Management Accounting and Information Systems

This assignment delves into the crucial connection between management accounting practices and information systems. It examines how various accounting techniques influence profitability and how information systems support management accounting decisions. The paper analyzes research on the role of management accounting in driving organizational success and explores the evolving landscape of management accounting in the digital age.

MANAGEMENT
ACCOUNITNG

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Different types of accounting system and their essential utilisation................................1
P2: Different types of management accounting report and their importance.........................3
P3: Different costing methods using for calculating net profit..............................................5
P4: Advantage and disadvantage of using planning tools......................................................7
P5: various financial problems and their effective control measure......................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting refers to the process of identifying, measuring, analysing and
preparing financial statement which help company in knowing their actual financial position in
competitive market world. The manager of company is held responsible to record and analyse
the accounting data and resources which will be useful in making an effective decision for
company. Preparing financial reports annually easily attracts investors, shareholders etc. to invest
more in an organisation through which an organisation can achieve growth and success for
longer duration. The main purpose of preparing this report is providing the role of management
accounting in the success of an organisation. Various accounting and reporting systems which is
helpful in improving the performance of company also discussed under this report. The project
also covers different planning tools which are used to control budgetary process and also other
techniques in order to resolve all financial issues are also mentioned under this report
(Schermann, Wiesche and Krcmar, 2012).
TASK 1
P1: Different types of accounting system and their essential utilisation
For every business organisation, it is important to record accounting transaction in order
to find out the actual revenue and expenses through which the manager can able to implement
corrective actions if any deviation found. The manager of company is held responsible to store
material accounting information regarding investors, shareholders, customers etc. which will be
helpful for them to take an effective decision in order to get positive outcome in near future.
Adopting accounting system enables manager to focus on important matters which will bring
beneficial to company. There are some advantages of adopting management accounting system
which are as follows:
Increase in efficiency: It will help in bringing efficiency in various business activities in
order to achieve desired goals and objectives within limited period of time.
Measurement of performance: It helps manager to measure the performance of
employees through comparing their actual performance with standard so that efficient workers
are easily identified.
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Effective management control: Through adopting Management accounting system, the
manager can able manage and control expenses incurred in business activities so that financial
position of company will be maintained.
Management accounting Financial accounting
It is an accounting system which is useful in
providing material information with the help of
which the manager can formulate policies,
plans and strategies in order to run business
more smoothly.
It is an accounting system which is helpful in
preparing financial statements with a motive of
providing financial details of an organisation to
stakeholders, investors etc.
It provides both monetary as well as non-
monetary information.
It provides only monetary information.
The main objective of management accounting
is to help manager in formulating an effective
decision by providing important information
on particular matters.
It main objective is to provide financial
information to outsiders
The accounting reports are prepared according
to the requirements Example of company.
It is compulsorily required from company to
prepare financial statement on annually basis.
Types of accounting system:
Price optimisation: Through such system the manager can able to know an effective
price which maximises the interest and satisfaction level of customers towards purchasing their
product. Various operating cost, stock and historical value need to be determined in order to set
up the price for product. The manager can need to use mathematical analysis which helps them
in determining the customer's behaviour towards the feature and qualities of product (Weygandt,
Kimmel and Kieso, 2015).
Cost accounting system: Such accounting systems are related with the cost incurred in
the manufacturing process of product. It main motive of adopting such system is to reduce the
cost and utilise resources in an optimum manner which directly increase the profitability of
business.
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Inventory management system: It helps manager in tracking the movement of goods
used in the business operation through which they can able to know the level of inventory
available in warehouses in order to avoid situation of shortage in production process. Thus
manager is held liable to maintain minimum level of stock in order to meet customer's needs and
demands.
Job costing system: It refers to such accounting system in which the total cost is
allocated for the purpose of completing specific project activity. It is helpful in deciding the costs
to a client which is needed to incur to execute specific project.
