MANAGEMENT ACCOUNTING INTRODUCTION

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
P1 Concept of management accounting and different types of management accounting systems
................................................................................................................................................3
P2 Different methods used for management accounting reporting........................................5
M1 & D1 Benefits of management accounting system and integration of management
accounting reporting in the organization................................................................................6
P3 Appropriate techniques to prepare income statement using marginal and absorption cost8
M2 & D2 Application of management techniques in preparation of financial reporting
documents.............................................................................................................................11
P4 Advantages and disadvantages of different types of planning tools for budgetary control11
M3 Use and application of different types of planning tools in forecasting budget............14
P5. Comparing the different management accounting systems used by the organization in
resolving the financial problems which leads the organization towards sustainable success. 15
Comparison between Excite entertainment and ABC company-.........................................17
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................19
Books and journal.................................................................................................................19
Online...................................................................................................................................20

INTRODUCTION
Management accounting is the representation of the accounting information in a way that
helps the managers in creation of its policies and the routine operations of the undertaking. It
relates with the utilization of the accounting data that is collected with help of cost accounting for
meeting the purpose in relation to the policy formulation, control, decision making and planning
by the management. It links the management of the company with the accounting because
accounting information is needed and plays a crucial role for the mangers in taking the most
appropriate decisions. The present study is based on Excite entertainment, a leisure and the
entertainment industry of the UK. The business of this company is to promote the concerts and the
festivals throughout the locations in UK. Furthermore, the report explains the concept and the
significance of the various systems of the management accounting. It also describes the several
reports that are prepared by the managers and the different planning tools of the budgetary
control.
P1 Concept of management accounting and different types of management accounting systems
Accounting that helps the management is simply known as management accounting. The
process to develop management reports and accounts that present brief, accurate and timely
information relate to finances to make day to day decisions for managers is what is known as
managemenrt accounting. It is a study of accounting which is related to management of the
company. It is required to know the financial situation in the business (Bromwich, 2016). It helps
in formulating policies and procedures and assist the management of the company in getting better
results. It also serves as a mean of communication through whole organization. It does not limit
itself to quantitative information but also takes qualitative information into consideration which
cannot be measured like employee's level of satisfaction etc. There is another branch of
accounting that is financial accounting which differs from management accounting in certain
way :
Financial accounting Management accounting
It is for the people outside of organization as it
contains only financial information about the
company.
It is for the internal users of the company and
contains both quantitative and qualitative
information.

It is required by law and need to be according
to I.A.S within Europe.
It depends upon historical information.
It is not compulsory to do management
accounting.
It is future oriented (Alsharari, 2015).
Different types of management accounting systems
Cost accounting system – A cost accounting system is used by the company to estimate
the cost of their products for analysis of profitability, inventory valuation and control of cost.
Estimating the cost of company's products and services is essential for profitable operations. The
company with cost management system can know which products of the company is profitable
and non profitable by analyzing correct cost of the product. In simple words, it tracks the flow of
inventory through various stages of production which includes raw materials, work in progress
and finished goods (Kastberg, 2016). In excite limited, it tracks raw materials as they go through
the stages of production and slowly turn into finished product. When raw materials are put into
production, the system immediately records use of materials by crediting raw material account
and debiting goods in process. It helps the production manager of the company tom see how much
inventory is in every stage of production at any point of time. There are two types of costs :
Direct cost – Direct costs are variable cost that can easily be recognized as projects of the
cost. It is calculated at the beginning of the cost sheet. The total of direct costs in the cost sheet is
called prime cost. Examples of direct costs are direct material, labour and wages.
Standard cost – It is also known as indirect cost which are not that easily identifiable.
They can also be called as fixed costs and are ascertained after calculating direct costs. The
aggregate of indirect costs are called overhead cost which include salary, rent etc.
Inventory management system – This system tracks goods through entire chain of supply
in the business or the part of the business in which it operates. It covers everything from
production to retail, warehousing and shipping the products to the consumers along with all the
movements of stock (Goddard, 2017). Each company has different requirements and inventory
management system includes bar coding, tools for reporting, forecasting for future needs of
inventory, tools accounting etc. In short it is then combination of software and hardware which
oversees maintenance of products that are in stock and are ready to sent to consumers. The two
methods of inventory valuation are :
LIFO – When the inventory comes in lase is sold at first known as last in first out.