Management Accounting: Role, Functions, and Techniques

This report provides an overview of management accounting and its role in business growth. It discusses the functions of management accounting, such as effective controlling and planning. The report also explores various techniques used in management accounting, including marginal costing and absorption costing. It includes examples of cost cards and profit and loss accounts. The insights provided in this report can help businesses make informed decisions and improve financial performance.

Management Accounting

INTRODUCTION
Management accounting is known as the model which is help full in using the framework
which is essential for the organisation to have operatives practises and are used to perform with
in the year. This help to manage and control as well as formulate all the strategies which are
interrelated with the growth of the business (Aini and Putri 2019). With the help of this, they can
manage to keep all the records of financial activities in the well define manner. This report is
done Speed board assembly service which is manufacturing company which produce industrial
equipment’s and communication devices for the defence. The company headquarters is located
in the UK. The main purpose of this report is to understand the management accounting so that
problems can be reduced and funds are managed properly. Along with this, it is essential to cover
all the role and function of the accounting system as this help in making identifying all the flaws
and also minimize the wastage of the resource. Apart from this, comparison among firms how
they are adopting management accounting system for responding to financial issues are also
discussed in this report.
TASK 1
P1
Management accounting is the process which help in defining the practises which help in
providing financial information and the resources to the manager in taking effective decision
which help in expansion and growth of the company. The accounting system is used by the
internal organisation as this help in analysing the financial problems of the company and make
effective decision for making revenue for the firm. In the context of Speed board assembly
services this is essential for the manager new business opportunities which the assistance of
management accounting. This help in making effective balance sheet as well as data for the
company. The main purpose of this is to identify the internal report which represent the company
for the betterment of the organisation. Here are some essential elements which are explain briefly
down below:
Helpful in effective controlling: Management accounting help in different factor to
create as well as control different form of operational activities as well as practises for the
organisation. This also assist in figure out the data from the internal report which is essential to
control and monitor the operational activities of the company. However, this help in providing
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high profitability and low cost production for the company. In the context of Speed board
assembly the finance department must ensure about the funds as should be managed in the well
define manner in order to reduce chaos and conflict in the organisation.
Assist in making effective planning: The management accounting help in making
developing proper planning which reduces the cost for the company. This can be possible while
having proper data and manager can help in making effective decision for the company. For the
company like Speedboard assembly services the different department of the company must have
proper planning for the company as this will aid in smooth functioning of the organisation.
(Akroyd and Li 2019)
The management accounting system is know as presentation of financial data of the
business activities for the internal management of the particular firm. The main objectives of the
firm is to use statistical data and aid in providing accurate data for making decision for the
company. Here are some of the management accounting system which are describe down below:
Inventory management system: This is the system which help in making effective
decision for the company for managing the inventory in the well define manner. This direct the
manager to accomplish the desire goal for the firm. Along with this it also assist in maintaining
the adequate stock for which can be utilized for performing the business activities such as
promotions, advertisement and many other features which are useful for growth and expansion.
With the help of inventory system organisation can able to maintain the stock in the systematised
way. There are three ways in which company can utilises the system which is explained down
below:
LIFO: This is the method which help the firm which directs the firm to utilize the
frequent inventory needed for performing out the overall implementation of the company.
AVCO: This is known as the average cost method for the company which help in
directing the firm to use the different stocks of the company through considering the overall cost
based on the average.
FIFO: It is known as the inventory management system which help the firm to permit to
use those product which are use earlier. However this is also consider as the first in and first out
system for the company.
Cost accounting system: This is known as the framework which are useful through the
large and small enterprises for the examine the actual cost which are associated with the firm
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operations. However for the organisation like Speedboard assembly services this is crucial for
the firm to manage and the operational activities effectively as this will help in reducing the cost
of per unit for the company. Here are two essential cost accounting system that are as follows:
Direct costing: This is the kind of costing under which changeable expenses are preferred
for the development and growth of the company in the coming future. However in this fixed cost
is not consider in the costing system.
