Management Accounting: A Comprehensive Guide to Techniques, Systems, and Applications

Management accounting
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Table of Contents
Introduction......................................................................................................................................4
Task 1...............................................................................................................................................5
a) Explanation of management accounting and the essential requirements of management
accounting system........................................................................................................................5
b) Presenting financial information.............................................................................................7
M1 Evaluate the benefits of management accounting systems and their application within an
organizational context..................................................................................................................9
D1 Critically evaluates how management accounting systems and management accounting
reporting is integrated within organizational processes.............................................................10
Task 2.............................................................................................................................................11
a) Calculate costs using appropriate techniques of cost analysis to prepare an income statement
using marginal and absorption costs..........................................................................................11
M2 Accurately apply a range of management accounting techniques and produce appropriate
financial reporting documents...................................................................................................13
D2 Produce financial reports that accurately apply and interpret data for a range of business
activities.....................................................................................................................................14
Task 3:...........................................................................................................................................15
a) Different kinds of budgets and their advantages and disadvantages.....................................15
b) The budget preparation process including determination of pricing and different costing
systems that can be used............................................................................................................16
c) The importance of budget as a tool for planning and control purposes................................17
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M3 You will need to analyze the use of the different planning tools and their application for
preparing and forecasting budgets.............................................................................................18
Task 4:...........................................................................................................................................19
Explain ways to which the Balanced Scorecard approach suggested by the auditors can be
used to respond its financial problem and compare this approach to another management
accounting approach used in another organization of your choice............................................19
M4 Analyse how, in responding to financial problems, management accounting can lead
organizations to sustainable success..........................................................................................20
D3 Evaluate how planning tools for accounting respond appropriately to solving financial
problems to lead to sustainable success.....................................................................................21
Conclusion.....................................................................................................................................22
References......................................................................................................................................23
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Introduction
In the business there is the need to perform all of the operations in the most effective manner and
for that proper information and plan will be required. This will be carried with the help of
management accounting as there are systems which can be used for this purpose. There will be
use of various tools and techniques by which it will be possible for Tech UK to make the
required decisions in most effective manner. The planning will be done and also the income
statement in relation to the company will be prepared in the report. All of the issues will be
undertaken with the help of the approaches and techniques available by bringing them in use and
all this will be discussed below.
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Task 1
a) Explanation of management accounting and the essential requirements of management
accounting system.
Management accounting is the essential requirement of all the businesses as in this various
processes will be undertaken such as collection, analyzing, interpretation and identification
which will be assisting management in making of the decisions. This all will be performed with
the help of the principles which are available in this respect (Weygandt, et. al., 2015). There is
the need to consider financial accounting also so that all of the aspects are covered in proper way
and for that difference among them are provided below:
Financial accounting Management accounting
The main accounts which will be managed in
this will be all related to the financial aspects.
Under this all of the information will be taken
into use so that all the decisions are made
appropriately.
The company will be making the reports which
will be used by the outside parties so that
proper investment decisions are made by them.
The reports in this will be used for the internal
purpose only by the managers of the company.
There will be specified format which will be
used and also they are undertaken for a fixed
time period.
There will be no specific format or time limit
which will have to be followed under this.
Decision making by the use of management accounting
Decision making is the important concept of the business as by that only success will be ensured
and for that there is the need to use various tools. This will be made possible with the help of
management accounting as all of the required techniques are available under this. The main
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aspects is the cost which will be covered and for that information will be collected so that it can
be used in the approaches such as target costing, activity based costing and standard costing
(Dong, et. al., 2014). This will then be further utilized in the ascertainment of the best price
which will be providing the company with the required profitability. There are several methods
for this under management accounting such as penetration pricing, cost plus pricing and price
skimming. The budgets will be made which proves to be the plan which can be followed for the
attainment of targets. The company is required to make the improvements and for those
decisions will have to be made and they can be made possible with the help of variance analysis
in which the deviations together with the reason for same are identified and they will be used in
the further process (Ada & Ghaffarzadeh, 2015). All of the above mentioned actions will be
undertaken by the help of the information which will have to be collected by the management by
the use of the various systems which are there and an understanding of the same will be gained
below:
Cost accounting system: The data in relation to cost is most essential and that will be collected
by the help of this system. In this all the aspects which are to be noted in this respect will be
considered and for that various methods are there which will be taken into use. By the help of
them accurate cost will be determined by the company. Tech UK can undertake actual costing if
they believe in realistic accounting as all of the actual values will be used under this. The targets
are required to be achieved and this will be made possible when the cost will be ascertained by
the use of the standards that is performed in standard costing. A combination of both is covered
in normal costing in which direct expenses are taken in actual terms and the overheads will be
incorporated by the help of standards.
Job costing: The Company will be required to calculate the cost in relation to various jobs which
are undertaken in the business. There are several methods which can be used under it and this
will be including the process costing in which all of the processes which are performed will be
considered and the cost will be calculated. The contracts which are made by the company will be
valued by the use of contract costing in which all the activities which will be undertaken in the
contract will be covered (Zaleha Abdul Rashid, et. al., 2014). The company carries the
production in batches and for that batch costing will be taken into consideration so that the
identified cost can be allocated among all the units which are produced under that batch.
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