P2: Different types of management accounting report and their importance
Reporting: It is important concept which includes the collection and disbursement of
information. Every kind of organization, whether small or large in nature required to adopt
effective reporting system. Through implementation of reporting system large numbers of
benefits are obtained by organization like planning of future operations, disbursement of roles
and responsibilities, improved performance of employees, improved decision making of internal
parties etc. It provides the opportunity to the management of organization to attain sustainability
in their performance and improvement of profitability.
There are large numbers of management accounting reports are prepared by the cited
organization like job cost, performance, budgeted, inventory management report etc. Different
kind of reports contains various information regarding different departmental activities. It also
helps in maintaining effective communication and coordination among the different departments
of cited organization. Such reports are further used by the management of organization for
preparation of the budgets and standards to provide direction to employees in performance of
their tasks. Through such budgets goals and objectives are set by the organization which is
required to achieve by employees. It also helps in comparison of actual performance of
employees with such predetermined standards and find out the deviations. According to such
deviations, solutions are provided by managers to improve their performances. Different kinds of
reports which are prepared by organization are mentioned below:
 Inventory management report: This report contains the information regarding the stock
which is actually present in organization. It provides the opportunity regarding optimum
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utilization their given resources. Use of EOQ model while preparation of this report helps
in identification of the time period for re-ordering of their stocks. Such reports are most
useful for production department of organization to continue their operations without any
interruptions.
 Job cost report: These reports contain information about the cost which a company face
in execution of a specific project. This type of report is formulated by accounting
manager. One of the main benefits of this type of report is that it ensure adequate
allocation of firm's funds and provide guidance to employees to perform their roles and
responsibilities in effective way.
 Accounts receivable report: This report provides the information regarding the amount
which is due from debtors. It also provides the information regarding time period which
is provided to debtors to return their outstanding amount. Through such information,
management of organization takes the important decisions regarding change in their
credit policies and more strengthens their collection process. This type of report is
prepared to contain information about firms debtors as this help firm in receive payment
from them in time. It also contains information about the issues which a firm faces during
collection of payment. Such kinds of reports help firms in avoid the situation such as
financial crisis (Moorthy and et. al, 2012). This entire guide manager in formulate better
policies related with collect payment from third parties.
 Performance report: This report contains the information regarding the performance of
different departments and employees. Such reports are prepared on the basis of feedbacks
of employees. Such information helps in ascertainment of the issues which are present at
workplace. It is the duty of the manager is to apply different approaches and strategies
regarding removal of such issues and improvement of the actual performance of
employees. This report brings coordination among the different functions of department.
 Budget report: This type of report contains information about preparation of budgets so
organisation does not face any kind of shortage of funds in coming year. Preparation of
budgets give shape to actions and decision of firm and at the same time help in achieve
set target in minimum time. All this enhance productivity and profits of organisation (M
Ancini, Vaassen and D Ameri, 2013).
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Importance of different kind of reports
Large number of benefits is gathered by organization through preparation of such
different reports which are defined below:
 Improved decision making: Through use of such reports, manager of organization
collects the information regarding the functioning of different departments. It helps to
take informed and more accurate decisions which help in improvement of their
productivity and profitability.
 Management of risk: Large numbers of risks are associated with the different activities
of organization. Such reports provide the information which is further used by the
manager to remove the risks from their future functions and attain sustainability in their
business operations.
 Increased financial return: Preparation of performance report helps in improving the
actual performance of employees and different departments. On other hand, inventory
management report helps in effective allocation of resources. All such activities provide
the opportunity to earn large number of profits (Leitner, 2013).
P3: Different costing methods using for calculating net profit
There are mainly two methods such as:
Marginal costing: These are said to be additional cost.
Absorption costing: It is mainly related with all production costs.