Standard costing system: This refers to the costing system which help in minimising the
cost for ascertaining the variances among as well as the reason behind to develop the futuristic
decision for the company in the well define manner.
Job order costing system: This is known as the management accounting system which
directs the cost for the administration for allocating the whole business practises as per its nature.
This system is depend upon different activities which are going in the organisation from one
place to another. In the context of Speedboard assembly services this is essential for the company
to use this method as it help in making quality decision and increase the profitability of the
company.
Price optimisation system: This is the kind of management accounting system which
help in making systematised procedures and control the activities which are not beneficial for the
company. In addition to this, Speedboard assembly service should ensure about figure out such
method for price optimisation such as use of new tool and technique will minimize the price of
the commodity.
P2
For the organisation, this is crucial for the company to have all the data of the firm in
order to perform overall activities in the well define manner. Along with this, it is essential for
the firm to figure out the internal and external environment of the company for maintaining the
flow of cash effectively. In the case of Speedboard assembly services the finance department
have to use different kind of accounting method in order to make quality report for business.
However this particular procedures help in producing several reports for the income statements
as this help in making effective decision in the future. Here are some of the method which are
used in the organisation in the detail manner:
Performance report: This kind of report is consider which are relevant to the different
practises as well as the activities present in the organisation. According to this, the organisation
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manager have to make important decision for the company in order to expand the business in the
well define manner (Cooper and et., al., 2019). As per the organisation like Speedboard assembly
the department must ensure about the all the activities are performing effectively as per the
schedule plan. Along with this it is essential for the manager to make sure that all the staff are
doing their role as this lead towards expansion and growth. Beside this company should also
promote the hard working employees which help as the motivation for the company to work
better for the company.
Accounts receivable ageing report: This is the refers to the kind of management
accounting report which involves different data for the company and for the whole debtors
whose payment have not been received yet. Moreover this report help in keeping the systematic
records of the activities which are done in the organisation which include , interest rates, whole
debts amount and many more. For the company like Speedboard assembly the finance
department owned the debt from the clients into the less cost . This will help in gaining in
recovering the turnover ratio for the organisation.
Budget report: The budget report is the internal report used by the management in order
to compare the estimated budget projection with the help of actual performance under which the
number achieve during the passage of time. In other words, this is the process through which the
comparison is done that how to close the budget and performance of the actual report. For
Speedboard assembly services this is essential for the management to compare the budget and
also follow the income statements . Further this help in reducing the cost for the company and
increase the revenue generation for the organization.
Inventory report: A inventory report help in describing the summary of its belonging to
the business, industry as well as organisation. This provide the comprehensive account of the
stock and supply of various items for the company. In this kind of report this can be written in
the various form of length and size because this help in minimizing the conflict for the company.
In the context of Speedboard assembly services the inventory report should be clear, simple and
exhaustive so that quality outcomes can be developed. An accurate inventory accounting system
will keep track of these modification to inventory goods at all three production stages and adjust
company asset values and the costs associated with the inventory accordingly.
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TASK 2
P3
This is the technique which is consider as the method which is used for determining the
cost as well as the activities which are essential for the company. This help in building the
buying decision for the company such as price appraisal and the bonus. Here are some of the
techniques which are used in making income statements which are explained down below:
Marginal costing: This refers to the costing method for the overall cost which is incurred
to the cost of unit. However the fixed cost remain the same for the longer period of time. So for
the company like Speedboard the management must use this method for computing the income
statements for the three months.
Absorption costing: This is consider as the form of costing technique method which
used in the accomplishment of the practises of the business in the definite manner. This is
the fixed cost as well as the cost which is allocated to the unit of the costing. In the context
of Speedboard the company should prepare the income statements with the fixed cost.
