Management Accounting: Types, Reporting, and Budgetary Control

Management Accounting

Contents
INTRODUCTION.................................................................................................................................3
MAIN BODY........................................................................................................................................3
LO 1......................................................................................................................................................3
P1. Explaining the essential requirement of different types of management accounting
systems...................................................................................................................................3
P2. Different methods used for Management Accounting reporting.....................................5
M1. Benefits of application of the management accounting system in an organisation........6
LO 2......................................................................................................................................................7
P 3 Calculation of income statement under marginal and absorption costing.......................7
LO 3....................................................................................................................................................11
P4. Defining advantages and disadvantages of different planning tools of budgetary
control...................................................................................................................................11
M3. Analysing uses and application of the different planning tools....................................13
LO 4....................................................................................................................................................14
P5 & M4. Different types of management accounting systems available for resolving the
financial problems................................................................................................................14
CONCLUSION...................................................................................................................................16
REFERENCES....................................................................................................................................17

INTRODUCTION
Management accounting is defined as the process of analysis of the both the internal
management and financial accounting system. It further assists in the company in preparation
of managerial reports, records, and accounts with available information, statistics and other
financial as well as non-financial data. This helps the management and employees can in
decision making related to business operations and investment. The present report is based on
Galway Plc. which is a manufacturing firm. The present report will discuss different types of
management accounting systems for organization for making profit. Further the report will
discuss about the concept of management accounting reporting and its uses in decision
making. Income statement under Marginal and Absorption Costing of Galway Plc. Along
with interpretation will be disclosed. It will also define budgetary tools & advantages and
disadvantages from different budgetary planning tools. At last, the report will shed light on
solving the financial problems with the help of management accounting techniques.
MAIN BODY
LO 1
P1. Describing essential requirement of different types of management accounting systems.
Management accounting system is defined as the process of preparing internal
managerial reports for assisting the management. This system assists management of the
company in identifying, and recording statistical as well as financial information for
planning, decision-making process.
Essential requirements of different types of Management Accounting System in Galway Plc.
are as follows:
1. Cost Accounting System – This method of management accounting system is
basically related to the cost associated with the business operations and processes.
The cost accounting system helps Galway Plc. in evaluating cost value incurred for
carrying on all the manufacturing and production process. This method also helps in
assessing the level of profit margin with minimum operation cost by improving the
quality of product and service. Company should make effective business plans and
strategies for controlling cost expenses. This method consists of following sub parts:
1. Job Order Costing Method – This method of cost accounting system helps in
determining the cost amount as incurred for producing a specific product or group of
products by the company (Otley, 2016).

2. Process Costing Method – This method assists in the process of collecting and
assigning of cost amount. This cost amount is assigned to units produced. This
method helps the companies especially in case of identical units where large
production process is carried out.
2. Inventory Management System – This method of management accounting focuses
on controlling the cost as incurred on producing goods and services for meeting the
customer demands. It assists in managing inventory and stock level of the company.
By monitoring the quantity of inventory and stock through the supply chain, it helps
the company in making inventory valuation, improving the accuracy of inventory by
maintaining continuous workflow and its reorder so as to facilitate smooth
functioning of business operations. Valuation of inventory can be done with the help
of two methods:
1. LIFO – It is a method in which goods bought or purchased at last are available for
sale at the first place. LIFO stands for Last In First Out.
2. FIFO – This stands for First In First Out. It is related with the process of selling
stock on first priority which is purchase in first place.
3. Job Costing System – The job costing method of management accounting is a
business procedure focusing on the process of collecting and analysing all the
important information related to the cost expenses incurred. It emphasizes on
expenses associated with the production of specific product. It helps the company in
determining the cost of operations and corrective measures for minimising cost
expense (Chenhall and Moers, 2015). This method takes into consideration each part
of information related to the direct material, labour and overhead costs. Under this
system, information related to cost incurred for every job work completed is provided
to the customer for getting cost reimbursed as per the contract or agreement made.
P2. Different methods used for Management Accounting reporting.
Management Accounting Reporting is related with the process of preparing internal
managerial report. It provides correct & accurate internal information about the statistical and
financial aspect of the company. It also provides deep insight about the business operations
and procedures as required for making day to day decision making especially related to
investment purpose. Different methods which can be used by Galway Plc. for management
accounting reporting are as follows: