Management Accounting- Assessment

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION................................................................................................................................3
MAIN BODY.......................................................................................................................................3
LO 1......................................................................................................................................................3
P1. Assessment of various tools of management accounting systems.............................................3
P2. Defining various methods of managerial accounting reporting................................................4
M 1. Evaluating the importance of management accounting techniques and systems...................5
D1. Critical evaluation of management accounting system and reporting in integration with
organization process.........................................................................................................................6
LO 2......................................................................................................................................................6
P 3. Effective management accounting techniques..........................................................................6
LO 3......................................................................................................................................................9
P4. Benefit and drawback of various types of planning tools in budgetary control........................9
M 3. Assessment of various planning tools for predicting and preparing budget. .......................11
LO 4....................................................................................................................................................12
P 5. Comparison of the organization to respond to financial problems.........................................12
M 4. Analysing how evaluation of financial problems can lead to sustainable growth of
organization....................................................................................................................................13
D 3. Planning tools for solving financial problems......................................................................13
CONCLUSION..................................................................................................................................14
REFERENCES...................................................................................................................................15

INTRODUCTION
Management accounting is a concept which relates to the preparation as well as presentation
of all the accounting, statistical as well as financial information in the internal managerial report. By
using this report, it assists the manager of company in making crucial business as well as
investment related decisions in line with the business goals. By formulating sound and effective
business strategies, plans and policies every business organisation can successfully achieve its set
desired business goals and objectives in the economical manner. The report is based on Morphy
Richards, which is manufacturing company founded in 1936 engaged in the business of electrical
and home appliances. The company is having its headquarter in South Yorkshire, England. The
report will give deep insight related to different managerial accounting techniques & systems which
can assist the management in their decision-making process. Also, it will streamline various
budgetary planning tools by use of which Morphy can make high production and profit margin and
solve its financial issues as well.
MAIN BODY
LO 1
P1. Assessment of various tools of management accounting systems.
Management accounting
Management accounting is an effective tool which helps manager of the organization in
effectively evaluating the financial reports of the Morphy Richards which leads to higher decision
making (Management Accounting – Meaning, Advantages & Functions, 2018). It helps in analysing
the cost of the business in an efficient manner. Management reports are prepared on a timely
manner which helps internal management of the organization in taking strategic decision with
utmost accuracy and efficiency.
Management accounting systems
Management accounting system is an effective tool which focuses on providing statistical and
managerial information to the manager of the organization for strategic decision making (Kaplan
and Atkinson, 2015). On the contrary financial accounting gives information to the external
stakeholders of the organization. It helps in planning, organizing, controlling and monitoring the
activities for higher operational standards and efficiency. This helps in forecasting the future and
controlling the cost of the enterprise which leads to high growth and profitability for the Morphy
Richards.

Price optimizing system: It is an effective management accounting system which helps in
analysing the behaviour of the demand in the market with the changed in the price of a particular
products and services. This system helps management in evaluating the appropriate price which will
generate higher profits in return (Otley, 2016). This helps in analysing the buying behaviour of the
customers with the change in the prices. This helps Morphy Richards in taking effective decision
which leads to higher profits.
Cost accounting system: It is also referred to as product costing method. This management
accounting system helps organization in estimating the cost of the product or activity. Cost
accounting system leads to inventory valuation, cost control and profitability analysis. This system
helps Morphy Richards in effectively evaluating the accurate cost of carrying out the operations of
the business.
Inventory management system: It is an effective process of ordering, reordering and storing
the inventory of the organization on a timely manner without any delay. This helps in managing the
raw material, finished products and various other components related to the manufacturing and
production process (Renz, 2016). This mainly comprises of LIFO, FIFO and weighted average
method to accurately value and manage the stock of the Morphy Richards.
Job costing system: It helps Morphy Richards in accumulating and distributing cost to each
individual unit of the production. This method helps management in keeping track of the cost
assigned with each job (Maas, Schaltegger and Crutzen, 2016). Job costing system takes into
consideration direct labour, direct labours and overhead cost in order to accumulate the accurate
cost of the each unit of output.
P2. Defining various methods of managerial accounting reporting.
Managerial accounting report is a statement which is prepared by the company by
considering every material and relevant information of accounting nature about the business. It
helps company in process such as effective allocation of resources, evaluating & measuring the
performance level, decision making etc. These are of following types:
Budget report- Is a report which helps Morphy Richards in making estimates about future
business expenses and revenue amount for a definite period. It helps the management of Morphy
can forecast about cost amount to be incurred for carrying on a specific business operations. It also
helps in determining the level of variance, by making comparison of actual with estimated one
(Church, Kuang and Liu, 2019). Thus, plans and strategies are framed by Morphy as per the
variance determined for overcoming the issue of low probability and performance level.
Accounts receivable report- It tells about amount or the bill that are to be received by the
company on the credit sales made to the customers, vendors etc. This report determines the amount

