Management Accounting and Accounting System in Organizations

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
P1. Evaluate management accounting and management accounting system along with essential
requirement of it, in the organization...........................................................................................1
P2. Explain different methods which used in management accounting reporting.......................3
P3. Calculate cost by using various techniques and then prepare income statement by using
marginal or absorption costing method........................................................................................4
P4. Advantage or disadvantage of planning tools which used for budgetary control..................7
P5. Analyse how organization adopt management accounting system to respond financial
problems.....................................................................................................................................10
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is a professional skills which used to prepare financial or
accounting information. It will assist by internal management in order to formulate policies,
planning for the control of business operations. It is used for internal people which make it
different from financial accounting (Definition of Management Accounting, 2019). Main
objective of management accounting is to use collected information and take effective decision
in order to achieve business goals & objectives. In order to understand management accounting
concepts, this report select British American Tobacco plc which is UK based multinational
manufacture company (British American Tobacco plc (BAT), 2019). Company founded in 1902
by James Buchanan Duke and they serve worldwide area.
This report include various topic such as management accounting concept and essential
requirement of accounting system. In addition, management accounting report, method of
calculating cost, explain different tools for budgetary control and how different systems helps in
responding financial problems.
MAIN BODY
P1. Evaluate management accounting and management accounting system along with essential
requirement of it, in the organization
Management accounting: It is a process of collecting information which further help the
manager to formulate strategy and used in decision making process. This accounting used for
internal purpose by using financial data. It help the managers of British American Tobacco plc to
develop financial statement which is beneficial for the stakeholder to take necessary actions
regarding their investment.
Key functions of management accounting:
 Provide data: With help of management accounting, manager able to collect data which
is very important because all the decisions will going to take with the help of it.
 Analyse & interpret data: After collecting information, it is very important to interpret
and analyse in the decision making process.
 Use as communication mode: With help of management accounting, manager able to
collect information and represent in effective manner which further used by the manager,
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owner and investors for their future strategies. Financial information helps in
communicating their financial position and further actions will be based on it.
 Provide qualitative or quantitative information: Management accounting provide
qualitative as well as quantitative information. Net income or loss, total assets &
liabilities, cash inflow these are quantitative information for the organization
(Almaktoom, 2017). Growth or decline in the financial figures will helps in analysing
weather business perform well in their field or not. It will be consider into qualitative
information.
Management accounting system: There are various internal systems which is used by
the organization to measure or evaluate performance. It will further helps the stakeholders such
as creditors, investors, managers, owner etc. Some of accounting systems discussed below:
 Inventory management system: It is a system or software which helps the organization
to keep track their inventory level. Mostly it is used by manufacturing company to
maintain their records regarding stock. It is essentially required to analyse the availability
of material at the time of manufacturing goods (Carlsson-Wall, Kraus and Messner,
2016). In context of British American Tobacco (BAT), manager follow this system and
maintain proper records. It further helps in formulating strategy and taking decision in
respect of increasing productivity as well as profitability. There are three types of
inventory system such as LIFO, FIFO and Weighted Average but British American
Tobacco company follow FIFO method to manage inventory level.
 Cost accounting system: It is also called costing system where it helps in estimating and
evaluating cost of each item. Manager use this system to identify cost and develop more
effective strategy to reduce its cost because it further helps in increasing profit margin. In
British American Tobacco plc, it essentially required to identify tobacco's cost and
further maintain for the whole production period. This system also include two different
types of costing such as product costing or activity based costing to evaluate their product
cost and develop strategy accordingly.
 Price optimization system: It is an mathematical analysis which helps the organization
to identify customer behaviour on different price range for the product. It is also used to
identify that customers objectives will meet with organization and maximise operating
profit. This system required by British American Tobacco plc to identify customer
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