Management Accounting Systems and Reporting

This document provides an introduction to management accounting and its systems, including the basic requirements for various forms of MA systems. It also discusses the benefits of management accounting systems and how they are integrated within an organization's processes. The document further explores management accounting reporting and evaluation, as well as the potential merits and demerits of different costing methods. Additionally, it covers the purpose of budgeting, how entities adjust MA systems to handle financial problems, and how MA can improve overall financial performance. Finally, it evaluates planning tools used to minimize financial issues in management accounting.

MANAGEMENT
ACCOUNTING

Contents
INTRODUCTION...........................................................................................................................3
1.1 Describe MA and point out the basic requirements for the various forms of MA systems:. 3
1.2 Management Accounting Reporting......................................................................................4
1.3 Evaluation of benefits of Management accounting systems:................................................5
1.4 Evaluation about how the MASs and MA is united/integrated within organisation’s
processes:.....................................................................................................................................6
2.1................................................................................................................................................7
2.2................................................................................................................................................9
2.3..............................................................................................................................................11
3.1..............................................................................................................................................13
4.1..............................................................................................................................................17
4.2..............................................................................................................................................19
4.3..............................................................................................................................................20
CONCLUSION..............................................................................................................................21
REFERENCES..............................................................................................................................22

INTRODUCTION
Management Accounting is general concept that encompasses reporting, accounting, and
leadership frameworks together with famous corporate growth approaches. The central function
is to assess, quantify and track monetary and financial data that will aid management in making
decisions to meet a corporation's aims (Jiambalvo, 2019). It is primarily used by top managers in
taking key decisions and help to form strategies. It is a systematic framework which gather fiscal
data and transform it into useful information which finally used by managing personnel for
managerial decision-making.
The report discusses about numerous aspects of managerial accounting and its systems
along with discussion upon basic-requirements of its systems in relation to UCK furniture.
Further it involves systematic comparison of two or more business units with help to ratio
analysis.
1.1 Describe MA and point out the basic requirements for the various forms of MA systems:
Management accounting simple can be refers to process or mechanism which effectively
convert raw-data into relevant or critical information with intent to assist managers throughout
the managerial decision-taking phase. IMA (Institute of Management Accountants) explains that
"Management Accounting is indeed a practice requiring collaboration in financial decision-
making, strategic planning and output administration processes for top management
(Appelbaum, Kogan, Vasarhelyi and Yan, 2017). It incorporates financial reporting as well as
controlling resources to support management personnel in drawing up and managing the
key strategies of an enterprise.
Key perquisite of MA is adaption of processes defined under its different systems.
Moreover, it requires systematic collection, processing and evaluation of raw-data to convert
such data into more classified and effective meaningful information.
Managerial accounting is crucially important in thorough analysis of different
information and facts which are taken by managing personnel in organisational financial and
non-fiscal decision making processes.
Management accounting systems acts as a framework or model consisting of a variety of
procedures, methods and approaches used to review corporations 'functions. This has range of
systems outlined as below:

Inventory management system: This system is being employed to manage final products and
manufactured goods via point of supply chains to final distribution to consumers by managing
them. It conducts the diverse range of operations necessary to monitor product inventories inside
the entity. Through that, UCK furniture can manage stock-related costs for delivering
good quality outcomes. A manufacturing corporation faces multiple problems in keeping
details/information about existing stocks, raw materials, manufactured goods etc. Therefore, this
framework is configured in such a manner as to reduce the complexities. This system helps by
providing their parameters to maintain central tracking of each inventory (Weygandt, Kimmel,
Kieso and Aly, 2018).
Price Optimization system: This system/framework is about ascertaining the best and
reasonable costs that should be spent in a corporation's products or services. This enables a
corporation to evaluate multiple prices on an array of products by considering buyer
preferences and tastes. This assists in forecasting commodity prices at various demand scales and
is mixture of costs and production costs for improved performance. In this method, there is a
specific procedure that is pursued. UCK furniture can therefore use this to pick the correct
prices of the different furniture as per quality and design in order to enhance the revenue and
demand at optimum price.
Job Costing system: The system covers the aggregate reporting process and costs information
assigned to a single business jobs or manufacturing process. Job costing system is advantageous
for determining the expense of a given products or service and offering an option to review it
against the benchmarks and identify the discrepancy. This MA system is beneficial in UCK
furniture manufacture of diverse items with different features as it provides accountability by
assigning cost to different jobs. Job costs are categorized into raw products, raw labours and
overheads employed to assess actual costs of goods.
1.2 Management Accounting Reporting.
Reporting is crucial task in managerial accounting which provide effectiveness and
reliability to information used in the different discussed system of MA. There are several
methods which can be used by managers to report information as a part of managerial accounting
processes. Here key matters in reporting method is relevance, updated information, reliability,
understandable, accuracy of reportable information and data. As relevant and updated

