TASK 14 P1 Introduction to management accounting accounting systems and their application

8 M2 Range of management accounting techniques 9 D2 Financial reports that accurately apply and interpret data 9 TASK 39 P4 Advantagesand disadvantages of different planning tool used for budgetary control. 11 D3 Planning tools for accounting respond appropriately to solving financial problems.12 CONCLUSION 12 REFERENCES 13 INTRODUCTION Management accounting can be described as the method of maintaining the company's inner data records in order to develop policy decisions for organizational improvement. Management accounting also helps internal stakeholders in a way that

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION ..........................................................................................................................4
TASK 1............................................................................................................................................4
P1 Management accounting and essential requirements of its systems.......................................4
P2 Different methods used for management accounting reporting.............................................6
M1 benefits of management accounting systems and their application......................................7
D1 Evaluation of management accounting systems and management accounting reporting......7
TASK 2............................................................................................................................................8
P3 Calculation of cost using different costing techniques...........................................................8
M2 Range of management accounting techniques......................................................................9
D2 Financial reports that accurately apply and interpret data ....................................................9
TASK 3............................................................................................................................................9
P4 Advantages and disadvantages of different planning tool used for budgetary control..........9
M3 Use of different planning tools and their application for preparing and forecasting budgets
....................................................................................................................................................10
TASK 4..........................................................................................................................................10
P5 Comparison of the way in which organisations are adapting management accounting
systems.......................................................................................................................................10
M4 Responding to financial problems that lead organisations to sustainable success..............11
D3 Planning tools for accounting respond appropriately to solving financial problems...........12
CONCLUSION .............................................................................................................................12
REFERENCES .............................................................................................................................13

INTRODUCTION
Management accounting can be described as the method of maintaining the company's
inner data records in order to develop policy decisions for organizational improvement. In simple
words, it is recognized as the scheme of recoding, analysing and using financial and non-
financial information as concentrates on skills and enables the organization increase its profit by
reducing general operating costs and other activities (Abernethy, Bouwens and Van Lent, 2010).
It also allows executives to expand businesses by discovering fresh methods to boost revenues.
Management accounting also helps internal stakeholders in a way executives, staff might easily
analyse the performance of a company within the market and support external stakeholders in
order to determine the actual and real financial status of company. In order to recognise the
importance of management accounting Ryder Architecture have been selected that is a
construction company in UK and is client Equilibrium Asset Management the famous medium-
sized consultancy firm.
This reports includes multiple subjects like management accounting system and
importance, reporting, structures and using multiple costing techniques to measure cost of
production. Apart this benefits and drawbacks of planning instruments which are part of
budgetary control are also being discussed. This study also covers the manner businesses use
management accounting schemes to react to economic issues.
TASK 1
P1 Management accounting and essential requirements of its systems.
Management Accounting is a method of analysing and sharing crucial organizational
information with manager and responsible executives which enable them to monitor business
performance and to develop approaches to improve their efficiency. It has several advantages
that help in projections and serve a vital part in deciding on the purchase or selling of certain
investments that are beneficial for company. There have been number of management
accounting system that are used by the manager of company in order to maintain a proper record
of various crucial operational and functional section (Arena, Arnaboldi and Azzone, 2010). In
Ryder Architecture several types of system have been implemented which help their stakeholders
to easily assess the overall financial stability and strength. These system are elaborated
underneath:

