Management Accounting Systems and Reporting

Management
Accounting
1

INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
TASK 1............................................................................................................................................4
P1. Explain management accounting and different types of management accounting systems
along with its essential requirement.............................................................................................4
P2. Describe different method of management accounting reporting which are used by
organizations................................................................................................................................6
M1. Benefits of management accounting systems.......................................................................8
D1. Critically evaluate that how management accounting systems and management
accounting reporting are integrated within organisational processes..........................................8
TASK 2............................................................................................................................................9
P3. Calculate cost by using appreciate cost analysis techniques and prepare income statement
by using marginal or absorption costing method.........................................................................9
M2. Apply range of management accounting techniques and generate financial reporting
statements...................................................................................................................................13
D2.Produce financial reports that accurately apply and interpret data for a range of business
activities.....................................................................................................................................13
TASK 3..........................................................................................................................................14
P4. Explain the advantages and disadvantages of different types of planning tools used
for budgetary control...............................................................................................................14
M3. Analyze the use of different planning tools and their application for preparing
budgets and forecasts..............................................................................................................16
TASK 4..........................................................................................................................................16
P5. Compare how organizations are adapting management accounting systems to
respond to financial problems................................................................................................16
M4.Analyze how, in responding to financial problems, management accounting can lead
organizations to sustainable success......................................................................................19
D3.Evaluate how planning tools for accounting respond appropriately to solving financial
problems to lead organizations to sustainable success..............................................................20
CONCLUSION..............................................................................................................................20
2

REFERENCES..............................................................................................................................21
3

INTRODUCTION
Management accounting is defined as an accounting method that helps an organization to
function better(Weetman, 2019) (Muller, 2019). This can be described as implementing
management approaches and knowledge required to assist all department heads in managing and
controlling the business. It focuses on accounting aspects. The primary role in accounting units is
the compilation and analysis of data. Managers have used the gathered information to routinely
decide. Management accounting required information for managers to fulfil strategic
requirements. In financial reports various management decisions are presented.This report is
based on Grant Thornton which is UK based company and provides professional network
services.They offer financial services to their clients and Creams Limited is one of them. It is UK
based medium size organization which offersice creams, doughnuts, waffles etc.
This assessment covers several topics such as management accounting systems, range of
different accounting techniques which are used to evaluate operational performance. In addition,
it involves planning tools that are used for budgetary control and further evaluate the ways which
helps firms to resolve their financial issues through implementing range of management
accounting techniques.
MAIN BODY
TASK 1
P1. Explain management accounting and different types of management accounting systems
along with its essential requirement
Managerial accounting is an accounting division that deals with the identification,
calculation, review, and evaluation of accounting data so that it can be always had to help
managers make the required decisions to handle the activities of a organization
effectively(Singhand Verma, 2018). In order to perform accounting activities, there are several
management accounting systems which are used by the Creams Limited to improve their
operational efficiency as well as effectiveness. Some of them are as follow:
Cost accounting system: It is known to be the type of accounting management approach
encompassing a variety of activities as well as monetary factors(Cristea, 2018). For businesses it
is necessary to keep costs under estimated. In the Cream Ltd context, this accounting is used to
keep the costs of sales below the estimated costs. The main purpose of this system is to
4

concentrate as much as feasible on keeping the costs of various activities lower. Cost accounting
system essentially required by the Creams Ltd to estimate their product cost and make sure that,
production cost will not going to exceed. Otherwise, it minimise the profit margin which is not
good for the company to run their production so long in this situations.
Inventory management system: The inventory management system is an instrument for
improved stock control across the distribution chain of the company(Welsh, 2018). In Creams
limited the entire delivery process from placing an order to vendors is controlled by this
approach and makes the entire route of one business towards the customer. Through
using inventory management system, sales companies, suppliers, producers, and vendors may
make their businesses successful through making appropriate stock buying decisions. The
program contains critical methodologies such as LIFO, FIFO and Average Costs. Corrective
steps are important for businesses to take to control stored inventories. Company follow FIFO
inventory method which is essentially required to avoid wastage or damage due to store stock for
longer period. Due to this reason, this system essentially required by the organization to keep
tracks their inventory position and make further buying decisions accordingly.
Job order costing: The method of job order tracks the cost of each function within the
company. The management will closely monitor the costs of each job and assess if the real costs
produced are fairly similar and the costs estimated are higher (Hashorva and et.al., 2018). Large
cost shortfalls would compel managers to evaluate and enforce proactive measures to fix the
cause of cost increases. This method gathers and absorbs costs for individual jobs, tasks or work
orders. The cost of each function is correctly measured and each job is individually defined.
They apply such accounting method in the dimension of the above business, in order to
efficiently control the cost of each job. It is essentially required for managers of Cream Ltd, so
they can formulate effective strategies which are essentially required evaluating each order cost
and taking necessary actions accordingly.
Price optimising system: This is a type of management system which involves a detailed
pricing system and customer satisfaction requirements (Bottomleyand Bosman, 2018). This
method of accounting lets companies obtain valuable business trends and information on
customer demands. Basically this accounting method is essential for businesses to change the
market level of products and services. In the case of chosen business their marketing department
adjusts pricing strategies according to the desires of the customer. This system is essential to set
5

the product price which satisfy consumers as well as meet business objectives. It is essentially
required for the organizations to set suitable price which increase consumers’ willingness to buy
goods and services.
Essential requirement of management accounting systems:
Management accounting systems are essentially required for the organization and make
sure the available information should be reliable, accurate, presentable, updated and in
understanding form. So people can understand and further managers of Cream Ltd can used such
information in decision making process. All essential requirements mentioned below:
 Reliable: In context of management accounting systems, all the information should be
reliable because managers will take strategic decisions on the basis of it.
 Accurate: Accounting information should be accurate which an essential requirement of
management accounting is. Because it helps in identifying true financial position of the
Cream Ltd in terms of profit and loss.
 Presentable: All the accounting information is presented in standard format structure
which is globally used by the organizations to understand other’s financial reports.
 Up to date and on time: In the financial report, data recorded on quarterly or yearly
basis because managers of Cream Ltd make decisions on the basis of it and it is an
essentially required for decision making process to get updated data.
 Understandable and relevant: Data should be recorded in understandable manner, so
people of Cream Ltd can understand or perform their task accordingly.
Above discussed management accounting systems are very essential for organization to
perform their operational activities and make sure that it will maximise their efficiency as well as
effectiveness. By using these systems, managers of Creams Ltd build effective strategies to
maximise their production, profitability, performance and minimise overall cost of
manufacturing to meet their business goals & objectives.
P2. Describe different method of management accounting reporting which are used by
organizations
Job costing report: Job costing reports are administrative mechanisms used to assess the
performance of a project or output against a defined or expected norm (Quilty, Cosentinoand
Bagby, 2018). They have been used in areas of the market and their associated industries. The
primary objective of reporting on job costing is to recognize differences or favourable results,
6