Understanding of Management Accounting Systems

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Section (A) Understanding of management accounting system.................................................3
Section (B) Methods for management accounting reporting......................................................6
TASK 2............................................................................................................................................8
Computation of income statement of with the use of marginal and absorption costing method:
.....................................................................................................................................................8
TASK 3..........................................................................................................................................11
Part (A) Planning tools in management accounting..................................................................11
TASK 4..........................................................................................................................................14
Part (B) Comparison of ways in which organisations overcome from the financial issues......14
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management accounting is a type of accounting system which is related with the
preparing and providing financial and non financial information to the managers for making
important decisions (Kaplan and Atkinson, 2015). Eventually, this system is very crucial in the
aspect of the internal management of the organizations. In addition, it may be defined as a part of
accounting which is related to the collecting, analysing, summarising and presenting needed
information to the organizations. The importance of this accounting system increases because it
consists both kind of information such as monetary and non monetary information. To
understand in detail about the management accounting system, Excite entertainment limited
company is selected which is located in UK and deals in organising different kind of events. In
the project report, different kind of accounting system, accounting reports and their benefits are
mentioned. As well as income statements are prepared with the use of accounting techniques and
role of management accounting system in solving the financial issues is also described.
TASK 1.
Section (A) Understanding of management accounting system.
(a) Difference between management accounting and financial accounting:
Management accounting- This is a kind of accounting system which provides all the
needed information to the organizations for making internal decisions.
Financial accounting- It is concerned with the collecting, analysing, interpreting and
presenting financial data in the form of statements and report (DRURY, 2013). This accounting
system includes only financial information and it is useful for both to the internal and external
parties.
Herein, difference between the management and financial accounting is mentioned below:
Basis Management accounting
system
Financial accounting system
Mean The management accounting
system is an important part of
accounting which provides
While, the financial accounting
system is an accounting system
that prepares financial

relevant and needed
information to the managers.
So that they can make future
policies, plan and strategies to
run the business activities.
statement to provide
information to the
organization.
Information The management accounting
system consists financial and
non financial information.
While the financial accounting
system contains only financial
information.
Compulsory It is not compulsory to prepare
management accounting
reports by an organization.
Though, preparation of the
financial statements is
compulsory for the companies.
Suitability The management accounting is
suitable for the internal
management of the businesses.
On the other hand, the
financial accounting system is
suitable for external and
internal management.
Format There is no any specific format
to prepare the management
accounting reports.
Herein, the reports are
prepared as per the specific
format.
Time frame In this accounting system, the
reports are prepared as per the
organizational need.
While in the financial
accounting system, the
financial reports are prepared
according to the particular time
period. Usually at the end of
year.
(b) Cost accounting system- This is also known by the costing system. It is a kind of system
which provides a framework for analysing the cost of different products (Chiwamit, Modell and
Yang, 2014). The main purpose of this accounting system is to evaluate the profitability of the
products and services as well as to control the costs. In the aspect of the Excite entertainment