Cost accounting system: This system helping the company managers to analyse various
costs associated with different operations of manufacturing that directly support the company to
increase overall profit by a good margin by determining and eliminating wastage or unnecessary
activities. In Ryder Architecture manager uses this system to keeps records of immediate and
indirect company costs to maintain detail information on all expenditures linked to construction
and other facilities. With the support of this system company is able to add value to their
operation and activities by making decision related to reducing of expenses utilised within a
specific year.
Inventory management system: It is used primarily in manufacturing businesses to
properly handle inventory. This system also provides data on the correct amount of products to
be stored by an organization to help resolve supply chain issues. In Ryder Architecture manager,
this scheme is being used to keep track of all materials which is use for the constructing different
products. There have been three distinct kinds of LIFO, FIFO and AVCO inventory management
systems. In respective firm FIFO method is being used for building purposes because contracting
things are always on the need of customer and according to the latest trend of market.
Price optimisation system: As name suggests, it is primarily used to fix best possible
rates for all the goods the organization manufactures. This process performs a main part in
creating price-related decisions for different products that demonstrate to be the greatest for both
clients and business. This have been observed that consumers never purchase a product it the
prices are higher for them. In Ryder Architecture manager uses this system for the purpose to
establish the most appropriate and suitable prices for each and every buildings that are build for
the purpose of trading to customers. This system is essential and adds importance to the
respective firm as it helps to analyse whether or not the cost fixed can satisfy customer
expectations.
Job order costing system: This scheme used to allocate and collect costs that are
incurred by company on different valuable jobs which are involved in various operation. With
the help of this system, management of Ryder Architecture are able to assign cost to each and
every job related with constructing different building. It is very essential for organization to
analyse the price of various products that are being produced as per the consumer specifications.
This system helps to add value to respective firm because it helps to determine cost of each and

every jobs that are part of constructing operation so that actual price can be disclosed to customer
by considering to recover the total job cost (Jiang, Petroni and Wang, 2010).
P2 Different methods used for management accounting reporting
Management accounting reporting can be described as the method of producing various
significant reports covering reliable and authentic data about the overall performance of the
organization. There have been different method of reporting that are being used in Ryder
Architecture recommended by Equilibrium Asset Management which support in preserving
useful report of company. These are discussed underneath:
Performance report: This report is produced primarily used to maintain record related
with company's activities and employees performance during a specific time period. It is used by
the manager of Ryder Architecture to record, measure and make advance steps to improve the
performance of staff and businesses if its is necessary. It's used in organization to provide
bonuses and rewards to employees in accordance to their attempts to achieve the specific task
they have been assigned. This report is helpful to the company as it allows to create effective
methods to enhance its effectiveness. In case if this report is not made by the company, they
would never understand how their staff perform certain task and what error they make within
specific span of moment.
Budget report: From reporting perspective the budget report is most prevalent. This
report is essential as it provides all the data about the job and results of the company as well as
reveals both anticipated and real revenue and expense (Kallunki, Laitinen and Silvola, 2011). It
is an internal document that organizations use to allocate revenue to the various practical and
administrative departments. Managers use it to compare Ryder Architecture's real and normal
expenditure in order to evaluate its efficiency. It is useful for the company as it enables them to
allocate budget that ease to perform all company operations.
Account receivable report: This report is designed to find the actual and total amount
debtors are going to deliver to the business. It includes complete information of how much cash
is outstanding for company that has to be received up to a specific date and what is the origin of
these resources. This report aid to create to list of different customer those owed amount
company. It is produced primarily by companies offering goods on credit to clients in order to
increase sales for that specific period. It is used by staff in the corresponding company to
maintain track of all the outstanding amount that is needed to be collected from customers. With

the assistance of it, the company can strengthen its credit strategies so that customers can
overlook the condition of early payment.
Inventory management report: This report is mainly produced to maintain record total
inventory that is being hold and preserve by manufacturing firm to meet the certain demand of
customer. It Ryder Architecture manager use to create inventory report with the intention to
keep a valid record of total material required to construct building for customers and goods that
has been put in production process. The main benefit of this report is that it can overcome some
of the significant problems associated with overstocking and under-stocking products. It is
beneficial for respective company as it aids to verify inventory position whether it is in
warehouse, service or supplied to customers.
M1 benefits of management accounting systems and their application.
Benefits of management accounting systems
Management accounting system Benefit
Cost accounting system Manager of Ryder Architecture uses this reports to
maintain and keep track of the various cost that are
engaged in company activities.
Inventory management system It is applied within respective firm which support the
managers to analyse the actual requirements of inventory
for conducting different operations (Kaplan, 2011).
Price optimisation system Ryder Architecture Manager utilizes this system to
specify proper building prices as it allows to satisfy the
demands of customers.
Job costing system With the help of this system manager of company are
able to examine the cost of various jobs that are carried
out to meet the customer requirements.
D1 Evaluation of management accounting systems and management accounting reporting.
Different management accounting accounts and systems are incorporated within the
organizational process. Ryder Architecture uses the price optimization system to put suitable
prices for the structures they builds. Accounting receivables report are used to extend credit