information ensure the accurateness of decisions taken based on such information (Nitzl and
Chin, 2017). All these criteria related to information can be satisfied by adopting systematic
processes and selection of appropriate sources of information. In this regard following is
comprehensive discussion on key reports related to MA in context of UCK furniture, as follows:
Job costing report:
This is a report that enables the business to track ongoing operations or systems. this is
beneficial to recognize issues or assumptions that are evaluated to minimize them throughout a
specific job. It allows the managers before and when it's done to evaluate the concerns in a job
process. This report can help UCK furniture in finding the any faults in the production process
or specific jobs to eliminate them to enhance performance.
Inventory report:
This report is required to provide descriptions of the corporation's stock or inventories.
This indicates the accessible raw materials during holding period and is employed by
management to make informed decisions. The concerns that are taken with account include the
retention time, the cost of storage along with other essential aspects. For comparison, the forms
that can be used with this for estimation are the LIFO model (Last in First Out), the FIFO
approach (First in First Out) and the technique of weighted average value. -- of these, along with
efficiency, has its own individual pros and cons. UCK furniture use this system to assess the cost
of each kind of inventory item like raw items, materials, processes goods and finished goods
which assist mangers to track real time movement of inventories.
Performance report:
UCK furniture should use this kind of report to analyse each employee's adherence or
performance with the criteria and evaluate any deviation. This helps to make decisions on
employee or staff appraisals depending on a performance reviews. This also aims to create and
promote better strategies and services for employees employed within the organisation. It will
allow them to work faster and with total efficiency. Through this report, respective company can
concentrate on and rewards each of its workers based on their final performance.
1.3 Evaluation of benefits of Management accounting systems:
System Name Benefits
Inventory Management System In UCK furniture this inventory system help

managing staff and production managers to
optimise the aggregate costs of stocks and
track each movement and flow of inventory.
Price Optimisation System This system in UCK furniture can be used to
assess the key relationship among demand and
price of furniture. This useful in setting the
most efficient prices for its products (Andrei,
Gâlmeanu and Radu, 2018).
Job Costing System This system is efficient in maintain
accountability within entity. Further it enables
managers to effectively assigning costs to
defined key job processes within UCK.
1.4 Evaluation about how the MASs and MA is united/integrated within organisation’s
processes:
Multiple processes as well as practices serve as the central grounds of numerous MA systems as
operational structures build the foundations for such systems to be implemented. The
consequences of multiple operational processes are important specifications of the above-
mentioned systems. Like in the UCK, managers carry out manufacturing, financial and
accounting procedures that provide vital information and reporting on price optimization
programs and inventory control system such as cost data, inventory status, criteria, as well as
other accounting or financial data. Thus, integration of all processes within MA systems is
significant (Boyd and Pitre, 2019).
2.1

(b)Explain the potential merits and demerits of the both methods.
Marginal costing method- It can be described as a kind of accounting technique that is related to
taking fixed costs as time cost and variable expense as product expense. It has certain advantages
and disadvantages such as:
Benefits: This lowers the amount of losses incurred or under recovery by splitting fixed costs
from manufacturing costs (Ward, 2012).
Drawbacks- The separation of costs between fixed and variable is a demanding task. Fixed costs
do not account for semi-variable or semi-fixed costs.
Absorption costing method- Compared with marginal costing method, it is variant in nature. In
this fixed cost and variable cost are considered as product cost. Below its advantages and
disadvantages are mentioned:
Benefits- One of the main advantages of absorption costs is that GAAP complies with this
approach and is crucial in this manner.
Drawbacks- It is not helpful in regards with operational efficiency.

2.2.

2.3.
Interpretation and Analysis- In regards to above income statements and cost estimates under
using absorption and marginal processes, net profit by marginal model is estimated to be 75000
pounds and 64500 pounds alike over the January and February eras, whereas net profit is 77000
pounds and 63500 pounds alike during January and February by absorption strategies. The
recording of net profits varies due to over / under fixed costs.