of money due on to be received by Morphy. Also, it assists in determining the time period in which
the company is going recover its due amount and issues being faced by company in collecting its
money. With the help of this report, Morphy can assess its defaulters and can formulate strict credit
policies for improving its cash flow function.
Cost accounting reports- It helps in computing cost expenses incurred for producing a
product or unit. This report depicts about information relating to the cost expenditure related to the
material, labour and overhead necessary for carrying on the production function. With the help of
this report, Morphy can eradicate cost associated with unproductive department of business and thus
can maximize its overall business profitability and performance level (Prosser and et.al., 2016).
Performance report: it is an effective management accounting report which helps in
evaluating the performance of the company by effectively analysing the reports. This method helps
in evaluating the actual outcome by comparing it with the set budgeted plan (Stiglitz, Sen and
Fitoussi, 2017). In case of any variance necessary action is taken which leads to future growth and
success. This report helps in reviewing the performance of the company and taking strategic
decision. This report keeps a proper track of the information in order to reach desired goals and
objectives.
M 1. Evaluating the importance of management accounting techniques and systems.
Price optimization system: It helps in evaluating the buying pattern of the customers and their
preference with the change in the level of prices. This helps management in taking viable and quick
pricing decision in order to control the production according to the demand.
Cost accounting system: It helps in optimizing the operations of the business by controlling
cost to carry out specific activity (Klychova and et.al., 2015). This system helps in evaluating
profitable and non- profitable activities, control over material, expansion of production, fixation of
prices, aids future planning, increased productivity and efficiency, etc.
Inventory management system: This management accounting system helps in reducing
wastage and preventing stock. It helps management in optimizing stock, enhanced automation and
reducing labour expenses. Inventory management system can help improve the productivity and
efficiency which helps Morphy Richards in future growth and development.
Job costing system: It is beneficial in evaluating the cost attached with each unit of
production (Hall, 2016). It helps management of Morphy Richards in taking strategic decision and
controlling cost for higher generation of profits.

D1. Critical evaluation of management accounting system and reporting in integration with
organization process.
(Messner, 2016) established the fact that, Management accounting system helps in controlling
and monitoring the activities of the Morphy Richards organization in order to take strategic
decision. It also helps in predicting the future and controlling the cost in order to generate higher
profitability. (Renz, 2016) argues and sought to analyse the fact that, management accounting
system is based on intuitive decision making and is based on past information of financial and
management reports. They also critically argued that, it is a costly method and is suitable for large
companies.
(Kaplan and Atkinson, 2015) established the fact that, Management accounting report helps in
effective allocation of resources, performance and operational efficiency of the business and
particular activity in order to take strategic decision making. (Hopper and Bui, 2016) argues and
sought to analyse the fact that, management accounting report is based on financial records and take
into consideration past data which hampers the efficiency of decision making and leads to hamper
the decision making process.
LO 2
P 3. Effective management accounting techniques.
Absorption costing: It is an effective technique which helps in evaluating all the cost
associated with the manufacturing process. It takes into consideration material, labour and overhead
cost to determine the actual cost to carry out the production activity (Labro, 2019). Absorption
costing takes into consideration both fixed cost and variable cost. This is beneficial because it takes
into consideration all cost of production for a specific accounting period.
Marginal costing: It is an effective method to evaluate the cost of producing one additional
unit at the time of production (Kannaiah, 2015). This method helps in determining the optimum
production capacity of the company which helps in maximizing the profit (Bjørnenak and Nørreklit,
2018). This is a point where the company will produce upto a point where marginal revenue equals
to marginal cost for higher profitability.
Marginal costing method:
Sales price 50
Direct material cost 18
Direct Wages 4