(a) Cost card
Cost card
£/unit
Unit Variable Price 3
Marginal Cost 3
Selling price 5
Less- Marginal cost 3
Contribution 2
(b) Profit and loss account:
Particulars Amount (£)
Apr ’19 May ’19 Jun ’19 Jul ’19 Aug ’19 Sep’19
Sales revenue 375000 300000 450000 375000 350000 400000
Less: Variable cost -225000 -180000
-
270000 -225000 -210000
-
240000
5

Contribution Margin 150000 120000 180000 150000 140000 160000
Less: Fixed Manufacturing
Overheads 150000 150000 150000 150000 150000 150000
Less: Non-manufacturing Cost Per
period 50000 50000 50000 50000 50000 50000
Net Profit/Loss -50000 -80000 -20000 -50000 -60000 -40000
WN1
Calculation of Variable Cost
Variable cost Apr ’19 May ’19 Jun ’19 Jul ’19 Aug ’19 Sep’19
Opening stock 0 45000 0 0 45000
Production cost 225000 225000 225000 225000 255000 210000
Less closing stock 0 -45000 0 0 -45000 -15000
225000 180000 270000 225000 210000 240000
B)
(a) Cost card
Cost card (Absorption costing)
£/unit
Unit Variable Price 5
COGS Per Unit 5
Absorption cost of product
150000/
75000= 2
Selling price 5
Less- Total cost 5
Gross Profit 0
(b) Profit and loss account:
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Particulars Amount (£)
Apr ’19
May
’19
Jun
’19 Jul ’19
Aug
’19 Sep’19
Sales revenue 375000 300000 450000 375000 350000 400000
Less: Cost of Sales (WN1) 375000 300000 450000 375000 350000 400000
Gross Profit 0 0 0 0 0 0
Less: Non-manufacturing Cost Per
period -50000 -50000 -50000 -50000 -50000 -50000
+/- Over/Under Absorption (WN2) 0 0 0 0 -20000 10000
Net Profit/Loss -50000 -50000 -50000 -50000 -70000 -40000
WNI
Calculation of Variable cost
Apr
’19
May
’19
Jun
’19 Jul ’19
Aug
’19 Sep’19
Opening stock 0 0 75000 0 0 75000
Production cost 375000 375000 375000 375000 425000 350000
Less closing stock 0 -75000 0 0 -75000 -25000
375000 300000 450000 375000 350000 400000
Reconciliation of Net Income under Absorption and Marginal Costing
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8

a) Before installation of the new machine
b) After installation of the new machine
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P/V Ratio = (Contribution Margin p.u./ Sales
Price p.u.)*100 65
10

BEP from P/V Ratio 640000
It has been analyses from the variable costing to assess the contribution. Along with this
there have been some difference in the gain and loss of the statistics which are ascertained by the
absorption as well as nominal process. As per this financial report, business concern analyses the
actual positioning which help in identifying the profit and losses of the company which is
beneficial in making effective decision in future. Along with this statements this has been
included in the financial report which help to plan the future and the investment for the
preparation of strategies which are useful for making effective decision for the company.
2 . Financial statement
Scenario 1.
Scenario 2.
After installation
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From the above tables, it has been observed that organization should install new machine
as they are able to earn £1,04,000 and BEP is £0.00 when company sell 16000 units. Thus when
company gain its selling unit there will be more profit for the longer time period.
TASK 3
P4 Explain the advantages and disadvantages of different types of planning tools used in
budgetary control.
This refers to the statements which help in identifying the estimation of the revenue as
well as the expenses for the particular duration (Clarke and et., al., 2019). This help in gaining
the profitability with the firm cost. Hence for the company like Speedboard assembly service this
is crucial for the organisation to make budget as this will help in reducing the upcoming risk
present in the market. Overall this help in manager of the organisation to create the budget for
obtaining the profitability. Here are some of the planning tools which are explained briefly down
below:
Production budget: This is the kind of budget which include the data regarding the
manufacturing of the potential expenditure which occur in the production process. As per the
production budget the manager of the company makes all the polices which are essential for
making more profit for the company. In the context of Speedboard the department must ensure
about the cash flow as this help in making effective decision for the company.