SECTION 2
3.1.
Define and explain the purpose of budget:
A financial budget described as a fiscal plan designed to include forecasts of a
corporation's short- and lengthy-term spending and revenue for a particular time period (Renz,
2016). It is helpful for handling tax revenues as well as budget determines spending outflows on
a monthly, quarterly, or yearly basis.
Budget aims is to distribute, plan, organize, handle and monitor the allocation of funds. This is
also an important tool for decisions, reporting on corporate performance, and forecasting income
and spending. Limited resources are effectively managed by help of budgeting (Fullerton,
Kennedy and Widener, 2014).
Preparation of Budgets:

4.1.
Compare how entities adjust MA system to handle financial problems:
Organizations such as UCK are introducing MA frameworks / systems like price
optimisation system, inventory management and many more in order to meet goals and for
tackling financial challenges and concerns. Recognizing financial problems in the absence of
using the accounting control frameworks or methods is challenging. Logically, it is not easy to

come up with solutions to financial obstacles where issues cannot be identified. By management
accounting processes, a company is managed to consider risk points according to which fiscal
difficulties solved successfully and correctly (Otley, and Emmanuel, Kotas, 2014).

4.2.
How MA can aid to improve overall financial performance of both corporations to attain
sustainable success:
MA helps top build a system which allows workers management to boost overall
financial efficiency with the aim of achieving sustained results (Cazier, Rego, Tian and Wilson,
2015). It also includes using the ratios to compare two company's financial results. Compression
of UCK furniture and UCK woodwork into the above-mentioned calculated ratios is the follow
in this respect:
ROCE: ROCE measures the performance of the activity in terms of the net resources invested /
employed in the undertaking. It shows the income of the company as compared to the capital
funds worked the considerably higher the percentage, the better for enterprise. The UCK's
Furniture Design Division and the Gearbox Section both have a ratio of approximately 25.49%
and approx 11.27%, while the Woodworks division of UCK also has a ratio of 8.56%. This
means that UCK's Furniture-Design Segment generates the most income per cent of the capital
invested, followed by UCK Furniture and Woodworks 'Gearbox Segment.
Assets turnover ratio: It relates to proportion of sales per unit of accumulated assets that an
organization can produce. As per the above percentages, the Gearbox Division of the UCK has
the highest percentage of asset turnover at around 0.7798, the UCK Furniture-Design Section at
around 0.5627 and Woodworks at around 0.1918 alike. This reveals that UCK section Gearbox
will make full profit per unit of revenue.
Operating profit margin: It means percentage of Income Company gets from sales. The higher
the number is, the better for the organization. For the Woodworks division, the average operating
income figure is 44.64 percent, while the Furniture Design Segment's OP margin is 45.30 and the
GearBox Division is 14.46 percent, suggesting that the UCK Woodworks segment will earn the
greatest benefit over its sales.
4.3.
Evaluation of planning tools utilized to attain success in management accounting to
minimize financial issues
Planning tools include forecasting, strategic planning, performance evaluation, decision-
making, creating maps and graphs for a visual analysis, to mention a few of them from the

exhaustive list. Both budgeting and budgetary measures are acts taken to develop a viable
financial and management plan (DRURY, 2013). The approaches used in corporate performance
evaluation for financial preparation and management assistance, and the potential for growth.
The application of these techniques of forecasting of budgeting is used for basic market research.
This is accompanied by a discussion on some planning tools:
Budgeting: It is a process by which companies create a fund-investment strategy. The budget is
given the name for the investment strategy. Developing a budget strategy allows managers the
ability to determine ahead if the organization would have ample money to pursue everything they
need or wish to do. Budgeting is simply a calculation of expenditures toward the revenues of
businesses.
Budgetary control: It means a process by which forecasts are prepared for the upcoming timeline
and compares, if any, with real outcomes for measuring variances. Comparing budgeted
forecasts with real results will help managers identify deviations and take appropriate corrective
steps.
Project appraisal: It indicates a concept in a formal way, including before resource are
distributed, that correlates to the manner of evaluating and challenging case for proceeding with
a specific project. In short, it's the method of calculating project viability. Assessment is a vital
decision-making process, which sets the framework for execution and encourages investment in
project funds (Herzig and et.al. 2012).
Standard costing: It means accounting simply to replace / substitute an expected loss for real
expenses of financial reports. The variations are then recorded to indicate the distance between
the expected and the real costs.
CONCLUSION
Form above study it has been analysed that every organisation requires a specific
structure or framework for managing their numerous operations, processes and task. MA is only
key solution of it which is a systematic collection of systems, planning tools and other key
techniques which aggregately or individually assist managers in carrying out managerial
operations and enable them to respond to different financial issues. This also involve some
practical approaches like marginal and absorption costing as to prepare financial reports and

statements. Analysis of outcomes of MA systems enables managers to deal with adverse
financial and organisational issues.

REFERENCES
Books and Journals: