Understanding Management Accounting and Systems

MANAGEMENT
ACCOUNTING

INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
LO 1.................................................................................................................................................4
P1 Understanding management accounting and management accounting systems...............4
P2 Different methods used for management accounting reporting........................................6
M1. Evaluating the benefits of different management accounting systems...........................8
LO2..................................................................................................................................................9
P3. Reflecting income statement as per marginal and absorption costing.............................9
LO3................................................................................................................................................10
P 4 Advantages and disadvantages of different types of planning tools in budgetary control10
M 3 Use of different planning tools and their application....................................................12
LO4................................................................................................................................................12
P 5 Management accounting system to respond to financial problems................................12
M 4 Management accounting helps in gaining sustainable success.....................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting refers to the practice of analysing, presenting and interpreting an
accounting information that is been gathered with help of financial accounting and the cost
accounting for the purpose of assisting the management in decision making process, creating
policy, making routine operations for an organization, The main objective of MA is to measure
the performance, assessing risk, allocating the resources and presenting the final reports to
management which helps them in preparing budget, forecasting success and also helps in taking
corrective measures in respect of dealing with any kind of the financial problem. This study is
based on CORUS, a manufacturing company that deals producing steel and distributes its
products like cold and hot rolled, packaging, tubes, bars, electro-plated, metallic coated,
developing components. Its business operations are been spread across the whole world and is
headquartered in United Kingdom. Furthermore, the report provides a deeper insight towards
importance of MA systems and different methods that can be adopted for reporting with benefits
of each system that helps the firm in running its business operations smoothly. Moreover, the
report reflects framing of income statement as per marginal and absorption costing method along
with the evaluation of different panning tools and their use in solving the financial problem.
Several MA techniques are also been highlighted that CORUS is using for avoiding any type of
financial problem and uncertainty in the future.
MAIN BODY
LO 1
P1 Understanding management accounting and management accounting systems
Management Accounting is defined as a process through which the organisations
simplify the entire process of recording the transactions and facilitating activities related to
operational activities of the company (Sands, Lee and Gunarathne, 2015).. This technique assists
the managers and accountants working in an organisation in determining the operational costs
incurred in the business and also help to control and minimise such costs by reducing the
unnecessary expenditure avenues of the company. Overall, management accounting is a great
tool which facilitates the decision making of the managers of the company. However, financial
accounting must not be confused with management accounting since there is a very fine line

between both the modes of accounting. At Corus Group as well, the financial management and
financial managers assist in preparation of financial statement that helps in attracting the external
parties and investors of the company and management accounting is prepared for the internal
purpose i.e. for determining what will be their budgeted costs and how it can be minimised or to
compare such budgeted costs with the actual ones (Kaplan and Atkinson, 2015). Management
accounting plays a major role in the operation of Tata Corus and this can be ascertained through
following points:
Planning: Management Accounting is a major step in the planning done in the organisation due
to the various accounting tools that are being used which helps in determining the estimated
resource usage or the estimated cost that might be incurred in the company. Therefore it assists
in preplanning of the company.
Decision-Making: Management Accounting helps the mangers in formulating various
interpretations regarding the current resources, expenditures and income sources of the company.
Therefore, the company can be assisted in formulating various decisions related to the company
in a simplified manner.
Controlling: Management accounting also assists in regularly monitoring and evaluation of the
processes and techniques that are being implemented in the company. This helps the managers in
determining what is going wrong and right so that the managers are able to determine whatever
deviations that might be incurred between the estimated and actual costs.
In order to implement the management accounting systems, there are a variety of tools
that can be used and these can be categorised as follows:
Inventory Management System: Inventory Management System assists in maintaining and
keeping control of the stock levels in the company that are being used and ensuring that there are
no excess stocks in the company i.e. the cost incurred in maintaining the stock in the company
does not exceed too much or falls too low (Otley, 2016). There are various systems through
which inventory levels can be managed i.e. LIFO, FIFO etc. While LIFO is related to “Last In
First Out” under which the stock that has entered last is used first and the older stock is used later
on; in FIFO method which is “First In First Out”, the stock that entered earlier is used first and
the stock that entered later is used after that. Both of these inventory systems are used in the
management of the stock in the company so that the working capital of the company does not
gets blocked. Further, this system assists the management accountants in determining the