Variable production overhead 3
Total variable production cost 2

Absorption costing:

Interpretation: The sales revenue of the company on March is 500000 and in April is
6000000. The absorption costing method takes into consideration all cost of production for a
specific accounting period. The cost mainly consists of material, labour and overhead cost, fixed
cost and variable cost to estimate the profit and loss of the company for a specific financial year.
The profit generated in case of marginal costing in March is 61000 and on April is 101000. The
profit generated in case of absorption costing in March is 79000 and on April is 83000. This states
the company is in profitable position and leads to higher sustainable growth. It has been evaluated
that absorption costing is an effective method because it considers all the cost at the time of
production which helps in interpreting accurate results and outcomes. The marginal costing method
takes into consideration only those cost which were incurred at the time each individual unit was
produced. On the other hand, absorption costing takes into consideration production cost for all the
units produced.
LO 3
P4. Benefit and drawback of various types of planning tools in budgetary control.
Budgetary control is an effective tool which helps in evaluating the actual performance with the
budgeted plan by effectively finding out the variance and taking necessary action for higher results
and outcomes. This helps management of the organization in anticipating the future need and
controlling cost. This helps in effectively evaluating the performance of each department in the
organization and take strategic decision for optimum results and outcomes.
Zero based budgeting
Zero based budgeting is an effective budgetary tool where the expenses are justified for a
new period from a scratch. The budget is calculated for the specific period without considering any
past budgeted plan (Mohamed, Kerosi and Tirimba, 2016).
Advantages of Zero based budgeting

It helps in efficient allocation of resources in a cost effective manner by controlling and
improvising operations of the Morphy Richards. It is also beneficial in lowering cost and proper
execution of the plan.
Disadvantages of Zero based budgeting
The major drawback of Zero based budgeting is that it is a time consuming process because
budget is prepared from the zero base. Lack of expertise and extensive process is also a drawback of
this method.
Operating budgeting
This planning tool helps in estimating the expenses and revenues associated with a particular
financial year. This helps in identifying and estimating the resources and cost associated to the
operations of the business. This method helps in building financial reserves and projecting future
expenses.
Advantages of Operating budgeting
This helps management of the organization in keeping track on the operations and
productivity of the business. This helps in evaluating the expenses and helps business to keep
reserves for smooth functioning of the organization.
Disadvantages of Operating budgeting
Lack of talented expertise is a major drawback of this business which does not give accurate
estimation. It also leads to inflexibility in decision making which eventually hampers the
performance and operations of the business.
Cost budgeting
For any project to be made, the estimations that are made for the expenses and cost of it are
known as cost budgeting. The allocation of cost to the various departments of the project that are
assigned are done under the cost budgeting (Gooneratne and Hoque, 2016). cash budgeting helps in
evaluating and forecating the cash flows i.e., cash inflows and cash outflow of the company.
Advantages of Cost budgeting
Cost budgeting helps in estimating the cost of the project in an effective manner. This helps
in eliminating unnecessary cost at the time of carrying out specific activity. This method helps in
controlling cost which leads to higher profit for the Morphy Richards. This helps in evaluating the
liquidity position and maintaining reserves for the company.
Disadvantages of Cost budgeting

It is difficult to identify cost to carry out each activity. It is a complex and time consuming
process. This method leads to manipulation of data which eventually leads to distortion of actual
results and outcomes. It also takes into consideration past historical data for evaluating future cash
flows. This hampers the accuracy and validity of the results.
Activity based budgeting
Budget prepared using the activity based costing after consideration of the overhead costs is
known as activity based budgeting (Ofosu, 2018). In management accounting it deals with the
current year budget and has no relation to the past year's budget. The purpose to prepare activity
based budgeting is bring out the efficiency of the activities that take place in an organization.
Advantages of Activity based budgeting
Evaluation of each and every activity takes place in such a budget. The steps involved are
included and the irrelevant activities are excluded from it. Due to the exclusion of the irrelevant
activities, the cost is minimized and it has a competitive edge over the others. The budget is
prepared keeping the whole organization in mind and not only for one department of the business
unlike any other budget. The aim of this budget is to serve the customers at best price so it helps
build a good relationship of the business with the customers.
Disadvantages of Activity based budgeting
Activity based budgeting aims to serve the customers well so a deep study is required to
prepare this budget. There are various estimations required to prepare this budget so it is a complex
process for the organization. Since it is a complex process it requires a lot of resources like
employment of top officials and many other and also is a time consuming process. Only short term
goals can be achieved by preparing an activity based budget and not the long term goals can be
accomplished by this method.
M 3. Assessment of various planning tools for predicting and preparing budget.
Planning tools like cash budget, zero based budget, activity based budget helps management
in taking strategic decision in order to forecast the future needs and requirements. It helps in
controlling the cost of the business which leads to higher productivity and efficiency. The budgets
are prepared by taking into consideration past budgeted plan which helps in controlling cost and
taking decision. Morphy Richards will opt for balance scorecard tool to solve the financial problem.

