Management Accounting: Systems, Reporting, Tools & Evaluation

This management accounting report provides a comprehensive analysis of Sunshine Industries, focusing on the application of various management accounting systems and techniques. It begins by explaining the meaning and importance of management accounting, detailing systems such as cost accounting, job costing, inventory management, and price management. The report then explores different methods for management accounting reporting, including budget reports, accounts receivable reports, cost management reports, and performance reports, highlighting their benefits and integration effects on the organization. Furthermore, it prepares income statements using marginal and absorption costing techniques, evaluating their impact on financial data analysis. The report also discusses the benefits and drawbacks of planning tools like zero-based budgeting, cash flow budgeting, and flexible budgeting used in budgetary control, evaluating their effectiveness in achieving organizational goals and solving financial problems, ultimately aiming for sustainable success. Desklib provides a platform to explore similar solved assignments and past papers for students.

Management accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1Explaniation of meaning of management accounting and importance of their system........1
P2 Explantation of different methods used for management accounting reporting...................2
D1 Evaluation of integration of management accounting system reporting effect on
organization ................................................................................................................................3
D2 Financial reports uses in analysing financial data.................................................................4
TASK3.............................................................................................................................................4
P4 Benefits and drawbacks of planning tools used in budgetary control...................................4
M3 Evaluation of planning tools for budgetary control..............................................................5
TASK4.............................................................................................................................................6
P5 Evaluation of organisations
are adapting management
accounting systems to respond financial problems....................................................................6
M4 Analyse how, in responding to
financial
problems,
management t
accounting can lead organisations to
sustainable success......................................................................................................................7
D4Evaluation of how planning
tools for accounting respond
appropriately
t
solving inappreciable to lead
organisations to sustainable
success.........................................................................................................................................7
Conclusion.......................................................................................................................................7
REFERENCES .............................................................................................................................10

INTRODUCTION
Management accounting is part of accounting system in which manager’s analysis,
record, collect and represent accounting information in a way which help in decision making. It
is essential part of managerial process. In order to understand the concept of managerial
accounting in a better way Sunshine industries private limited has been taken. It is situated in
London. This organization provides emery stones and flour mills products to their customers. It
is medium size enterprises. In this report essential requirement of management accounting and
their system has been identified. Uses of various accounting technique in decision making is
analysis and various planning tools used in analysing performance of organization. This report
also contain how effectively management accounting used to solve financial problems arises
within organization.
TASK 1
P1Explaniation of meaning of management accounting and importance of their system
Management accounting: It is systematic accounting process of presentation of
accounting data in a way which help in formulating business strategies. Management accounting
help in achieving business organization goals with optimum utilization of resources.
Management accounting is made up of 2 words, management and accounting. Management
refers to art of getting things done by others. On the other hand accounting is the systematic
process of recording transactions thus management accounting is an art of doing accounting
actives in a way which help in taking essential decision regarding achieving organizational goal.

It is branch of accounting. Following are the systems of managerial accounting (Alyousef and
Mickan, 2016).
Cost accounting system: In this system cost of manufacturing products are identified. It
is essential part of management accounting. Manager of Sunshine limited uses this system to
analysis cost of manufacturing flour mills and emery stones and other products of their industry.
Job costing system: It refers as the system in which managers identify cost generating in
producing each product. It will useful in those organization where they provides service and
products according to specific demand of customers. This type of costing is useful for auto
mobile industry. Companies manufacturer weapons and equipment tools useful for government
adopt this system. Manager of Sunshine limited will be used this if they produced products
according to preferences of their potential customers.
Inventory management system : It also an essential part of managerial accounting
system. Business organization uses this tool identify their stock level and control and maintain
stock level of their running business organization. Sunshine limited uses various methods like
ABC analysis and EOQ method to manage their stock level within the organization (Aouni,
McGillis, and Abdulkarim, M2017).
Price management system: It is a framework which are used by managers to formulate
strategies regarding price. Managers determine rate of product after scanning market
environment. They take decision regarding price by identifying prices of their rivalries .Sunshine
industry determine their rate of price on the basis of cost incurred in manufacturering and
supplying their products. They set price rate which satisfied customers and also give financial
gain to the company.
P2 Explantation of different methods used for management accounting reporting.
Management accounting reporting: It defines as systematic tool of communicating essential
information to various departments of organization. In other words management accounting
reports are those statement which describes summery of collected data. It will be used to
analysing performance and formulating of plans for future. Sunshine industries prepare following
types of accounting reports:
Budget report: Budgets are numerical statement describe future earnings and expenses.
It will be help managers to take essential decision regarding investments. Manager of Sunshine

