Management Accounting: Role, Function, and Methods

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Management accounting and their role & function.....................................................................1
Methods used for accounting reports..........................................................................................3
TASK 2............................................................................................................................................4
Using costing techniques to prepare income statement..............................................................4
TASK 3............................................................................................................................................5
Advantage and disadvantage of planning tools...........................................................................5
TASK 4............................................................................................................................................7
Organisation are adapting management accounting system for financial problem....................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Today accounting is used as a tool in analysis of business and its activities. Accounting
information is presented in different ways which is analysing by the various users for producing
reports. Management accounting is part of the accounting which is called as managerial
accounting or cost accounting. It is the procedure of examining cost of business and operations to
produce internal financial report, records and account to assistance manager's decision making
procedure in order to obtain goals & objectives of business (Bento, Mertins and White, 2018). To
better understand of the report selected organisation Shell, which is food sector organisation and
conduct 1100 service station across the UK and has partnership with Deli2Go and Costa Coffee.
This report cover several topics like essential requirement of system, role, principle & function
of management accounting. Along with different methods of report and prepare income
statement for business with the help of absorption and marginal costing. In addition, identify
merit & demerit of planning tools and comparison in between two companies and apply
management accounting system to respond financial problem.
TASK 1
Management accounting and their role & function
Management accounting is the practice of recognising, measuring, evaluating,
explaining and communicating about financial information to managers for follow the gaols of
business. It is different from financial accounting because in management accounting all the
information are presented in front of manager and board of directors. While financial accounting
collect all the information and presented to external stakeholders.
Role: Management accounting department plays essential role in gathering, recording
and reporting financial and non financial data from different sources.
Function: The main function of a department to examine relevant cost and to analysis the
existing expenditure and provide appropriate suggestions for future operations. In a smaller
business, an accounting department involves of all financial data, entry and different types of
reports (Boiral, 2016).
Principles: The principle of management accounting were introduced to understand the
requirement of internal management to enhance effective decision support objectives. These
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principles are using as guidelines to prepare financial statements. There are defined two main
principle such as: Principle Of Causality: Causality is defined as genetic connection of phenomena under
definite condition that arise in business due to some reasons. It is mainly depended on the
cost of business and create relation in between input and output of resources.
 Principle of analogy: The users of business apply this principle to analysis the
information and apply the knowledge or insight from the casual relationships modelled
like preparing, dominating.
Management accounting system is internal part of business in which associated with
provision of information in order to take right decision. This system is required for business in
decision making procedure and recognising the progressive ideas to operate business activities
systematically (Cescon, Costantini and Grassetti, 2019). There are defined different types of
management accounting system in context of Shell such as:
Inventory management system: It is most important system of management accounting
which is applied by the every type of organisation in order to track stock and collect all the
information. Shell is food sector organisation where require to keep safe and fresh food so
applying this system to collect all detailed information. According to that keep stock in
warehouse and supply for sales. The essential requirement of this system to reduce wastages of
stock and proper utilisation. For this system apply three types of method: Average cost method: It is a valuation method in which assets are analysed at various
rates and according to that number of stocks are identified by organisation for particular
unit. LIFO (Last in first out): In this method, number of stock sell out first that come last in the
business and according to that set cost per unit.
 FIFO (First in first out): According to this method company sell out those products
firstly which are coming first in the company.
From the different methods of the system Shell select FIFO method because for food
safety it is best method that proper utilise all the resources.
Price optimization system: This system is part of management accounting in which
company set effective price structure and take feedback from the people about price of different
food products. It is also analysis the best price for food items that satisfy the customer and
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