Management Accounting and Systems

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
Explaining the meaning of management accounting and essential requirements of the
management accounting systems................................................................................................1
Explaining several methods of reporting under management accounting..................................2
Evaluating the advantages and the application of the management accounting systems...........3
Evaluating the integration in between the management accounting reporting and the systems.4
LO2..................................................................................................................................................4
Preparation of the income statement for the month of June &Calculation of per unit
production cost &computing total cost of production &Advising the best technique for
evaluating the net profits ............................................................................................................5
Interpreting the difference in the actual and the budgeted profit for the month of June ............6
LO3..................................................................................................................................................8
Explaining the benefits and the limitation of the several planning tools under the budgetary
control ........................................................................................................................................8
Analysing the uses and the application of planning tools used for forecasting the budget .......9
Evaluating the use of the planning tools in responding to resolving the financial problems....10
LO4................................................................................................................................................10
Comparing different organization in respect of adopting the systems of management
accounting in order to respond financial problems...................................................................10
Analysing the ways in which resolving the financial problems leads the company towards
sustainable success....................................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is defined as a process of preparing and presenting all the
financial as well as statistical information of the business in form of internal managerial report.
With the help of such report, it aids the management of the company in decision making process
related to business operations and investments. The present report is on KEF Ltd. Which is a
medium sized enterprise engaged in the manufacturing business. It will define about different
management accounting system and their use in business issues. Statements will be produced
using Absorption and Marginal costing techniques. Further, it will discuss about various types of
budgetary planning tools by use of which, company can make more profit and improves its
business performance. At last, it will streamline about techniques of management accounting
which can assist in resolving financial problems of the company.
LO1.
Explaining the meaning of management accounting and essential requirements of the
management accounting systems
Management accounting is the process of formulating the management reports and the
accounts which provides for the accurate and the timely financial as well as the statistical
information needed by the managers in order to make the routing and the short term decisions
(Management accounting and its importance, 2019). There are various management accounting
system that plays an essential role in efficient functioning of the business as follows-
Inventory management system- It refers to the system that includes proper planning of
the purchases, storing and handling the material or stock within the organization. It aims for
reaching the optimal inventory for the company and a detailed information regarding the material
that is to be purchased, the quantity of the material and the place from which it is to be purchased
with adequate details of associated storage cost (Huang and et.al., 2015). This system is essential
for tracing the supply of the goods and in maintaining the adequate level of the inventory in the
organization.
Cost accounting system- This system of MA considered as the framework that is used by
the organization in order to estimate their product cost for the purpose of making the profitability
analysis, valuation of the inventory and the controlling the cost. It is critical for the organization
to estimate accurate cost in producing the product which in turn results in the profitable
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operations (Gerrish and Spreen, 2017). Through this system the firm can know about the
products that are profitable and the which leads to loss anticipation of the correct cost.
Price optimization system- It is the system that act as the mathematical program which
computes the varying demand of the customers at various price levels and then combining the
data with the information relating to the cost and the level of inventory for recommending the
prices that improves the profits (Lasyoud and Alsharari, 2017). This system is crucial because it
allows the organization in using the pricing as the powerful tool of the profit lever, that is often
considered as underdeveloped. It also helps the enterprise in achieving its objective like customer
satisfaction, forecasting demand, creating promotion strategies.
Job costing system- It is the practice that include accumulating the information relating
to the associated cost with the particular production and the service job. It is counted as an
essential information as it helps in determining the adequacy in the estimating system of the
company which is to be made for quoting or fixing the best possible price that accounts for the
reasonable profits. Job costing system accumulates mainly three kinds of the cost that involve
direct material, labour and the overhead cost (Otley, 2016). It also facilitates managers in
keeping the track of the individual as well as the performance of the team in context of the cost
control, productivity and the efficiency.
Explaining several methods of reporting under management accounting
The reports prepared under managerial accounting are been used for regulating, decision
making, planning and in measuring the performance. The reports are formulated on the
continuous basis throughout the period of the accounting as per the requirements. Major crucial
decision of the organization depends upon the preparation of the reports with authenticity.
Managers analyse the reports for highlighting the particular pattern and converting it into the
useful information (Papa and et.al., 2017). There are several reports that are prepared by the
managers as follows-
Budget report- This report involves the anticipation of the sources of the earnings and the
expenditure for the organization. It plays a critical role in measuring the performance of an
overall enterprise. Estimations in the report are made on the basis of previous experiences so that
any unforeseen event in the future could be met. Firm could function its operations in budgeted
amount for achieving its goals and the mission effectively (Shil and Das, 2018). Budget report
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