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Cash budget: The cash budget is the plan of the expected cash receipt for the limited
period of time. These cash flow include the revenue collected, expenses paid as well as receipt
and payment. In other words, a cash budget is an estimated projection of the company’s cash
position in the future. For the company like Speedboard the management of the firm must ensure
about the sales and purchase done within the organisation as this will help in making decision
which aid in increasing the revenue of the company. The management use this cash budget to
manage the cash flow of the company. In other words, this will help the firm to correct the
problem before the payments are due.
Sales budget: These are the kind of budget which are made for monitoring as well as
tracking the sales of the firm. Depending upon the data the Speedboard team can analyse the
sales and help forecasting the sales of the company in the well define manner. There are different
kind of benefits for the company such as it helps in minimising the cost and increase the sales for
the company for the longer time period.
TASK 4
P5
This is considering as the different types circumstances where the financial entities do not
have sufficient amount of finances for accomplishing the desire goal for the company. This have
become crucial for the company to adopt the managerial accounting system as this will help in
keeping as well as monitoring the financial record of the company in the well define manner.
There are different kinds of financial problems which are briefly explained down below:
Improvements in the whole expenditure: This is considering as the financial problems
which has been faced every organisation. So in the case of Speedboard assembly the
management must have proper record for the expenses and try to reduce those expenses which
help in improving the financial conditions of the company.
Shortage of sales revenues: This is the kind of financial problems which help in making
slow revenue for the organisation. The financial problems have become the main reason for the
closure of the firm. As for Speedboard assembly services this is essential to make proper plan
and blueprint which is helpful for the company grow and expand in the shorter time span.
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Various techniques that is utilised for addressing the monetary issues are discussed
underneath:
Benchmarking: This is the chain of activities which are related to the measuring of the
performance of the firm such as product, services etc. Hence this is crucial for the organisation to
create the benchmark for the competitors by having effective management tool. Further this is
also important for the company like Speedboard manager to set the benchmark with the
assistance of using accounting technique's in the organisation (CHENG, 2019).
Key performance indicators: KPI is the tool to measure the value by describing the
achievement of the organisation. This is the method which is used at the multiple level to
examine the success of the organisation. For the company like Speedboard assembly this is
essential to make effective decision and focus on the KPI for the growth and development of the
organisation in the well define manner. There are two kinds of KPI that are Financial KPI which
is one of important tool which indicates conditions about How well an organisation is pursuing
in context of revenue and profits.
Financial governance: This is consider as most effectively tool which help in governing
the different aspect of the business and also make sure that firm works smoothly. The process of
financial governance assist in gathering , managing, monitoring and using the financial
information for the betterment of the organization.
Compare among two entities for resolving financial problems:
Basis of differences Speedboard assembly Open house Products Ltd.
Financial problems This organisation is facing the
financial problems because
they have reduces there sales .
This is done as the firm do not
have sufficient amount to pay
to its creditors( Albalaki and
et., al., 2019).
As this firm is facing the
financial crises due to
expenditure. As this impact the
image of the company.
Accounting techniques This is the method through
which the company use to
This help in making effective
decision for increasing the
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perform the operational
activities effectively. This also
help in slow down the
performance of the company.
sales in the well define
manner.
CONCLUSION
From the above mentioned report it has been conclude that management accounting is
vital for the organisation as with the assistance of this they can able to evaluate as well as control
insider circumstances of firm in order to formulate decision for the betterment of entities. The
mangers of the company must ensure that all the activities should be done effectively as this will
help in minimizing the cost for the company and increase the sales as per the requirement. In
addition to this, benchmarking, financial governance are some techniques which are mainly
utilised to respond the issues regarding monetary that are tackle through entities. Along with this
there are several kinds of technique's of planning which is applied in the organisation for
controlling the budget in the well define manner.
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