industry prepare budget to analysis future profits generated by business organization. Budgets
are important part of every organization.
Account receivable reports: These reports are prepared to identified status of debtor of
business organization . Accounting receivable reports are the summery of value of debtor
available in organization . Amount pending by debtors, net value of non performing assets are
summarised in this report. Manager of Sunshine industry uses account receivable report in order
to systematically manage their debtor collection ratio. They use this report in order to formulate
effective polices for their potential customers.
Cost managerial report: These are essential part of accounting reports. These are the
statements which describe cost incurred in manufacturing reports. It will help in identifying those
activities which are most expensive. Manager of Sunshine industry uses this report to identify
cost incurred on production of emery stones and flour mills and various types of emery stone
produced and supply in organization. This report help in take decision regarding cost
management system
Performance report: These reports are prepared for evaluation of p[performance of
organization. It is summery of results of all acticires incurred in various departments. It will help
in identifying whatever business organization attain their predetermine goals or not. These
reports help in taking essential decision regarding future investments. Manager of Sunshine
limited used to prepare performance report to analysis performance of their workforce. It also
help them to determine the polices which area formulated to reduces differences between current
and desired goals. This will also help in identifying those employers which needed training to
develop their skills (Chiwamit, Modell, and Scapens, 2017).
M1Benifits of management accounting system
Management accounting systems helps in taking decision regarding formulation of effective
policies within organization. These systems help in controlling cost and minimize risk. Sunshine
industries is manufacturing organization and it uses managerial accounting systems to run their
business effectively within the market environments. To make long term sustainability in
market economy they uses inventory management system, pricer mechanism system and other
system to determine their cost and policies related to prices.
D1 Evaluation of integration of management accounting system reporting effect on organization

Reports are essential tool for managers these help them to summarised all activities
happens in business organization. Sunshine industries uses managerial accounting report in
their operational business activities as these reports provides them summery of all activities.
Manager of this industry uses these report to evaluate performance systems of their organization
and then built those polices and strategies which help in reduces causes of arising differences in
organization (Granlund and Lukka, 2017).
TASK2
P3 Preparation of income statements using managerial accounting techniques
Marginal costing: Tool of management accounting which help to determine effect of
changing in volume output in profitability rate of company.
PARTICULARS PRODUCT X
PRODUCT
Y
SALES 828000 480000
LESS DIRECT MATERIAL 150000 84000
LESS DIRECT LABOUR 180000 84000
LESS VARIABLE PRODUCTION
OVERHEADS 120000 56000
TOTAL VARIABLE PRODUCTION
OVERHEAD 450000 224000
SELLING OVERHEADS 9200 7000
TOTAL VARIABLE COST 459200 231000
CONTRIBUTION 368800 249000
LESS FIXED PRODUCTION OVERHEAD 210000 210000
LESS FIXED ADMINISTRATION
OVERHEAD 54000 54000
PROFIT 104800 -15000
Interpretation: If manger uses marginal costing technique then they will earn 104800 profit
with contribution amount 368800
Absorption costing: In this method of managerial accounting all cost used to calculated
profit .