LO 4
P 5. Comparison of the organization to respond to financial problems.
There are various management accounting techniques which can be used to resolve the
financial problems. This can be further classified as:
Benchmarking: The financial problem faced by the company is that the sale is declining
which leads to lower generation of revenues and profit. It is an effective technique which helps in
analysing and measuring the performance and productivity of the Morphy Richards. It is an
effective process of comparing the products, procedure, policies and process of a business with the
other organization in order to identify the opportunities for future improvement which leads to
higher success (Pavlatos and Kostakis, 2015). Benchmarking is an effective tool which helps in
comparing the actual result with the budgeted plan in order to find the deviation and take necessary
action thereto.
Cospolich company the competitor of Morphy Richards effectively apply this method in
order to resolve the financial problem faced by the company. This method helps in extracting the
main cause of the problem by setting a base or benchmark for higher operational efficiency and
productivity. This method helps management of the organization in improving the process by
setting the standard and benchmark for long term growth and efficiency.
Key performance indicators:
The financial problem faced by the company is that the company does not have any control
over their expenses. This is an effective management accounting technique which helps in
measuring the effectiveness of the company in order to key business goals and objectives. The
management of the organization use Key performance indicators in order to evaluate the success of
the organization in reaching set target on a timely and accurate manner. This technique can be used
by the management of the Morphy Richards in order to solve the financial problems. This method
helps in evaluating the cause of the problem and develop effective strategies in order to resolve the
financial problems (Anand and Grover, 2015). This method helps Morphy Richards in finding the
variance in the operations of the business and take necessary measures which helps in achieving
higher competitive advantage. This tool is used to determine the progress of the company which
helps in achieving the operational goals and also helps in comparing the financial performance of
the organization with its competitors to effectively track the progress.
Balance scorecard:
The financial problem faced by the company is that the organization does not enough access

to the funds and the cash flow is poor. It is an effective tool which helps in identifying and
improvising various internal operations and functions of the business. It also helps in identifying
and evaluating the resulting outcomes for strategic decision making. Balance scorecard technique is
used to measure the activity and give feedback to the management of the organization. This helps in
strategic decision making for future growth and development of Arçelik company. This technique is
beneficial to solve the various financial problems of the Arçelik company by investigating the
business process, financial data, customer perspective and growth and outcomes of the company
(Cooper, Ezzamel and Qu, 2017). This method helps in resolving the financial problems in order to
identify effective business operations and better outcomes. Balance scorecard helps Arçelik
company in monitoring the activities of the business and also focuses on prioritizing the work.
Balance scorecard improves execution of plan and communicating with the team members, better
strategic planning, improved performance forecasting, effective organizational alignment and
strategic framework for resolving the financial problem and achieving competitive position in the
market.
M 4. Analysing how evaluation of financial problems can lead to sustainable growth of
organization.
Resolving various financial problems leads to higher growth of the business by finding
necessary solution to the problem. The financial can be resolved using various management
accounting system and techniques by finding the best solution to the problem and attaining desired
goals and objectives. Management accounting take into consideration all the management reports
for strategic decision making and controlling the costa and operations of the Morphy Richards for
sustainable growth and development.
D 3. Planning tools for solving financial problems.
Planning tools helps in giving insight over the future growth and success of the organization.
It is an impressive tool which helps in taking strategic decision in order to solve the various
financial problems of the company effectively and efficiently (Gooneratne and Hoque, 2016). This
helps in accurately assigning cost to each unit, optimum utilization of resources and cost control
which leads to higher sustainable growth and development of the Morphy Richards. On the
contrary, planning tools of budget considers past budgeted plan. It is a time consuming and
complex process.