Statement of profit and loss using absorption
costing
Quarter 1
No. Of
units ￡/unit ￡ ￡
Sales value 66000 1 66000
Less: Cost of sales
Less: Opening inventory 0 0.85 0
Add: Production 78000 0.85 66300
Less: closing inventory -12000 0.85
-
10200 -56100
Gross profit 9900
Expenses
Selling &Administration costs -5200
Profit 4700
Less: Under absorption -2800
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Profit reconciled 1900
Quarter2
No. Of
units ￡/unit ￡ ￡
Sales value 74000 1 74000
Cost of sales
Opening inventory 12000 0.85 10200
Add: Production 66000 0.85 56100
66300
Less: closing inventory -4000 0.85 -3400 -62900
Gross profit 11100
Expenses
Selling &Administration costs -5200
Profit 5900
Statement of profit and loss using marginal costing
Quarter 1
No. Of units ￡/unit ￡ ￡
Sales value 66000 1 66000
Cost of sales
Opening inventory 0 0.65 0
Add: Production 78000 0.65 50700
50700
Less: closing inventory 12000 0.65 -7800 -42900
Contribution 23100
Less: fixed costs -16000
Less: selling &administration -5200
Profit 1900
Quarter 2
No. Of units ￡/unit ￡ ￡
Sales 74000 1 74000
Cost of sales
Opening inventory 12000 0.65 7800
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Add: Production 66000 0.65 42900
50700
Less: closing inventory 4000 0.65 2600 -48100
Contribution 25900
Less: Fixed costs -1600
Less: selling &administration -5200
Profit 4700
P4: Advantage and disadvantage of using planning tools
In every business organisation, it has been seen that they need to manage their business
operations by the help of various tools and techniques. These methods are useful in attaining
better future and growth in near time period. The primary target of the company is to increase
their efficiency and productivity of Nero ltd for the purpose of achieving their aims and
objectives. Some other aspects that need to be taken into consideration which is related with
short and long term goals of the company. For making bright future in coming time, they need to
control their costs and expenses.
A well organise budgets needs to be prepared by the company to look after all their operations on
continuous basis. Because, it is known as future estimation for the company’s total earning and
sales. It is more crucial for the company in making any vital decisions by making proper analysis
of their respective financial statements such as profit and losses, balance sheet and cash flows.
This budget must be revalued on regular basis in order to make effective decision and standard
for enhance employees moral to perform their tasks efficient manner. It is associated with
internal tools and techniques that are useful in respect to control any risk which is affecting the
performance of Nero Ltd (Lee and Cobia, 2013).
There are various factors those are affecting the business operations on regular basis in
accordance with their costs and expenses. Budgets are more future planning done by the
company in order to manage their cost of production in allotted time frame. It includes
estimating total sales income and expenses. It is said to be more crucial estimation of total
earning and expenses for definite period of time. To operate or deal with these aspects some
useful planning tools are need to be use (Lapsley, 2012). Those are mentioned underneath:
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Forecasting tools: These are said to be more effective tools which is useful in making
crucial estimation of future events on continuous basis of their previous and present data in
easier manner. This planning technique begins with assumption that is being associated with
administration assumption, ability and decision making.
Advantage: The primary benefits of using these tools is said to be helpful for the business with
effective decision making. As the major aspects of this is related with the future growth and
sustainability of the company. This helps in determining more positive outcomes for Nero Ltd. In
case of forecasting qualitative data is mostly depending on taking crucial decision making for the
experts (Harris and Mongiello, 2012).
Disadvantage: In few cases, it is not possible to estimate accurate target and growth
results. Because future is uncertain, it is done so because of their qualitative nature of estimation
of business plan they cannot be able to come up with modern ideas and innovative thinking.
Scenario tools: it is known as the most thinking evaluating techniques. Thus, planning is
more crucial according to their mention situation in the manufacturing firm. This will assists in
long term planning and investment decision for the company. In large business organisation, they
primarily use to adapt these techniques to make their team action under their control.
Advantage: These planning techniques are final estimation of effective thinking ability
which is related with different alternatives. It is mostly helpful in determining better capability
and objectives of employees and their staff members. It will lead to focus on various critical
conditions as per the mentioned results (Eierle and Schultze, 2013).
Disadvantage: The major limitation of these planning tools is that it becomes sometime
very difficult to handle any critical situations. Because these are arises uniform and make huge
impacts on the productivity and growth of the company.
Contingency tools: It is said to be an effective strategies which devise for a perfect
results which often useful in getting more positive results. It mainly helpful in managing and
hedging risk factors those are present in any financial or non-financial term. It is mostly concern
with local authorities and large business enterprises.