Statement of absorption costing
PARTICULARS PRODUCT X
PRODUCT
Y
TOTAL SELLING PRICE 828000 480000
LESS VARIABLE COST OF GOODS SOLD 150000 84000
180000 84000
VARIABLE PRODUCTION OVERHEAD 120000 56000
FIXED PRODUCTION OVERHEAD 210000 210000
GROSS PROFIT 168000 46000
VARIABLE SELLING OVERHEADS 9200 6400
FIXED ADMINISTRATION EXPENSES 54000 54000
PROFIT 104800 -14400
Interpretation: If manager uses absorption costing method then they will gain effective gross
profit of 168000 (Soderstrom, Soderstrom, N. S. and Stewart, 2017).
D2 Financial reports uses in analysing financial data
From the above interpretation it has been clearly identified that managerial accounting
techniques help in identify profits in different manners. If mangers uses marginal costing then
they archive profit of 104800 and in absorption costing they gain gross profit 168000.
TASK3
P4 Benefits and drawbacks of planning tools used in budgetary control
Budget: It is systematic framework which used to prepared for identifying future income
and expenses of an running organization. In other words budget is a numerical framework which
estimate effect of business activities on future earning. Organizations prepared budgets for
formulating essential polices. Process of preparing budget framework s known as budgeting.
Managers Sunshine industries prepare budget to recognized their future earning from business
activities. It will also help them in identify best alternatives among others.
Budgetary control: It is part of controlling managerial process. Business organization
uses this tool to reduces the differences between actual target achieved and budget target.
Manager of Sunshine limited uses various approaches to control their budgets activities
differences. Budgetary control play vital part in managerial process. Management department

use this tool for performance evaluation purpose. Following are the planning tools uses by
business organization for budgeting controlling (Maas, Schaltegger, and Crutzen, N2016).
Zero base budgeting approach: It is one of the useful approach of budget planning budget
are prepared from scratch levels. Budgets are prepare on the basis of research and
planning. Managers uses this tool as budgets are prepared for each line of cash flow.
Manager of Sunshine limited will be used this tool when they expand their business
units or start up new projects.
Advantages: This technique help in reduction of cost related activities within the business
organization. As managers preparers polices after analysing which activities incurred
cost on high level.
Disadvantages: It is very time consuming tool. It is hard to understand process.
Cash flow budget:- In this process budgets are prepared on the basis of cash and cash
equivalent activities. Cash budget considers only monetary activities. This budget is
prepared to identified cash inflow and outflow activities. within a fix period of time.
Manager of Sunshine industries use to this technique to control this cash flow budget
activities. This will help in maintaining liquidity status of their organization. Manager
formulate this budget and compare it with cash flow activity with budget cash flow
activities. And then build those policies which help in in reducing differences between
actual and target activities.
Advantages:- This budget help in managing liquidity status of an running organization.
This help in identifying overdue of cash and implement policies which help in enhancing
cash inflow activities.
Disadvantages:- It is very rigid process of using this technique a due to changing in
technologies, this tool does not help in reducing overall cost of differences.
- Flexible budget: It is very important tool of budgetary controlling. In this tool budgets
are prepared on the basis of quantity of manufacture products. Flexible budget are prepared to
identify effect of changing outputs on profit. These budgets will help in analysing effect of
various material on cost. Managers of Sunshine Prepared flexible budgets to changing their
policies as per the requirement of customers (Phan, Baird and Su 2017).
Advantages: These budgeting tools are more reliable and accurate to measuring
efficiency of management department within changing volume of outcomes.

