Management Accounting: A Comprehensive Analysis of Systems and Applications

Assignment – Management Accounting
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Table of Contents
Introduction....................................................................................................................................................3
Task 1.............................................................................................................................................................4
[M1] Evaluate the benefits of management accounting systems and their application within an
organizational context for the chosen scenario.........................................................................................8
[D1] Critically evaluate how management accounting systems and management accounting reporting is
integrated within organisational processes..............................................................................................10
Task 2...........................................................................................................................................................11
[M2, D2] Demonstrate an understanding of management accounting systems...........................................11
Reconciliation statement is prepared to reconcile the net income of both the statements. Net income of
marginal cost is reconciled it with that of the absorption cost. This can be done by the two ways-.......14
Difference between Marginal Costing and Absorption Costing.............................................................14
Task 3...........................................................................................................................................................16
LO3 Tools of Planning along with the Advantages and Disadvantages......................................................16
[M3] Analysis of the use of the tools of the planning.........................................................................19
Task 4...........................................................................................................................................................22
LO4 Compare ways in which organization could use management accounting to respond to financial
problems.......................................................................................................................................................22
[M4] Analyse how, in responding to financial problems, management accounting can lead
organizations to sustainable success........................................................................................................24
Conclusion...................................................................................................................................................25
Bibliography................................................................................................................................................26
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Introduction
The report covers the aspects relating to management accounting. All the possible aspects
relating to management accounting has been covered in the report. The report has been divided
into four parts. Each part deals with the individual part of management accounting system. A
combined reading of all the four sub-points will help to give a clear understanding of the concept
of management accounting reporting. For the ease of understanding of the ambit and scope of
management accounting, a practical instance of UK based company namely; Hakim Group has
been taken for the reference purpose. Hakim Group is the top SME Company established in the
year 2001 particularly engaged in the optical business. This will facilitate the reader of the report
to understand in an interpretative manner. The applicable and suitable conclusions have been
given at appropriate places. This will help to understand the role and significance of management
accounting system.
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Task 1
Introduction
The given report deals with the concept of management accounting in deals. This will help to
understand the scope and ambit of management accounting in detail. The report has been
covered in two parts. The first part deals with the essential requirements of management
accounting system. The latter part deals with the different possible methods that can be used for
management accounting reporting.
Content
Management accounting is concerned with the managerial accounting and other aspects of
management. All these branches of studies help to achieve organizational goals and objectives.
As such, every business organization whether manufacturing concern or service-oriented needs
to formulate and implement management accounting in their organizational structure. Sometimes
management accounting and management accounting system are used interchangeably
(Omotayo, 2015). However, there is a conceptual difference between both the concepts. For the
better result, all the departments operating or functioning in the concerned business enterprise
needs to work in coordination and with mutual assistance. This can be done by the preparation of
various budgets by all the concerned departments. This will help to establish pre-determined cost
and revenue standards for every department. Achievement of their respective objectives will
ultimately help to fulfill overall organizational goals (Sukhia, et. al., 2014).
Hakim group is the UK’s best small company as per the Sunday Times List for 2018. The
company is continuously attempting to diversify its business operations. As such, the
management accounting will help to diversify its business operations and activities.
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Image 1: Essential requirements of management accounting systems
Source: By Author, 2018
The above essential and prominent requirements of management accounting have been explained
in detail. These requirements need to be present if the organization wants to formulate and
implement management accounting system in their organization.
1. Planning: For management accounting to be successful, proper planning needs to be done. This
planning will provide a strategic direction to all the personnel working at all the levels of the
Hakim group (Sukhia, et. al., 2014). All the possible circumstances should be considered during
the planning stage. The assumptions should be listed to the extent possible. Also, the possibility
of these assumptions should be mentioned. This will give the planning report a better approach
and reflect an achievable stage. For making planning an effective step, all the concerned
departments or segments of Hakim Group should be involved in the planning.
2. Management accounting reporting: The useful information generated from the management
accounting system is formulated under the management accounting reporting. For information to
be presentable, it is essential that information should be presented in an informative way. There
are many ways to present information in an understandable manner. The major tools used to
present information are charts, tables, graph and bar charts. This will help the reader to interpret
the information accurately and correctly (Omotayo, 2015).
3. Better coordination: The management accounting will provide fruitful result only if there is
proper coordination and management between all the departments and segments of the Hakim
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Planning
Management accounting reporting
Better coordination
Correct decisions

group. Only then the organization will be able to achieve the results and outcomes of the
management accounting systems (Guga & Musa, 2015). Such coordination can be maintained if
all the departments maintain a healthy environment in the concerned organization. Besides,
within the department, there should be a trustworthy relationship between all the employees and
personnel working at all the levels.
4. Correct decision: The management accounting should provide the correct and accurate result
and output keeping the assumptions in consideration. The incorrect or misleading result may
facilitate the top level management to take wrong decisions (Anna, 2015). Taking wrong
decision may bring closure to the business of the Hakim group. This is the reason that the
branches of management accounting need to be carefully applied by any organization. All the
possible consequences should be considered before going to any branch of management
accounting (Ada & Ghaffarzadeh, 2015).
The different methods that can be used for management accounting reporting are as follow:
Image 2: Different methods used for management accounting reporting
Source: By Author, 2018
Budget reporting: Under budget reporting, different types of budgets are prepared. Budgets are
prepared by different departments or segments of the concerned business enterprise. These
budgets determine or fix the standards or benchmarks for relevant cost or revenue. Personnel or
employees of all the departments must work to achieve the departmental objectives. This will
help to achieve organizational goals and objectives. This can be possible only if all the
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Budget
reporting
Variance
analysis
Capital
Budgeting