Advantages: One of the biggest merits of these tools is to recognise company’s total
limitation and operations those are useful for the success of their company. They are always
ready to face any issues arises without giving any alarm.
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Disadvantage: It is very hard to deal with automatically problems those are arising in the
company. In those situations, they are not able to work in proper manner because manager
cannot control risk those are uncertain (Belfo and Trigo, 2013).
P5: various financial problems and their effective control measure
There are various financial issues those are affecting the productivity of an organisation.
Some of them are mentioned underneath:
Profit level: without proper flow of cash a company cannot able to operate their business in
better manner. It would directly affect their net profitability during the time. Because they always
planning for maintain high profit level which cannot be done because of low budget.
Productivity level: This issue is majorly related with the growth of the company. If total
production gets affected they are not able earn maximum revenue. This will tends to slow down
their stability in the market (Akbar, 2010).
To deal with the above two issues they need to use below mentioned financial tools. Such
as:
KPI (Key performance indicators): This seems to be the most crucial techniques which can
lead to analyse and control past and present financial performance of the company. This is done
by using data from actual and standard budgets variances.
Financial governance: This particular financial technique is developing by the local
government and other financial institution for the smooth running of businesses. This will consist
of various norms and rules those are application in conducting business in more effective
manner. By the help of these tools they can easily control their issues (Abdelmoneim Mohamed
and Jones, 2014).
Nero Ltd Unicorn grocery
This company is operating positively in
delivering better productivity because they
are using appropriate tools to manage their
financial problems.
Under this company, most their transaction
are been done on regular basis by the
operational department which is being
manage by using proper rules and
regulations.
They mainly use Key performance indicators
to control organisational issues.
This company use financial governance and
benchmarking tools to perform more
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effectively.
CONCLUSION
From the above project report, it has been conclude that management accounting is
utmost important part of every business concern. This will help every organisation to manage
and control their every day operations. For this purpose various tools and techniques are being
used those are mentioned clearly under this report.
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REFERENCES
Books and Journals:
Abdelmoneim Mohamed, A. and Jones, T., 2014. Relationship between strategic management
accounting techniques and profitability–a proposed model. Measuring Business
Excellence. 18(3). pp.1-22.
Akbar, S., 2010. Management accounting change: a comparative study of Indian and UK
organisations. Journal for Global Business Advancement. 3(1). pp.1-27.
Belfo, F. and Trigo, A., 2013. Accounting information systems: Tradition and future directions.
Procedia Technology. 9. pp.536-546.
Eierle, B. and Schultze, W., 2013. The role of management as a user of accounting information:
implications for standard setting.
Harris, P. and Mongiello, M., 2012. Accounting and Financial Management. Routledge.
Lapsley, I., 2012. Financial Accountability & Management. Qualitative Research in Accounting
& Management. 9(3).
Lee, M. and Cobia, S.R., 2013. Management accounting systems support start-up business
growth. Management Accounting Quarterly.
Leitner, S., 2013. Information Quality and Management Accounting: A Simulation Analysis of
Biases in Costing Systems (Vol. 664). Springer Science & Business Media.
M Ancini, D. A. A., Vaassen, E. H. and D Ameri, R. A. A., 2013. Accounting information
systems for decision making. Springer,.
Moorthy, M. K., and et. al, 2012. Application of information technology in management
accounting decision making. International Journal of Academic Research in Business
and Social Sciences. 2(3). p.1.
Schermann, M., Wiesche, M. and Krcmar, H., 2012. The role of information systems in
supporting exploitative and exploratory management control activities. Journal of
Management Accounting Research. 24(1). pp.31-59.
Weygandt, J. J., Kimmel, P. D. and Kieso, D. E., 2015. Managerial accounting. Wiley.
(Abdelmoneim Mohamed and Jones, 2014) (Akbar, 2010) (Belfo and Trigo, 2013) ( Eierle and
Schultze, 2013) (Harris and Mongiello, 2012) (Lapsley, 2012) (Lee and Cobia, 2013)
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