Evaluation of management accounting systems

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Evaluation of management accounting and significant needs of different kinds of this
system..........................................................................................................................................1
P2 Analysis of methods that are for reporting of management accounting ...............................3
TASK 2............................................................................................................................................4
P3 Preparation of statement of income of absorption and marginal costing and analyse the
difference.....................................................................................................................................4
Difference between both the management accounting methods.................................................8
TASK 3............................................................................................................................................9
P4 Analysis of pros and cons of various tools used in budgetary control...................................9
TASK 4..........................................................................................................................................10
P5 Use of management accounting system for the resolution of financial problems...............10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
Illustration Index
Illustration 1: Income statement on the basis of absorption costing................................................5
Illustration 2: Income statement on the basis of marginal costing...................................................6
Illustration 3: Working notes...........................................................................................................7

INTRODUCTION
Accounting is the process which help organization company to make the reports and
different type of statement of financial transaction by using various standards. We can easily
measure its performance and find out the problems in the relation to the profit and expenses. In
this report we are analysing the management accounting of RL Maynard which is one of the
leading organization operating in the manufacturing industry. In this report we have taken
different approaches to identify the managing the financial problem. Income statement is most
significant and effective statement that is created to determine the firms' financial profitability
situation at end of particular year or specific period that is being mentioned in the report.
TASK 1
P1 Evaluation of management accounting and significant needs of different kinds of this system.
It is considered as an system of accounting that involves a continuous process of
analysing the costs and business data for the preparation of various financial reports, journals and
accounts in order to provide assistance to managers in decisions making (Cinquini and Tenucci,
2010). It is also recognised as evaluation of financial data of business for converting in to useful
information by preparing multiple reports that helps the management to analyse the actual
financial position of enterprise. In the context, analysis of RL Maynard limited is done as
accounting officer to analyse the financial position of firms in the construction industry. Various
types of systems and approaches of management accounting are considered that must be utilized
by the cited firm to manage the business operations and achieve a continuous growth in industry.
Following are the essential needs of management accounting system which are followed by the
cited firm such as:
 Traditional cost accounting: Most essential system that used is by the management for
the allocation of manufacturing cost of products that are to be developed. It is also
considered as conventional method designed to analyse the direct and indirect expenses
on the work which has to be accomplished by the firm (Nandan, 2010). In this system,
allocation of production overhead cost of the products that has to be developed by firm in
their premises. In this context, it has been recognised that the most of the firms operating
in manufacturing sector used this system of analysing the cost, like RL Maynard. Mainly
it includes the distribution of indirect cost in production unit over the manufactured
units. It involves two other system of accounting that such as job costing and process
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costing that helps the firm to analyse the expenses that are to be done made on
development of particular unit.
 Transfer pricing: It is also significant process that is used to allocate the cost of
transferring the goods from the holding firm to the subsidiary enterprise. It also
recognised as the expenses that are incurred by the parent company on the transfer of
goods to other host company (Angelakis, Theriou, and Floropoulos, 2010). In present
context, cost of variables and opportunity cost mainly incurred by cited firm on transfer
of particular product or services. Firms use this method of pricing to reduce the cost of
raw material is to be utilized in process of manufacturing the units. Cost of variable is
depended on the unit of production and the opportunity is that amount which the firm has
to bear at the time of outsourcing of goods to the subsidiary company.
 Accounting of cost: It is also considered as a suitable frame work that is utilized by the
firms to analyse the overall cots of manufacturing a unit. It is most suitable method of
accounting that should be considered to analyse the data of cost to be incurred by the
cited business entity at level of operations. Along with this, it can also consider as
suitable for them to reduce the high expenses on the manufacturing of units.
 System of price optimization: Another system that is considered as essential for cited to
analyse the response of potential buyers towards different possible cost of units
manufactured ( Bebbington and Thomson, 2013). In this context, this system of
accounting is mainly used by RL Maynard for the optimization of cost that must be
suitable for customer.
 Accounting for inventory: Essential system of accounting utilised by the managers to
analyse the raw material that is available at the factory premises in order to meet the
requirement in the future. Further, it can be said that it is beneficial for authorities to
manage the inventory and provide the information about the future needs.
P2 Analysis of methods that are for reporting of management accounting
In the competitive business environment, is essential for the firms manage theeir funds
appropriately in order to meet the future requirements (DRURY, 2013). For the generation of
funds, they have determined the actual position of business to its stakeholders and they will
provide information by using various accounting reports. Following are the essential reports that
are to be formulated and combined with the financial statements by R.L Maynard such as:
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