Management Accounting and Types of Systems

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Management accounting and different types of systems.......................................................1
P2: Different methods used for management accounting reporting:...........................................3
M1: Benefits of management accounting systems:.....................................................................4
D1: Integration of management accounting system with reporting:............................................5
TASK 2............................................................................................................................................6
P3 Profit and cost calculation by using appropriate management accounting techniques:.........6
P4 Planning tools used for budgetary control:.............................................................................8
M3 Use of planning tools and their application for preparing and forecasting budgets:...........10
P5 Organisations are adapting management accounting systems to solve Financial Problems:
....................................................................................................................................................10
M4 Management accounting can lead organisations to sustainable success: ...........................12
D3 Planning tools respond appropriately respond to solving financial problems:....................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is defined as a process that deals with the specific reports
preparation about the source and use of funds in order to improve any business performance via a
more efficient decision making process. These reports are prepared, in some cases, using the
financial statements as information source, but also can use other specific queries which derivate
in other particular reports. Financial accounting is the discipline which, indeed, deals more
properly with the financial statements’ preparation . It is the application of skill and knowledge
that will help management in taking effective decisions regarding organisational growth. (Ball,
2016). This is required in planning process and measuring performance of individuals. It
increases efficiency of company in performance operations as well as assist in completion of
goals. For this report, Airdri has been selected which was founded in Oxfordshire (UK) in 1974.
Business partners of the entity are Peter Philipps and Peter Allen. This report consists of
management accounting reports, systems, planning tools used for budgetary control and
responding to financial problems of Airdri etc.
TASK 1
P1: Management accounting and different types of systems
Management accounting: Management accounting refers to a process of identifying,
analysing, recording of accounting information that can be used internally by administrators for
strategic planning and making decisions. It assists them in calculating profit margins for products
used. Since, this is an internal process of circulating information so it becomes complex for
management to attain accurate data (Bazley, Hancock and Robinson, 2014). This is required by
personnel in solving business related problems with effective and efficient decision making.
Airdri hires management accountants which carry an understanding of internal operations within
the firm. By adopting this practice, planning and performance of individuals has improved in the
company.
Management accounting systems: Management accounting system is a process of
controlling, reporting, planning and evaluating performance of an organisation as a whole. It is
largely concerned with providing economic information to managers for achieving organisational
goals. Every management system is designed to give information to individuals based on their
needs and requirements. This involves use of various systems to value inventory, optimise price
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etc. Airdri uses this method to plan and evaluate performance of people employed in company
(Bebbington and Fraser, 2014). The firm also manages its day-to-day operations for getting
effective as well as efficient results.
Inventory management system: It refers to a process of ordering, storing and using a
company's stock that include raw materials, components, pre-assembled components, and
finished products ready to be sold in managing activities of an organisation. This includes
management of raw materials, finished goods etc. It maintains hard and soft resources used to
check if products are available in a warehouse or in any other place which allows to deliver them
in-time when the customers need it. This system ensures that proper stock count takes place
within an entity and goods are ordered from suppliers before lead time to avoid any stock-outs.
One of the best software to keep a track of goods sold is a barcode printer. The major
requirement of this system is for e-commerce, recording product history etc. (Biddle, Ma and
Song, 2016). Airdri uses inventory management system to keep a record of dryers present at the
warehouse. Valuation can be done on the basis of average cost method, LIFO etc.
Cost accounting system: It is defined as a process of recording, classifying, analysing,
summarising and allocating cost of product to managers within an organisation. This is used by
companies to estimate and track monetary value of goods & services. The two main types of
costing techniques are job order that determines how a company allocates price to different units
of production like direct material, labour, overheads whereas process involves assigning
manufacturing cost to the units produced at various levels of production (Boyle, Carpenter and
Hermanson, 2014). It is required to have a proper accounting system that analyses profitability of
various departments in a firm. Airdri Limited apply system of cost accounting to calculate the
price of its products & services and also offer discount on older versions of dryers.
Job costing system: It is defined as a system which is used to record cost of different
activities of an organisation. This involves manufacturing allocates cost to various activities
happening at a service or job such as assigning salaries to individuals, maintenance of
equipment’s, performance appraisal of employees etc. This needs to consider use of direct
material, labour and variable overheads in production process. It is required to maintain cost
sheets to track how much material is used in developing a product, estimate working capacity of
labour etc. Airdri manufactures electric dryers for which there is a requirement of efficient
labour (Cheng, Wang and Wei, 2015). To check their competency, company can maintain punch
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