Management Accounting and Reporting Techniques

MANAGEMENT
ACCOUNTING
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Contents
INTRODUCTION..................................................................................................................3
PART 1...................................................................................................................................3
Section 1.................................................................................................................................3
1.1) Explain management accounting and various essential requirements of different
types of management accounting systems...................................................................................3
1.2) Explain different methods used for management accounting reporting.....................4
Section 2.................................................................................................................................5
2.1) Calculate costs using appropriate techniques of cost analysis....................................5
2.2) Apply a range of management accounting techniques and produce a financial
reporting document......................................................................................................................8
2.3) Produce financial reports by accurately applying methods and interpret data.........10
PART 2.................................................................................................................................12
Section 3...............................................................................................................................12
3.1) Define and explain the purpose of budget and prepare different budget..................12
Section 4...............................................................................................................................17
4.1) Compare how organisations are adapting management accounting systems to
respond to financial problems....................................................................................................17
4.2) Analyse how management accounting can help to improve the financial
performance of companies to achieve the sustainable success..................................................18
4.3) Evaluate the tools of planning used in management accounting to reduce financial
problems to achieve success......................................................................................................19
CONCLUSION....................................................................................................................19
REFERENCES.....................................................................................................................20
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INTRODUCTION
Management accounting is an accounting system with the help of which the managers of
the organisation identify, analyse various financial information about the organisation that helps
the financial department to take various decisions (Otley, 2016). Various managerial accounting
reports are formulated by the managers which enable them to supervise all the internal matters
within the organisation and to identify key areas. This report is based on UK based Furniture
Company, UCK furniture. This reports aims to develop an understanding of various aspects of
management accounting, its system and various reporting framework. Apart from this various
methods of estimating the cost are discussed along with their application. It also includes the use
of various planning tools that facilitate an organisation in responding to various financial
problem so faced by the company.
PART 1
Section 1
1.1) Explain management accounting and various essential requirements of different types of
management accounting systems
Management accounting is the process with the help of which the companies analyses and
manages their cost of operations and business. With the help of this various reports are
formulated that facilitate internal management in the decision making process (Renz, 2016).
According to institute of cost and management accounting, it is related with the application of
professional skills for managing various accounting information in such a manner that the
organisation can formulate various policies and strategies so that they can achieve their
objectives. UCK furniture can use different management accounting system that can help them in
improving their productivity and profitability:
Cost management system: This accounting system is considered to be one of the most
important system as with the help of this the UCK determines the total of their final products i.e.,
their furniture. The valuation of inventory is done; the cost of labour is estimated with the help of
the profitability is estimated. It enables the managers of UCK in identifying the area from where
they can reduce the cost for the company, also this enables them to ensure the efficient utilisation
of the resources (Akbar, 2010).
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Price optimisation system: With the help of this system the best price for the product can
be determined by the organisation as per the willingness to pay of the customer. The UCK
furniture can set prices for the furniture as per the reactions of the customers so that they can be
satisfied. With the help of this they can identify the scope for the promotional activities,
discounts that they can provide to the clients and many more as they has to be adjusted within the
cost of the furniture.
Inventory management system: Management of the inventory is important for each and
every organisation as with this they can efficient manage their cost. For UCK furniture it
includes the management of the flow of the material in the organisation and flow of the finished
goods, also in this the production of the furniture must be scheduled efficiently so that the stock
can be made available all the time. They can use various methods such as LIFO, FIFO method
which ensures the flow of the inventory. With LIFO method, the material which is purchased in
the last must be sold first as they believed that the last item is priced more than the previous
material. While in FIFO method the material first purchase must be sold first as with this they
can manage their cost which is recorded first against sales. For UCK furniture FIFO method is
suitable as with this they can manage their records efficiently and their designs of furniture will
also not become outdated (Senftlechner and Hiebl, 2015).
All these methods will enable UCK furniture to utilise all their financial information so
that they can make efficient decisions related to the reduction of the overall cost of the company.
Also with the help of this they can formulate various strategies that can help UCK furniture in
achieving their goals by improving their profitability and productivity.
1.2) Explain different methods used for management accounting reporting
The organisations need to use various management accounting reporting so that they can
let their management know about the exact situation prevailing in the organisation. These reports
are formulated by the managers on the basis of information received by the cost accountant
managers from other departments (Hopper and Bui, 2016). The reports that UCK furniture need
to prepare are:
Cost accounting managerial report: With the help of this report the prices of the
product so produced by the company can be estimated as it includes cost of all the items such as
raw material, labour, other indirect cost etc. The cost sheet is prepared with which per unit cost is
estimated by dividing the total cost with the number of units produced by the company. This cost
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