Management Accounting: A Comprehensive Guide to Costing, Planning, and Financial Problem Solving

MANAGEMENT ACCOUNTING

Table of contents
Introduction................................................................................................................................3
Task 1 - Demonstrate an understanding of management accounting systems...........................3
P1. Explain management accounting and give the essential requirements of different types of
management accounting.............................................................................................................3
P2. Explain different methods used for management accounting reporting..............................5
Task 2 - Apply a range of management accounting techniques.................................................7
P3. Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costing......................................................................7
Task 3 - Explain the use of planning tools used in management accounting............................8
P4. Explain the advantages and disadvantages of different types of planning tools used in
budgetary control.......................................................................................................................8
Task 4 - Compare ways in which organizations could use management accounting to respond
to financial problems................................................................................................................12
P5. Compare how organizations are adapting management accounting systems to respond to
financial problems....................................................................................................................12
Conclusion................................................................................................................................12
Reference list............................................................................................................................14
2 | P a g e

Introduction
With the introduction of globalization, a huge change has taken place in the business
environments. The business world is now more complicated and it involves higher level of
competition. Surviving in this competitive world of business is the major challenge that the
companies are facing in the current scenario (Drury, 2013). However, there is one way
through which companies especially the large multinational organizations are safeguarding
their operations from the ever increasing threats of internal and external business
environments. This way is known as management accounting. Taking care of financial and
non-financial activities, management accounting became one of the most popular
organizational systems in the recent era.
This study has completely focused on this popular organizational system that has made the
business process easier to the companies. However, the discussion is made from the point of
view of Zylla Company, which is one of the multinational organizations in UK market and
currently it is facing tremendous competition in the market. In order to safeguard the
business, the management of the company has decided to focus on the management
accounting activities and due to that this study has been carried on.
Task 1 - Demonstrate an understanding of management accounting systems
P1. Explain management accounting and give the essential requirements of different
types of management accounting
Management accounting can be defined as an on-going process that keeps the managers
updated about the activities of the business. It mainly takes care of the internal business
activities, but the results or information that it generates is useful for maintaining the
sustainability of the business. Gluhovsky et al., (2016) has explained management accounting
as a broad organizational system involving planning, organizing, co-ordinating and
controlling of the organizational activities. Management accounting is considered to be the
most important part of today’s organizations because it helps the managers developing
effective plans for the business by considering different aspects of the business like, sales,
cost, production, inventory and many others (Kamal, 2015). Therefore, from this point of
view, it can be stated that management of Zylla Company will be able to develop effective
plans for the business if they follow the management accounting techniques.
3 | P a g e

Apart from planning, management accounting is also very useful in co-ordinating the
business activities among different departments of the organization. If the management of
Zylla Company follows the management accounting system, they will require preparing
different reports considering the results of different departments. These reports will be the
base of co-ordination. With the help of these reports, developing effective strategies will be
easier for the managers (Hopper and Bui, 2016). In this context, it is important to be noted
that management accounting is a very important element that controls the organizational
functions. This particular organizational system takes care of the costing techniques which
are the main factor in the context of controlling the business activities. Controlling the cost
level, management accounting can help Zylla Company enhancing their financial strengths.
In this context, it is important to be mentioned that management accounting is different from
the financial accounting. The differences between the two most important systems of the
organization are stated below:
Management accounting Financial accounting
Management accounting is important but not
mandatory for the organizations
Financial accounting is important as well as
mandatory for the organizations.
Management accounting develops reports
and generates information for internal
business usage.
Financial accounting develops reports and
generates information to serve the needs of
the external stakeholders.
Management accounting takes care of the
non-financial and financial both types of
activities (Bruno, 2014).
Financial accounting only takes care of the
financial activities or transactions.
Management accounting covers a broader
area of business management.
Financial accounting is very limited and it is
a small part of business management.
Management accounting does not depend on
the rules and regulations provided by the
financial boards.
Financial accounting activities are guided by
the rules and regulations provided by the
financial boards within the country
(Edmonds et al., 2016).
While discussing about management accounting, it is important to know that management
accounting involves three main systems on which the effectiveness of management
accounting depends. These three main systems are as follows:
4 | P a g e