough to
above mentioned company because they will not be able to manage requirement and
supply of raw material. In result it may occur as a high cost of construction project.
 Cost accounting reports- These are related to providing information about cost of
different types of activities of organisation. Basically, a complete cost accounting report
consists information like cost centre, distribution of fund, summary of cost and cost
reconciliation etc. It is so because necessary information derives from this accounting
system. For example, in the above company they produce this report to get complete
information about cost of their various construction projects. It consists detailed brief of
allocation of cost in different activities, total incurred cost etc. Apart from it, this report is
also beneficial in analysing the actual profit by comparing the actual cost by standard
cost.
 Account receivable ageing report- This is related to providing information about the total
due amount by debtors which is going to be receive by the company (Serena Chiucchi,
2013). By this report, companies can find out about how much amount of money is
needed to be collected from debtors. One of the key feature of this report is that it
consists date on which credit transaction proceeded and due to this companies can
calculate the interest with ease. Herein, the above company they produce this report that
helps them in keeping record about number of debtors and amount is due by them. Along
with this report not only includes information about debtors but also it consists
information about creditors too.
 Performance report- It is a type of report that is associated with containing information
about performance of various activities and employees. By preparation of the
performance report companies can track the record of performance that may help in
further planning. Like above organisation produce this report with an objective to
evaluate and manage the performance of their engineering projects.
Advantage of various kind of management accounting systems