strategies by evaluating separate customers complete quantity due. It has been also critically
evaluated that performance report is also used to record and improve the performance of
employees which support to search the desired target.
TASK 2
P3 Calculation of cost using different costing techniques.
In general, the cost is defined as anything that have been spent by an individual to get
something. In business term the word cost defines the total expenses an organisation incurred in
producing useful product or services. In Ryder Architecture, the manager spend huge amount on
constructing different building as per the needs of customer. There are various costing methods
that have been used by the manager of company in order to calculate the total cost incurred by
company on different operation. This also support to prepare income statements for the specific
accounting year so that actual net profit for the year can be calculated. Some of these methods
are as follows:
Marginal costing: The cost that have been spend on producing an extra unit of output
and it support in making short term decision is known as marginal costing. It is determined as the
percentage by which overall expenses are altered at any specified production volume if the
production volume is improved or reduced by one unit.
Calculating net profit with the help of Marginal costing.
Particulars November (£)
Sales 50 500000
Less: Cost of sales
Direct Material Costs 18 -180000
Direct Labour costs 4 -40000
Variable Production Overheads 3 -30000
Contribution 250000
Less:
Variable selling overheads (10% sale value) 10000*5 -50000
Fixed selling expenses -14000
Fixed Administration Overhead -26000
Fixed production overheads -99000

Net Profit 61000
Particulars December (£)
Sales 50 600000
Less: cost of sale
Direct Material Costs 18 -216000
Direct Labour costs 4 -48000
Variable Production Overheads 3 -36000
Contribution 300000
Less:
Variable selling overheads (10% sale value) 12000*5 -60000
Fixed selling expenses -14000
Fixed Administration Overhead -26000
Fixed production overheads -99000
Net Profit 101000
Absorption costing: This is also known as full-absorbed costing, contributes to direct
material costs, direct labour and overhead production costs to evaluate the total price per unit
(Absorption costing, 2019). This also offers accurate costing data which would not be accessible
if the company struggled to assess the real prices until the end of the year.
Calculating net profit with the help of Absorption costing.
Particulars November (£)
Sales 50 500000
Less: Cost of sales -340000
Gross profit 160000
Variable selling overheads (10% sale value) 10000*5 -50000
Fixed selling expenses -14000
Fixed Administration Overhead -26000
Under/over-absorbed prod expenses 9000
Net Profit 79000
Particulars November (£)

Sales 50 600000
Less: Cost of sales -408000
Gross profit 192000
Under/over absorbed prod expenses -9000
Variable selling overheads (10% sale value) 12000*5 -60000
Fixed selling expenses -14000
Fixed Administration Overhead -26000
Net Profit 83000
M2 Range of management accounting techniques
Mainly there are two key methods to assess profitability of company, these are Marginal
and Absorption costing methods. These two different methods defines profitability level with
different perspectives. Most of the companies, prepare income statements by applying both
methods for better presentation and analysis. These two techniques are differentiated by their
different aims and approach. Profit assessed under marginal costing always shifts in direction of
volume of sales. Whereas in absorption costing, profit may be on an irregular basis thus in
opposite direction from units sold. If manufacturing is lower than revenues, then absorption
method will show less profit. The cause is that fixed costs for the prior period are included in
opening inventory and are charged against present earnings.
D2 Financial reports that accurately apply and interpret data
From the above calculation it has been interpreted that from marginal costing the
contribution for month of November was 250000 and the balance of net profit was 61000 GBP.
In the month of December the value of contribution was 300000 and for net profit it was 101000
because the sales for the period increases that also grow profitability of company. With the help
of absorption costing the gross profit for November month was 1600000 GBP and total of net
profit was 79000 GBP. On the other side in month of December the sales was 600000 GBP,
gross profit was 192000 and the value of net profit was 83000 that shows that there is a increase
in the value of net profit due to sale of more unit for company.