It will help in managing cost control and work according to current data.
Disadvantage: Changes in planning and technologies will decrease motivation level of
employers due to changes in policies they cannot make efficient policies.
M3 Evaluation of planning tools for budgetary control
Planning tools are effective techniques of budget controlling. These includes various tools
which help management department in controlling process. Manager of Sunshine
industries uses apply these tools to reduces the differences among set target and
achieved target. They used to prepare cash budgets and flexible budgets to their
organization. Managers uses of these two tools they can effectively use and manger
cash capital of their organization. Or they'll also used flexibility budgets to manage
their profitable rate and reduces cost.
TASK4
P5 Evaluation of organisations
are adapting management
accounting systems to respond financial problems
Financial problems: Problems arises due to lack of monetary assets are known as
financial problems. It is a situation where business organization unable to pay their debt
liabilities to their creditors and other vendor's. In their words financial problems are those
problems which causes done to lack of cash availability in entity. There will be lots of reason of
business organizations suffering from financial problems. Due to lack of managerial problem
conflicts between workforce, lack of knowledge regarding investment decisions. Many
organization suffers from financial probes in present time special small and medium size
enterprises as they does not haver potential amount of capital and lack of goodwill in market
environment they suffers from financial problems. Sunshine industries is medium size
enterprises. They provides products of flour mills, Emery, Danish stone in market economy. still
their profitability ratio decrease de top suffers from financial problems. following are the reasons
w of sunshine suffers from financial problems :
 Lack of managerial policies: Sunshine industries is suffering from financial problems
due to lack of managerial polices. They did not hire skilled individuals and it will
adversely effect on their decision making. Managers does not take right decision

regarding to investment in various project due to lack of managerial skills (Quattrone,
2016).
 Income problems: Due to lack of managerial problems they could not formulated effete
policies regarding their debtors and vendors it will directly effect income status of their
organization. Sunshine limited does not generated more income. They does not effective
promotional strategies and provides normal wages to their labour force due to this
problems they cannot generated more income by selling their products.
 Less saving: Sunshine limited is suffering from financial problems due to lack of their
saving abilities. They effectively not utilizes their monetary resources. They can not save
money. Due to their insufficient saving and lack of taking decision regarding portfolio
investment decisions they will not recover from financial problems.
To overcome the financial problem manger of Sunshine limited uses management accounting
system tools . Followings are the tools used by managers to reduces financial problem:
Key Performance Indicator (KPI): These indicated key objective to achieve efficiency
level of an business organization. Key indicator are set value which shows ideal target to .These
values help overcome financial problems as if company achieve these target then it shows that
they are in god financial conduct. Manager of Sunshine limited uses key indicator tool increase
their income target and enhancing their managerial policies (Rikhardsson, 2017).
Bench marking:- In this process organizations compare their business performance with
their rivalry companies or their set targets. Mangers of Sunshine industry set target by using their
past data. On the basis of this they compare their past performances. It will help them to
overcome problem of less saving. It will help in set target to achieved saving target.
Financial governance: It is a framework which are used by companies to track the way
companies collect, measure, record and represent their financial data. Financial governance is
useful for internal adulating, enhancing financial performance . This provides data which help in
monitoring transaction of an running business organization. It will help mangers to run their
business organization in ethical way. This is system which are used to valid data of input.

M4 Analyse how, in responding to
financial
problems,
management t
accounting can lead organisations to
sustainable success.
In today's competitive world every business wants to maintain strong position within
market area. Business organization only achieved sustainable when they overcome their
problems and effectively utilized their available resources. Management accounting tools
will be effectively used in reducing problems arises related to finance in business. These
tools help in manage all the business activities in a way by which management department
will be record all these problems. and they can also help to save their investment in better
way which help in attains financial a gain (Samuel, 2018).
D4Evaluation of how planning
tools for accounting respond
appropriately
ot
solving inappreciable to lead
organisations to sustainable
success.
Planning tools help management to achieve their goal in appropriate time with appropriate
manner. These tools help organization to effectively manage their scares resource.
Conclusion
From the above analysis it has been identified that management accounting play essential
part in an business organization. It is technique of presentation of accounting data in
effective way which help in achieving organization objective through optimum

utilization of resources. Managers uses different managerial accounting systems to
formulate effective polices . These tools helps business organizations to minimize cost
of their business achieve. They will also apply budgetary control tools which help to
achieve their target at predetermined time period. Management accounting tools help in
overcoming financial problem of running business entity. Success of business
organization depends on how effectively manger uses their accounting policies in their
daily routine business.