Management Accounting: Methods, Techniques, and Reporting

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
ACTIVITY 1....................................................................................................................................3
Methods of management accounting reporting......................................................................5
Management accounting techniques.......................................................................................6
ANNEX A..............................................................................................................................7
ANNEX B............................................................................................................................12
Particulars......................................................................................................................................13
Plan 1............................................................................................................................................13
Plan 2.............................................................................................................................................13
Plan 3.............................................................................................................................................13
ACTIVITY 2..................................................................................................................................14
Planning tools advantages and disadvantages......................................................................14
ANNEX C ...........................................................................................................................16
Comparison of ways in which management accounting is applied for confronting financial
problems...............................................................................................................................18
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
Management accounting is an effective technique which produces internal financial
reports which aids managers of the organization in effective decision making. Management
accounting is an effective tool which helps in planning, decision making, strategic management,
etc. it helps managers in forecasting and analysing the future prospects for long term growth and
sustainability (Kaplan and Atkinson, 2015). It is an effective process of analysing and presenting
financial information to the internal managers on a regular interval for strategic decision making.
This is a report which is used by internal management for solving financial problems and finding
effective solution for long term sustainable growth.
This study will highlight, management accounting and the essential requirements of
various types of management accounting system. It will also highlight different methods which
are used in management accounting report. Further it will also effectively include various
management accounting techniques. This study will further include planning tools which are
used for budgetary control. It will further analyse the advantages and disadvantage of these
budgetary control tool which helps in decision making. Furthermore, this study will evaluate and
compare two organizations in order to effectively respond to various financial problems.
Furthermore this study will critically evaluate the importance of planning tools in solving
financial problem and lead organization to sustainable growth and development.
Hochtief company is a construction engineering company which focuses on building
various projects like highways, bridges, stations, etc.
ACTIVITY 1
Management accounting: It is an effective process which helps internal management of
the organization to analyse various financial statement in order to take necessary strategic
decision for long term sustainable growth of the business (Quattrone, 2016). Management
accounting helps in capital budgeting analysis, stock valuation, forecasting, new product
analysis, break even analysis, forecasting, helps in financial accounting and solving financial
problems which leads to long term sustainable growth. Management accounting helps in
enhancing the operations of the business by eliminating cost and reducing risk.
Management accounting systems

Management accounting systems helps in improvising the productivity of the
organization in order to reach higher profitability and market share for future growth and
development. This mainly focus on formulating of various reports which helps in strategic
decision making. Management accounting systems can be further classified into:
Cost accounting system: It is a framework which helps Hochtief company in estimating
the cost of the activities for profitability analysis, cost control and inventory valuation. Cost
accounting system helps in effectively determining the cost of various production departments.
This helps management of the organization to determine the cost of the product for profitable
operations (What is a Cost Accounting System?, 2019). It helps in determining the work- in-
progress, material inventory, finished goods to prepare financial statements.
The key elements of cost accounting system mainly comprises of material i.e., direct
material and indirect material, labour i.e., direct labour and indirect labour and overhead i.e.,
variable O/h and fixed O/h. Cost accounting techniques is an effective way to analyse and
determine the future expenses for production. Cost accounting system take into consideration
direct costing, which can be attributed to the production of the goods. It mainly comprises of
commission, wages, manufacturing expense, piece rate, etc.
Inventory management system: It is a management accounting system which helps in
tracking levels of stocks, sales, orders and deliveries. Inventory management system helps
management of the organization to determine the requirements and reordering gods without any
delay (Granlund and Lukka, 2017) . It helps in effective decision making regarding ordering and
managing production in an effective and efficient manner. Inventory management system helps
in managing the supply chain which helps in placing order in an effective and efficient manner.
This helps in collection of surplus material and effectively control the orders according to the
production level. Inventory management techniques mainly includes last in first out method
(LIFO), first in first out method (FIFO), stock review, ABC analysis, just in time method and
weighted average method.
Job costing system: It is an effective process which helps in analysing and predicting the
cost attached with each job carried out at the time of production. It focuses on accumulating cost
to each individual unit of the production. It helps management of the Hochtief company to keep
proper record and track expenses of each product. This helps in determining the cost of the

project in an effective manner. It is very important to evaluate the cost which eventually results
in effective estimation, financial reporting and strategic decision.
Price optimisation system: It is an effective tool which helps in determining the price of
the products ad services delivered by the organization. This helps management to meet the goals
and objectives of the company in order to maximize profits and revenues. This helps in analysing
the behaviour of the customer with the change in the prices and determine the demand and
supply of a particular product. This helps ion combining information of cost and inventory level
to determine the prices which lads to higher profitability and growth in the business. It can be
effectively used by the management to tailor the price for customer and analyse their behaviour
with the change in the price levels of products and services (Alptekinoğlu and Semple, 2016).
Benefits of management accounting system.
Management accounting system helps management of the Hochtief company in
controlling, organizing, coordinating and controlling various activities which leads to higher
sustainable growth of the organization. This also in improving the productivity and efficiency by
reaching higher economies of scale (Dekker, 2016). Management accounting system helps in
effectively determining the operations of the business. This also helps in reducing the cost,
optimally accumulate the price, inventory management which eventually enhances the market
share and profit. Theses management accounting system helps in better application and
effectively managing the plans and budget.
Methods of management accounting reporting
Management accounting reports are an effective tool which helps in understanding the
operations of the business with utmost accuracy and efficiency. Management accounting report
gives accurate information to the management which helps them in taking strategic decision in
an efficient manner (Maskell, Baggaley and Grasso, 2016). Management reports are very
important for the internal management like CEO, owners, management in order to find necessary
solution to the problem. Management accounting reports must be in compliance with various
principles and standards which shows true and accurate results.
Budget report: It is an effective tool which helps in evaluating the performance of the
company. This helps management to compare the actual results with the budgeted plan and in
case of any deviation necessary action will be taken. This helps in comparing the past
performance with the actual performance and take necessary action to achieve higher profit. This

helps in controlling the activities for future sustainable growth (Brown and et.al., 2016). Budget
report helps in estimating the revenue and cost for a particular period of time. This helps in
planning the future by controlling the variance with utmost accuracy.
Account receivable report: This report shows cash amount which are owed to the
company by individual and entities outside the company (Mills, 2018). If the account receivables
indicates that the receivables are being collected at a slower rate then it is set as a warning sign
for the business. This eventually leads to greater credit risk for the company. Account receivable
report is an asset for the company which keeps track of all the customers who owe money to the
company.
Performance report: The report will evaluate the performance of the company with
utmost efficiency in an orderly manner. This report gives detailed analysis of the project which
gives them clear picture of the operational efficiency of the Hochtief company. This report
provides all the data to the stakeholders in a detailed manner to take necessary decision with
utmost accuracy (Hopper and Bui, 2016). Performance report gives clear picture of the current
status of the project and analyse how much profit will this project earn.
Cost report: This report helps in identifying the cost related with the financial activities
of the business. This report determines the cost of each activity, products, services, projects and
processes (Labro, 2019). This helps management to control the cost in an efficient manner. Cost
report evaluates the income and expenses of the the particular activity which leads to higher
growth and efficiency of the business.
Management accounting techniques
Marginal costing: This technique evaluates the variation in the total cost with the change
in the level of production. This helps management of the Hochtief company in determining the
extra cost incurred while producing extra units at the time of production.
Advantages of Marginal costing
It is easy to determine and helps in controlling the cost of production. This also focuses
on eliminating the cost variance of the company because fixed overhead does not change. This
leads to better decision making and higher future growth of the organization.
Disadvantages of Marginal costing