TASK 3
P4 Advantages and disadvantages of different planning tool used for budgetary control.
Budget: These are known as financial plan that constitutes transactions related to
resource quantities, assets, liabilities,sales volumes, expenses as well as flows of cash for defined
period (Northcott and Linacre, 2010). Families, companies and government authorities uses such
concept to describe strategic plans associated with different events addition to activities in
measurable terms. Budgets ensures that all the spendings are to be made within the set limit so
that available resources are used to attain more productive results. Creating and sticking towards
budgetary estimates helps in overcoming from precarious positions. Budgets helps in building
successful action plan shows where cash is to be spend and from where it is to be earned. Ryder
Architecture creates as well as manages budgets so to regularly monitor business performance
together with financial situations.
Budgetary control: These enables administrators in conducting business with adequate
spendings. There are various budgetary control mechanisms that plays significant functions at
Ryder Architecture in monitoring spendings and earnings through distinct operational activities.
The controls makes sure that cash inflows addition to cash outflow resides within adequate
limits. Planning tools are described beneath:
Balanced budget: Organisational budget comes into category of balanced budget when
the receipts are equal to expected expenditure throughout the financial year. While financial
planning, it is estimated that total revenues will be equal or greater that expenses. Management
of Ryder Architecture also prepares such budget where they make estimations to attain budget
surplus with ongoing business activities (Otley and Emmanuel, 2013).
Advantages: Balanced budgets ensures stability of business when implemented
successfully. They ensures to Ryder Architecture that organisation can withhold cash from
incautious expenditures.
Disadvantages: The budget does not offer solutions to various problems such as inflation
or deflation. It is very difficult to manage such budget when various changes as experienced by
an organisation.
Sales budget: the budget provides estimations related to total sales revenue addition to
selling expenses of a company. It is considered as backbone of business. Sales budget provides

actual forecasting of sales of various products of Ryder Architecture for defined period in
context to values and quantities.
Advantages: Sales budget guides management of the company to identify weak links as
well as taking appropriate actions to eliminate hurdles in attaining forecasted sales.
Disadvantages: Various unforeseen circumstances are not forecasted properly through
such budget that can limit earning of Ryder Architecture through sales (Parker, 2012).
Activity based budget: It is prepared after analysing overhead costs associated with each
activity. It is prepared without considering previous year budget instead current activities are
deeply analysed as well as researched so to arrive at proper estimate.
Advantages: Activity based budget helps in eliminating unnecessary activities at Ryder
Architecture through focusing each activities and making final estimate decision. It also helps in
saving costs to strengthen competitive edges.
Disadvantages: The budget requires deep understanding of each activity which is only
done by professional accountant and appointing professionals for such adds extra cost to selected
business. It many times results in incapability to understand as well as evaluate activities that
leads to budget preparation in accurate manner.
M3 Use of different planning tools and their application for preparing and forecasting budgets
In business world, the different planning tools are used to prepare and forecast budgets so
that expenses can be reduces and overall profit margin can be grown in specific accounting year.
The common planning tool used by Ryder Architecture are balanced budget, Sales budget and
Activity based budget that plays a significant role in forecasting budgets for number of effective
activities of company. All these budgets are important because they contain financial information
which help to make framework for accurate projection of future expenses and income (Qian,
Burritt and Monroe, 2011).
TASK 4
P5 Comparison of the way in which organisations are adapting management accounting systems.
Financial issue can be described as the scenario in which an organization experiences
problems owing to a absence of financial assets. These problem can be internal which happen
due to wrong decision made by manager and external issues that arise due to sudden changes
occurring within environment. Identifying the sources of such kinds of issues and then using