CONCLUSION
From the above conducted study it has been summarized that, Management accounting is an
effective technique which helps in effectively evaluating the financial reports of the company in
order to take strategic decision for future growth and development. This study will further focus on
management accounting system such as, Price optimizing system, Cost accounting method,
Inventory system and job costing system. It further evaluates the various management accounting
report such as cost accounting reports, Accounts receivable report, Budget report, performance
report and other managerial report which helps management in strategic decision making. It will
also critically evaluate the Management accounting system and report for sustainable growth and
development of the business.
This study also concluded the management accounting techniques like marginal costing and
absorption costing. Furthermore this study will highlight, different types of planning tools like
activity based budgeting , zero based budgeting, cost budgeting, operating budgeting and flexible
budgeting in budgetary control. This study also compare different organization in conform to
management accounting systems to resolve financial problems. Tools and techniques used to
resolve financil problems are benchmarking, key performance indicator and balance scorcrad for
resolving the financial problem and achieving competitive position in the market.

REFERENCES
Books and Journals
Anand, N. and Grover, N., 2015. Measuring retail supply chain performance: Theoretical model
using key performance indicators (KPIs). Benchmarking: An International Journal. 22(1).
pp.135-166.
Bjørnenak, T. and Nørreklit, H., 2018. Costing vs. prediction machines in pricing decisions A
Pragmatic Constructivist approach. Proceedings of Pragmatic Constructivism.8(1). pp.4-4.
Church, B. K., Kuang, X. J. and Liu, Y. S., 2019. The effects of measurement basis and slack
benefits on honesty in budget reporting. Accounting, Organizations and Society. 72. pp.74-84.
Cooper, D.J., Ezzamel, M. and Qu, S.Q., 2017. Popularizing a management accounting idea: The
case of the balanced scorecard. Contemporary Accounting Research 34(2). pp.991-1025.
Gooneratne, T.N. and Hoque, Z., 2016. Institutions, agency and the institutionalization of budgetary
control in a hybrid state-owned entity. Critical Perspectives on Accounting .36. pp.58-70.
Hall, M., 2016. Realising the richness of psychology theory in contingency-based management
accounting research. Management Accounting Research. 31. pp.63-74.
Hopper, T. and Bui, B., 2016. Has management accounting research been critical?. Management
Accounting Research. 31. pp.10-30.
Kannaiah, D., 2015. Activity based costing (ABC): Is it a tool for company to achieve competitive
advantage. International Journal of Economics and Finance.7(12). pp.275-281.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Klychova, G.S and et.al., 2015. Management aspects of production cost accounting in horse
breeding. Asian Social Science. 11(11). p.308.
Kraft, A. G., Vashishtha, R. and Venkatachalam, M., 2017. Frequent financial reporting and
managerial myopia. The Accounting Review. 93(2). pp.249-275.
Labro, E., 2019. Costing Systems. Foundations and Trends® in Accounting. 13(3-4), pp.267-404.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment,
management accounting, control, and reporting. Journal of Cleaner Production. 136. pp.237-
248.
Messner, M., 2016. Does industry matter? How industry context shapes management accounting
practice. Management Accounting Research. 31. pp.103-111.

Mohamed, I.A., Kerosi, E. and Tirimba, O.I., 2016. Analysis of the Effectiveness of Budgetary
Control Techniques on Organizational Performance at DaraSalaam Bank Headquarters in
Hargeisa Somaliland.
Ofosu, E., 2018. Budgetary Control in Local Government Administration: a study at Kwahu East
District Assembly (Doctoral dissertation).
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research. 31. pp.45-62.
Pavlatos, O. and Kostakis, H., 2015. Management accounting practices before and during economic
crisis: Evidence from Greece. Advances in accounting. 31(1). pp.150-164.
Prosser, L. A. and et.al., 2016. Reporting Cost-Effectiveness Analyses. Cost-Effectiveness in Health
and Medicine, p.343.
Renz, D.O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John Wiley
& Sons.
Stiglitz, J.E., Sen, A. and Fitoussi, J.P., 2017. Report by the commission on the measurement of
economic performance and social progress.
Online
Management Accounting – Meaning, Advantages & Functions. 2018. [ONLINE]. Available
through:<https://cleartax.in/s/management-accounting>