Management accounting concepts and techniques in decision making

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
Management Accounting and different types of management accounting systems...................1
Different methods used on the management accounting reporting.............................................2
Evaluation of the benefits and application of the management accounting techniques..............3
Integration of the management accounting systems with the reporting......................................4
LO2..................................................................................................................................................4
Calculating costs using different cost accounting techniques.....................................................4
LO3..................................................................................................................................................7
Application of different planning tools with their advantages and disadvantages......................7
LO4..................................................................................................................................................9
Organisations adapting management accounting systems for resolving the financial problems.9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting refers to the process involving gathering, analysing, interpreting
and preparing the financial records and reports. Management accounting involves the preparation
of financial reports that provide the management with important decision making. This helps the
management in improving and enhancing the productivity of the organisation.MA aims at
achieving the goals and objectives of the organisation using various management accounting
tools and techniques. Present report is based over PQR Ltd that is a manufacturing concern
dealing in the production of furniture. Report will provide about the concepts and methods used
by management for effective decision making.
LO1
Management Accounting and different types of management accounting systems.
Management accounting refers to presentation of the financial information for the
formulation of policies that are required to be adapted by management and for assisting them in
meeting their day-to-day operations and activities. Management accounting involves function
such as planning, collecting, organising, directing & controlling.
Management accounting systems.
Management accounting systems are the internal management system used by
organisation.
Inventory management systems.
Inventory management refers to the system that involves keeping record of each and
inventory of the organisation. Inventory management is the combination of software and the
hardware for effectively managing the inventory of the organisation. This helps the management
in making informed decisions related with the inventory (Hopper and Bui, 2016). Different
inventory management methods include.
 LIFO – In this method inventory that comes in last is sold out at first. The goods are sold
at the prices at which they are purchased in by entity.
 FIFO –This refers to the method in which goods that are purchased first are sold first.
This helps in learning their older stocks of inventory.
 WAC – In this approach the prices of the inventory are calculated on the weighted
average basis on all the goods purchased first and last at different prices.
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Cost Accounting System
This a method used for recording all the cost information of the business. it involves
accounting for all the costs such as raw materials, labour and production overheads. This helps
the management in controlling its costs and expenditures related with the business and in taking
effective decision. Job costing is used by organisation for making decision related with cost of
manufacturing and profit margins.
Direct Costing – This system accounts only variable costs associated with the production of the
units and not the fixed cost.
Standard Costing – This costing methods involves carrying out the production as per the set
standards and measuring variances ate the year with the actual output for taking the corrective
measures.
Job Costing
It could be defines as the for recording of costs related to the manufacturing of job, instead
of the process. This helps in identifying the costs related with the specific jobs carried out for
manufacturing particular product. Costing method is used by the companies involved in
manufacturing or construction that involve more than one process.
Different methods used on the management accounting reporting.
Management accounting reporting contains all the information related with the business
operations.
Budgeting Report
Budget report are the report prepared by the organisation for keeping its costs and
expenditures under control and preventing overspending. Budget reports are one of the most
important reports that are prepared by the management after analysing the records of previous
years (Weetman, 2019). For the preparation of current budget information of previous budgets
are used and other adjustments related are made related with inflation and market conditions.
Performance Report
Performance report is prepared for evaluating the performance of the business operations.
Performance report contains all the information related with the effectiveness of management in
achieving the targeted objectives. This is essential for analysing the strengths and weaknesses of
the company in achieving its benchmarks. This also helps the management in taking effective
improvement steps for increasing the efficiency and productivity.
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