efficient policies to solve them is really crucial for all businesses. Ryder Architecture also faces
the following economic difficulties due to which they are unable to perform important activities.
Some of these are discussed below:
Unexpected Expenses: For Ryder Architecture, this financial issue occurs owing to the
absence of efficient planning in which an unforeseen expenses occurs and executives have to use
reserve resources to handle that expenses. It further causes the problem of lack of funds to run
crucial operation of company.
Late payment from clients: In a selfishness to boost sales quantity for that era, Ryder
Architecture offers its clients with credit facility. It often leads to late payouts by consumers
resulting in the unavailability of financial funds that is mainly required to run companies day-to-
day operations (Renz, 2016).
As Ryder Architecture's financial consultant manager is accountable for identifying the
factors of such above-mentioned issues and finding suitable alternatives to them which help to
improve the overall performance during specific year. The advisors use various methods in the
for this purpose. Some of them are explained in detail below:
KPIs (Key Performance Indicators): These are primarily used to measure the
company's efficiency. There have been two primary types of KPI, financial key performance
indicator which is used to discover all the useless costs the organization makes and the other is
non-financial, that is used to analyse issues in the procedure, supply chain, etc. of the
organization. In Ryder Architecture manager uses financial KPI to identify problem of
unexpected expenses due to which planned activities and expenses gets hampered.
Benchmarking: It is a measuring tool that companies are using to measure their
efficiency with rivals in the same sector (Scapens and Bromwich, 2010). This tool is used by
respective firm to identify the major financial problem that is related with late payment by
customer due to which company do not have enough cash flow to run and manage other
activities. They can make changes within their strategies by making valid comparison and
modification to its credit strategies with rivals.
Financial governance: It can be described as the collection of various economic values
that businesses need to adopt to cope with money-related issues. Management tries to solve
challenges faced by Ryder Architecture by identifying suitable alternatives for all of them with
the assistance of this tool. It is also used to track organisational approach by examining whether

or not adequate financial rules are being pursued. Such as they use to maintain proper preserve
which help to deal with any contingency that company faces. They also make suitable strategies
in order to recover amount from customer such as if payment gets delayed then they have to bear
half more amount as plenty.
Comparison:
Ryder Architecture Galway Plc.
The organization uses the cost accounting
system to analyse material costs and to create
efficient policies in order to fix the problem of
unexpected or unscheduled expenditures.
The organization uses the inventory
management system to maintain track of the
inventory and overlook the problem of poor
material accessibility for the products.
The organization uses the price optimization
system to set suitable rates for the building
build by them, so that customers do not request
for credits and they can fix the problem of
missed payments (Tessier and Otley, 2012).
In the respective firm, the management uses
cost management system which support in
maintaining proper record of total cost in detail
which support in reducing the unwanted
expenses that hinder the performance of
company.
M4 Responding to financial problems that lead organisations to sustainable success.
In companies there have been several problems that are needed to be resolved at exact
time as it can lead to series losses. There are useful management accounting tool which have
been used by the manager of respective firm which benefits to ascertain the ongoing problem and
make possible solution to resolve these issues to grow profitability. Tools such as Key
performance indicators and benchmarking are being used to track the reason of issues within
company and financial indicator is being implemented by manager to make suitable plans and
policies to resolve the issues identified (Ward, 2012).
D3 Planning tools for accounting respond appropriately to solving financial problems.
Financial problems like unexpected expenses and late payment from customer lead to
solve growth and development for company. These are main reason which hinder the functioning
of operation as company do not have enough liquidity. By using balanced budget manager use to
bring balance in the figure of expenses for next year which is beneficial to grow profit. With the
help of Activity based budget the manager are able to control the different activities of company

due to which problem can arises and there is a huge impact on the performance of Ryder
Architecture.
CONCLUSION
It was found from the above-mentioned project that management accounting is the
method of assessing, tracking, examining and regulating the efficiency of the organization in
order to shape potential strategic decision to improve future business conditions. There are
different management accounting schemes and statements produced by enterprises to evaluate
the existing entity position. There are two kind of approaches named marginal and absorption
accounting that are used to prepare financial statement which is crucial to identify the net profit
for that respective year. Specific planning tools like master budget, zero-based and operating
budgets that are used for predicting and budgeting purposes in monitoring budget for a specific
time period. It has been also concluded that due to number of financial issues including late
client payments and unexpected expenditures are also encountered by company while operating
different operation. Thus assorted methods like benchmarking, KPI are being implemented to
track these issues and by applying financial governance they can easily address these issues
maintaining long term financial sustainability.

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